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Weekly Indicators for October 7 – 11 at Seeking Alpha

1 day ago

– by New Deal democratMy Weekly Indicators post is up at Seeking Alpha.The stars are aligning for the recovery from the present slowdown in the longer term. But in the meantime, the present and short term data is still soft.As usual, clicking over and reading helps reward me a little bit for my efforts.

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Real average and aggregate wages for September

3 days ago

– by New Deal democrat

Now that we have the September inflation reading, let’s take a look at real wage growth.

First of all, nominal average hourly wages in September increased +0.2%, while consumer prices were unchanged. As a result, after rounding, real average hourly wages for non-managerial personnel increased +0.1%. This translates into real wages of 97.7% of their all time high in January 1973:

On a YoY basis, real average wages were up +1.7%, still below their recent peak growth of 1.9% YoY in February:

Aggregate hours and payrolls improved sharply in the past several months, so real aggregate wages – the total amount of real pay taken home by the middle and working classes – are up 30%  from their October 2009 trough at the beginning of this expansion:

For

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Initial claims still positive, negative near term recession

4 days ago

– by New Deal democrat

I’ve been monitoring initial jobless claims closely for the past several months, to see if there are any signs of stress. This is because the long leading indicators were negative one year ago, and many – but not a majority – of the short leading indicators have recently turned negative as well. So I have been on “recession watch.” But no recession is going to begin unless and until layoffs increase.

To reiterate, my two thresholds are: 1. If the four week average on claims is more than 10% above its expansion low.2. If the YoY% change in the monthly average turns higher.

As of this week, initial claims continue to be very close to their expansion lows. The 4 week moving average of claims Is 213,500, only 12,500, or 6.1%, above the lowest reading of this

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August JOLTS report: nearly all employment measures now neutral

5 days ago

– by New Deal democrat
This morning’s JOLTS report for August showed a decline in all metrics m/m as well as a slowing trend overall.

To review, because this series is only 20 years old, we only have one full business cycle to compare. During the 2000s expansion:

Hires peaked first, from December 2004 through September 2005
Quits peaked next, in September 2005
Layoffs and Discharges peaked next, from October 2005 through September 2006
Openings peaked last, in April 2007 

as shown in the below graph (quarterly, normed to 100 as of May 2018): 

Here is the close-up on the past five years (monthly):

As you can see, in today’s report all four metrics declined. Job openings have completely rolled over, and both quits and total separations have essentially been stagnant for over a

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Scenes from the September jobs report

6 days ago

– by New Deal democrat

Yesterday I shared the best good news from the September jobs report released last Friday: there’s a good argument that the economy has reached “full employment,” although we could do even better if real wages improved more. Today let’s look at the bad news, which comes from examining the leading indicators for employment.

That there has been a jobs slowdown is by now well established. In the last 8 months, per the more reliable establishment report, 1,135,000 jobs have been added, an average of 142,000 per month, which If we subtract temporary census hiring of 26,000, becomes 139,000. And keep in mind that the number of jobs added between March 2018 and March 2019 is going to be reduced from roughly 210,000 to 167,000 per month:  

Next, the three

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Have we finally reached “full employment”?

7 days ago

– by New Deal democratAs I noted on Friday, the household report – the one that tells us about unemployment, underemployment, and labor force participation – was particularly good. In fact, the last two months together have been so good that, at least by some measures, we may finally have arrived at “full employment.”

Let’s start with the basics. Gains in employment as measured by the household survey (blue in the graphs below), as opposed to the larger (and, yes, more reliable) payrolls survey (red), were 590,000 and 391,000 in the last two months, respectively. Those were the biggest gains in nearly a year: 

At 3.5%, that gave us the lowest unemployment rate in the past 65 years (except for a few months in 1968-69):

The U6 underemployment rate is also at its lowest level,

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A TV watching recommendation: “David Makes Man”

8 days ago

– by New Deal democrat“Well, we all have a faceThat we hide away foreverAnd we take them outAnd show ourselves when everyone has gone”
 – Billy Joel, “The Stranger”“No one here is exactly what he appears.” – G’Kar, Babylon 5

“David Makes Man” is a loosely autobiographical coming of age drama created bt Terell Alvin McCraney, (executive produced in part by Oprah Winfrey) centered on the academically gifted 14 year old African American “David,” who lives in the projects of Homestead, Florida with his single mother and his little brother. His father, who he has never met, is a college professor with whom his mother, when a student, had a brief affair. During the day, he attends a magnet school where he is known at “DJ.” To the drug-dealing gang members at “the Ville,” as the housing

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Weekly Indicators for September 30 – October 4 at Seeking Alpha

9 days ago

– by New Deal democratMy Weekly Indicators post is up at Seeking Alpha.It’s pretty clear that manufacturing is in a recession right now. The economy as a whole isn’t because the consumer sector of the economy is still doing fairly well.As usual, clicking over and reading should bring you up to the minute on the economy, and reward me a little bit for my efforts.

