Weekly Indicators for November 2 - 6 at XE.com

 - by New Deal democrat

My Weekly Indicators piece is up at XE.com .

Several trends in the US economy have all intensified within the last month.

Houses, cars, and now jobs too say US growth intact

 - by New Deal democrat

I have a new post up at XE.com .  Strong jobs reports like this morning's are inconsistent with any near-term downturn in the US economy.

October Jobs report: blowout raises odds of December Fed action

- by New Deal democrat

HEADLINES:

• 271,000 jobs added to the economy
• U3 unemployment rate down -0.1% to 5.0% 

With the expansion firmly established, the focus has shifted to wages and the chronic heightened unemployment.  Here's the headlines on those:

Wages and participation rates

• Not in Labor Force, but Want a Job Now: up 97,000 from 5.935 million to 6.052 million
• Part time for economic reasons: down  -269,000 from 6.036 million to 5.767 million
• Employment/population ratio ages 25-54: unchanged at 77.2% 
• Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.09 from $21.09 to $21.18,  up +2.2%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 17,000.  September was revised downward by -5,000, for a net change of +12,000.

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

• the average manufacturing workweek rose +0.1 hours from 41.6 hours to 41.7 hours.  This is one of the 10 components of the LEI and so will affect it positively.
 
• construction jobs increased.by 31,000.  YoY construction jobs are up 233,,000.  
 
• manufacturing jobs were unchanged, and are up 80,000 YoY.

• Professional and business employment (generally higher-paying jobs) increased by 78,000 and are up 664,000 YoY.


• temporary jobs - a leading indicator for jobs overall increased by 24,500.


• the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - fell by -37,000 from 2,363,000 to 2.326,000.  The post-recession low was set 2 months ago at 2,095,000.

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

• Overtime rose 0.2 hours from 3.1 hours to 3.3 hours.


• the index of aggregate hours worked in the economy rose by 0.3% from  103.8 to 104.1. 
 
• The broad U-6 unemployment rate, that includes discouraged workers fell  by  0.2% from 10.0% to 9.8%. 

•  the index of aggregate payrolls rose by 0.6% from 124.3  to 125.2.

Other news included:      

• the alternate jobs number contained in the more volatile household survey increased by  320,000 jobs.  This represents an in crease of 1,860,000  jobs YoY vs. 2,814,000 in the establishment survey.  


• G overnment jobs rose by 3,000.  

• the overall employment  to population ratio for all ages 16 and above rose 0.1%  from 59.2% to 59.3%, and has risen by 0.1%  YoY. The labor force participation rate was unchanged at   62.4% and is down -0.4% YoY (remember, this incl udes droves of retiring Boomers). 

SUMMARY: 

This was obviously a very strong reoprt, which if duplicated next month strongly implies the Fed will raise rates.  There were only a few negatives, including stalled labor force participation, the relatively poor household increase YoY,  and the increase inthose who are out of the labor force but want a job.

Everything else - the unemployment rate, YoY wage growth, the decline in those working part-time for economic reasons, and even manufacturing hours, was positive to strongly positive.

I am particularly heartened by signs that wage growth may finally be improving, in keeping with the thesis that it would do so once the U-6 rate fell under 10%.  With nonexistent inflation, it would be nice if the Fed would give labor a break.

Forecasting the 2016 election economy, first forecast: the long leading indicators

 - by New Deal democrat

Last week I showed that, going back 160 years, roughly 3/4 of all US Presidential election results correlated positively with whether or not at the time of the election campaign, the US was in a recession or not. More than 2/3 of the time, it accurately predicted the Electoral College winner, and 80% of the time, it accurately showed the winner of the populat vote.  In fact, if we simply go by the metric of whether or not the US was in recession during the 3rd Quarter of the election year, then 84% of the time the winner of the popular vote was from the incumbent party if the economy was expanding, and from the opposition party if the economy was in recession.

We now have enough information to make a good forecast as to whether or not the US economy will be in recession in Q3 2016.  That means we can make a reasonable forecast as to which party's candidate will win the popular vote.

