Weekly Indicators for December 15 - 19 at XE.com

 - by New Deal democrat

My Weekly Indicators post is up at XE.com.

The strong dichotomy between international and domestic US data continues.

US Equity Market Review For the Week of December 15-19: Searching For the Signal In the Noise

     I think it's the secret desire of every technical analyst to always find order in the chaos.  We secretly believe that if we look long enough and hard enough at a series of charts, a clear pattern and future course of action will emerge.  There are times -- like the last couple of weeks -- where it has been damn hard to see what is happening.  For example, take this 30-day, 5-minute chart of the SPYs:

There are two week-long rallies with a slight upward angle -- one at the end of November and one at the beginning of December.  Both rallies hit resistance in the upper-206/lower207 area.  Then a downward sloping channel emerges with increased volatility and wider price swings.  Losses were consolidated at the beginning of last week until the Fed announcement when prices moved sharply higher.  But the chart really doesn't give us any meaningful and understandable overall pattern to discern.  Instead, it's a jumbled mess.

 

 

The daily SPY does still show an upward-sloping rally.  But there are two problems with this, with the first being the sell-off that clearly broke through the support lines connecting the early February and mid-December lows.  Martin Pring advises that a break doesn't change the trend if it is less than 2%-3%.  But that's not the case here where the move was over 6%.  And then there's the potential upward sloping wedge pattern forming, which is usually considered a topping pattern.  The trend break and the wedge give a strong indication that the market is indeed topping. 

 

     But, when we pull the lens back further to a far longer time frame, we're still in a rally:

 

 

   

Looking at the 4-year weekly chart, we're still clearly moving higher.  The price action that was so confusing above has been reduced to two bars, one red and one clear, indicating we had a brief sell-off followed by a rally. 

          And that analysis falls in line with the latest economic analysis from the Fed's latest policy statement:

Information received since the Federal Open Market Committee met in October suggests that economic activity is expanding at a moderate pace. Labor market conditions improved further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has continued to run below the Committee's longer-run objective, partly reflecting declines in energy prices. Market-based measures of inflation compensation have declined somewhat further; survey-based measures of longer-term inflation expectations have remained stable.

          This is directly in line with the Conference Board's LEIs and CEIs:

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.6 percent in November to 105.5 (2004 = 100), following a 0.6 percent increase in October, and a 0.8 percent increase in September.

“The increase in the LEI signals continued moderate growth through the winter season,” said Ken Goldstein, Economist at The Conference Board. “The biggest challenge has been, and remains, more income growth. However, with labor market conditions tightening, we are seeing the first signs of wage growth starting to pick up.”

“Widespread and persistent gains in the LEI point to strong underlying conditions in the U.S. economic expansion,” said Ataman Ozyildirim, Economist at The Conference Board. “The current situation, measured by the coincident economic index, has been improving steadily, with employment and industrial production making the largest contributions in November.”

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.4 percent in November to 110.7 (2004 = 100), following a 0.2 percent increase in October, and a 0.3 percent increase in September.

          And finally, consider this chart from Scott Grannis showing the relationship between corporate profits and GDP:

Earnings are the mother's milk of the stock market.  And right now, corporations are making a ton of money.

     On the downside, the market is still expensive from a valuation perspective, so the upside is limited, barring further growth.  But given the underlying economic fundamentals there is no reason to think growth won't continue.  And that makes the last month of price action nothing more than statistical noise in the wider context of a growing economy.

Programming note

 - by New Deal democrat

We're getting down to the end of the year.  Next week we get reports on durable goods, personal income, and the final revision of Q3 GDP, and that about does it.

So over the next two weeks, I'll be grading my forecast for 2014 made at the end of last year,  making a detailed forecast for 2015, and pointing out a few important relationships to watch.  Also I'll be looking back at my 2014  housing forecast and compare it with the very different forecast made by Bill McBride, a/k/a Calculated Risk.

BTW, I'm sure you have noticed that the guy after whom this site is anmed has been more or less M.I.A.  That's because he hasn't been posting links to most of his stuff, which you can find by clicking on this link to XE.com's market blog. Since we routinely get 2000+ page views over there (I got 7000+ for my Weekly Indicators piece last weekend), he's been spoiled.

