Saturday, September 8, 2018

Weekly indicators for September 3 - 7 at Seeking Alpha

 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

We have 4 long leading indicators fluctuating around the points where their ratings change.  This past week they fluctuated in a positive direction.

As usual, clicking over and reading doesn't just inform you about the likely path of the economy going forward, but it rewards me a little bitty bit for putting together the information.

Friday, September 7, 2018

Next Friday could be a very bad day somewhere along the East Coast

 - by New Deal democrat

I think I may have mentioned once or twice that I am a nerd, right? 

So, last year during hurricane season I got hooked on a site called Tropical Tidbits.

The neat thing about this site -- well, from a nerdy point of view -- is that it posts the GFS model forecast, updated every 6 six hours, for the next two weeks! While you normally don't hear forecasts more than five days out, I noticed that frequently the forecast even 10 or more days out can come pretty close. Winter or summer, if the model says there's going to be warmer temperatures and a low pressure system, then it's pretty darn likely that there's going to be warmer temperatures a low pressure system.

It just might be 800 miles away from where the model says it will be.  

For example, one model run put hurricane Jose directly over New York City about 12 days later! Needless to say, that disaster was averted -- but Jose ultimately did pass about 600 miles southeast.

So here's what the model run for 12 Noon next Friday (September 14) looked like as of noon Tuesday September 4:

B o r i n g.

Then, in the next model run 6 hours later, look what popped up:

That's Florence, about 300 miles off the Outer Banks. 

That run had Florence curving back out to sea, as did the model as of its noon on Wednesday September 5:

But by the 6 p.m. run on Wednesday, it had the hurricane making landfall over North Carolina and continuing northward over Norfolk, VA by 6 p.m. on the night of Thursday the 13th:

By noon of Thursday September 6, it had the hurricane in New York Bay at 6 a.m. on the14th:

Here's what it looks like as of the noon run on Friday September 7:

The latest run has the hurricane making landfall late thursday over the North Carolina outer banks and heading northwest.

In short, it increasingly looks like this: draw a triangle anchored by Bermuda on the southeast and by the Appalachians on the West. Take out the south-easternmost 1/4 of the triangle closest to Bermuda. Florence is going to be somewhere in the remaining 3/4 of that triangle next Friday.

By the way, although I don't have a screenshot, the European model as of this morning had Florence coming ashore near Charleston, SC.
Next Friday could be a very bad day somewhere on the east coast.

(P. S.  I think Iwill update this periodically over the next week and see how well the model does). 
----------------------- Update Saturday September 8: The noon GFS run today has Florence doing a loop-de-loop off the North Carolina coast and never making landfall:

the Euro model, however, continues to show the hurricane track further sourth with a landfall of a major hurricane between Myrtle Beach and Charleston, SC.

August jobs report: overall progress, with some new highs and some givebacks

 - by New Deal democrat

  • +201,000 jobs added
  • U3 unemployment rate unchanged at 3.9%
  • U6 underemployment rate declined -0.1% from 7.5% to 7.4% (NEW EXPANSION LOW) 
Here are the headlines on wages and the broader measures of underemployment:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now:  rose 226,000 from 5.163 million to 5.379 million   
  • Part time for economic reasons: fell -188,000 from 4.567 million to 4.379 million 
  • Employment/population ratio ages 25-54: declined -0.2% from 79.5% to 79.3% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: rose $.07 from  $22.66 to $22.73, up +2.8% 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.)  (NEW EXPANSION HIGH)
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 fell -3,000 for an average of +21,000/month in the past year vs. the last seven 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 +50/month vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month
June was revised downward by -40,000. July was also revised downward by -10,000, for a net change of -50,000.   

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 41.0 hours.  This is one of the 10 components of the LEI.
  • construction jobs increased by +23,000. YoY construction jobs are up +297,000.  
  • temporary jobs increased by +10,000. 
  • the number of people unemployed for 5 weeks or less increased by +117,000 from 2,091,000 to 2,208,000.  The post-recession low was set three months ago at 2,034,000.
Other important coincident indicators help  us paint a more complete picture of the present:
  • Overtime was unchanged at 3.5 hours.
  • Professional and business employment (generally higher-paying jobs) increased by +53,000 and  is up +519,000 YoY.

  • the index of aggregate hours worked for non-managerial workers rose by 0.2%.
  •  the index of aggregate payrolls for non-managerial workers rose by 0.4%.     
Other news included:            
  • the  alternate jobs number contained  in the more volatile household survey decreased by  -423,000  jobs.  This represents an increase of 2,071,000 jobs YoY vs. 2,330,000 in the establishment survey.      
  • Government jobs decreased by -3,000.
  • the overall employment to population ratio for all ages 16 and up decreased -0.2% from 60.5% m/m to 60.3% but is up 0.2% YoY.          
  • The labor force participation rate decreased from 62.9% to 62.7% and is down -0.2% YoY.


This was a mixed report with an overall positive tone.

Most of the negatives, such as the prime age employment population ratio simply gave back the very good numbers from last month and returned us to where we were two months ago. Still, several leading components did decline, such as short time unemployment, past revisions, and employment as measured by the more volatile household survey.

The positives showed continued improvement in some problematic areas. Most importantly, nominal YoY wage growth for ordinary workers increased to an expansion high of +2.8%. Involuntary part time employment continued to fall, as did the broad underemployment rate.

