Saturday, August 19, 2017

Weekly Indicators for August 14 - 18 at XE.com


 - by New Deal democrat

My Weekly Indicators post is up at XE.com.

If you are looking for DOOOOOM, you are looking in the wrong place.

Thursday, August 17, 2017

Industrial production: once again, the hard data fails to confirm the sof ... ofertheluvofgaud


 - by New Deal democrat

This morning's report on industrial production confirms that the economy remains on autopilot, and that's a good thing.

Overall production increased again, and the trend of rising production since spring of last year is clear:


When we break it down by manufacturing (blue, left scale), mining, and utilities (red and green, right scale), we get pretty much the same picture:


While it's true that the manufacturing subindex is below its April peak, I am not terribly concerned. There were very volatile readings in March, April, and May, and if we smooth the readings out via a three month moving average, July is only slightly below June, and both June and July are above every other 3 month average reading.

So the Doomers will have to move on from their "soft data/hard data" argument to something else.

Housing is still going sideways


 - by New Deal democrat
.
Although June got revised higher, July housing permits and starts continue to fail to impress

This post is up at XE.com.

Wednesday, August 16, 2017

On the erection of Confederate memorials: in which I have to get this off my chest


 - by New Deal democrat

Below is a photograph of the World War Two Memorial on the National Mall in Washington, D.C.


Keep it in the back of your mind. I'll return to it. 

I am a data nerd, and leaping to conclusions about data is a pet peeve of mine. I really hate it when anyone, and particularly my own side, falls for groupthink, jumping to instant conclusions which then become the only acceptable opinion. In the last 48 hours, without consideration of other possibilities, or looking for contrary vs. corroborating data, it seems that just about everyone on the center and left has become an instant expert on the fact that Confederate statues were erected because of Jim Crow.

In support of that, a number of graphics, such as this one, have been used:



So, has it occurred to nobody that there might be a more straightforward reason why there would be a huge spike in Memorials (cough, cough, hint, hint) ***50*** and ***100*** years after the Civil War?

Yes there were a number of racial incidents that occurred in the 1910s.  But before the last 48 hours, the general consensus was that there was a resurgence in violence associated with white supremacy in the 1920s, not the 1910s.

But 1910-1915 marked 50 years sine the Civil War, and those 20 year old soldiers who fought it  had dwindled to a band of 70 year old men, who did not want themselves or their cause to be forgotten after their generation had passed.

For (huge) example, on July 2-4, 1913, on the 50th anniversary of the Battle of Gettysburg, there was a reunion of both northern and southern armies who camped out at the site. That reunion was commemorated by the Eternal Light Peace Memorial erected on the 75th anniversary during another encampment of the last few survivors:



In our own time, we have had a demonstration of the exact same psychology: the World War Two Memorial shown at the beginning of this piece was championed as the 50th anniversary of the war approached, as a monument to the "Greatest Generation," particularly by veterans such as Bob Dole who did not want their sacrifice  to be forgotten after they shuffled off to the Last Great Muster in the sky.   Bill Clinton signed the authorizing Act for the memorial in 1993.

I am sure speeches were made lionize Jim Crow when the statues were dedicated, and none of this affects the debate on what should become of them. But can our side please not succumb to leaping to conclusions?

Here's a good test: when were monuments to Union soldiers and leaders erected? I haven't found any information onlline on that subject. Was there a similar spike in the vicinity of the 50th anniversary of the Civil War? If there wasn't, then there was something "special" about what the South did. But if there was, then the more straightforward explanation is probably the correct one.

Thank you for letting me get that off my chest.

UPDATE: Oh, good, I'm not the only one.  Here's a data analyst and neurocognitive researcher replying to Kevin Drum



Tuesday, August 15, 2017

Real retail sales disappoints . . . the Doomers


 - by New Deal democrat

This morning's report on July retail sales once again belies the claim that "hard data" and "soft data" are divergent..

Not only did July come in at a strong +0.6% (+0.5% ex-autos), but June was revised up as well. Given basically non-existent inflation, this means that real retail sales made two more new records for this expansion:



In fact, real retail sales look like they are right in line with a multi-year trend.

Real retail sales per capita tend to turn down well in advance of the onset of a recession, so here is real retail sales per capita:



Again, the upward trend is continuing .

Finally, although the relationship is noisy, YoY growth in retail retail sales tends to correlate with YoY growth in employment during the ensuing months:



.So this suggests that recent stronger monthly jobs reports will continue.

Doomers will once agin have to find a new place to hang their hats.

Monday, August 14, 2017

One tiny little ray of hope


 - by New Deal democrat

After the Charlottesville, VA white supremacy violence, and his failure to explicitly condemn it, Donald Trump's Gallup approval rating has fallen to a new low of 34%, and his disapproval to a new high of 61%:



This puts him below the lowest ratings during their entire term of Lyndon Johnson, Ronald Reagan, and Bill Clinton. Only Truman, Ford, Carter, and George W. Bush ever scored lower.

So far, alas Rasmussen has not followed suit.

Measuring full employment by actual hires vs. job openings


 - by New Deal democrat

How close are we to full employment? One method that is sometimes touted is the Beveridge curve.  The Beveridge curve (invented by a British economist named, you guessed it, Beveridge, compares the level of job openings with the level of unemployment. Generally speaking, if there are as many job openings as there are unemployed, then the economy is running at full employment (since everyone who wants a job ought to be able to get one).

As we saw last week, job openings as measured by the JOLTS report are at an all-time high.  This gives us a Beveridge curve that suggests that the US is close to full employment:



The unemployment rate, at 4.3%, is only 0.3% above the job openings rate, at 4.0%. Of course, another way to look at the data is that it has taken many more job openings to get us down to 4.3%, compared with the last expansion at least.

But as I have frequently noted, this assumes that job openings are offered in good faith.  If employers are just trolling for resumes, or laying the groundwork for H1-B slave labor visas, then job openings aren't offered in good faith.  I think we have to measure employers not by their words (advertising openings), but by their deeds (actual hires).

So I put together a graph to compare labor market tightness by the ratio of openings to the unemployment rate (blue line) vs. the ratio of actual hires to the unemployment rate (red line):



Note that at the end of the late 1990s boom, we really were at full employment. The ratio of both openings and hires to the unemployment rate was close to  1:1. Pretty much everyone who wanted a job could be matched with one. The 2000s economy never got to that point. While the current economy looks like it is at full employment measured by openings, measured by actual hires there is still slack, as there are only 8.5 hires for every 10 people who are unemployed.

For completeness' sake, I did the same thing with the U6 underemployment rate. Here's what that shows:



Here the relative comparison is considerably worse.  While the ratio of job openings to the underemployed is close to its 1990s boom level, the ratio of actual hires to the underemployed isn't even close -- and hasn't reached the peak of the 2000s economy either.

Needless to say, I think the most reliable measure is based on deeds rather than words, and measured by deeds, we aren't at full employment, let alone a boom.