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September jobs report: excellent in coincident and lagging sectors, cautionary in leading sectors

10 days ago

– by New Deal democrat
HEADLINES: 
+136,000 jobs added (+135,000 ex-Census)
U3 unemployment rate declined -0.2% from 3.7% to 3.5% (NEW LOW)
U6 underemployment rate declined -0.3% from 7.2% to 6.9% (NEW LOW)

Leading employment indicators of a slowdown or recession

I am highlighting these because many leading indicators overall strongly suggest that an employment slowdown is coming. The following more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed.
the average manufacturing workweek declined -0.1 from 40.6 hours to 40.5 hours. This is one of the 10 components of the LEI and is negative.
Manufacturing jobs declined by -2,000. YoY manufacturing is up 117,000, a deceleration from 2018’s pace.
construction jobs rose by

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September 2019 motor vehicle sales

11 days ago

– by New Deal democratMotor vehicle sales are a short leading indicator. In particular, on the consumer side, they have typically rolled over after housing but before consumer nondurables, so they are useful in gauging the health of the consumer.

More recently I’ve started tracking heavy truck sales as well. That’s because, in addition for being a proxy for the producer side of the economy, as the below graph shows, they are much less noisy that light vehicle sales, and susceptible to fewer false positives (note: measure is quarterly to cut down further on noise):

With the exception of 1969, heavy truck sales have always declined ~20% or more from peak prior to the onset of a recession. The only false positives are 1984-86, 1994-96, and 2015-16, all of which were pronounced

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Expect a weak report for the leading jobs sectors on Friday

12 days ago

– by New Deal democratSeptember motor vehicle sales will be reported later today, after the domestic US manufacturers post their numbers. Sales of all other vehicles were down -13% YoY, but that is without seasonal adjustment including for Labor Day, so the seasonally adjusted sales might tell a completely different story.

In the meantime, with an eye towards Friday’s jobs report, let’s take a look at what is happening with temporary help services, one of the most leading components of employment.

Every week I update the American Staffing Index, (from which site the first four graphs below are taken) which has a 14 year history and in that time has correlated pretty well with the final temp help employment numbers. This year it has turned increasingly negative, and this week had the

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Once again, two sharply contrasting reports to start the month

13 days ago

– by New Deal democrat
One month ago, I wrote that the first reports in September, construction spending and the ISM manufacturing index, showed two contrasting views of the economy. That was again the case today.As in last month, residential construction spending increased for the month. Below I show it in comparison with single family permits:

Typically construction follows permits. In the past few years, it has been almost coincident with permits. In any event, this is more confirming evidence that in the important and leading housing sector, the decline that started in early 2018 has ended. This is positive news for the economy as a whole in 2020.

But once again the ISM manufacturing index was bad news, falling further below 50 from 49.1 in August to 47.8 in September. Just as

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Weekly Indicators for September 23 – 27 at Seeking Alpha

14 days ago

– by New Deal democratMy Weekly Indicators post is up at Seeking Alpha.If you’re wondering why it’s so late, it’s because SA pretty much shut down between Friday afternoon and this morning.Anyway, recession risks are rapidly receding, at least through the 4th Quarter.  As usual, clicking over and reading puts a little jingle in my pocket, as well as brining you up to the moment on the economy.

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Personal spending shows consumers OK; durable goods shows producers still struggling

17 days ago

– by New Deal democratThis morning’s reports on personal income and spending continue to show a consumer that is doing alright. Meanwhile durable goods orders continue to show a production sector that is struggling.

First, real personal income (red in the graph below) rose +0.4% in August, while real personal spending rose +0.1%. Since July spending (blue) was revised down -0.1%, the result was a wash:

The rising trend remains intact.

In general, spending has slightly lagged income in the past few years. Thus the personal saving rate has increased:

Overall the savings rate has increased since before the Great Recession, meaning that households are being more cautious with spending. This is a real change in the trend of declining savings that started in about 1980.

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Initial jobless claims continue near expansion lows

18 days ago

– by New Deal democrat
I’ve been monitoring initial jobless claims closely for the past several months, to see if there are any signs of stress. This is because the long leading indicators were negative one year ago, and many – but not a majority – of the short leading indicators have recently turned negative as well. So I have been on “recession watch.” But no recession is going to begin unless and until layoffs increase.

To reiterate, my two thresholds are:1. If the four week average on claims is more than 10% above its expansion low.2. If the YoY% change in the monthly average turns higher.

