Friday, July 20, 2018

The US is not in an economic Boom: midyear udpate

 - by New Deal democrat

At the beginning of this year I asked: Is the US economy going to enter a Boom in 2018?

To recap, there is no standard definition of a Boom. But in my lifetime there have been two occasions when the "good times" feeling was palpable, and the economy was working extremely well on a very broad basis: the 1960s and the late 1990s tech era. During both times,  employment was rampant and average people felt that their situations were going well.

Back in January I identified five markers that, taken together, marked off the two eras as unique: the low unemployment rate, the duration of a very good rate of growth of industrial production, strong growth in real average and real aggregate hourly wages, and increasing inflation.

Let's update all of these through midyear.

First, in both the 1960s and late 1990s, the unemployment rate (note that the U6 underemployment rate wasn't reported in its current configuration until 1994, and so is not helpful), hit 4.5% or below for extended periods of time:

While these weren't the only two periods of low unemployment, they are among those that stand out.

Needless to say, we've hit that marker.

Second, during both the 1960s and 1990s, production grew at or over 4% a year for extended periods of time, not just right after the end of a recession  

While the YoY% growth of industrial production has been accelerating this year (up to +3.8% in June), it has still not hit 4%.

The rate of growth of real average earnings for non-managerial employees, both individually and in the aggregate are the third and fourth markers of the two Booms.  In contrast to other expansions, real average hourly earnings also grew at roughly 1% YoY or better:

Meanwhile, real aggregate earnings grew at a rate of 4% YoY or better:

Real average hourly earnings have not grown at all in the past year. Real aggregate earnings are growing at the tepid rate of 2.5%.

The fifth and final  marker of a Boom -- probably as the byproduct of the first four -- is an increase in the YoY rate of inflation:

This has been occurring, although it is probably due more to the price of gas than to any wage pressures.

So far this year, only the first and last markers are present: low unemployment and an increasing YoY inflation rate. But industrial production is not growing as fast as during either of the two Booms, and real wage growth has continued to be lackluster to say the least.

In short, while the production side of US economy is doing pretty well, the consumer side of the economy remains tepid, and in particular wage growth is non-existent. As of midyear 2018, the US economy is not Booming.

Thursday, July 19, 2018

US layoff rate at all time lows

 - by New Deal democrat

I don't write about new jobless claims much anymore, mainly because it has been boringly good for a few years (outside of hurricane disruptions!).  But there are times like this week when I am particularly thankful that I am concentrating on the one thing - the economy - that is doing unequivocally well.

Back in 2009 and 2010 when I was arguing with the Doomer dead-end recession double-dippers, I used to hear from people who were still in danger of, or worse, had been laid off. I sympathized, and just noted that, however bad things seemed, they had been even worse in 2008 and early 2009, and conditions were still going to improve.

I haven't heard stories like that in a few years. One of my milestones was when Atrios over at the Eschaton blog stopped reporting on the weekly jobless claims as "xxx,000 new lucky duckies."

Well, this morning, we had yet another new 48 year low in initial jobless claims, at 207,000. We had lower numbers, in the high 100,000's, in the 1960s, but that was against a US population that was only half of what it is now.

In other words, we have never had a lower *rate* of layoffs for as long as records have been collected:

As of this morning, roughly only 1 in 800 workers is filing a new jobless claim each week.

Occasionally  I still see it noted that the percent of jobs which qualify for filing for unemployment insurance is lower than it used to be. That is true, but the DoL keeps track of that number as well, and we can calculate what the number of initial claims would be normed for  this:

If the same percent of jobs now qualified for unemployment insurance as at any point in the last 50+ years, it would translate into about 270,000 new claims per week -- still a very good number.

So today I will celebrate one unabashedly good thing about the US economy: it is almost unheard of now to get laid off.

Wednesday, July 18, 2018

Disappointing housing permits and starts point to housing, GDP slowdown

 -  by New Deal democrat

For the second month in a row, the preponderance of evidence from housing permits and starts is that increased interest rates and continuing increased prices are beginning to take a bite out of the market. 

FRED doesn't have the graphic updates yet, so let's look at the charts provided by the Census Bureau.

