Saturday, July 15, 2017

Weekly Indicators for July 10 - 14 at

 - by New Deal democrat

My Weekly Indicators post is up at

One week ago I downgraded my longer term forecast. That remains this week.

Friday, July 14, 2017

Real retail sales concerning while industrial production shines

 - by New Deal democrat

Real retail sales is one of my favorite data series, because it tells us so much about the consumer economy.  This morning's report was no exception.

To begin with, the unusual early decline in gas prices brought down CPI to unchanged. On a YoY basis, CPI is now only up 1.7%:

This is a backdoor positive for real wages. with nominal growth in the 2.3%-2.5% range, the decline in inflation means more spending power for consumers.

But since nominal retail sales declined -0.2%, this means that real retail sales declined as well:

Next, real retail sales per capita is a medium to long leading indicator, and here the story is, a plateau since last December:

This indicator has to be rated as no better than a neutral as of now. That is clearer when we look YoY:

While we've had pauses in real retail sales growth before in this expansion, this time the pause coincides with the weakening or turning outright negative of several other of the long leading indicators. It wouldn't take much more weakening of this metric to turn it, too, into a negative.

If retail sales were poor, at least the Doomer mantra that "hard" data hasn't confirmed "soft" data will be a little more quiet today, as industrial production rose +0.4%, and the manufacturing component rose +0.2%:

Bottom line: mixed news for the nowcast, with a little more cause for concern in the long term forecast.

Thursday, July 13, 2017

An important deterioration in the long leading indicators

 - by New Deal democrat

The failure of interest rates to make a new low in the llast 12 months has important ramifications.

This post is up at

Wednesday, July 12, 2017

Trump: the endgame

 - by New Deal democrat

There was some economic news last week which is important for the long term, and I'll try to post about it later today or tomorrow, but in the meantime ...

I'm as interested in the latest Trump-Russia tidbit as the next person, but really, don't we all already know the endgame? 

Remember during the campaign, no matter what devastating gaffes Trump made, he always rebounded into the low 40%'s? Well, about the same thing has been true for the last 5 months.  No matter what the news, Trump's approval rating is 38% +/-3%:

So here, as a public service, to save you all the sturm und drang of the next 3 years, I present you in narrative form with the endgame:

PUTIN: Do as I say or else!

TRUMP: So what? I'm the President!

PUTIN: If you don't carry out what I want, I will release my most devastating information on you.

TRUMP: Don't you know I always welch on the last payment?

PUTIN: [releases devastating information]

DEMOCRATIC ESTABLISHMENT: We're horrified! So horrified that now we can run on this, and we don't have to offer an actual program to help people.

PRESS [to GOP Congress]: Are you going to impeach Trump?

GOP CONGRESS: ...   ...  ...

GOP BASE: Attaboy!  What a guy!

FOX NEWS: It's Clinton and Obama's fault!

GOP CONGRESS: We think Trump is doing a wonderful job.

PUTIN: Wtf?!?

TRUMP: See, I told you so.

RYAN AND MCCONNELL: Hey, Donald, while everyone else is busy, here's some byootifull legislation for you to sign: 
repealing Obamacare
repealing Medicaid
repealing the Voting Rights Act
cutting Medicare
repealing the Civil Rights Act
cutting Social Security
repealing the 14th and 15th Amendments, and what the heck, everything after that.

RYAN: He can't repeal Constitutional Amendments!

MCCONNELL: Shaddup! He doesn't know that. Besides, now the Kennedy is retiring, we're going to have 5 Justices on the Supreme Court who will do whatever we want.

A reminder: the econometric election models actually performed very well in 2016, forecasting a very tight race, with most models showing Clinton winning *the popular vote* by a slim margin.

Don't forget that Trump actually came right out and invited the Russian government to collude with him to defeat Clinton. Why should he care if the collusion turns out to have actually happened? The most likely case is that Trump has been neck deep funnelling Russian money to his "Investments,"whether or not it was lawful or merely unsavory. His base does not care.   For Putin, he is the Mother of All Useful Idiots, nothing more.