I generally post stuff relevant to jobs and wages over here, with general data and forecasting commentary over there. I don't plan on changing that, and I've been encouraging Hale Stewart to post more "old-fashioned" Bonddad pieces here.

The current economic tale told by real retail sales

 - by New Deal democrat

I have a new post up at XE.com, describing how real retail sales have value as long leading, coincident, and mid-cycle indicator for the economy, and a short leading indicator for jobs.

It's a pretty useful metric.  What's it showing now?

Americans finally think the economy has turned a corner

 - by New Deal democrat

I have a new post up at XE.com.  All sorts of gauges of consumer sentiment indicate that, courtesy of cheaper gasoline, and probably consistent job gains of over 200,000 a month, in the last few months American consumers are coming around to the opinion that the economy is actually doing OK.

Real aggregate and average wage measures set records in November

 - by New Deal democrat

Courtesy of the huge decline in gas prices, in November consumer prices actually declined by -0.3%. Not only does that bring the YoY inflation rate down to +1.4%, but because of this deflation, at least two important measures of wages set records.

The most important record is that in real aggregate wages per capita.  What this measures is how much in real, inflation-adjusted wages are being paid out for each person in the US population.  This further tells us how much, in real terms, wage-earners in the aggregate have to spend on their families.  Here's the graph:

This just set an all time record in this metric, which goes back 50 years.

Second, average real wages for all employees just set a post-recession record:

This series is less than 10 years old, so this is a record for the series.

Finally, while it did not set a record, here is a look at real, inflation-adjusted wages for all nonsupervisory workers (a more representative series for middle and working class Americans):

As a result of the boot due to declining energy prices in November, this series is only 0.3% off from its October 2010 post-recession peak, and thus only 0.4% from a 35-year high, as shown in this graph showing the entire 50 years of this metric:

None of this should take away from the fact that workers have not been rewarded by owners for their increased productivity over the last 40 years.  Because of this, in the larger view, wages are still stagnant.  But this is real, solid progress, and it deserves mention.  And it is all because of the breaking of the Oil choke collar.

The Oil Choke Collar: 2015 may be the acid test

 - by New Deal democrat

It's nice to be proven right.  Even more, it's nice to be proven right, for the right reason.

Back in 2011, I described what I called the "Oil choke collar," writing:

For the second time in two years, Oil's choke hold on the economy is asserting itself. Acceleration in recovery causes acceleration of demand, and acceleration of Oil prices - which causes the economy to stall. That choke hold won't go on forever, though. There are three forces that will combine to bring it to an end: alternate fuels, conservation, and exploration.
.... 

[T]he Oil choke hold on the economy will not last forever. I claim no clairvoyance, but a good guess is that by 2013 or 2014, the combination of alternative fuels and technology, conservation, and exploration will relieve the current situation

(emphasis added)

In 2012 and 2013, gas prices made lower seasonal peaks, and lower seasonal troughs, than in 2011.  They made a lower peak again this past spring.  Periodically during that time (e.g.,here and here) I updated the data on alternative fuels, conservation, and exploration.  Finally, a few months ago, I documented, as I consistently have since 2011, that the use of alternative fuels has been increasing - including in the vehicle fleet, that ridership on mass transit was still increasings, that demand of gas in the US was consistently declining from its 2006-07 peak, and that exploration was bringing on new supply.  I concluded:

In short, there is a very good chance that at some point in the next few months - or even weeks - we will see a new 4 year low in gas prices in the US.

Of course, by November we did see that new 4 year low, and now we have even seen a 5 year low.

In short, 3 and a half years ago I made a specific forecast about oil prices.  Not only was I right, and not only was I right about the time frame involved, but I was also right for the right reasons.  Average vehicle fleet mileage rose.  Use of mass transit rose.  Use of alternative fuels, such as in natural gas powered vehicles, and solar power, rose.  Demand for gasoline in the US fell.  New oil supplies from deep water drilling and shale oil extraction, came on line.

In simplest terms, supply rose faster than demand, ultimately creating a surplus in prodcution.  Indeed, depending on which source you read, demand is either expected to rise more slowly, or to actually fall.  And because, as Bill McBride a/k/a Calculated Risk pointed out yesterday, because supply is inelastic over the short term, a small change in demand leads to a large change in price.

