Saturday, November 10, 2018

Weekly Indicators for November 5 - 9 at Seeking Alpha

 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

Interest rattes rose even further this past week, portend further erosion in the housing market.

As usual, not only does reading this post give you of the up-to-the-moment view of the economy, but it also put a little extra $$$ in my pocket.

Friday, November 9, 2018

Big producer price increase in October - if a trend - is a problem

 - by New Deal democrat

In a light data week, this morning's report on producer prices is certainly worth mentioning.  As you may have read elsewhere, headline producer prices rose +0.6% in October, the highest reading in 6 years. The below graph compares that (blue) with commodity prices (red):

As you can see, commodity price increases were within the normal range.

The difference happens when we break down final demand by goods (first graph below, in red) vs. services (second graph):

Producer prices for services were among the 4 highest monthly readings in the past 6 years.

This is important for several reasons.

First of all, producer prices tend to bleed over into consumer prices. But even more importantly at this point, is the potential reaction from the Fed.

If I am right and the economy slows next year, then it is important whether or not the Fed feels free to react by lowering interest rates. That is what happened in 1984, 1995, and 1997. But if the Fed thinks that inflation is beginning to accelerate, it will probably feel that it has no choice but to continue raising rates, even in the face of economic weakness.

In that regard, it is worth pointing out that, despite the monthly increase, YoY producer inflation does not appear to be accelerating on any basis:

Thursday, November 8, 2018

Setting markers for a 2019 slowdown in the jobs market

- by New Deal democrat

How might a slowdown (not a recession, but a decline in growth to the 1%-2% YoY range in GDP) that I've been forecasting for around midyear 2019 manifest itself in the employment arena?

One of my mantras is that "hiring leads firing." In other words, companies slow or stop their hiring plans, or cut back on hours, before they actually start laying people off.

So, one natural place to look is the "hires" component of the Job Openings and Labor Turnover (JOLTS) survey. Here's what the *rate* of hiring looks like over the nearly 20 year life of that survey:

If there is a slowdown, I would expect this rate to plateau, in the 3.7%-3.9% range, similar to its plateauing in 2015-16, when we had the "shallow industrial recession." Obviously there's not enough there to make a call at this point, but this is a data point I'll be watching.

On the "firing" front, the easiest place to look is the weekly initial jobless claims report, particularly in the less volatile 4 week moving average.  Here's what that looks like over the past 5 years:

Again, note that from roughly spring 2015 through spring 2016, the decline in weekly jobless claims almost stalled out.  Here's what the same data looks like measured as a YoY% change:

During the "shallow industrial recession," the YoY% decline in new jobless claims rose from roughly -10% to -5%, with a fair amount of noise.  I would be looking for a similar move over the next 8 months, to the range of -5% or even flat YoY. [Note: the spike upward in late 2016 was due to the hurricanes, leading to a similar spike downward one year later.]

On a weekly basis, this means I am looking for initial jobless claims to stay above 200,000, except for an occasional weekly outlier, and for the 4 week average, which at midyear this year was in the 220-225,000 range, to be in the range of 207,500 to 220,000 at midyear 2019.

Needless to say, I am also looking for monthly employment gains to decline back significantly below 200,000 by that time.

Wednesday, November 7, 2018

Final thoughts on the 2018 midterms

 - by New Deal democrat

Here are six takeaways from last night's results:

1. It *was* a wave election in the popular vote, but it was blunted by gerrymandering:

Here's a tweet by Sam Wang:

Even though Democrats won the popular vote by 9.2%, they only eked out 12 seats over a majority, and came about 4 seats short of Nate Silver's median projection:

By contrast, in 2010, a smaller vote advantage led to a 63 seat gain for the GOP.

 2. The Senate races were effectively nationalized

Here's a current map of the state of the Senate (except we know Feinstein won re-election in California):

With the exception of Joe Manchin in West Virginia, all of the incumbent Democratic Senators in red states either lost, or are slightly behind, in their races. The blue vs. red re-alignment is nearly complete in the Senate.  This is going to be an ongoing problem if the GOP remains the party of old white rural people, since rural states are vastly over-represented in the Senate.

3. Governorships were *not* nationalized, although the upper midwest returned "home" to the Democrats

Three of the New England staes, plus Maryland, elected GOP governors. Meanwhile Wisconsin, Michigan, and Illinois returned to Democratic governors.

I expect the true 2020 battlegrounds to be the 3 "blue wall" states that have possibly returned to the fold, plus North Carolina, if that state's Supreme Court, now controlled by Democrats, throws out the GOP's gerrymander on state Constitutional grounds.

