Saturday, May 31, 2014

Weekly Indicators for May 26 - 30 at

 - by New Deal democrat

My Weekly Indicators post is up at

This was a week that shows why watching the high frequency data is so valuable.  We got the revised Q1 GDP report on Thursday, and since then the Doomers have been pouring out the woodwork with stories of their discoveries that it is supposedly a really big deal.

Naked Capitalism has been especially noteworthy (and not in a good way) for showcasing these Doomer-discoveries-come-latelies.  The Telegraph's Ambrose Evans-Pritchard came out with the news that a heretofore unknown money supply measure  called "Divisia M4" showed that the US economy was DOOOOOOMED.  A particularly incoherent rant showed up at The Automatic Earth, where it was argued (although that word conveys a basic rationality not present in the article) that the second quarter wasn't showing a rebound because -- just look at that bad January and February data!!!!  Ummm, okay. (Hint: when even the Pied Piper of Doom doesn't cite a blog anymore, that's a pretty good sign that showcasing it is conceding the argument in advance).

To the contrary, if you were reading my Weekly Indicator columns, you saw the parade of poor data in real time in  January and February, and have been watching its strong rebound since mid-March. Don't bother looking for the Doomer concessions when revised Q2 GDP data is released in three months. It won't be there.

Friday, May 30, 2014

John Hinderaker: Once Again Proving His Economic Stupidity

I've gotta hand it to John Hinderaker; never has someone with such a horrible record of economic analysis consistently proven his incompetence.  It's almost as though he has a pathological need to publicly demonstrate on a regular basis that he has no clue how to perform economic analysis. 

Now he's talking about the labor force participation rate, claiming,

Apologists for the Obama administration sometimes argue that the nation’s declining rate of labor force participation is largely a function of baby boomers retiring from the labor force. Unfortunately, this is not the case

Unfortunately, John, there has been a ton of research on this.  Several Federal Reserve branches have looked at along with a lot of economists. 

Invictus, over that the Big Picture blog, has a really good summary at this link.  That link as a series of links at the bottom that show a lot of the research on the topic.  You'd think Hinderaker would have looked at some of these before he put his foot in this mouth ... again.

First Quarter GDP Contraction A Statistical Blip

This is over at

The state of the housing market, April 2014

 - by New Deal democrat

As most readers know Bill McBride a/k/a Calculated Risk and I made a charitable bet about the direction of housing in 2014.

In his forecast for 2014 residential investment, CR said, "I expect growth for new home sales and housing starts in the 20% range in 2014 compared to 2013."  By contrast, half a year ago, in a post at, I said that "If the typical past pattern is followed, we will shortly see permits running 100,000 less than one year previously."

Courtesy of a horrible comparison number with April 2013, YoY housing starts were up over 20% in April 2014, and so I have made a charitable contribution to the scholarship established in the name of CR's late co-blogger, Tanta.

This morning the final monthly report on housing for April, pending home sales, was reported by the NAR.  The index was +0.4% m/m and remains down -9.2% YoY:

(h/t RTT News)

So, with the first four months of 2014 in the books, here is what the housing market looks like.

First, here is a graph of the change, in thousands, YoY of starts (blue), permits (red), new home sales (green), and existing home sales (orange) (note that the St. Louis FRED does not track pending home sales):

Next, here is the YoY% change in the same four statistics:

Both of these graphs show the clear deceleration in the housing market through 2013 and into 2014, with a definite surge in starts (making up for their poor showing vis-a-vis permits in the first few months of 2014).  Whether that was a one-month phenomenon or the beginning of a positive reversal is very much open to question.

More specifically, through April 2014:
  • Permits are down -0.8% from their October 2013 high
  • Starts are down -3% from their December 2013 high
  • New home sales are down -6% from their June 2013 high
  • Existing home sales are down -14% from their July 2013 high
  • Pending home sales are down  -13% from their June 2013 high
Note that there have been extensive revisions to the 2013 data this month, resulting in several altered comparison high months.

But as I have written in the last several weeks, it is only multi-unit (apartment) construction that is carrying the recovery in housing this year. Single family home starts and sales have completely stalled.  Here is a graph of single family permits (blue) and starts (green) compared with 5 unit or higher permits (red) and starts (orange), all normed to 100 as of September 2012:

It is easy to see that it is multiunit construction, especially beginning in the second half of 2013, that is entirely responsible for any continuing increase in residential construction. Single family home construction and sales have gone nowhere since the beginning of 2013.

With mortgage rates at 7 month lows, and with interest rates likely to be lower YoY in several months, there will probably be renewed vigor in the market by the end of this year.  Still, with one-third of 2014 in the books, the odds that the housing market as a whole will be up as much as 20% for the year look like slim and none.  Due to the demographic tailwind of the Millennial (a/k/a "echo boom") generation, and the boom in apartment construction, it also looks unlikely that permits will fall -100,000 as I originally forecast.

Thursday, May 29, 2014

Sometimes it's just too easy . . .