Now, on November 27, Saudi Arabia refused to cut production, triggering the most recent cliff-dive in oil prices.  It is important to remember that, by that time, gas prices in the US has already fallen below $3 a gallon.  Was there a political aspect to that?  It's certainly possible, as Russia, Iran, and ISIS are among the biggest losers.

But - and somebody really needs to explain this to the Village Idiot over at Daily Kos - it is precisely because the Oil choke collar was already disengaging that such a move, if politically motivated, became possible. If demand were rising faster than supply, prices would be rising, not falling. There would be no way to "punish" players, since they would all be sharing in the profits windfall.  It is only because there was now excess supply that the issue of who would take the hit from already-lower prices became an issue.

Further, unlike the Village Idiot, somebody who actually does know what he is talking about when it comes to the oil markets, Prof. James Hamilton of Econbrowser, has estimated that "In other words, of the observed 45% decline in the price of oil, 19 percentage points– more than 2/5– might be reflecting new indications of weakness in the global economy." In other words, the fall in the price of Oil is not just about politics.

All of which means that the year 2015 could prove to be the ultimate test of my "oil choke collar" thesis.  One of my stock replies to those bemoaning relatively poor, below-trend, US GDP growth over the last few years has been, "Give me $2.50 a gallon gas instead of $3.50 a gallon gas, and I'll show you growth!"  If oil prices have been acting like a governor, choking off growth in the US economy by approaching $4 whenever the economy appears poised to obtain "escape velocity," then particularly with the present positive configuration of both the long and short leading indicators, IF oil prices remain in a new, lower range in 2015, we finally ought to see above-trend US growth.

Gas prices now at 5 year low, nearing Y2K prices in real, wage-adjusted terms

 - by New Deal democrat

This is from GasBuddy:

Gas prices have fallen below $2.56 per gallon.  This is the lowest they have been in 5 years.

Here is an update of the price of a gallon of gas as a share of the average hourly wage:

Note this is only through November. So far in December prices have plunge another 10%. "Real" gas prices could be at a 10 year low by the end of this month, and barely above their price at the turn of the Millennium.

There is evidence this is having a pronounced effect on living expenses on lower income households.  More on that in a post later this week.

Note:  As Jeff Miller points out, just as "the cure for high prices, is ... high prices," so low prices tend to "cure" themselves as well.  I do not claim any profound knowledge as to how long these relatively low prices for gas will last. To the extent there is a political, rather than economic, reason for the Saudis in particular not to cut back on production, then as soon as the political goal has been achieved, prices might rise again quickly.  On the other hand, to the extent the moves in price have an economic basis, then, just as it took from 2008 through 2014 for exploration, conservation, and alternative fuels to break through the "Oil choke collar," it may well take a similar amount of time for those forces to reverse.

A thought for Sunday: one step from despair

 - by New Deal democrat

[Who said: "I believe that our Great Maker is preparing the world, in His own good time, to become one nation, speaking one language, and when armies and navies will be no longer required" ?  Hint:  not a hippie.  Answer at the bottom.]

This was a horrible week for what I once thought were American values.

First we find out that letter that state officials are submitting as official "comments" to federal legislation, were in fact dictated almost word-for-word by energy companies.  Then we find out that the CIA enthusiastically embraced torture - not even to extract actionable information, but to make sure that nothing was left, or even to induce false information that could be used politically.

Finally a multi-billion dollar gift is delivered from Congress to Wall Street, repealing a provision of the Dodd-Frank Act that prohibited Wall Street banks from gambling on derivatives with their FDIC-insured deposits.  On this last bit, fully 1/3 of all Democrats in the House voted in favor, Senate Democrats are expected to follow, and President Obama is expected to sign the bill into law.

Let's be clear about one thing:  not a single word has been uttered by any lawmaker as to why this repealer is economically necessary. Wall Street banks are already making record profits.  By definition we are not talking about a farmer, industrialist, or merchant hedging against adverse contingencies.  This is strictly about gambling - with deposits that are backed up ultimately by the US taxpayer.  It is also "moral hazard" at its absolute worst.  Gains will be distributed as profits.  Catastrophic losses will be bailed out.  There is every incentive to swing for the fences.

And 1/3 of the supposed protectors of the middle/working class voted in favor?

