- by New Deal democrat
At the end of last year, I highlighted 5 graphs to watch in 2015. We are now 10 months through the year, so let's take another look.
#5. Mortgage refinancing
After a mini-surge at the end of January (light brown in the graph below) due to low mortgage rates, refinancing applications fell back to their post-recession lows during spring. With a decrease in rates in summer and autumn, there was a small increase, but we are still nowhere near the level of refinancing we saw in 2010 and 2012. Mortgage News Daily has the graph:
Over the last 35 years, refinancing debt at lower rates has been an important middle/working class strategy. There is little room left for that strategy.
#4 Gas prices
Here is a graph of average hourly wages divided by gas prices (blue) since the bottom in gas prices in 1999:
How long must a worker labor in order to buy a gallon of gas? After skyrocketing in the lead-up to the Great Recession, gas prices collapsed, helping the consumer start to spend again on other things at the bottom of that recession. The steep drop in gas prices late last year took us almost all the way back to that bottom. Just as in 1986 and 2006, at first consumers saved the money, but once they loosened their pursestrings, the economy responded.
#3 Part time employment for economic reasons
Next is a graph of part time workers for economic reasons expressed as a percentage of the labor force. This is one of the big positive stories of the year. Over the last 10 months, this has fallen by about 0.8% or 1,300,000:
In the longer view, this is still 1.5% (about 2.25 million) above the boom level of 1999 and about 1.0% (1.5 million) above the level of 2007, but is at least finally close to its 1994 - 2007 range:
This moved generally sideways during the first quarter, improved nicely for the next few months, but slid back in the last 2 months:
It is now only 300,000 above its post-recession low of November 2013 (just prior to Congress's cutoff of extended unemployment benefits) and about 1.6 million, or 1.1% of the workforce, above its 1999 and 2007 lows.
#1 Nominal wage growth
After 3 poor readings last August, December, and February, YoY growth in nominal wages for nonsupervisory personnel fell back close to their post-recession lows before rebounding this spring. In October YoY growth finally cracked 2% to the upside. In the below graph, I have s ubtracted 1.9% fromYoY nominal wage growth, and 10.3% fromcthe U6 unemployment rate, to set both to zero at their current levels:
In the 1990s and 2000s, nominal wage growth started to accelerate when the broad U6 unemployment rate fell to 9.9% and 9.7% respectively. The increase in YoY growth in wages last month coincided exactly with U6 falling from 10% to 9.8%.
In summary, 10 months into the year we finally have improvement in 4 of the 5 metrics, some more than others:
- Involuntary part time employment has declined substantially.
- Low oil prices have continued to benefit consumers.
- Wage growth, driven in part by the decline in the broad unemployment rate, has finally started to improve.
- Although the decline has stalled in the last several months, over the year there has been a decrease in the number of people not even in the labor force, but who want a job now.
- Refinancing is still at low ebb. For the economic expansion to continue for a substantial time, we must either see a new low in rates (very unlikely), or real wages must continue to grow (at the moment looking likely).
Still, if current trends continue, we won't achieve real, full employment like 1999 or even 2007 for about another 2 years!