As of this week, initial claims continue to be very close to their expansion lows. The 4 week moving average of claims Is 212,000, only 11,000, or 5.2%, above the lowest reading of this

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August new home sales continue rebounding trend

19 days ago

– by New Deal democratLet me start out my look at this morning’s August new home sales report with my typical housing mantra:

Interest rates lead sales
Sales lead prices
Prices lead inventory

We saw all of that in this morning’s report.

First, the trend of rising single family sales continues, and the three month average of this very volatile series (blue), shown in comparison with single family housing permits  was the highest since late 2007:

Note, by the way, that new single family home sales have a tendency to lead every other metric, including permits – but they are much more volatile and heavily revised.

Next, the median new home price (red) turned positive YoY, for only the second time since the slump that began last year, vs. the YoY change in sales (blue) which has been

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The incipient housing choke collar: July prices update

20 days ago

– by New Deal democratThree months ago I first wrote about the concept of a “housing choke collar” constraining economic growth, to wit:

The FHFA and Case-Shiller price indexes have only decelerated to a point where they roughly match median household income growth. This makes me wonder if prices for new homes will shoot back up again quickly as demand returns. If so, we could wind up in a “choke collar” situation (similar to what we had with gas prices 5 to 10 years ago), where rapid price increases choke off demand, which causes prices to back off, which reignites demand, and so on repeatedly. 

This is important, because if the producer side of the economy falters, a choking off of higher new demand for housing would enhance the chances of a recession.

Three months later, and it

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Tame inflation —-> “soft landing”?

21 days ago

– by New Deal democratI have a new post up at Seeking Alpha. So long as inflation remains tame, the Fed has scope to bring about a “soft landing” to the slowdown, without there necessarily being a recession (so long as the Toddler in the White House doesn’t tip over the whole apple cart).As usual, clicking over and reading puts a penny or two in my pocket.

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What Kurt Eichenwald says – Saving the Republic

22 days ago

– by New Deal democratWhen I’m not reading and writing about the economy, I do occasionally comment elsewhere on political topics. 
So it was on Thursday when, in response to this post asserting that Democrats were powerless to do anything – (including enforcing THEIR OWN GODDAM SUBPOENAS!) – and that it was “green lantern-ism” to believe otherwise, I decided I had had enough (see comment #25), for which I was called a “kook” and a disloyal Democrat. It would “hand the President a public relations victory,” it would have “undesirable optics,” and wouldn’t show “comity.”

Worse, most of these people – presumably people paying attention to the news – didn’t know that each House of Congress, like courtroom judges, have the the power of “inherent contempt,” meaning that they don’t have to

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Weekly Indicators for September 16 – 20 at Seeking Alpha

23 days ago

– by New Deal democratMy Weekly Indicators post is up at Seeking Alpha.For all of the discussion about various iterations of the treasury bond yield curve, it is little noted that right now it is sending a different message than virtually every other long leading indicator for the economy.As usual, clicking over and reading should bring you up to the moment on the economy, and bring me a penny or two for my efforts.

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A closer look at the housing rebound

24 days ago

-by New Deal democratOn Wednesday we got some excellent new residential construction numbers. I went into a lot more detail, showing how – exactly as I forecast – the turn in interest rates led the turn in housing sales by about six months, over at Seeking Alpha.As usual, clicking over and reading helps reward me with a penny or two for my efforts.While I am at it, on the subject of housing, here is a chart I am working on (not completed yet!) for another post, showing the maximum percentage decline in total and single family housing permits from expansion peak until the onset of recession, ever since reports started in the early 1960s, plus the decline from peak between the beginning of 2018 to the present:
Recession onsetTotal housing
Permits1 unit

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Initial claims increasingly foreclose 2019-early 2020 downturn

25 days ago

– by New Deal democrat
I’ve been monitoring initial jobless claims closely for the past several months, to see if there are any signs of stress. This is because the long leading indicators were negative one year ago, and many – but not a majority – of the short leading indicators have recently turned negative as well. So I have been on “recession watch.” But no recession is going to begin unless and until layoffs increase.

To reiterate, my two thresholds are:1. If the four week average on claims is more than 10% above its expansion low.2. If the YoY% change in the monthly average turns higher.

As of this week, initial claims continue to be very close to their expansion lows. The 4 week moving average of claims as of this morning is 212,500, only 11,000, or 5.3%, above the lowest

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Housing: BOOM!

26 days ago

– by New Deal democratWell, this is an easy post. This morning’s report on housing permits and starts showed new expansion highs in both overall permits and starts. The less volatile single family segment also recovered, with both single family permits and starts at one year highs, although slightly below their expansion peaks.

Here are total and single family permits:

And here are total and single family starts:

The housing downturn is over. As expected, lower interest rates for the past eight months have shown up in the housing data in spades.