But wait, we are told soberly by, among others, Barack Obama. Here's what the democrats got out of deal, according to Kevin Drum at Mother Jones:

Here's retiring Rep. Jim Moran: 

In 20 years of being on the appropriations bill, I haven’t seen a better compromise in terms of Democratic priorities. Implementing the Affordable Care Act, there’s a lot more money for early-childhood development — the only priority that got cut was the EPA but we gave them more money than the administration asked for....There were 26 riders that were extreme and would have devastated the Environmental Protection Agency in terms of the Clean Water and Clean Air Act administration; all of those were dropped. There were only two that were kept and they wouldn’t have been implemented this fiscal year. So, we got virtually everything that the Democrats tried to get.

And here is President Obama:

The ... full-year appropriations legislation for most Government functions [ ] allows ... authorities and funding provided to enhance the U.S. Government’s response to the Ebola epidemic, and to implement the Administration’s strategy tocounter the Islamic State of Iraq and the Levant, as well as investments for the President’s early education agenda, Pell Grants, the bipartisan Manufacturing Institutes initiative, and extension of the Trade Adjustment Assistance program.

In other words, the democrats got funding - for one year - for favored programs.  The republicans permanently killed a provision keeping Wall Street from gambling with FDIC-insured deposits.

Imagine you want to throw a party for your graduating senior.  You expect the party to get a little raucous, and you don't want trouble, so you go to your difficult neighbor and ask him to agree.  He agrees, but only if you agree to deed over to him 5' of your yard.  You got something temporary. He got something permanent. Sound like a deal?  Well, that's akin to what those guardians of the little guy and gal just agreed to.

Mark my words, those same cuts will be demanded by the GOP next year.  And the protection against gambling with FDIC insured deposits will still be gone, so another demand will be made of the democrats to save the cuts.

When it comes to American history, the scales fell from my eyes long ago. Andrew Jackson and Manifest Destiny virtually defined the 19th Century.  If native tribes had to be slaughtered, well, too bad for them.  The effort to expand slavery West and South (to Cuba, Mexico, and the Caribbean) were centerpieces of the Jacksonian dogma.

And torture?  Been there, done that, in the Phillippine - American War of 1899 - 1902.  Just an example:

To force information from a Filipino mayor believed to have been covertly helping insurgents, American soldiers resort to what they call the “water cure.” After tying the mayor’s hands behind his back and forcing him to lie beneath a large water tank, they pry his mouth open, hold it in place with a stick and then turn on the spigot. When his stomach is full to bursting, the soldiers begin pounding on it with their fists, stopping only after the water, now mixed with gastric juices, has poured from his mouth and nose. Then they turn on the spigot again.

The disgust felt by many, such as Mark Twain, was unpersuasive.

In World War 2, many Americans at home wanted all Nazi and Japanese POW's killed.  They were restrained by the military, which pointed out that American POWs were also being held by Germany and Japan.

But I digress.  A couple of weeks ago, I wrote that the Presidency of George W. Bush might turn out to be as influential as that of Andrew Jackson.  That torture - even if not effective - is viewed as a legitimate tool of government, that Wall Street should unquestioningly be given what it wants - are now topics of "legitimate" discussion, even "bipartisan" approval.  The entire range of acceptable policies has been moved a full standard deviation to the right, and remained so during the presidency of the man who ran on "Hope" and "Change."

And the GOP hasn't officially taken control of the Senate yet.

I am one step from despair.  But despair will never be an option.

You want hope?  Here is the answer to the question I posed at the outset of this post.  That sentence was uttered by President Ulysses S. Grant, the General who had saved the Union, in his second inaugural speech, 1873.  There is no record of outrage from Washington insiders in response.

Weekly Indicators for December 8 - 12 at XE.com

 - by New Deal democrat

My Weekly Indicator post is up at XE.com.

There is a stark contrast between the more internationally-influenced data vs. US domestic data.

The Oil choke collar breaks: American consumers attack!

 - by New Deal democrat

I have a post up at XE.com about the great November retail sales report this morning.

A few Doomers have actually predicted poor Christmas sales.  Not gonna happen.

A look at the first 6 months of 2015

 - by New Deal democrat

I have a new post up at XE.com looking at the short leading indicators -- those that tell us the direction of the economy about 6 months out.  These should verify for us the direction forecast by the long leading indicators roughly 6 months ago.