Prof. Geoffrey Moore, who for decades published the Index of Leading Indicators, and founded the Economic Cycle Research Institute (ECRI) in 1993, wrote  Leading Economic Indicators: New Approaches and Forecasting Records describing and explaining what he called "long leading indicators," that is, economic metrics that reliably turn a year or more before the onset of a recession.  He identified 4:

- corporate bond yields

- housing permits and starts

- real money supply

- corporate profits

A variation of the above is Paul Kasriel's "foolproof recession indicator," which combines real money supply with the yield curve, i.e., the difference in the interest rate between short and long term treasury bonds. This turns negative a year or more before the next recession about half of the time.

Another long leading indicator has been described by UCLA Prof. Edward E. Leamer who has written that "Housing IS the Business Cycle."  In that article he identified real residential investments as a share of GDP as an indicator that typically turns at least 5 quarters before the onset of a recession.

Finally, Doug Short has identified real retail sales per capita as another important metric.  This metric tops out at least a year before the onset of a recession about half of the time.

That gives us a total of 7 long leading indicators.  All of these economic series have a long term history of turning a year or more before a recession.  Let's look at them in turn:

CORPORATE BOND YIELDS

With the sole exception of the 1981 "double-dip," corporate bond yields have always made their most recent low over 1 year before the onset of the next recession.  Corporate bonds most recently made a confirmed low 3 years ago. BAA-rated corporate bonds equalled that low, but AAA-rated bonds did not:

This is a negative, but the good news is that frequently a recession has not occurred until 4 years or more after these lows.

HOUSING PERMITS AND STARTS

With the exception of the 1981 "double dip" and the 1970 recession, these have always peaked at least one year before the next recession.  Both housing permits for single family structures and housing starts made new highs in the #rd quarter.  Here is the long-term view:  

And here is the last 3 years:

I am not making use of housing permits for mult-unit structures because these were distorted by the expiration of a NYC housing program at the end of June.  This caused a rush to get permits for multi-unit structures before then, pulling the number forward and depressing subsequent months.  This program did not affect single structure permits, nor did it affect housing starts. 

This is a positive.

REAL MONEY SUPPLY

Real money supply, whether measured by M1 or M2, continues to be positive:

In addition to the 1981 "double dip," on only 2 other occasions have these failed to turn neegative at least 1 year before a recession.  No recession has ever started without at least one of these two turning negative.

CORPORATE PROFITS

Ideally we would like corporate profits and wages to grow at about the same rate.  Unfortunately since 2000, corporate profit growth has soared while wages have stagnated.  But worse than soaring coporate profits are declining corporate profits: when profits decline businesses stop hiring and if that isn't enough they start laying people off.

Corporate profits have peaked at least one year before thennext recession 8 of the last 11 times, one of the misses being the 1981 "double-dip." The best metric for corporate profits for the 3rd Quarter won't be reported until the end of November..

  But a good proxy, Proprietors' Income, which is almost as reliable, was reported last week:

Proprietors' Income, deflated, made a new high in the 3rd Quarter.  This is a positive.

THE YIELD CURVE

Since 1960, the yield curve inverted more than one year before the next recession about half the time. Below is a graph of the yield on a 10 year US Treasury minus the yield on a 3 month Treasury:

No recession in the last 50 years has started without an inversion in the yield curve (i.e., 3 month Treasuries yielding more interested than 10 year Treasuries).  This statement was not true for the period from 1932-1954, so I do not regard this metric as being that helpful, and Paul Kasriel himself has ntoed that the FED's Zero Interest Rate Policy moots this indicator.  Nevertheless, it is positive now.

REAL PRIVATE RESIDENTIAL FXEDINVESTMENT

Basically this is spending on private housing as a percentage of GDP. Aside from the 1981 "double-dip," and 1948, it has always peaked at least one year before the next recession: .  

Last Thursday it was reported for the 3rd Quarter and made a new post-recession high:

This is a positive.