First, here are housing permits:

Total permits declined to a 9 month low, and are actually down YoY. The less volatile single family permits rose, but are just above its 9 month low from one month ago. 

This remains the first time that single family permits have declined about 4% since 2010. But because the peaks for single family homes were only in February, and overall in March, not enough time has passed to be confident that this downturn is truly significant. Declines of 4% or more took place several times in the 1990s and 2000s without signaling the top of the market, as in 1994-95, 1996, and 2004:

It is noteworthy that in 2017, there was a similar pattern of new highs in permits during the winter months, and a decline in the spring and summer. So there may also be some residual seasonality that has not been accounted for (data shown through May):

The more volatile total and single family housing starts also declined to 9 month lows:

There were also significant downward revisions to the last several months. This had a significant effect on the three month rolling average, which cuts down on volatility. Initially, last month's three month average was a new expansion high. With the revisions, the high is now back in March.

So there is not enough evidence of a significant downturn to set off any recession alarms. It would take a decline of at least 5% from peak in single family permits for me to change my evaluation of the housing market. At the same time, as I noted last month, even though the economy didn't roll over, in two of the last 3 times -- 1994 and 2004 -- where there was a similar decline in permits outside of recessions, real GDP did slow down:

Further, note that we are getting the same message from the flat but not inverted yield curve, which over the last few decades has signaled a substantial slowdown in GDP growth several quarters later.

Thus,while the evidence is hardly conclusive, there is an increased preponderance of evidence  that housing is slowing down, and that this slowdown will show up in GDP within the next year.

Tuesday, July 17, 2018

Real retail sales and industrial production update

 - by New Deal democrat

I'm having a hardware issue, so this will be a quick hit. Hopefully sometime tomorrow everything will be back to normal.

Yesterday we had another excellent retail sales number, up +0.4. YoY real retail sales are up +3.7%. Since these sales are a good short leading indicator for employment, that suggests the good monthly jobs readings are likely to continue, at least for a few more months:

This morning industrial production was positive, but with a significant caveat. Production increased +0.6% in June, extending the recent good trend (total is black, manufacturing is red in the graph below):

The caveat is that May was revised down by -0.4%, so on net June was up +0.2% over the level as of last month's initial report.

Bottom line: the run of good, positive news continues.

Saturday, July 14, 2018

Weekly Indicators for July 9 - 13 at Seeking Alpha

 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

The biggest story continues to be what is happening with the long leading indicators.  This week several moved in opposing directions.

Since my compensation is tied to the number of readers, by all means indulge your curiosity! You'll have to register, but registration is free.

Friday, July 13, 2018

Real average and aggregate wages: July 2018 update

 - by New Deal democrat

As we close out this week devoted to jobs and wages, with the consumer price index having been reported yesterday, let's take a look at real wages.

By now you've probably read elsewhere that YoY wages for average workers actually declined slightly (-0.1%):

But the flatness goes back further: all the way to February 2016:

Real wages have only grown 0.4% in the last 2 years and 4 months.

So why is the consumer economy still growing?  In part because the savings rate has declined:

Another reason for the growth, at least this year, which I'm unable to graph, is that on net there was about $4 Billion per month cut in withheld taxes, much and perhaps most of which is being spent.

Finally, let me update the graph on real aggregate wage growth, which shows that since their bottom way back in October 2009, they have risen by about 26%:

Basically, the improvement in the employment rate, plus the growth in average hours worked, is making up for the stagnation in real hourly wages.

Thursday, July 12, 2018

A (mainly) business cycle explanation for this year's better jobs growth

 - by New Deal democrat

The pace of job creation declined from averaging over 200,000 a month between Q2 2014 through Q2 2015 to 180,000 or less during most of 2017. This year, it has picked up noticeably to over 200,000 per month again:

Why?  A basic analysis of the business cycle supplies an answer. To quickly refresh, long leading indicators tell us about the direction of the economy more than 1 year out; short leading indicators by less than 1 year. Payrolls, along with industrial production, are the premiere coincident indicators.

So let's see where we have been over the last few years.

