Weekly Indicators for October 31 - November 4 at XE.com

 - by New Deal democrat

My Weekly Indicator post is up at XE.com.  The most up-to-date data typifies an economy in Indian Summer, and forecasts a narrow win for Hillary Clinton in Tuesday's election.

Here's my prediction, FWIW:

Clinton 49.5%
Trump 46.0%
Third parties 4.5%

October Jobs report: a positive final report before the election

- by New Deal democrat

HEADLINES:

• +161,000 jobs added
• U3 unemployment rate declined -0.1% from 5.0% to 4.9%
• U6 underemployment rate declined -0.2% from 9.7% to 9.5% (new post-recession low)

Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates

• Not in Labor Force, but Want a Job Now: down -176,000 from 6.088 million to 5.912 million  
• Part time for economic reasons: down 5,000 from 5.894 million to 5.889 million
• Employment/population ratio ages 25-54:rose +0.2% from 78.0% to 78.2% (new post-recession high)
• Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 from $21.68 to $21.72,  up +2.5% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)

August was revised upward by +9,000, and September was revised upward by +35,000, for a net change of +44,000. 

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were positive.

• the average manufacturing workweek rose +0.1 from 40.8 to 40.9 hours.  This is one of the 10 components of the LEI, and is a positive.
 
• construction jobs increased by +11,000 YoY construction jobs are up +195,000.  
 
• manufacturing jobs declined by -9,000, and are down -53,000 YoY

• temporary jobs - a leading indicator for jobs overall - increased by 6,400 (this made a peak last December, and recently has been stabilizing).


• the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - decreased by -177,000 from 2,574,000 to 2.397,000.  The post-recession low was set 1 year ago at 2,095,000.

Other important coincident indicators help  us paint a more complete picture of the present:

• Overtime was unchanged at 3.3 hours.
• Professional and business employment (generally higher- paying jobs) increased by +43,000 and are up +542,000 YoY.


• the index of aggregate hours worked in the economy rose by 0.2  from  105.8 to 106.0 

•  the index of aggregate payrolls rose  0.7 from 130.6 to  131.3 . 

Other news included:         

• the alternate jobs number contained  in the more volatile household survey decreased by  -43,000 jobs.  This represents an increase  of 2,728,000  jobs YoY vs. 2,357,000 in the establishment survey.    
   
• Government jobs rose by +19,000.     

• the overall employment  to  population ratio for all ages 16 and above declined from 59.8% to 59.7% m/m and is up +0.4% Y oY.   
• The  labor force participation rate fell from 62. 9% to 62.8% and is up +0.3% YoY (remember, this includes droves of retiring Bsoomers).     

 SUMMARY

This was a nearly perfectly positive report, With the exception of manufacturing jobs, YoY wage growth and broad labor force participation, everything else was positive across the board. Espectially positive was the new low in the U6 underemployment rate, and the increase in the prime age participation rate.  One longer term caution is that the YoY change in payroll growth continues to decelerate, but there is no imminent cause for concern.

This report is probably more significant as the last piece of economic data that could affect the election.  That both the unemployment and underemployment rates are lower than they were last December is particularly positive for the candidate of the incumbent party.  The economic fundamentals point to a narrow (e.g., 52%/48%) Hillary Clinton victory.  If the broad electorate views both candidattes as about equally distasteful, that's where I see the election result coming in.

  

Q# rents, housing, and car sales show slow consumer growth

 - by Neew Deal democrat

This post is up at XE.com.  Hosuing and cars are thw two most leading consumer sectors.  Right now both are essentially flat, while continued high rents are pressuring consumers and virtually the only source of any inflation at all.

Bonddad's Thursday Linkfest

For those of you who follow me on Twitter, I'm moving from @captivelawyer to @originalbonddad.  

I'm a Financial Adviser with Thompson Creek Wealth Advisers and an attorney with the Law Office of Hale Stewart

Total Residential and NonResidential Construction Spending

10-Year Chart of Private and Public Construction Spending as a Percent of GDP

YOY Percentage Change in Wage and Supplemental Payments Growth 

YOY Percentage Change in Service and Manufacturing Wages and Salaries

ISM Up Slightly in Latest Reading

ADP Employment Report

The 2016 election economy: the "Bread and Peace" model final forecast

 - by New Deal democrat

One of the election forecasts I have referred to frequently for the last year is the "Bread and Peace" model by Professor Douglas Hibbs.  Hibbs himself has not published any forecasts for this election, but the result forecast by his model has been updated from time to time by the site "Pollyvote," which describes his model thusly: 

The Bread and Peace model, developed by Douglas Hibbs, predicts the two-party popular vote based on just two fundamental variables that systematically affected post-war aggregate votes for president:

1. Weighted-average growth of per capita real disposable personal income over the term, and

1. Cumulative US military fatalities due to unprovoked, hostile deployments of American armed forces in foreign wars.

As of one week ago, the site forecast:

The 2016 Bread and Peace model predicts a victory for Hillary Clinton with 53.9% of the major party vote (compared to 46.1% for Donald Trump).