REAL RETAIL SALES PER CAPITA

This basically tells us how much spending is being done for each consumer.  Consumers tend to cut back well before the economy as a whole rolls over.  It has peaked 1 year or more before the next recession about half of the time. .  

Here is what it looks like for the last 20+ years:

This made a new post-recession high in the last month.  This is a positive.

AND THE WINNER IS ...

Six of the seven long leading indicators had their most positive readings of this economic expansion in the 3rd Quarter just ended.  This gives us a good indication that the economy will not be in recession by the 3rd Quarter of next year. 

Note that none of the indicators are perfect. None of them forecast the 1981 "double-dip," which was engineered by the Volcker Fed.  If the Fed similarly decided to raise rates aggressively in the next 6 - 9 months, or if there were an Oil price spike caused by a Middle eastern War, a recession could happen anyway.

This is a very preliminary forecast, but nevertheless based on the 160-year correlation between economic expansions and Presidential election results, if there is no exogenous economic shock, the most likely winner of the 2016 Presidential election will be the Democratic nominee.

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Weekly Indicators for October 26 - 30 at XE.com

 - by New Deal democrat

My Weekly Indicators post is up at XE.com .

Nothing scary this Halloween. Just weakness, but steady as she goes.

Ed Morrissey Shows His Amateurish Economic Abilities ... Again

     I haven't picked on ol' Ed in awhile.  Frankly, it seemed that he passed on the economic writing to the far more competent Steve Eggleston.  But after yesterday's GDP print of 1.5%, I had a feeling Ed would chime in with his, "the economy really sucks" line of thought.  Thankfully, he didn't disappoint.  So, let's explain why his analysis is incredibly amateurish.

     He starts by correctly noting that PCEs were very strong,  coming in over 3%.  It would have been a bit better if he'd actually looked at the report's detail, however.  Had he done so, he would have found that durable good spending was up a very strong 6.7% while non-durable spending increased 3.5% (see table 1 from the accompanying Excel information; it's on the right hand side of the BEA release).  Why is this important?  Because durable goods require financing, meaning consumers don't make these purchases unless they think they'll be able to make payments for a few years.  This is why the strong level of new car sales (that's a durable good, Ed) is so important; recessions don't happen when the consumer is buying bigger goods.  And this is the second quarter in a row this reading has been strong; 2Q DGs M/Ms were up 4.3%.  In short, this data alone tells us that the release probably isn't the harbinger of doom.

     But then Ed shows is analytical failings.  And I mean his amazingly amateurish "abilities."  He notes that Reuters mentioned the large inventory drag.  But then Ed drops the ball when he notes, "That might be the case, but the big decline in business investment was in structures rather than inventory."

     Actually, Ed, if you had looked at the accompanying Excel sheet, ESPECIALLY TABLE 2, you would have seen that an inventory correction subtracted 1.44% from GDP growth.  See especially cell T48 of Table 2, Ed.  In fact, Ed, according to the same table, total fixed investment added .47% to total growth.

     In contrast to Ed's perma-bear routine, people who know how to read tables and data and who also watch more than the one data point, yesterday's report wasn't nearly as fatal as Ed makes out.  As my co-blogger noted:

The big issue this year has been the effect of the 20% increase in the broad trade weighted dollar. Yesterday's report indicates that
(1) the consumer has not been harmed, and continues to power the US economy forward;
(2) the bleeding in the import/export sector has been staunched; and
(3) affected industries are making progress working through their accumulated inventories.

     This isn't to say there aren't reasons for concern.  As I've noted in my weekly equity columns for a number of months, corporate earnings may have peaked for this cycle.  And the shallow industrial recession caused by a combination of the strong dollar, oil sector contraction and weak international environment continues.  But ol' Ed doesn't mention any of these.  Instead, he continues in the same pattern he has since 2008: he waits for news he can spin negatively and then does so.

     In short, Ed is a partisan hack, who's analysis is poor and whose understanding of the topic is weak.