Professor Geoffrey Moore identified four long leading indicators in his 1993 book on forecasting: corporate bond yields, housing permits, real M2, and corporate profits deflated by unit labor costs. These four historically were bundled into the proprietary "US Long Leading Index" by the Economic Cycle Research Institute, or ECRI.  After disappearing from view since 2010, late last year an updated graph was published. Here it is:

Note that growth in the index nearly stalled in early 2016, before rising considerably later that year, then declining in early 2017.

In other words, the index forecast a stalling economy into early 2017, with growth picking up later in 2017 into early 2018.

But we can graph the four long leading indicators ourselves. Here is their YoY% change over the last five years:

We can see their steep slowdown beginning in 2014 and continuing into early 2016, and an upturn in late 2016 through early 2017 before sharply decelerating again.

And here's what happened with real GDP:

Note that YoY GDP growth started to decline one year after the LLI turned down, bottom six months after the trough in the LLI, and accelerated through 2017.

Thus, for example, in my forecast for 2017, which I published in January of the year, I called for the economy to be quite strong in the first half, and continued positivity in the second half.  Following a normal pattern, strength in the long leading indicators should transmit into strength in short leading indicators as we get towards one year later.

So did we see an upturn in short leading indicators in 2017? We sure did.

Here, for example, are three of them: stock prices, real retail sales, and initial jobless claims (inverted), all normed to 100 in January 2016:

After largely stalling in 2016, they turned up somewhat in early 2017 before really taking off later in 2017 into early this year.

Here's another short leading indicator: the ISM manufacturing new orders index:

Note how it turned up sharply going into 2017 and remained that way throughout the year.

So, to recapitulate, we had an upturn in the long leading indicators beginning in Q2  2016, which translated into an upturn in short leading indicators especially later in 2017, and now we see the strength spilling into the coincident indicator of job creation in the first part of 2018, as well as the other premier coincident indicator, industrial production:

I don't mean to suggest that the reason for strong job growth this year is mono-causal. I suspect that hurricane and California fire repairs played an important role in new production and spending during the last few months of 2017. The turnaround in energy production has also  helped. And the tax cut, while very inefficient -- because it is so lopsided in favor of the wealthy -- has shown up in decreased withholding tax receipts this year, which presumably means that amount of money is available to consumers to spend.

So, what's ahead? Well, if you go back and look, the long leading indicators almost all hit zero at the end of last year, before a weak rebound in the first quarter of this year. The stock market has gone basically sideways for six months, initial claims for the last few, and manufacturing new orders, while positive, are not so strong as before.

Thus, back in January my forecast was for weaker, but positive, growth in the second half of this year compared with the first half.

For what it's worth, consistent with my view, at the time ECRI's LLI was publicly published late last year, ECRI's Chairman, Lakshman Achuthan, indicated that they portended a global slowdown.

And that means I expect job growth to slow back down later this year.

Wednesday, July 11, 2018

May JOLTS report: as good as could be asked for

 - by New Deal democrat

The simple take on yesterday's JOLTS report for May is that it was excellent:
  • Hires made a new high
  • Quits made a new high
  • Total separations made a new high
  • Openings were just shy of their expansion high
  • Discharges were just shy of their expansion low
In short, pretty much everything good that could happen during a positive labor market, happened.

So let's update where the report might tell us we are in the cycle.

Let's start with the simple metric of "hiring leads firing." Here's the long term relationship since 2000, quarterly through the end of March:

Here is the monthly update for the past several years through May:

In the 2000s business cycle, both turned down well in advance of the recession. That isn't the case now.

Hires had been within a 2% range since last May, and had not made a new high since last October, making YoY comparisons more challenging as of this month, but both hires and separations jumped considerably (interestingly, just like May last year, which makes me wonder if there is a little unresolved seasonality).

Further, in the previous cycle, after hires stagnated, shortly thereafter involuntary separations began to rise, even as quits continued to rise for a short period of time as well:

[Note: above graph show quarterly data, ending Q1, to smooth out noise]

Here is a close-up of the same data on a monthly basis for the last 2 years through May:

This in no way resembles a late cycle report from the 2000s cycle. Nevertheless, the large majority of overall economic data suggests we are late in the cycle. Thus, my anticipation remains that we will see weaker, and even negative YoY readings on hiring in particular at some point in the second half of this year. We'll see.