On Monday September personal income was reported, rising +0.3%. The inflation measure rose +0.1%.  But real *disposable* income for the month actually declined, so here is what real disposable personal income per capita looks like through Q3, the last measure before the election: 

The deceleration in growth of real disposable personal income is evident when we look at this data YoY:

Through August, Q3 real disposable income averaged an increase of +0.2% from Q2.  With September's report, that declines to less than +0.1%.

Thus the Bread and Peace model's final reading for Hillary Clinton is less than 53.9%, although above 50%.

Since August 1, poll aggregations have floated around +4% for Clinton, +/-3% depending on which candidate for whom the most recent news was awful.  If the voting public concludes on average that they are about equally distasteful, then a result closer to that forecast by economic fundamentals becomes more likely.

Bonddad's Thursday Linkfest

For those of you who follow me on Twitter, I'm moving from @captivelawyer to @originalbonddad.  

I'm a Financial Adviser with Thompson Creek Wealth Advisers and an attorney with the Law Office of Hale Stewart

Total Residential and NonResidential Construction Spending

10-Year Chart of Private and Public Construction Spending as a Percent of GDP

YOY Percentage Change in Wage and Supplemental Payments Growth 

YOY Percentage Change in Service and Manufacturing Wages and Salaries

ISM Up Slightly in Latest Reading

ADP Employment Report

ISM positive, construction spending confirms flattish housing market

 - by New Deal democrat

This morning we got our first October economic report.  The ISM manufacturing index was again weakly positive at 51.9.  The more forward looking new orders sub-index was a little bit more positive at 52.1.  The new orders component in particular was about at its average for this entire year, telegraphing continued weak expansion.

So let me turn some extra attention to the report for construction spending for September.   This was negative for the second month in a row, and has been essentially flat for over a year:

Although I won't put up a graph, YoY total construction spending is slightly negative at -0.2%.

When we break down construction spending into its components, it is easy to see that residential spending turns first (red in the graph below), followed by nonresidential (blue), and finally with a big lag, public construction (green right scale):

Let's take a closer look at the last couple of years.  Both residential and nonresidential peaked early this year, and have declined slightly since then:

Finally, let's see how residential construction spending compares with an important leading indicator, housing starts (as usual for the last year, I am choosing this metric vs. permits because permits were greatly distorted by an NYC tax break in spring 2015):

Construction spending follows housing starts with a slight lag (although they have the virtue of being much less noisy).  Starts have been going sideways for about 18 months, and construction spending followed the trend a few months later.

So I look at construction spending as simply confirming what we have seen with the longer  leading indicators in the housing sector.  I continue to expect a little bounce in starts as summer's low mortgage rates filter through the system.  But for the foreseeable future, I expect the slightly lagging construction spending series to remain essentially flat.

 

My outlook differs from that of Bill McBride a/k/a Calculated Risk a/k/a the Nicest Guy in the Econoblogosphere, who expects housing to pick up in the next few years (and has been cited for that proposition by Econbrowser's Prof. James Hamilton.  While I have great respect for both, my question is, if you are correct, then why has housing been so flat for the last year or more?  Wan't your dynamic already in place?  Why hasn't it played out in the last 12 months?

My view is that housing is driven first and foremost by interest rates, with an assist from demographics.  Demographics are positive, which is why the increase in interest rates in late 2013 only made the housing sector go flat, not down.  But without meaningful new lows in interest rates, history going back 60+ years says that the housing sector will remain stalled at best.

Bonddad's Tuesday Linkfest

For those of you who follow me on Twitter, I'm moving from @captivelawyer to @originalbonddad.  

I'm a Financial Adviser with Thompson Creek Wealth Advisers and an attorney with the Law Office of Hale Stewart

EU Continues Moderate Growth Path

EU Inflation Picks Up a Bit Thanks to Service Prices

1-Year Charts of EU ETFs

Japanese Industrial Production and Retail Sales Continue to Disappoint

Personal Income and Expenditures Increased in September

Personal income increased $46.7 billion (0.3 percent) in September according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $37.0 billion (0.3 percent) and personal consumption expenditures (PCE) increased $61.0 billion (0.5 percent).

Real DPI increased less than 0.1 percent in September and Real PCE increased 0.3 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

1-Year Chart of Monthly Change in Durable, Nondurable and Service Spending

Bonddad's Monday Linkfest

For those of you who follow me on Twitter, I'm moving from @captivelawyer to @originalbonddad.  

I'm a Financial Adviser with Thompson Creek Wealth Advisers and an attorney with the Law Office of Hale Stewart

Key Charts From Friday's GDP Report 

Quarterly Change in GDP

Contributions to Percentage Change in GDP

Quarterly Percentage Change in Sub-Categories of PCE Growth

Quarterly Percentage Change in Investment Growth

Building Permits and Housing Starts

Building Permits

Housing Starts

Durable Goods Orders

Case-Shiller Home Price Indexes

We Weekly Columns Are Up at XE.com

US Equity and Economic Week in Review

US Bond Market Week in Review

International Week in Review