     He really needs to stop writing about econ; he's that bad.

Q3 2015 GDP report: pretty d*#$!d good for +1.6%

 - by New Deal democrat

I have a new post up at XE.com , explaining why yesterday's GDP report is probably the best +1.6% you could ever see.

The decline in prime age labor force participation: the smoking gun (part 2 of 2); comparing June Cleaver and Roseanne Conner

 - by New Deal democrat

I recently wrote about the compelling evidence that the biggest reason for the decline in the prime working age labor participation rate was the "child care cost crunch," i.e., the increase in the number of second-earner spouses who decided to stay at home and raise their children, occasioned by the particularly significant decline in wages among lower quintile jobs, together with the soaring costs of outside day care.

In my post yesterday, I showed that the biggest reason why the percentage of both mothers and fathers of minor children who have dropped out of the labor force has increased, is in order to care for their children -- not discouragement, not disability, not education, and not any other reason.

But that is not the end of the story, even though over 80% of men and women eventually become parents of minor children.  In particular, there are other studies which put the spotlight on an increase in disability claims.  In particular, the Atlanta Fed went to the trouble of decomposing the monthly data as to why people aren't in the labor force over the last 16 years.  The graphs are interactive, and illuminating.

To cut to the chase, the Atlanta Fed found that the single biggest reason for the increase in labor force non-participation was disability claims:

A similar graph was compiled in a separate report:

So that's it, the real reason for the increase isn't the "child care cost crunch" but disability, right?  Well, yes and no.  To see why, let's go into the Atlanta Fed's interactive database a little more closely.

At age 50 and above, there has been an outsized increase in the percentage of labor force participants who say they are disabled.  That is the lion's hsare of the increase in disability claims: 

Part of this is simply the overall aging of the labor force during that time. Older people are more likely to be disabled.

But the big news is the mirror image big decline in people aged 50 and over saying they are homemakers between 1998 and 2014:

 

Aside from this huge anomaly that begins at age 50, what we are left with is a sustained increase in people in their 30s and 40s who are staying home to take care of thier children.

What can explain this shift from homemakers to disabled former workers over age 50?  Was there a group,who formerly, say before the 1970s, were largely homemakers, who entered the labor force as young people, say in the 1970s and 1980s, and who are older now and, because they were  working, can go on SS disability?

Of course! The aging of women who entered the labor force is the answer.  First of all, here's the familiar graph showing the big secular increase of women in the workforce between 1965 and 1995:

Consider the two cases of June Cleaver, 1950s homemaker, and Roseanne Conner, 1980s blue collar mother. When June Cleaver got older and more infirm, presumably she have told the Census Bureau that she was still a homemaker. Contrarily, when  Roseanne Conner became older and more infirm, she would probably tell the Census Bureau that she was disabled, not that she had chosen to be a homemaker. 

In short, homemakers don't go on disability.  The big surge in those identifying as disabled in their 50s after 1999 probably reflects the fact that they are the group of women who when they were 18-25, entered the workforce between 1965 and 1995.

-----

Another source of pushback against the idea that the decline of wages for second earners compared with the price of daycare for children came from the Financial Times. 

As an initial matter, the FT's article clearly shows that the most striking feature of the change in the US labor force since 2000 in comparison with every single other country, has been the big decline in women in the labor force:

There is no such equivalent defference for men.

 But  the FT then pointed out that among the prime working age demographic, the percentage of women who were not in the labor force actually declined *more* for women who were not mothers of minor children. ere's their graph:

Here the problem is at the other end of the age spectrum.  Look at the below graphic of the age at which women have typically have their first child over the last 30 years:

For most of the last decade, an absolute majority of 25 year old women had not yet had their first child -- and that age is still increasing!

And now let's go back to the Altnata Fed's interactive graphs, and show what has happened among younger adults who say they are not working because they are pursuing an education:

This  shows a big increase in people in their 20s who are not in the labor force because they are continuing their educational studies.  That's the explanation for the statistic cited by the Financial Times. The relatively big increase in childless women age 25 -54 who are not in the labor force (note: only about 18% of women ultimately fall into this category) is because of the big increase in this population at the youngest end of the range, and we know why that group is not in the labor force.