Tuesday, July 10, 2018

A business cycle theory of labor force participation and wage growth

 - by New Deal democrat

I've devoted a lot of time and thought, and typed a lot of pixels of commentary, about wage growth in the last few years. Some of it has panned out: based on past expansions,I expected YoY wage growth to bottom consistent with an unemployment rate of about 6%. A little later I refined that to an underemployment rate of 9%. In retrospect that is indeed about when wage growth bottomed out in this expansion.

But even three years ago, I expected wage growth to rather quickly reach 3% YoY once that level of underemployment was breached to the downside.  Obviously, that didn't happen.

Rather than ignore the call that didn't pan out, I have tried to understand why.

One important part is the changed behavioral set-points of both employers and employees. Ever since the 1980s, when unions were effectively broken, employers have found that they can get away with paying less and less to maintain employees. Those employees learned to expect less and less in the way of raises from employers. During each successive expansion, employers have tightened the screws more and more, until by now giving raises has become a taboo, where employers would rather sacrifice at the least short term profits from more production than give in to the necessity of raising pay.

But if the taboo against raising wages is a secularly increasing phenomenon, on another level I think we can still tease out a lot of information in terms of the order and direction of employment and wage trends.

To that end, I want to propose a general theory of labor force participation and wages within business cycles. To wit, at least in the modern era since 1982, the pattern has been:

1. the unemployment rate peaks, and begins to decline.
2. prime age labor force participation bottoms, and begins to rise
3. nominal wage growth bottoms, and begins to rise.
4. If labor force participation grows too quickly, wage growth languishes.

In other words, as a recession deepens, not only are more people laid off, but an increasing number of people leave the labor force entirely. At some point, as more of the people remaining in the labor force get work, people who have been on the sidelines are drawn back into the labor force and look for work. As even a bigger share of this expanded pool of potential workers find employment, the wages needed to entice them to a job begin to rise. But sometimes the increased number of those entering the workforce causes the pool of available workers for hire to become temporarily saturated, and in that case the pressure for increased wage growth ebbs.

Now let me lay out the supporting graphs. All of these date from 1982 to the present.

First, the unemployment rate leads prime age labor force participation:

The unemployment rate (blue, inverted in the graph below) also leads wage growth:

Further, the prime age labor force force participation rate leads wage growth:

Thus, we have our progression: decreasing unemployment rate --> rising prime age participation --> increased wage growth. 

But while it seems pretty clear that, over an economic cycle, participation leads wages, within that cycle there may be waxing and waning rates of participation increase. That's what is shown in this next graph, which shows the YoY change in the prime age labor force participation rate:

Note that the last several years have shown the sharpest growth in prime age labor force participation since the 1980s, except for 1996.

Further to the point, in the below graph, prime age labor force participation in inverted, with any YoY rate of increase greater than +0.3% showing as a negative:

We can see that when there is a surge in labor force participation, wage growth tends to wane. In the 1980s, when there was persistent growth in participation YoY over more than 0.3%, wages actually declined.

Let's now zoom in on the last 5 years:

Prime age labor force participation has grown by more than 0.3% YoY in 22 of the last 24 months. While there has been some acceleration in wage growth during the first part of this year, it has still not hit so much as 3%.

To put my whole theory together, I think employers increasingly developing a the behavior of a taboo against raising wages ("wages are also sticky to the upside" in econospeak) is a powerful explanation of the decades'-long secular trend; while the pattern I have set forth in this post is an equally good hypothesis to explain the within-cycle behavior of labor force participation and wages over the last 35 years. 

Monday, July 9, 2018

A teaser about wages and labor force participation

 - by New Deal democrat

I was going to put up a short piece about wages this morning, but it has turned into a longer, more comprehensive piece, so in the meantime, here are some teasers to ponder.

1. There is a direct relationship between the economy generally, and child care costs specifically, and couples' decisions about whether or not to have more children:

The below graph comes from It is the top eight reasons that couples give for not having (more) children:

Note that 6 of the 8 reasons have to do with the economy, and 4 of those specifically have to do with the costs of child care.