What will defeat Trump and the GOP is either an unsuccessful major war, like Korea or Vietnam, and/or an economic downturn that hurts their base.  That's the bottom line. The rest is opera.

Tuesday, July 11, 2017

JOLTS and Labor Market Conditions Index: for once, a good report

 - by New Deal democrat

Usually I am the lone Debbie Downer when it comes to the JOLTS report, mainly because I think there is way too much attention paid to the "soft" openings data vs. the "hard" hires and quits numbers.

Well, in this morning's report on May, it was the "hard" data that was better.

As I usually do, first here are openings (blue) vs. hires (red):

Openings declined to back within their 2 year range, while hires rose to the top of their 2 yeear range.

On a YoY basis, both were positive, although not by much:

The best news of all was quits, which made a new record high:

Yesterday's Labor Market Conditions Index for May wasn't too shabby either:

While it wasn't as high as the last few months, it remained positive, and since it shows promise as a long leading indicator, that's a good thing.

My overall take remains that we are late in the cycle, but the coincident data is still pretty positive, and there is no imminent problem in sight.

Sunday, July 9, 2017

A thought for Sunday: Trump voters and the "peasant mentality"

 - by New Deal democrat

I am currently reading a comprehensive tome on 19th century European history, "The Pursuit of Power," by Richard J. Evans.

One episode that made a big impression on me was the decision by Otto von Bismarck (no conservative he) upon the establishment of the German Confederation, to eschew property qualifications for the franchise for the Reichstag and embrace universal male suffrage (p. 257).  Why? In so doing, he "bypass[ed] the liberal middle classes to appeal to what he assumed were the loyal and conservative masses in the countryside."

I was reminded of Bismarck's shrewd insight upon reading a post by Dietrich Vollrath:  "The return of the peasant mentality."

Discussing the outcomes of recent research, Vollrath writes:
[W[hen people move from rural to urban, or urban to rural places in these countries, do their wages change?.... 
The combination of facts tells you that there is selection out of rural/agricultural work and into urban/non-agricultural work for people with lots of human capital. There is not some distortion that prevents rural people from moving to higher wage positions, apparently, its just that all the really skilled or smart people move off the farm.

What’s really interesting is that this pattern shows up in the Raven’s Z-scores .... a crude, but effective, proxy for IQ....  So it’s not just that people who are lucky enough to get an education in an urban area stay there, and people unlucky enough to miss out on schooling in rural areas stay there. People with better measures of inherent smarts tend to end up in the city, or are in cities to begin with. 
Perhaps we should take seriously the idea that peasants are really different, not just in their constraints (which the development literature ..., but in their underlying preferences as well ....
One sees the pattern repeating over and over, across all sorts of societies, from the Spanish Civil War of 1937 to most of Mexican history. A decade or so I read that many of the Chinese immigrants to the U.S. in the late 20th century were Fujianese.  What distinguished the leavers from the stayers?  More than anything else, it was the propensity for risk-taking.

If we think in terms of the Biblical Parable of the Talents,  the risk-taking servants who invested their two and three Talents tend to leave economic backwaters and gravitate to high-growth areas, while the fearful and conservative servant who buried his one Talent tends to stay behind in the economic backwaters.

Which brings me to the small urban and rural Trump voter in the U.S. What distinguishes those people who have left the Rust Belt for greener economic climes vs. the stayers?  Maybe, like the Fujianese, and like the populations that Vollrath's post describes, the biggest distinguishing factor is the willingness to take a risk vs. social conservatism.

That the stayers might have an "underlying preference" for things staying the same as always  can explain a lot about the phenomenon of the right-wing populist voter in the U.S.   They don't want globalism, they don't want change, and they don't want retraining either.  They want the kind of jobs, and the kind of society that they remember from their youths.