-------

In conclusion, put together this information with that published by the Pew Foundation, and we have a pretty complete picture of why there has been a decline in the prime age labor force since 1999:

1. There has been a spike in the relative number of disability claims among older workers, with a concomitant downward spike in the relative number of homemakers among older workers, as the demographics of women in the workforce has aged.

2. Parents of both sexes of minor children have been leaving the labor force in order to care for their minor children,  driven by declining real wages for those jobs held by the second earner, and exacerbated by the surging costs of child day care.

3. A smaller part of the increase is explained by young adults seeking a competitive advantage in the workplace by staying in college longer to obtain deboth undergraduate and graduate degrees. 

The mystery has been solved.

The decline in prime age labor participation: the smoking gun (Part 1of 2)

- by New Deal democrat

 I recently wrote about the compelling evidence that the biggest reason for the decline in the prime working age labor participation rate was the increase in the number of second-earner spouses who decided to stay at home and raise their children, occasioned by the particularly significant decline in wages among lower quintile jobs, together with the soaring costs of outside day care.

Since that time (and I'd like to think in part because of my argument), the issue of the "child care cost crunch" has become much more visible, with the candidates in the recent Democratic Presidential debate weighing in, in support of more assistance for working mothers.
   
For example, Fortune magazine repored that:

the Economic Policy Institute (EPI), a worker advocacy group, finds that caretaking costs have become so exorbitant that in most parts of the U.S., families spend more on childcare than they do on rent (included in that number: babysitting, nannies, and out-of-home day care centers.
I think [the cost of childcare] plays a role in a woman’s decision to go to work,” says Gould. “It is taking a toll on labor force participation and therefore on the economy.”
Measuring child care costs against a variety of benchmarks—including the cost of college tuition, the HHS’s 10 percent affordability threshold, and median family incomes—demonstrates that high quality child care is out of reach for working families.

And the Pew Research Foundations updated its study of the impact of child care on the careers of mothers in the labor force:

[W]hile 42% of mothers with some work experience reported in 2013 that they had reduced their work hours in order to care for a child or other family member at some point in their career, only 28% of fathers said the same. Similarly, 39% of mothers said they had taken a significant amount of time off from work in order to care for a family member (compared with 24% of men). And mothers were about three times as likely as men to report that at some point they quit a job so that they could care for a family member (27% of women vs. 10% of men).
It’s important to note that when we asked people whether they regretted taking these steps, the resounding answer was “No.”

To briefly recapitulate my posts from August, against a backdrop of surging costs for child care, and declining real wages for the lower quintile jobs occupied by second earners, the number of stay-at home dads has increased from 1.1 million to 2.0 million between 2000 and 2012, and  the increase in the percentage of stay-at-home dads who are caring for their children is the primary reason:  

Further, the percentage of mothers who are staying at home has also increased, going from 23% in 1999 to 29% of all mothers of minor children in 2012, as shown in the graph below:

In 1999, approximately 10% of stay at home mothers said they were home due to disability, and approximately 82% said they were home to take care of their home and family.

The Pew study found that as of 2012 the vast majority --  85% -- of stay at home married mothers say the reason for not working is to take care of their children.  Including both married and single mothers, the  number of stay-at-home moms is about 10 times the number of stay at home dads.

What we didn't have was  the *reason* those mothers have dropped out of the labor force since 1999.  That was the missing " smoking gun."  Until now.