2. While correlation is not causation, nonetheless in the modern era, there has been a clear correlation whereby prime age labor force participation leads nominal wage growth:

3. Despite #2 above, in the shorter term there appears to be an inverse correlation between the rate of prime age employment growth and relative wage growth:

I'll flesh this out in the more comprehensive post.

Sunday, July 8, 2018

Understanding the simple strategy for the 2018 elections

 - by New Deal democrat

It's Sunday, so I feel free to stray from nerdy economics ....

Pretend for a moment that you are a political strategist. Your party is the party in power. The opposition has been enraged since the moment of your standard-bearer's election. In the special and off-year elections since, they have been showing up in unprecedented droves for offices up and down the ticket, from Governor and US Senator to state representative and local council.

The mid-term election is bearing down, and you know very well that midterm elections are fundamentally referendums on how the party in power is doing. The odds look overwhelming that the opposition turnout tsunami, at least, is likely to continue.

As a strategist, what of the following courses of action do you recommend?

(a) make soothing noises, hoping that the anger of the opposition is mollified enough that your candidates squeak through
(b) engage in searingly divisive behavior that will rile up your base
(c) get rip-roaring drunk and hide under a table curled up in a fetal position until it's over, so that you don't remember anything

Whether or not you choose to do (c), it's pretty obvious that (b) is the correct answer, isn't it?

Opposition supporters already hate your with the heat of 1000 suns. So what if you repeatedly do such cruel and outrageous things that they become incandescent with rage. They're going to turn up anyway, regardless of what you do. 

Since the opposition is going to turn out in droves, your best option is to get your base to turn out in droves as well. You don't do that by disappointing your base, or putting them to sleep (Cf. Obama, 2010). Here's Rasmussen's poll of "strong approval vs. strong disapproval" from that time:

Note how enervated Obama's base was, with only about 27% +/-2% during that time.

No, you do that by getting your base incandescent with rage as well. You want to pick the bloodiest fights you can, so that your base feels they need to show up and support you and your allies, lest their enemies prevail. Here's Rasmussen's equivalent poll for Trump right now:

Note that the level of strong disapproval is about the same as for Obama, but the level of strong approval has been inching up, and is currently at about 33% +/-2%.

Once you understand this simple strategy, all of the horrible things that have been done by Trump and the GOP in the last few months make perfect sense. The more mean, cruel, divisive, bloody fights that are boiling over this November, the more the GOP base will turn up. Since the Democrats' base is going to turn up anyway, this gives you your best chance to preserve your majorities.

