This week in 1994, Dumb and Dumber hit U.S. theaters, giving us Jim Carrey and Jeff Daniels as two idiot friends who embark on a cross-country road trip just to return a briefcase. The film became a cultural phenomenon for its banter and slapstick comedy. Lloyd (Carrey) trades a van for a moped. Harry (Daniels) kills a rare owl. They both eat some hot peppers and go nuts with the ketchup and mustard. In the end, they run into a Hawaiian Tropic Bikini Tour and turn down the opportunity to join, deciding instead to walk back to Rhode Island.
What’s interesting about the film is that it made $250 million with only a $17 million budget. We’re not the greatest at math, but that’s a 15x return on a couple of guys running jokes with a naughty grandma. To this day, Dumb and Dumber is one of the highest grossing comedies of all time. Carrey would go on to become a superstar, starring dozens of well-known films like The Mask, How the Grinch Stole Christmas, Batman Forever, and my personal favorite, The Cable Guy, which features one of the greatest pick-up basketball scenes featuring Matthew Broderick you will ever see in your life. But it was Dumb and Dumber that provided the foundation for it all.
This month’s indicators are a lot like that—going dumb and flush with cash. Only we aren’t sure how much cash we’ve got. That’s because the Bureau of Labor Statistics decided that the best way to handle a government shutdown was to simply stop collecting employment data altogether. That means no fresh unemployment rate, no new wage growth figures, and no labor force numbers. Just a black box (or black hole, depending on how you view government). Usually, the only problem we have with federal data is that it’s about a month behind. Now, there’s just no data at all.
The irony isn’t lost on us. We have a government shutdown (supposedly worked out by the time of this writing) happening because politicians can't agree on fiscal responsibility, and the solution is to...wait for it…stop measuring the economy? The logic is so circular it needs an air traffic controller.
Just what do we know about September's economy? First, people are still buying stuff. Gross sales rose to $930.1 million (up 2.92% year-over-year). And people are still flying. Airport passengers came in at 92,141 (up 2.07%), suggesting people are still traveling even though half the TSA agents are probably wondering if they're getting paid. But the residential real estate market continues to try and find its footing. Active listings increased to 461 (up 54.7%), while days-on-market increased to 53 days. Correspondingly, median list prices dropped for two of the three Rapid City zip codes. I guess you could say this is the market’s way of telling buyers, “so you're telling me there's a chance?"
Building permits dropped to 199 and building valuation fell to $29.6 million. That’s not particularly surprising, given the seasonality of construction. However, even with new housing permits increasing to 22 (up from 13), it’s really going from “not much" to "not much more.” It’s certainly not enough to fix our housing supply.
This brings us to interest rates. Nothing spurs growth like rate cuts. And we finally got one. The prime rate dropped to 7.25%, down from 7.5%, with more rate cuts expected in the future. If cuts continue, this should slowly ease borrowing costs for mortgages and business investment here, but it won’t be overnight. It’s becoming clear, and we heard this from the Minneapolis Fed President last month when we hosted him here in Rapid City, that with inflation persistently at 3%, we may be headed into a multi-year period of slightly-higher-than-expected inflation to achieve growth.
Dumb? Dumber? Who knows. It’s economics for you. And as we all know, sometimes economics comes with trade-offs.
Stay safe and God-speed,
Tom