Thanks to Gretchen Livingston of the Pew Foundation, who provided me with additional information, I was able to generate the following chart detailing the relative increases in mothers who dropped out of the labor force due to discouragement, child care, disability, and other reasons including education and retirement:

	1999	2012	Change
Can't find job	0.2	1.7	+1.5%
Child care	18.9	21.4	+2.5%
Disability	2.3	3.2	+0.9%
All Other*	1.6	2.5	+0.9%
TOTAL	23	28.9 (29)	+5.9

*includes education, retirement, and other

This is the smoking gun.  As you can see, the number of mothers who dropped out of the labor force in order to raise their minor children outstripped  all other reasons including those who wanted a job, consituting nearly half of the total.  Note by the way that the number of those who are out of the labor force but want a job now has declined by about 1 million since 2012, so the likelihood is that as of 2015, the effect of rising day care costs and declining real lower quintile wages is even stronger.

Since According to the Census Bureau, by age 40, 81% of all women have borne at least 1 child, the number of mothers utterly dwarfs the number of prime age women who are not mothers (and, ahem, by necessity of reproductive biology, it is similarly true of men).  Together, the numbers of women and men who are staying at home to raise their children, solve the mystery of the decline in the labor force participation rate among the prime working age population. 

In Part 2, I will address issues raised by an Atlanta Fed study of the microdata, and in prticular, disability.  I will also address some pushback against the "child care cost crunch" meme by the Financial Times.

The Underpants Gnomes Theory of how the US imports a global recession

 - by New Deal democrat

It used to be said that "When America sneezes, the world catches a cold."  Sometime later this century, maybe even 20 years from now that will probably be updated to "When China sneezes, the world catches a cold."  But I don't see how we are there yet.

The domestic consumer economy is still 70% of US GDP.  International trade only accounts for about 15% of GDP.  So it should take a really, really major dislocation of that international trade to overcome domestic strength.

This morning's negative durable goods report is yet another reminder that the shallow industrial recession is real.  Rail shipments are down YoY, truck shipments are down YoY, the regional Fed indexes are negative, industrial production and capacity utilization are down.  That seems to have become widely accepted.  I hasten to add that it showed up in February in the Weekly Indicators and has been there relentlessly since -- another reason not to wait for the lagging monthly reports.

At the same time, housing, cars, real retail spending and real personal consumption expenditures have continued to power ahead.  And that is the problem for scenarios whereby the US imports a global recession.

I have read a number of articles over the last several months, including one this past week, all of which can be summarized as follows:

1. China is undergoing a downturn.
2. This has spread to China's suppliers, who are undergoing worse downturns.
3. ?????
4.  This will bring about a US recession.

This is the "underpants gnomes" theory of how the US will import a global recession (if you don't know what this meme is, Google is your friend).  None of the articles had any detailed or credible explanation of what step 3 is.  It is all vagueness and hand-waving.

The weakness in the Oil patch, and generally in the industrial exporting sector will continue and will send ripples out into the wider pond, including layoffs and cutbacks in manufacturing, leading to I suspect one or more monthly employment reports that will be under 100,000 by the end of this winter.

But there is no reason to think that those ripples will be enough to overcome the positive ripples out from housing construction and vehicle production.  And there is reason to believe that, contrary to expectations that the gas price dividend will peter out this fall, the US consumer is in the process of getting yet another boost, as gas prices are still over $.80 less than they were ago, and look like they will break below $2.02 (last January's bottom) before they seasonally bottom out this year:

The below is a graphic I cribbed from ECRI.  They used it to explain how a consumer slowdown to propagate into a supplier recession, but the converse is just as valid:

Until someone comes up with a credible scenario for Step 3, all we have is the Doomer version of the Underpants Gnomes.

Price appreciatioin of new homes has completely stopped. Here's why

 - by New Deal democrat

I have a new post up at XE.com .

Price appreciation in new homes has completely stopped over the last 11 months.  That is partly due to the feeding through of the 2014 stall in construction, and partly due to the disappearance of the Chinese cash purchaser.

BTW, tomomrrow we will get the Q3 report on median rents, and that will complete the overall picture of the housing market.

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Condolences to BooMan

 - by New Deal democrat

One of the places I always stop by for political analysis is the BooMan Tribune.  Yesterday Booman's brother suddently passed away, and he is in mounring.