Overall, we continue to make progress, and so long as short term leading indicators of consumption continue to do well, so should employment.

Thursday, September 6, 2018

August producer data goes in the opposite direction from the consumer

 - by New Deal democrat

I have a new post, "Producers are Hot*, but Consumers Maybe Not," up at Seeking Alpha.

in which I contrast the white hot ISM manufacturing report with the lackluster motor vehicle sales and residential construction -- the two biggest durable consumer purchases.

As usual, not only is reading it hopefully informative, but also compensates me a little bit for the work I put in.

Tuesday, September 4, 2018

July residential construction spending: pause or peak?

 - by New Deal democrat

While the ISM manufacturing index came in very hot this morning (I'll wait for graphs to update before I discuss in any detail), residential construction spending continued its recent flatness.

To recap, while construction spending lags housing sales, permits, and starts, it has the virtue of being the least noisy of any housing metric, and it still does lead the economy as a whole.  Here's what it looks like (blue) through July compared with single family housing permits (red):

Its reading in July, while up from June, was below that for February, April, and May.

Here are the same two metrics as YoY% changes, starting from midyear 2014:

It is apparent that the rate of growth of both is still positive, but has very much decelerated.  In fact, the YoY% growth in residential construction spending is the lowest in 6 years.

Residential construction is consistent with both a pause in housing growth, and a cyclical peak. House prices are likely to continue to rise, putting more pressure on housing. So the big question is, what happens to mortgage rates in the next few months?

Monday, September 3, 2018

Brad DeLong hops aboard the "Employers have a Taboo against raising Wages" bandwagon

 - by New Deal democrat

For Labor Day Prof. Brad DeLong posted a talk on the implications (or not) of the US being near "full employment."

The arguments on a few of the pages will be familiar to readers of this blog:

My only significant quibble here is that "Job Openings" rates from both the JOLTS reports and the NFIB (Small Business) survey have been soaring for over 2 years. If employers knew that they had to pay higher wages to attract workers, but didn't want to be locked in, why would they bother posting the job openings at all? That, to the contrary, they are posting job openings at record rates strongly suggests they *haven't* learned yet that they must pay higher wages.

A thought for Labor Day, 2018

 - by New Deal democrat

US voters will continue to vote for alternating partisan "waves" in Congress, and for "outsiders" however chancey for President, until the problem depicted in the below graph is solved:

Sunday, September 2, 2018

Trump's base: not the white working class, but white evangelicals -- all men and lesser-educated women -- who believe the ends justify the means

 - by New Deal democrat

Via Digby:
1. Trump has always been unpopular with college-educated voters
[A] Pew Research assessment ... [using a] validated voter survey (they matched voter file with the survey respondents) showed white women narrowly preferring Trump to Clinton by 2 points - 47 percent to 45 percent. ... the Pew data suggests white women have always been, at best, ambivalent about Trump. 
... Clinton won (white college-educated voters ) voters by 17 points! 
... if you compared Trump’s current standing with the Pew data[,] Trump took 38 percent of college-educated voters in 2016, and his current standing with these voters is….37 percent. Their vote preference in 2016 (38 percent Trump to 55 percent Clinton), pretty much mirrors their vote preference for 2018 - 39 percent Republican to 54 percent Democrat.
2. But the biggest determinant is whether a voter is evangelical
Mike Podhorzer, AFL-CIO’s political director, suggests that ... [w]hat really distinguishes a Trump-supporting white voter from one who doesn’t isn’t education or even gender, it's whether or not that voter is evangelical. 
Using a data set from Public Religion Research Institute, Podhorzer broke out white voters by gender, education and whether they identified as evangelical. The gap between white voters who approve and disapprove of Trump by gender was 25 points. By education (college versus non-college) it was about the same at 26 percent. But the gap in perceptions of the president between white voters who are evangelical and those who aren’t was a whopping 60 percent!
This evangelical support gap transcends education and gender. For example, among white evangelicals, college-educated men and non-college educated men give Trump equally impressive job approval ratings (78 percent and 80 percent respectively). But, among white men who aren’t evangelical, the education gap is significant. Those without a college degree give Trump a 52 percent job approval rating, while just 40 percent of those with a college degree approve of the job he’s doing.
White evangelical women without a college degree give Trump a 68 percent job approval rating, while those with a degree give him a much lower, though still positive 51 percent approval rating. Meanwhile, Trump’s approval among white, non-evangelical women without a college degree is 35 percent, just five points higher than the 30 percent approval rating he gets from white, non-evangelical college-educated women.
Podhorzer’s analysis leads to two conclusions. First, ... Trump’s base is evangelical white voters, regardless of education level. Second, white non-evangelical, non-college women are the ultimate swing voters.

It's fairly clear that the justification that evangelicals have for supporting Trump is that, no matter how vile he is personally, no matter how many laws and norms he flouts, he is being used by God to do God's work.

Which brings to mind the story attributed to Sir Thomas More in the 1960s film "A Man for All Seasons":

  • Roper: So now you'd give the Devil benefit of law!
    More: Yes. What would you do? Cut a great road through the law to get after the Devil?
    Roper: I'd cut down every law in England to do that!
    More: Oh? And when the last law was down, and the Devil turned round on you — where would you hide, Roper, the laws all being flat?