Saturday, July 7, 2018

Weekly Indicators for July 2 - 6: long term forecast continues to deteriorate

 - by New Deal democrat

June data started out with another strong jobs report, but once again with weak wage growth. Motor vehicle sales and both the ISM manufacturing and nonmanufacturing indexes were very positive as well.  
May data included and increase in construction spending and factory orders.
My usual note: I look at the high frequency weekly indicators because while they can be very noisy, they provide a good Now-cast of the economy, and will telegraph the maintenance or change in the economy well before monthly or quarterly data is available. They are also an excellent way to "mark your beliefs to market."
In general I go in order of long leading indicators, then short leading indicators, then coincident indicators.
NOTE that I include 12 month highs and lows in the data in parentheses to the right. All data taken from St. Louis FRED unless otherwise linked.
Interest rates and credit spreads
  • BAA corporate bond index 4.79% down -.05% w/w (1 yr range: 4.15 - 4.94) 
  • 10 year treasury bonds 2.82% down -.04% w/w (2.05 - 3.11) 
  • Credit spread 1.97% down -.01% w/w (1.56 - 2.30)
Yield curve, 10 year minus 2 year:
  • 0.28%, down -0.05% w/w (0.28 - 1.30) (new expansion low)
  • 4.69%, up +0.03% w/w (3.84 - 4.79) 
BAA Corporate bonds remain neutral. If these go above 5%, they will become a negative. Mortgage rates and treasury bonds are still both negatives. The spread between corporate bonds and treasuries has now gone above 1.85%, and so I have switched it from positive to neutral. The only remaining positive is the yield curve, and if that declines to +0.25%, that too will become a neutral.
  • Purchase apps down +1% to 244 w/w (225 - 262)
  • Purchase apps 4 week avg. -2 to 248
  • Purchase apps YoY -1%, 4 week YoY avg. +1%
  • Refi app down -2% w/w
  • Up +.1% w/w 
  • Up +3.8% YoY ( 3.3 - 6.5) (re-benchmarked, adding roughly +0.5% to prior comparisons) 
Refi has been dead for some time. Purchase applications were strong almost all last year, began to falter YoY in late December, but rebounded during spring, ultimately making new expansion highs. The 4 week average declined from the peak enough to qualify as neutral for most of the past month, including this week. If it drops below 240 and is negative YoY, it will become a negative.
With the re-benchmarking of the last year, the growth rate of real estate loans changed from neutral to positive. If the YoY rate falls below +3.25%, I will downgrade back to neutral.
Money supply
  • -0.1% w/w 
  • -0.7% m/m 
  • -0.8% Real M1 last 6 months
  • +0.9% YoY Real M1 (0.9 - 6.9) (new expansion low) 
  • +0.1% w/w 
  • +0.5% m/m 
  • +1.9% YoY Real M2 (0.9 - 4.1)
Since 2010, both real M1 and real M2 were resolutely positive. Both decelerated substantially in 2017. Real M2 growth has fallen below 2.5% and is thus a negative. Real M1 growth this week was again below 3.5% YoY, and again on a 6 month basis was negative, so real M1 overall is scored as neutral. Note that it is less than 1% above the point where it will turn outright negative.
Credit conditions (from the Chicago Fed)
  • Financial Conditions Index up +0.03 to -0.78
  • Adjusted Index (removing background economic conditions) up +.02 to -0.51
  • Leverage subindex up +.05 to -0.26 (2 year high)
The Chicago Fed's Adjusted Index's real break-even point is roughly -0.25. In the leverage index, a negative number is good, a positive poor. The historical breakeven point has been -0.5 for the unadjusted Index. All three metrics presently show looseness and so are positives for the economy; HOWEVER, in the last two months, leverage has turned up by roughly +0.2 to a two year high.
Trade weighted US$ 
  • Up +0.15 to 124.12 w/w +2.3% YoY (last week) (broad) (116.42 -128.62) 
  • Down -0.49 to 94.00 w/w, -2.08% YoY (yesterday) (major currencies
The US$ appreciated about 20% between mid-2014 and mid-2015. It went mainly sideways afterward until briefly spiking higher after the US presidential election. Both measures had been positives since last summer, but in the last month the broad measure turned neutral.

Commodity prices
Bloomberg Commodity Index
  • Up +0.68 to 86.21 (81.67 - 91.94)
  • Up +5.38% YoY
  • 124.23 down -5,81 w/w, up +9.28% YoY (112.03 - 149.10) 
Commodity prices bottomed near the end of 2015. After briefly turning negative, metals also surged higher after the 2016 presidential election. The overall commodity index (which includes oil) is neutral. Industrial metals had been strongly positive and recently made a new high, but have declined significantly in the past several weeks, enough to change their rating to neutral.
  • Up +1.5% w/w at 2759.82 
After being neutral for several months, by an ever-so-slight margin stock prices made a new 3 month high on June 12, and so have returned to being positive.
Regional Fed New Orders Indexes
(*indicates report this week) (no reports this week)
The regional average has been more volatile than the ISM manufacturing index, but has accurately forecast its month over month direction. After being very positive for most of this year, it has moderated slightly in the last few weeks.
Employment metrics
Initial jobless claims
  • 231,000 up +4.000
  • 4 week average 224,500 up +2,500 
Initial claims have recently made several 40+ year lows and so are very positive. The YoY% change in these metrics had been decelerating but is now back on its multi-year pace. 