Blogs are easy places to bring out the worst in people (see just about any comment section).  It is important to recognize that there are real live human beings, with real feelings, behind those posts.

So, condolences to BooMan, and a hope that he will find peace again as mourning permits.

Weekly Indicators for October 19 - 23 at XE.com

 -by New Deal democrat

My Weekly Indicator piece is up at XE.com .

The changes were all positive this week, but the Big Story remains the effects of the strong US$.

Forecasting the Presidential election: simply knowing whether the economy is expanding or in recession gives you the correct answer more than 2/3 of the time

- by New Deal democrat

If you want a quick and dirty guide to whether an incumbent political party will retain control of the White House in a Presidential election, simply knowing whether the economy will be in expansion or recession in the 3rd or 4th quarter of the election year gives you the correct answer more than 2/3's of the time.

The NBER maintains the official list of US recessions going back over 160 years to 1854.  During that time, there have been 33 recessions, and 40 Presidential elections.  Eleven of those Presidential elections have taken place during a recession (measured by the 3rd or 4th Quarter of the election year).  

In only 3 cases has the incumbent party been successful maintaining control of the White House (and in one of those cases, the incumbent party's candidate lost the popular vote, but won in the Electoral College).  In the other 8 cases, the incumbent party lost, including at least 3 of the biggest political turning points in US history (1860, 1932, 1980).

Similarly, of the 29 times the economy has been expanding during the 3rd and 4th Quarter of an election year, the incumbent party has retained control of the White House nearly 3/4 of the time.

Here's the complete list:

Recession, incumbent party maintains control (3 elections):

1876 - Hayes (R, succeeds R Grant)*

1900 - McKinley (R re-elected)

1948 - Truman (D, elected)**

Recession, incumbent party loses control (8 elections):

1860 - Lincoln (R, replaces D Buchanan)

1884 - Cleveland (D, replaces R Arthur)

1896 - McKinley (R, replaces D Cleveland)

1920 - Harding (R, replaces D Wilson)

1932 - FDR (D, replaces R Hoover)

1960 - Kennedy (D, replaces R Eisenhower)

1980 - Reagan (R, replaces D Carter)

2008 - Obama (D, replaces R Bush)

Economic expansion, incumbent party retains control (21 elections):

1856 (D Buchanan succeeds D Pierce) 

1864 (R Lincoln re-elected) 

1868 (R Grant replaces R Johnson)

1872 (R Grant re-elected)

1880 (R Garfield succeeds R Hayes)

1904 (R Teddy Roosevelt elected)**

1908 (R Taft succeeds R Teddy Roosevelt)

1916 (D Wilson re-elected)

1924 (R Coolidge elected)**

1928 (R Hoover succeeds R Coolidge)

1936 (D FDR re-elected)

1940 (D FDR re-elected)

1944 (D FDR re-elected)

1956 (R Eisenhower re-elected)

1964 (D Johnson elected)**

1972 (R Nixon re-elected)

1984 (R Reagan re-elected)

1988 (R Bush succeeds R Reagan)

1992 (D Clinton re-elected)

2004 (R GW Bush re-elected)

2012 (D Obama re-elected)

Economic expansion, incumbent party loses (8 elections):

1888 (R Harrison replaces D Cleveland)

1892 (D Cleveland replaces R Harrison)

1912 (D Wilson replaces R Taft)

1952 (R Eisenhower replaces D Truman)

1968 (R Nixon replaces D Johnson)

1976 (D Carter replaces R Ford)

1992 (D Clinton succeeds R Bush)

2000 (R Bush succeeds D Clinton)*

*lost popular vote; decided in Electoral College

**predecessor of same party died in office

Bottom line:  while an ongoing recession at the time of the election does not always mean that the incumbent party will lose control of the White House, it spells DOOM by better than a 2:1 ratio.  

Similarly, while an ongoing economic expansion at the time of the election does not guarantee that the incumbent party will retain control of the White House, it has been a meant success by better than a 2:1 ratio.