 - by New Deal democrat

I'd say that catching out the Pied Piper of Doom in inconsistency and hypocrisy is like shooting fish in a barrel.  But at least sometimes, that would be unfair to the fish.

The Pied Piper of Doom, March 10, 2014, reacting to the first revised GDP estimate for the 4th quarter of 2013, at +2.4%:
touting Gross Domestic Product numbers are meaningless, and little more than a talking point for the one percent (it is a Wall Street meme, given greater truths) to obfuscate what's really happening in our economy.
The Pied Piper of Doom, May 28, 2014, reacting to the first revised GDP estimate for the 1st quarter of 2014, at -1.0%:
The fact that the economy shrunk 1% in Q1 is a rather MAJOR piece of economic data.
Yeah, I know, we've all read the weeping and gnashing of teeth and rending of garments today about the GDP report. ... Oh, wait, no we haven't.

First quarter corporate profits post small decline

 - by New Deal democrat

This post is up over at

Corporate profits, adjusted for unit labor costs, are significant as a long leading indicator for the economy as a whole.

Wednesday, May 28, 2014

Why Real Median Housiehold Income is the most misused statistic in the econoblogosphere

- by New Deal democrat

In virtually any discussion in the econoblogophere about the well-being of the middle and working class, you are bound to see reference to "real median household income" as proof that the average family is much worse off now than they were at the outset of the Millennium.  Everyone seems to know that real median household income peaked in 1999, never surpassed that figure during the Bush years, took it on the chin during the Great Recession, and has barely budged since. So wages have plummeted.

The problem is, what everyone seems to know is wrong.

Real median household income is compiled by the Census Bureau for all households headed by a person age 16 or older. NOT just wage/salary earners.  Households consisting of two retirees are included.  Households headed by somebody in college are included.  Households headed by one or two unemployed person are included.

So, real median household income does not tell you what is happening with salaries and wages.  It is in no way "proof" that real wages and salaries have been declining.  In fact, real wages and salaries have been essentially stagnant since the turn of the Millenium.  We know that because that's what the BLS quarterly report on median weekly earnings shows.

While the Census Bureau reports median household income only once a year, the data is collected each month by the Census Bureau as part of its Household Survey (one of two surveys included in the monthly jobs report). Sentier Reseach uses this to create a monthly update on median household income, which blogger Doug Short uses to update graphically.  At my request, Doug  (who creates some of the best economic graphs on the internet, and if you aren't  already, you should start reading him) put together two graphs comparing real usual weekly earnings with real median household income, and also to the employment to population ratio.

Here is the resulting graph, dating from the onset of the Great Recession at the end of 2007:

You can see the stark divergence between wages and household income at the end of 2008.  The huge increase in unemployment depressed median household income (and the E/P ratio), while those who kept their jobs actually saw their real wages increase, as gas prices declined from a high of $4.25 to $1.50 a gallon.  As a small bout of inflation rippled through the economy in 2010-12, due to gas prices returning to near $4/gallon, real median wages declined somewhat.  As the YoY comparisons of gas prices have since largely turned negative, real median wages have shown a slight improvement.

Now here is the same comparison, taken back to 2000:

This graph confirms that real median wages have largely been stagnant since 2000.  Further, note that the two time periods of the most divergence between real median household income and the E/P ratio, 2002-05 and 2009, the the two times when there were upward spikes in real median weekly earnings.

In summary, real median household income has been declining because of increased unemployment, and because of Boomers retiring in droves. (The first Boomers hit age 62 in 2012.  They have already caused an increase of 4.4 million in the total population age 65 and above to 43.9 million, and an increase as a percentage of the population over 16 over over 1% to 17.9%.  Retirement typically causes a decline of about 50% in the total income of households.)  Because of that, real median household income largely mirrors the employment to population ratio.

To reiterate, real median household income is the most misused statistic in the econoblogosphere.  Whenever you see a citation to it, you should examine the post carefully to see if the piece is using it appropriately to discuss income broadly including non-wage earning households, or is mis-citing it as evidence of a big decline in wages.

Oil At Top of Triangle Consolidation Pattern

Tuesday, May 27, 2014

This does not look like a market on the edge of a Crash

by New Deal democrat
Barron's ratio of insider to selling last 52 weeks:

S&P 500 last 52 weeks:

Hmmmm, insiders vs. Zero Hedge. I wonder which have the better record?

Since the Beginning of the Year, Bonds Have Outperformed

Above is a chart that compares the SPYs, UUP, IEF and DBC.  Since the beginning of the year, the IEF (7-10 year treasury) has clearly outperformed.

Monday, May 26, 2014

The world will little note, nor long remember what we say here, but it can never forget what they did here.

  - by New Deal democrat

Gettysburg National Cemetery

Antietam National Cemetery

Arlington National Cemetery

"We cannot dedicate - we cannot consecrate - we cannot hallow - this ground.  The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract."  - Abraham Lincoln

Sunday, May 25, 2014

International Week In Review: Slow But Steady Growth Continues Edition

This is up over at