Saturday, August 1, 2015

Weekly Indicators for July 27 31 at

 - by New Deal democrat

My Weekly Indicator post is up at  Several more coincident indicators have turned soft or close to negative.

Friday, July 31, 2015

International Economic Week in Review: Emerging Market Exodus, Edition

This is over at

The Q2 stall in labor costs and part-time employment

 - by New Deal democrat

The employment cost index (ECI), a median measure of employee compensation, pretty much laid an egg in the second quarter, and actually decreased slightly when deflated by personal consumption expenditures.

It is instructive to compare this with several other measures of employee compensation, first of all, another median measure of usual weekly earnings for full time employees (red):

Note that even with the 2Q small decline, the wage trend as measured by the ECI has been improving, whereas usual weekly earnings have been generally flat perhaps with slight improvement over the last several years.

Why the difference?  Most likely in the differing ways the two measures treat part time employment.  Here is a good explanation from Moody's:
There are several measures of wages and compensation, but one of the most closely watched is the employment cost index. This measure is important because it attempts to control for differences in job mix that can affect wage growth and therefore capture inflation in the true underlying cost of labor.... 
The ECI controls for job mix by measuring average compensation within specific groups of workers within the same firm... including ... part- or full-time status ....  For example, if a firm interviewed for the ECI has one worker who is a part-time nonunion cashier and another who is a full-time unionized cashier, they would not be grouped together. 
As a result, when firms increase [decrease] their share of part-time workers to save on compensation costs, it will not show up as a decline [increase] in the ECI. This is potentially problematic, as early in the recession there was a significant rise in part-time workers, and during the recovery this has fallen.
Now let's take a look at the number of workers who usually work full time (blue) vs. part time (red) over the last year:

After a year of improvement, full time employment stalled in the second quarter while part time employment grew.  It is likely that increases in hours (and so pay) explains the relative improvement in the ECI through the first quarter, and its stall in the second quarter, whereas full time employees have seen little increase in real compensation over that time period.
Another way to look at this is real aggregate compensation, which has risen stoutly during most of this expansion, but has stalled this year:

Aside from paltry nominal wage increases and the mix of part-time vs. full-time workers, the second quarter stall is probably due in part to gas prices which rose into June this year, but peaked in April last year, and part to housing costs which have in significant part been driven by foreign, especially Chinese, cash buyers (which may abruptly end now!).

International Economic Week in Review: Emerging Market Exodus, Edition

This is over at

Thursday, July 30, 2015

Sorry, Doomers, there's still no sign of recession

 - by New Deal democrat

As you all probably know by now, the first estimate of 2nd quarter GDP was reported at +2.3% annualized, in line with the Atlanta Fed's GDPNow calculator (and kudos to them!). Real GDP also grew at +2.3%.  As the graph below shows, this is par for the course for the last 4 years, in which YoY real GDP has grown at +2%, +/-1%:

There have been a few diehard Doomers who have been trumpeting an alleged recession this year, based mainly on Industrial Production and related metrics, usually citing the downturn in the Oil patch (which, as I have repeatedly pointed out, has been more than outweighed by increased consumer spending).

Speaking of which, here is the YoY% change in GDP (blue) compared with the YoY% change in the price of gasoline, inverted (/10 to better scale)(red):

While the price of gas is hardly the single determinant of GDP, since consumer spending is 70% of GDP, it is an important one.  As gas prices rose YoY into 2012, downward presssure was placed on real GDP. As YoY gas prices stabilized and then declined, there has been a general upward trend in real GDP.

With today's release, and the accompanying revisions to prior quarters, Doomers will have to go back to their tinfoil hat claims that the numbers are cooked.  Because we are always DOOMED; only the rationalization changes.

Wednesday, July 29, 2015

Record high rents, record low vacancies continue

 -by New Deal democrat

I have a new post up at The apartment boom is continuing, featuring record high rents, and record low vacancies.