A Deep Question for John "Trillion Dollar Loss" Hinderaker; Isn't Obama A Genius, Too?

     By way of background, John Hinderaker of the Power Line blog was one of the many conservatives who argued that QE and government stimulus would lead to massive inflation and a spike in interest rates.  Obviously, neither happened.  Bloomberg analyzed the potential investment ramifications of this failed thinking and determined that, if you had taken this advice, you would have lost $1 trillion dollars.  Put in less formal terms, we know that Mr. Hinderaker's economic analysis would have lost you serious money.  Of course, that has not stopped him from continuing to write about economics in the ensuing years.  (Gee, I wonder is he's invested in stocks .... )

     Which leads to this observation.  Mr. Hinderaker once made the following public statement about President Bush:

It must be very strange to be President Bush. A man of extraordinary vision and brilliance approaching to genius, he can’t get anyone to notice. He is like a great painter or musician who is ahead of his time, and who unveils one masterpiece after another to a reception that, when not bored, is hostile.

He later attempted to walk the above statement back, but it's most likely this was done because of the large amount of ridicule directed at him for that statement.

However, let's assume for the sake of argument that Bush is a genius and compare the total establishment jobs performance under Bush and Obama:

Obama's overall performance is better than Bush's.

So, if Bush is a genius, and his establishment jobs performance was worse than Obama's doesn't that make Obama ... a super-genius?

Weekly Indicators for December 1 - 5 at XE.com

 - by New Deal democrat

My Weekly Indicator post is up at XE.com.  The global slowdown is having a negative effect on a few things, but the main effect continues to look quite positive for the US.

November Jobs Report: Blowout on jobs, slight help on wages, participation still dismal

- by New Deal democrat

HEADLINES:

• 321,000 jobs added to the economy
• U3 unemployment rate unchanged at 5.8%

Wages and participation rates

• Not in Labor Force, but Want a Job Now: up 8,000 from 6.537 million to 6.545 million
• Employment/population ratio ages 25-54: unchanged at 76.9%
• Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 (or +0.2%) from $20.70 to $20.74 up 2.1%YoY

September was revised upward by 15,000 to 271,000. October was revised upward by 29,000 from to 243,000. The net revision was +44,000.

Since the economic expansion is well established, in recent months my focus has shifted to wages and the chronic heightened unemployment.  The headline numbers for  November show strong jobs growth, continuing the trend all this year.  Real wages are slowly trending higher - but mainly due to lower inflation.  Participation rates are barely budging.

Those who want a job now, but weren't even counted in the workforce were 4.3 million at the height of the tech boom, and were at 7.0 million a couple of years ago.  Since Congress cut off extended unemployment benefits at the end of last year, they have actually risen, and this month were 6.545 million, over 750,000 higher than they were last November.

On the other hand, the participation rate in the prime working age group has made up over 40% of its loss from its pre-recession high, although it did not change this month.

After inflation, real hourly wages for nonsupervisory employees probably rose from October to November. The  nominal YoY% change in average hourly earnings is 2.1% somewhat better than the likely November YoY inflation rate of 1.5%.

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

• the average manufacturing workweek rose from 40.9 to 41.1 hours.  This is one of the 10 components of the LEI, and will be a strong positive.


• construction jobs increased by 20,000. YoY construction jobs are up 213,000.  


• manufacturing jobs  were up 28,000, and are up 171,000 YoY.

• Professional and business employment rose 86,000 and is averaging a 58,000 monthly gain for the last year.


• temporary jobs - a leading indicator for jobs overall - increased by 22,700.


• the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by 56,000 from 2,473,000 to 2,529,000, compared with last December's 2,255,000 low.

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

• Overtime hours rose 0.1 hour to 3.5 hours.


• the index of aggregate hours worked in the economy rose sharply from 101.6 to 102.2


• The broad U-6 unemployment rate, that includes discouraged workers decreased from 11.5% to 11.4%


• Part time jobs for economic reasons decreased by -177,000 to a total of  6.850 million.

Other news included:

• the alternate jobs number contained in the more volatile household survey increased by a mere 4,000 jobs.  The total number of unemployed rose 114,000. This will be the number seized upon by Doomers this month.  But this still represents a 2,734,000 million increase in jobs YoY vs. 2,696,000 in the establishment survey. 


