Saturday, July 8, 2017

Weekly Indicators for July 3 - 7 at

 - by New Deal democrat

My Weekly Indicators post is up at

This week, for this first time in years, there was a change in the longer term outlook.

Friday, July 7, 2017

June jobs report: great headline, but once again where are the wages?!?

- by New Deal democrat

  • +222,000 jobs added
  • U3 unemployment rate rose +0.1% from 4.3% to 4.4%
  • U6 underemployment rate rose +0.2% from 8.4% to 8.6%
Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now: down -130,000 from 5.561 million to 5.431 million   
  • Part time for economic reasons: up +107,000 from 5.219 million to 5.326 million
  • Employment/population ratio ages 25-54: up +0.1% from 78.4% to 78.5%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 from $21.99,  to $22.03, up +2.3% 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.)
Holding Trump accountable on manufacturing and mining jobs
 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise? 

  • Manufacturing jobs rose by +1,000 for an average of +2000 vs. the last severn years of Obama's presidency in which an average of 10,300 manufacturing jobs were added each month.   
  • Coal mining jobs were unchanged for an average of +200 vs. the last severn years of Obama's presidency in which an average of -300 jobs were lost each month
April was revised upward by +33,000. May was also revised upward by +14,000, for a net change of +47,000.  

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 +9.1 hour from 40.7 hours to 40.8 hours.  This is one of the 10 components of the LEI.
  • construction jobs increased by +16,000. YoY construction jobs are up +206,000.  
  • temporary jobs increased by +13,400.

  • the number of people unemployed for 5 weeks or less increased by +151,000 from 2,154,000 to 2,305,000.  The post-recession low was set 18 months ago at 2,095,000.
Other important coincident indicators help  us paint a more complete picture of the present:
  • Overtime was unchanged at 3.3 hours.
  • Professional and business employment (generally higher- paying jobs) increased by +35,000 and is up +624,000 YoY.

  • the index of aggregate hours worked in the economy rose by 0.5 from 106.9 to 107.4  
  •  the index of aggregate payrolls rose by +0.8 from 134.0 to 134.8.   
Other news included:          
  • the alternate jobs number contained  in the more volatile household survey increased by   +190,000   jobs.  This represents an increase of 1,560,000  jobs YoY vs. 2,238,000 in the establishment survey.    
  • Government jobs rose by +35,000 .     
  • the overall employment to population ratio for all ages 16 and up rose +0.1% from  60.0% to  60.1 m/m  and is  up +0.5%  YoY.     
  • The  labor force participation rate rose +0.1%  m/m and is up +0.1% YoY from 62.7% to 62.8%.      

The best thing about this report was the headline number of jobs added, plus the big positive revisions to April and May, which brought the average of the last three months to +191,000.  Most of the leading internals were also positive, suggesting the positive headline news should continue over the next six months. Those not in the labor force but who want a job now also declined to a post-recession low (but still elevated by nearly 1 million above the late 1990s boom.)

While the unemployment and underemployment rates went up, this was balanced by the increase in labor force participation rate. 

One weak spot was that involuntary part-time employment increased slightly.  Also, politically, Trump  has so far actually *underperformed* Obama in the net for manufacturing and coal mining jobs.

But the one big negative -- broken record here -- was wages, which have now grown only +2.3% YoY for nonsupervisory workers.  So while this a a very good late cycle report, my fears are increasing about how bad it will be for workers when the next recession does hit.

Thursday, July 6, 2017

La araña

 - by New Deal democrat

Just a little aside....

Here is a photo of the dessert I got yesterday at my favorite local authentic Mexican restaurant:

It is flan with whipped cream, a couple of blackberries, and shaped cinnamon sticks.  I had to laugh when the waiter delivered it.

And yes, "la araña" in Spanish means "the spider."

Reality begins to sink in for GOPer economic confidence

 - by New Deal democrat

While we are waiting for tomorrow's employment report, here's a little something to chew on.

In the immediate aftermath of the Presidential election -- as in, by the end of that week -- Gallup's measure of economic confidence soared, from its 2016 average of roughly -10 to a positive number and to nearly +10 by the end of November:

In fact, while the confidence of Democrats sank, the confidence of GOPers skyrocketed even more.

Since I have very little faith in the GOP agenda to deliver any uptick in growth, I have been watching and waiting for this confidence to ebb.  It did somewhat beginning in March, but never to the point of coming close to that in the final year of Obama's term. (For the doubters, consider George W. Bush's economic policies.  Despite being the most right-wing since the 1950s, we had the weakest post-War jobs and wage growth on record, and a weak GDP to boot. Where was the trickle-down?)

Until last week.  Last week Gallup's economic confidence index fell to -7:

As shown in the graph, it has since rebounded.  But it appears that after half a year of accomplishing absolutely nothing legislatively, the reality that the economy really hasn't changed at all -- in fact it may be waning just a bit -- is beginning to sink in.

Wednesday, July 5, 2017

While houses and cars slow down, manufacturing picks up

 - by New Deal democrat

There were conflicting reports on the economy Monday, in the form of June vehicle sales vs. June manufacturing.

This post is up at

Tuesday, July 4, 2017

Happy 8th Independence Day, economic expansion!

 - by New Deal democrat

In lieu of a more traditional Independance Day post, in view of the fact that the economic expansion turned 8 years old this week, I thought I would take a moment to highlight how far we have come.  Because as mediocre as some things are, we have come a long, long way since the dark days of June 30, 2009.

Unemployment has fallen from a high of 10.0 to 4.2%, and underemployment has fallen from 17.1% to 8.4%:

Over 16 million jobs have been added since the bottom in February 2010:

As of May, real median household income just made a  new high (h/t Doug Short):

Since this statistic is skewed by the increasing share of households headed by retirees, the odds are pretty good that working age real median household income is actually doing a little better.

In real terms, the amount of wages paid out to regular nonsupervisory workers has increased by about 22%:

Finallly, real GDP per capita has increased by 11%:

None of this is stellar. In particular, I wish that wage growth were more stout.

But when you compare where we were then with where we are now, there's no contest. So Happy 4th of July, economy!

Monday, July 3, 2017

A prescient forecast by the Senior Loan Officer Survey

 - by New Deal democrat

There has been a spate of Doomish commentary recently (for example, here) claiming that the stalling of commericial and industrial loan growth means that we are heading into, if not already in, a recession.

Aside from the fact that typically in the past, YoY commerical and industrial loan growth has been a lagging rather than leading indicator, bottoming out well after recessions have ended,  over the weekend I was cleaning out some old saved material when I came across the following graph dating from the first quarter of 2015.  The graph compared the percentage of senior loan officers reporting tightening of standards (right scale) for commercial and industrial loans (lagged 6 quarters) to the YoY% change in commercial and industrial loans (left scale):

The relationship forecast that YoY commercial and industrial loans were going to decelerate to about +5% YoY.  I wish I knew whose graph it was, because I would sure like to give them proper kudos! Because that is exactly what has happened since (note that FRED does not permit me to lag one series of data):

Commercial and industrial loans have flatlined, just as forecast by the writer in Q1 2015.

Note, of course that in the last three quarters, the Senior Loan Officers have reported a slight loosening of standards, which suggests that commercial and industrial loans will continue to flatline through about the end of the year, and improve in 2018.

Finally, I have recently noted that the weekly Chicago National Financial Conditions Index does a decent job of forecasting the direction of the Senior Loan Officer Survey itself.  So here is the Chicago NFCI  vs. YoY commercial and industrial loans:

The Chicago weekly survey is forecasting a continued improvement in the Senior Loan Officer Survey when it is reported for Q2 in about a month.