This has major implications for the index of leading indicators this month, which can be expected to pop. And since housing permits are a long leading indicator, this, along with new expansion lows in corporate bond yields, new

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Industrial production rebounds; another message of slowdown, no recession

27 days ago

– by New Deal democratIndustrial Production is the King of Coincident Indicators.  When industrial production peaks and troughs coincides more often than any other indicator to NBER’s recession dating. Let’s take a look at the report for August, which was pretty darn good, which was released this morning.

Production as a whole increased 0.6%, and last month’s report was revised upward by +0.1%. The manufacturing component also increased, by 0.5%. Both, however, are still below their peaks set last December (left scale in the graphs below). The other important component, mining (which includes oil production) increased 1.4%, reversing July’s decline, missing a new high by less than 0.1% (right scale):

Stepping back for a longer term look, here is the same graph including the

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Weekly Indicators for September 9 – 13 at Seeking Alpha

28 days ago

– by New Deal democratI realized that I neglected to post a link to this Saturday’s Weekly Indicators post, which was up at Seeking Alpha.  So here it is.The theme over the past few months has been that, despite worsening conditions in manufacturing, and almost singular forecaster attention to the yield curve, many of the short and long term indicators have been improving, or are starting to improve.As always, clicking over and reading helps reward me a little bit for the efforts I put in.

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Last week’s initial jobless claims still show slowdown, no recession

28 days ago

– by New Deal democratA couple of weeks ago, I updated the entire list of short leading indicators. To cut to the chase, those that were negative or trending negative came out of the production sector, while those that were positive were mainly from the consumer sector. 

But, regardless of which sector’s weakness might give rise to a recession, at some point it would have to be reflected in increased layoffs. As last Thursday’s report of initial jobless claims showed, that isn’t happening. Since I didn’t get around to commenting on this last week, let’s take a look now.

At 204,000, last week’s number of initial claims is close to the bottom of the number of claims even in the past year. The four week moving average is only 5.5% above the low point set in April:

Before a

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August retail sales confirm healthy consumer sector

September 13, 2019

– by New Deal democrat
Retail sales are one of my favorite indicators, because in real terms they can tell us so much about the present, near term forecast, and longer term forecast for the economy.

This morning retail sales for August were reported up +0.4%, and July, which was already very good at +0.7%,  was revised upward by another +0.1% as well. Since consumer inflation increased by +0.4% over that two month period, real retail sales have risen +0.7% in the past two months. As a result, YoY real retail sales, which had been faltering earlier this year, are  now up +2.3%.

Here is what the last five years look like:

Others may use other deflators. I use overall CPI because:

1. I’ve been doing it this way for over 10 years. 

2. This is the deflator used by FRED.

3. It

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Real average and aggregate wage growth for August

September 12, 2019

– by New Deal democrat

Now that we have the August inflation reading, let’s take a look at real wage growth.

First of all, nominal average hourly wages in June increased a strong +0.5%, while consumer prices increased +0.1%, meaning real average hourly wages for non-managerial personnel increased +0.4%. This translates into real wages of 97.5% of their all time high in January 1973, a new high following revisions to prior months:

On a YoY basis, real average wages were up +1.7%, still below their recent peak growth of 1.9% YoY in February:

Aggregate hours and payrolls were up strongly in August’s household jobs report, so real aggregate wages – the total amount of real pay taken home by the middle and working classes – are up 29.7%  from their October 2009 trough at the

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An update on forecasts

September 11, 2019

– by New Deal democratI have a new post up at Seeking Alpha, describing the order in which data has tended to deteriorate before consumer-led recessions. A few conditions have been met; most others have not.I have previously written that if a recession is in the works over the next few quarters, it is more likely to be a producer-led recession, a la 2001. In that regard, a few weeks ago I said that Q2 corporate profits would be a crucial report.Well, they were reported a couple of weeks ago. I hadn’t linked to that article before, but that too was posted at Seeking Alpha.The bottom line is that both the nowcast and the long-term 12+ month forecast are reasonably clear. The short term, 3 – 9 month forecast, is a lot dicier, and depends greatly on whether Tariff Man can resist the impulse

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July JOLTS report: m/m improvement, but slowing trend

September 10, 2019

– by New Deal democratThis morning’s JOLTS report for July was in general surprisingly positive on a monthly basis, but continued to show a slowing trend.

To review, because this series is only 20 years old, we only have one full business cycle to compare. During the 2000s expansion:

Hires peaked first, from December 2004 through September 2005
Quits peaked next, in September 2005
Layoffs and Discharges peaked next, from October 2005 through September 2006
Openings peaked last, in April 2007 

as shown in the below graph (quarterly, normed to 100 as of May 2018):

Here is the close-up on the past three years (monthly):

In today’s report, all of the above series improved month over month. But the only series that is meaningfully higher than it was one year ago, was voluntary

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