• Government jobs increased by 7,000.

• the overall employment to population ratio for all ages 16 and above remained unchanged at 59.2%,  and has risen by +0.6% YoY. The labor force participation rate was also unchanged at 62.8%, and is down -0.2% YoY  (remember, this includes droves of retiring Boomers).

First, a note of caution about seasonal adjustments. In the last several years, November jobs reports have tended to be somewhat outliers to the upside.  While any number over 300,000 is a great number, temper your enthusiasm a little.

All of the internals of the employment survey were strong.  Job gains were across the board, revisions remained strongly positive, and aggregate hours also increased sharply.

The relative weakness is in the household report, with its small gain in jobs, which is why the unemployment rate stayed neutral.  Those who have completely dropped out of the workforce but want a job now increased yet again, and is close to 800,000 since one year ago.  If that number had not increased, the unemployment rate would be about 0.5% higher than it is.  On the other hand, those who report that they are part time for economic reasons continues to decline.

Wages increased 0.2% in November.  Prices were probably flat or possibly declined, so real wages increased by about as much.

The bottom line:  Jobs growth remains strong, part time work is ebbing compared with full time work, real wages are still increasing slightly, but participation measures remain dismal.

From Bonddad

I have only one caveat to the report, which is expressed in this table from the Bank of America/Merrill Lynch Research Report issued on the jobs number.

 

We've had solid growth in the establishment numbers since the beginning of the year.  However, since June, the participation rate has been steady and the employment/population ratio has only increased .2%.  With such strong establishment numbers, you'd think we'd be seeing a better performance in the utilization metrics.

 

Now, these numbers are revised numerous times, to the upward revisions may be coming in the subsequent  months. 

 

Just food for thought.

 

 

Bonddad's Post-Election Rant

I'm going through one of my "God both parties really suck shit" phases.  Let's start with the Democrats who got their asses handed to them in the last election.  Obama is a terrible president.  For the last two years he's been entirely reactionary on foreign policy.  Domestically he's, well, something, but I don't know what.  The Dems desperately need new leadership and blood, but right now the Hill is managed by the old guard (they re-elected Reid and Pelosi for God's sake) and there is no meaningful state apparatus anywhere outside the NE and California.  They've abdicated the entire center of the country to the Republicans, who, when elected, slash and burn state budgets (Kansas), pass abortion and voting restrictions and little else.

What the hell to the Democrats stand for?  If you can find a consistent policy proposal, please tell me.  Because I can't find it anywhere.   And -- 35 years after Reagan -- the Democrats will haven't learned the lesson: have a few basic selling points, frame them in simple terms and find a charismatic person to sell them.  The closest things the Dems have to that is Elizabeth Warren.  While I don't agree with her on several issues, I think she's great because she's a highly articulate person who stakes out her policy positions clearly and effectively. 

Texas was a very big disappointment; Davis lost by 20%.  Some of the post mortems have been very interesting, with several noting that running a candidate who's position on abortion was the centerpiece of her campaign was a really stupid idea for Texas. And, frankly, they're right.  Houston and San Antonio do democratic mayors and ours is actually very good; Anise Parker is a pure technocrat.  The city works, and it works well.  But she's an openly gay woman who isn't that photogenic, which will probably limit her on the larger Texas stage.

The Republicans -- dear God, where do they find these people? Stupid doesn't begin to describe the dearth of intellect.  And yet, people still take them seriously.  Consider this: in 2008-2009 a number of conservative economists signed a letter saying QE would lead to hyper-inflation and spiking interest rates.  Invictus and I wrote a response to this over at the Huffington Post arguing it wouldn't.  Krugman also debunked this line of thinking.  A few months ago, Bloomberg first calculated that making an investment based on their advice would have cost you $ 1 trillion.  Next, they called these idiots to get their take on why neither had happened.  Their answer?  No change in thought!    The best response was from Amity Shales:

“Inflation could come, and many of us are concerned that the nation is not prepared.”
“The rule with inflation is ‘first do no harm.’ So you always want to be careful.”

Translation: I'm going to write a few sentences that contain the words inflation in the hopes no one will notice that I'm untrained in economics." 

