Saturday, December 5, 2015

Weekly Indicators for November 30 - December 4 at

 - by New Deal democrat

My Weekly Indicator post is up at .

Appropos of Star Wars, we are all familiar with the Millenium Falcon's "hyperdrive."  Well, that's what Thanksgiving seasonality did to the intensifying commodity slump, and some other indicators too.

Friday, December 4, 2015

November jobs report: truly a mixed report, but enough for the Fed

- by New Deal democrat


  • 211,000 jobs added to the economy
  • U3 unemployment rate unchanged at 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: down -416,000 from 6.052 million to 5.636 million
  • Part time for economic reasons: up 319,000 from 5.767 million to 6.086 million
  • Employment/population ratio ages 25-54: up from 77.2% to 77.4%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.01 from $21.18 to $21.19,  up +2.0%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.)
September was revised upward by 8,000.  October was also revised upward by 27,000, for a net change of +35,000.

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

  • the average manufacturing workweek was unchanged at 41.7 hours.  This is one of the 10 components of the LEI.
  • construction jobs 46,000.  YoY construction jobs are up 259,000.  
  • manufacturing jobs fell by -1,000, and are up 28,000 YoY.
  • Professional and business employment (generally higher-paying jobs) increased by 28,000 and are up 298,000 YoY.

  • temporary jobs - a leading indicator for jobs overall decreased by -12,300.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - rose by 80,000 from 2,326,000 to 2.406,000.  The post-recession low was set 3 months ago at 2,095,000.

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

  • Overtime was unchanged at 3.2 hours.

  • the index of aggregate hours worked in the economy fell by -0.1% from  104.4 to 104.3. 
  • The broad U-6 unemployment rate, that includes discouraged workers rose by  0.1% from 9.8% to 9.9%. 
  •  the index of aggregate payrolls rose by 0.1%  from 125.6 to 125.7-.
Other news included:      
  • the alternate jobs number contained in the more volatile household survey increased by 244,000  \jobs.   This represents an increase  of 2,031,000  jobs YoY vs. 2,609,000 in the establishment survey.  
  • Government jobs rose  by 14,000.  
  • the overall employment  to population ratio for all ages 16 and above was unchanged at 59.3% both m/m and  YoY.  The labor force participation rate rose by 0.1 from  62.4%  to 62.5%  and is down -0.3% YoY (remember, this incl udes droves of retiring Boomers).  


This was actually a mixed report, with some good positives and some nasty negatives.

The positives, in addition to the headline jobs number, included substantial upward revisions in hours and jobs to last month. Those not in the labor force, but who want a job now, dropped by over 400,000 to a new post-recession low, more than outweighing the increase in involuntary part time workers. Construction and high paying professional and services jobs continue to increase. The prime age employment to population ration is now almost exactly halfway back to its peak almost a decade ago.

The negatives were first and foremost, wages, which after inflation, probably declined in November. The YoY change in wages for non-supervisory personnel is back to +2.0%.  My biggest fear is that in the next recession, this will actually go negative, i.e., there will be outright wage deflation. Aggregate hours dropped month over (upwardly revised) month, and aggregate payrolls rose a pathetic 0.1%..  The YoY change in job growth continues to decelerate from its peak a year ago, continuing to signal that we are later in the economic expansion.

This will presumably be enough for the Fed to raise rates, the lack of wage-push inflation be damned.  Hopefully they won't drive the economy into a new recession next year. .

Thursday, December 3, 2015

November ISM non-manufacturing confirms consumer growth

 - by New Deal democrat

This morning's ISM services report shows some weakening, but still no cause for any immediate concern.

Note that because the "ISM services" index only has about 8 years of data, in this post I am making use of "ISM non-manufacturing" which dates to 1997.

Below I've done the same thing I did with ISM manufacturing two days ago: I subtracted 58.2 from the current reading so that it shows exactly at zero (blue).  I also again included ISM manufacturing (red):

There have been 5 times since 1997 that ISM non-manufacturing crossed its current bound to the downside: 1998, 2000, 2002, 2006, and 2011.  The most bearish of those was October 2000, only 5 months before the onset of the next recession.  The non-manufacturing reading was much weaker not just at the onset of the 2008 recession, but for 2 years prior!  On the other three occasions, (1998, 2002, and 2011), there was no recession at all.

Since the 2000 recession is the closest analogue to our current situation -- an industrial slowdown triggered by a strengthening dollar -- obviously there is some cause for concern, and the US$ bears watching exceptionally closely.  At the same time, today's reading like yesterday's motor vehicle sales confirms that the consumer part of the economy continues to outweigh the industrial weakness.

Wednesday, December 2, 2015

The importance of record November vehicle sales

 - by New Deal democrat

The preliminary information shows that vehicle sales for November set yet another post-recession record: 

This is definitely *not* something that happens on the cusp of a recession.  If the "shallow industrial recession" I have been writing about for most of this year is deepening, it hasn't deepened enough to take down the consumer.

The 2001 recession was largely driven by a downturn in business investments -- but even there, vehicle sales did decline from a peak one year prior to the commencement of the downturn:

If the global downturn were being imported into the US via the stronger $ with sufficient force to cause not just a more pronounced slowdown, but an outright contraction, it would show up in fewer vehicle  purchases. We're simply not there.

Tuesday, December 1, 2015

November ISM index confirms intensified deflationary pulse. Can the Fed listen?

 - by New Deal democrat

For the last month in my "Weekly Indicators" column, I have been writing about an intensified deflationary pulse in the US economy.  For example, one month ago in my summary I wrote:

"Several intensified trends are emerging.  The positive trend is increased spending by US consumers as imported deflation finally teams up with a little improvement in wage growth. The negative trends are increased downturns in rail, shipping, and steel - i.e., that part of the US economy most exposed to global weakness - which have been joined by intensified strength in the US$ and a nascent upturn in interest rates courtesy of an anticipated December rate hike by the Fed."

This renewed pulse has now shown up in the November ISM index, which fell to a 3 year low of 48.6.  This is actual bad news, showing an economy that is near contraction.  The silver lining is, we have seen plenty of times before where the ISM index fell to this level without the economy going into recession.  In the below graphs I subtracted 48.6 from the reading, so that the November reading is at the 0 line.  Here is 1948- 1980:

and here is 1981 - present:

A level between 48 and 50 way associated with an oncoming recession 10 times -- and just a mid cycle correction another 8 times.

The simple fact is, the US$ has been accomplishing a tightening without the Fed hiking rates at all.  Here is the chart of the broad trade-weighted US$ since it began its ascent in July 2104:

In November it surged again to new highs.

At some point if the industrial recession becomes deep enough, it could overcome the still-growing consumer economy.   The strengthening US$ was certainly a factor in the 2001 recession:

 At present, however, unlike 2001, neither the yield curve nor housing nor real money supply are playing along. 

But this is a potent reason for the Fed to pull back on their rate hike plans.

Monday, November 30, 2015

New home sales vs. housing permits - how unusual is the divergeance?

 - by New Deal democrat

I have a new post up at .  The latest housing data from October shows a new high in single family housing permits, but new home sales haven't made a new peak since February.  What gives?  I take a look at the historical record, and find an interesting nerdy nugget.