Tuesday, February 19, 2019

Wages continued to improve through January


 - by New Deal democrat

One item I didn’t get around to in the last couple of weeks is how wages performed as of January’s jobs report. And the basic answer is: pretty good!

The first graph below shows real, inflation adjusted average wage gains for non-managerial workers measured YoY:
As of January they were up +1.9%. This is the best showing except for a few months in 2015.
As Jared Bernstein has shown, the “real” gains in wages have a lot to do with the price of gas (blue in the graph below). But in the last two months they have risen the most in the last 8 years in real terms ex-energy:
So average workers are finally making some real headway.

By the way, this also shows up in the Q4 2018 Employment Cost Index that was released three weeks ago:

The ECI measures *median* wages, i.e., the 50th percentile level, and so does away with the “Bill Gates enters a bar” problem. At +3.1% YoY, this is the best showing since late 2006-early 2008.

Returning to real inflation adjusted average wages, they improved again and are now only 3% below their 1973 peak:

Finally, total wage growth for non-managerial workers since the bottom in October 2009 is now up +28.5%:

Total wage growth from this entire expansion has only been exceeded by the 1960s and 1990s expansion. The bad news, of course, is that it took 9 years to get here.

Monday, February 18, 2019

It’s Presidents Day, and we’re still basically flying blind on the eoncomy


 - by New Deal democrat

Not only are the markets closed today for President’s Day, but this entire week is about the emptiest I can ever recall for economic data. Literally the only data of note is going to be released on Thursday, and except for weekly jobless claims, even that is not what I would generally consider first-order metrics.

Even worse, we are still basically flying blind due to the government shutdown. The only data of note that had been on hiatus, and has been updated since it ended was last week’s retail sales for December. And that report was jarring enough to justify worrying that not only did the shutdown make us economically blind, but it itself may have further weakened an already weakening economy. So we may be in for some more jarring surprises when December housing starts and permits, December income and spending, and Q4 GDP finally get released next week.

There are a couple of series I’ve been meaning to update, so maybe I’ll get around to them. But, don’t be surprised if I don’t post any material for a day or two, or post a brief note on a political topic.

Saturday, February 16, 2019

Weekly Indicators for February 11 - 15 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

There was some widespread deterioration among both the short leading and coincident weekly data, as well as the monthly data.

This is similar to what happened during the 2011 “debt ceiling debacle,” which makes me think that the government shutdown had a more pronounced (but hopefully transient) impact on the economy.

Friday, February 15, 2019

Industrial production face-plants, but hold the DOOOM for now


 - by New Deal democrat

For the second day in a row, a major piece of economic data face-planted. Industrial production for the month of January declined -0.6%. Worse, almost all of the decline was in manufacturing.
This kind of decline is most consistent with the onset of a recession, or at very least a significant slowdown, as shown in these two long-term graphs covering the last 50+ years, which have been normed so that only a monthly decline in excess of -0.5% shows as negative:
1961-82
1982- present
Zooming in on this expansion, the YoY% change in industrial production, at 3.8%, while certainly backing off from its “boom” readings of half a year ago, is still in the high range of average:

While the combination of yesterday’s retail sales number for December and today’s January industrial production number are pretty awful, I recommend treating each with caution, for two reasons.
First, the government shutdown - which started in late December - may have had a bigger effect on production and consumption than earlier believed. If so, I would expect the situation to reverse in the next month or two.
Second, at least in the case of January, the worst cold snap in the last 30 years hitting the industrial heartland almost certainly had some effect on production. The typical rejoinder to this is that winter comes every year. But winter weather is particularly variable from year to year, and waxes and wanes over its three month length at differing times from year to year as well.
So: definitely not good. Definitely consistent with a slowdown at least. But we need to see all of the data caught up through February before we can really judge if it is temporary or not.

Thursday, February 14, 2019

More signs of a slowdown: initial claims and real retail sales


 - by New Deal democrat

This morning we got two negative data points. One is cause for concern; the other - not quite yet.

Let me start with the “not yet” first. Initial jobless claims rose 4,000 to 239,000. That means that the 4 week moving average rose to 231,750:



This means that the number is both higher YoY, and 12.5% above its 206,000 low in September.

Ordinarily that would be cause for concern. BUT, the biggest factor in the increase is the week of 253,000 claims two weeks ago, which was almost certainly due to the government shutdown. That week, in turn, was immediately preceded by the week of 200,000 claims, which was the lowest in nearly 50 years.

The bottom line is, although the trend is clearly higher since September, I would prefer to wait two more weeks for both of those outliers to pass out of the 4 week moving average before hoisting a yellow flag on jobless claims.

Now let me turn to the number that *is* a cause for concern now: real retail sales, which cratered by -1.2% in December. That is the worst monthly reading since just after the Great Recession, and consistent with readings in the year before both of the last two recessions, so unless this reading is revised away, it is a definite sign of a slowdown. On the other hand, in the longer view monthly readings of -1% or more aren’t that uncommon during expansions:



What this does do is  bring YoY real retail sales down to a meager +0.1%(!), the second lowest of the entire expansion.  Real retail sales per capita (red in the graph below) actually turned negative YoY:


In absolute terms, real retail sales per capita still made an expansion high only one month ago, so I am not ready yet to move this signal from positive to neutral yet:
 


Finally, real retail sales are a good if noisy leading indicator for YoY employment, shown in red in the graph below (note: real retail sales averaged quarterly to cut down on noise):



If the poor December number isn’t revised away, or reversed by a big gain in the next months’ report, this portends a significant deceleration in jobs growth in the monthly employment reports over about the next 6 months.