And then there's their whole stance on climate change.  Here's a question for them: they keep saying that global warming is a liberal plot. OK -- assume that to be true.  Why hasn't Fox news and Rupert Murdoch created a giant "there is no global warming" convention to write a giant paper in response to the UN's climate change paper?  They've had 10 years to do it and haven't.  That tells me in no uncertain terms that the "there's no change" crowd is full of it.  And yet, they continue to spout their crap and no one calls them on their bullshit.

And what is their response on health care to the ACA?  Nothing that would come even close to working -- and they've had 4 years to come up with something -- hell, anything.  For God's sake -- OmamaCare is Roomney Care which is based on several bedrock Republican concepts from the 1993 response to Clinton's health care reform.  And yet, now the ACA is somehow bad despite the dropping rate of uninsured people in the country and slowing down of overall health care costs.

And this is before we get into their long-standing desire to turn the science classroom into a theological indoctrination platform where the earth is only 6,000 years old and evolution is only a "theory."

So, on one side, we have Democrats who don't really stand for anything and who have an aging and more and more ineffective leadership.  With the Republicans we have a pool of people who represent the largest known pool of collective stupidity we've ever seen. 

What's there to be happy about?  

October housing: green across the screen for 2015 (at XE.com)

 - by New Deal democrat

I have a new post up at XE.com, detailing all of the October housing reports, and showing why they are adding to my optimism about 2015.

That Thanksgiving weekend 11% decline in retail sales ... didn't happen

 - by New Deal democrat

The usual suspects (We're DOOOOMED!!!) have picked up on media reports that allegedly US holiday sales over the post-Thanksgiving weekend slid by 11% compared with last year.

There's just one little problem with that assertion:  It didn't happen.  Click on over to XE.com for the gory details.

Gas prices vs. average hourly wages

 - by New Deal democrat

One of my goals is to bring you "value added," in other words, rather than simply updating you on the day's data releases - there are a slew of sites that do that - I want write about important topics that I think are being overlooked.

That's why I have harped so much on the price of gas over the last 5+ years.It was in no small part because of $4.25/gallon gas in June 2008 that the American consumer threw in the towel, intensifying what had previously only been a mild downturn, if that.  Similarly, $1.45/gallon gas in December 2008, in the very teeth of the general cliff-diving, marked the point where consumer spending stabilized.  This suggested that downturn might hit bottom at or about the anniversary of that $4.25 peak (as YoY consumers had significantly more to spend).

Thus the seasonal return to nearly $4/gallon gas in 2011-2014 put pressure on workers, who pay growth was barely keeping up.

How much pressure?  Here is a graph of gas prices deflated by average hourly wages - in other words, what percent of an hour does the average worker have to work, to afford a gallon of gas:

As you can see, this was more or less steadily rising from 1999 through summer 2008.  It more or less stabilized near that peak for the last 3 years. Note that the above graph ends in October.  Since gas prices fell on average close to 10% during November, we can expect a value a little over 0.14 once the jobs report is released this Friday.

The relationship between gas prices and GDP is not linear. In general, up to a point (approximated at $4/gallon over the last 10 years in the graph below, red), the lower the price of gas, the higher the quarterly GDP (blue).  Once the recession began, however, lower gas prices correlated with lower GDP.

The bottom line is that this quarter's lower gas prices should lead to higher GDP, perhaps not in this quarter, but very likely by Q1 2015.

10 year gas chart

 - by New Deal democrat

The below graph comes from GasBuddy, showing gas prices for the last 10 years:

See that upward spike way over by the left?  That's Hurricane Katrina, which knocked out refineries in Louisiana for several weeks. Gasoline is now less expensive than any time since except for winter 2005-06 and 06-07, and 2009 - and almost as cheap as most of 2010. Put another way, it is closer to its 10 year low than its 10 year high.

Here's a graph showing how $65/barrel Oil (its price as of Friday) (blue, left scale) translated into gas prices at the pump (red, right scale) in the 2005-07 period:

At current Oil prices, I would expect gas prices at the pump to settle somewhere between their current level of   $2.76 and $2.60.

I have no idea how long this is going to last.  But it is almost half as big a stimulus as the crash in prices that put a  bottom in for the late 2008 consumer collapse in the Great Recession.