  • Unchanged at 97 w/w
  • Up +1.1% YoY
This index was generally neutral from May through December 2016, and then positive with a few exceptions all during 2017. It was negative for over a month at the beginning of this year, but returned to a positive since then.
  • $181.0 B for the last 20 reporting days vs. $184.2 B one year ago, down -$3.2 B or -1.7%
  • 20 day rolling average adjusted for tax cut [+$4 B]: up +$0.8 B or +0.4%
With the exception of the month of August and late November, this was positive for almost all of 2017. It has generally been negative since the effects of the recent tax cuts started in February.
I have discontinued the intramonth metric for the remainder of this year, since the kludge to guesstimate the impact of the recent tax cuts makes it too noisy to be of real use.
I have been adjusting based on Treasury Dept. estimates of a decline of roughly $4 Billion over a 20 day period. Until we have YoY comparisons, we have to take this measure with a big grain of salt.
  • Oil down -$0.46 to $73.93 w/w, up +61.1% YoY
  • Gas prices up +$.01 to $2.84 w/w, up $0.58 YoY 
  • Usage 4 week average up +1.2% YoY 
The price of gas bottomed over 2 years ago at $1.69. With the exception of last July, prices generally went sideways with a slight increasing trend in 2017. Usage turned negative in the first half of 2017, but has almost always been positive since then. The YoY change went back above 40% recently, so the rating has turned negative.
Bank lending rates
  • 0.429 TED spread down -0.028 w/w 
  • 2.010 LIBOR up +0.001 w/w (tied for new expansion high)
Both TED and LIBOR rose in 2016 to the point where both were usually negatives, with lots of fluctuation. Of importance is that TED was above 0.50 before both the 2001 and 2008 recessions. The TED spread was generally increasingly positive in 2017, while LIBOR was increasingly negative. This year the TED spread has whipsawed between being positive or negative. This week it was positve.

Consumer spending 
Both the Goldman Sachs and Johnson Redbook Indexes generally improved from weak to moderate or strong positives during 2017 and have remained positive this year.
  • Carloads up +0.7 YoY
  • Intermodal units up +8.5% YoY
  • Total loads up +4.6% YoY
Shipping transport
Rail was generally positive since November 2016 and remained so during all of 2017 with the exception of a period during autumn when it was mixed. After some weakness in January and February this year, rail has returned to positive.
Harpex made multi-year lows in early 2017, then improved, declined again, and then improved yet again to recent highs. BDI traced a similar trajectory, and made 3 year highs near the end of 2017, declined early this year, but recently has hit multiyear highs.
I am wary of reading too much into price indexes like this, since they are heavily influenced by supply (as in, a huge overbuilding of ships in the last decade) as well as demand.
  • Up +0.5% w/w
  • Up +1.9% YoY
Steel production improved from negative to "less bad" to positive in 2016 and with the exception of early summer, remained generally positive in 2017. It turned negative in January and early February, but with the exception of three weeks recently has been positive since then. 
Among the long leading indicators, the Chicago Fed Adjusted Financial Conditions Index,  real estate loans, and the yield curve remain positives -- but the the Chicago Fed Financial Leverage Index, while still positive, is significantly less so than in the last two years. Corporate bonds, credit spreads,mortgage rates, and real M1 are neutral, rejoined this week by purchase mortgage applications. Real M1 is on the cusp of turning negative. Treasuries, refinance applications, and real M2 are all negative.
Among the short leading indicators, the regional Fed new orders indexes, the Chicago National Conditions Index, jobless claims, stock prices (just barely), and staffing are all positive. Gas prices, the commodities indexes, and the spread between corporate and Treasury bonds are neutral. The US$ is mixed. Oil prices are strongly negative.
Among the coincident indicators, positives include consumer spending, Harpex, and rail, steel, the TED spread, and tax withholding. The Baltic Dry Index also turned positive this week.  LIBOR remains negative.
As has been the case for many months, both the nowcast and the short term forecast remain positive. Manufacturing in particular is doing very well. 
The longer term forecast, however, led by real M1, the yield curve, the credit spread,  purchase mortgage applications, and now one financial conditions index, continues to deteriorate. The first three are all very close to downgrades.  About a month ago the deterioration was enough to downgrade the forecast from positive to neutral. *IF* this trend continues, it is within the range of reasonable possibility that the forecast turns negative within the next month.
Have a nice weekend!