UPDATE:  If we go by popular vote rather than Electoral College victory, then the elections of 1876 and 2000 fall into line, meaning that the  popular vote in fully 80% of all Presidential elections correlates positively with whether or not the economy has been in recession or not at the time of the election.

By the end of next week, all but one of the long leading indicators, designed to tell us 1+ year out whether the economy will be expanding or in recession, will have been reported for Q3, meaning that we should have visibility through the 3rd Quarter of next year.

September housing permits: a pause, but rising trend still intract

 - by New Deal democrat

I have a new post up at XE.com , taking a look at the trends in housing permits and starts.

Forecasting the 2016 election: the "gatekeeper" role of social and moral issues

 - by New Deal democrat

Tom Schaller made a convincing case in "Whistling Past Dixie" that in the South, moral and social issues are threshold issues, writing that there, Democrats "flunk the litmus test:"

Why do Democrats struggle so mightily in the South? ....  The short answer [ ] is that social and cultural isues tend to trump economic considerations for many voters in the South....

In other words, only candidates whose views on those issues are acceptable then get their economic positions considered.  In other words, a socially liberal Democrat with historically populist economic positions stands no chance in the Old South.

I think Schaller's analysis is more universally true than he considered, and is equally applicable to the left.  For example, in 2012 Huckabee had very populist anti-Wall Street positions.  Was there the slightest feeling on the left that he might be an acceptable GOP candidate?  Hell no!  Because of his position on social issues.  In other words, I think Dixie only stands out because its moral "screen" is half a standard deviation to the right of that of the relatively conservative Midwest or Mountain states.

In the last few weeks, we have had two more demonstrations of this "gatekeeper" role of social and moral issues.  Jim Webb, an economic populist with RW views on a number of social and foreign policy issues, got zero traction as a democrat and is considering running as an independent.

More importantly, look at what just happened in Canada.  The NDP was leading until its leader made comments about the Muslim face covering, the naqib.  At that point their poll numbers collapsed and their voters turned to the Liberals as an acceptable second choice even though apparently the Liberals are within the "neoliberal" economic mainstream.

BTW, historically this same tension has played out in countries like Mexico and in Europe, where RW parties come to power by highlighting socially unacceptable positions held by economically populist LW parties.

The bottom line is, there isn't just a trade-off between social and economic issues. Rather, voters will vote their pocketbook, but they will only vote their pocketbook from among those candidates who hold acceptable positions on social and moral issues.

Steven Hayward Continues the Long History of Powerline's Economic Stupidity

As I previously pointed out, Powerline has a long history of being 100% wrong on the economy.  From the "Fed is printing money so inflation will spike" garbage, to "the CRA caused the housing crisis" to the latest "Dodd Frank is crushing small business lending" meme,  these guys have not been able to get one thing right.

Steven Hayward continues that trend.  On October 8th, he argued that interest rates would spike because China was selling treasuries. He concluded:

The Fed may have to raise interest rates whether it wants to or not in order to get more suckers buyers for our bonds.

As usual, he was dead wrong.

The buying has been crucial in keeping a lid on America’s financing costs as China -- the largest foreign creditor with about $1.4 trillion of U.S. government debt -- pares its stake for the first time since at least 2001. Yields on benchmark Treasuries have surprised almost everyone by falling this year, dipping below 2 percent last week.

It’s not the scenario that doomsayers predicted would leave the U.S. vulnerable to China’s whims. But the fact that Americans are pouring into Treasuries may point to a deeper concern: the world’s largest economy, plagued by lackluster wage growth and almost no inflation, just isn’t strong enough for the Federal Reserve to raise interest rates.

“As you develop a more pessimistic view on global growth, inflation, and rates, asset managers are going to buy Treasuries in that environment,” said Brandon Swensen, the co-head of U.S. fixed-income at RBC Global Asset Management, which oversees $35 billion.

If anything, Powerline continues their long and solid history of being a great contrarian indicator.  Do the opposite of what they project and you'll make out like a bandit.

PS: I'm sure that Hayward will print a clarification any day now ...