4. Florida is red. Virginia is blue.

Democrats keep losing close races in Florida, because the influx of old, white retirees from the midwest to the Gulf coast outweighs the growth of the minority vote. It's possible that felon re-enfranchisement will make up the difference, but I'm not holding my breath.

Meanwhile the Democrats have both Senate seats, the Governorship, and 3 more House seats in Virginia. Last year they roared back to a tie (minus one vote!) in VA's lower state house. If they pick up the upper chamber next rear, Virginia's re-alignment will be complete.

5. White voters lie about their intentions when an African-American candidate is running.

In both Florida and Georgia, the black candidate came in 3%-5% under their polling. I do not believe that was an accident.

6. Finally, beware the lame duck "smash and grab"

Like jewel thieves making a quick getaway, I expect the GOP to inflict as much damage as possible on the budget, Medicare, Medicaid, Social Security, Obamacare, and anything else they can get their hands on, between now and December 31, figuring that voters will forget by 2020.  It's going to be bad, so brace yourself.

And now, back to the boring economy.

Tuesday, November 6, 2018

Live-blogging the 2018 Democratic ripple? Wave? Tsunami?

 - by New Deal democrat

I'm close to calling it a night, maybe one more post.  The summary is that there was no blue wave, just enough of a high blue tide to apparently take control of the House. the GOPers wone the lion's share of the close races. But the Democrats won just enough to flip the House.

And white voters lie to pollsters about their voting intentions when a black person is on the ballot.

Hopefully we'll pick up the governorship in Wisconsin, so that we get most of the upper midwest back.


11:05 - NBC calls two bellwetherupstate NY races for the Democrat, Brindini and Faso.
---------11 pm - In Maine, GOPer Poliquin holds a small lead over Democrat Golden.
In North Carolina, GOPer Ted Budd leads Democrat Kathy Manning with a majority of votes counted.-------
10:40 - Mixed results in NY and NJ so far. In upstate NY, with about 34% of the vote in, Democrat Faso leads GOPer Delgado by a substantial margin. The situtation is reversed in NJ, where GOPer MacArthur leads Democrat Kim. In PA, GOPer Brian Fitzpatrick also leads Democrat Scott Wallace.

10_30 - Georgia, along with Florida, look like the dark spots for the Democrats tonight.  In the House: in Georgia, Lucy McGrath  (D) has apparently lost against Karen Handel (R).

If the Dems can knock out Scott Walker in Wisconsin, the recompense may be the upper midwest coming back. And beating Kris Kobach in Kansas is also pretty sweet.

10:20 - In NC,  GOPer holds a slight lead over Demovrat McCready.
10 PM - EVERY VOTE COUNTS. With 94% of the vote in, about 250,000 total votes, in VA's 2nd District, Democrat Elaine Luria leads Republican Scott Taylor by 40 votes.

AAAAAND, NVC says she has won!

9:45 - It looks like a VA House district may flip after all.  With 97% of the vote counted, Spandberger leads Brat by about 2,000 votes. Brat would have to pick up something like 70% of the remaining votes to pull back ahead.

9:40 - With 34% of the vote in, MacArthur (r) leads Kim by over 20% in NJ.

9:30 Aaaand, not so fast in Virginia. Spanberger has just pulled slightly ahead of Brat, and Luria has pulled even with Taylor, each with about 90% of the vote counted.

Also, do the elctecion boards in NY, NJ, and PA know that this is election day and maybe they should start couting, you know. votes?

9 pm - More bad news out of Florida: it looks like Rick Scott is going to defeat incumbent democrat Bill Nelson. He is ahead by 1% with 80% of the vote counted.

And now NBC says the R's have also picked up the Indiana Senate seet by defedating Democrtic incumbent Joe Donnelly.

8:50 A little good news: NC-9 Dan McCready (D) vs. Mark Harris (R) - McCready holds a slight lead with 15% of the vote in.

And Menendez won the "vote for the crook, it's important" election in NJ

8:40 This is big, and it's bad news: it looks like DeSantis is beating Gillum in Florida.


FL-26 Debbie Mucarsel-Powell vs. Carlos Curbelo (R) - Democrats projected to flip the seat. This was a D slight lean.

UPDATE 8:20 -- all 3 of the close Virginia races are breaking against the Democrats:

VA-2 Elaine Luria (D) vs. Scott Taylor (R) - 8:15 with 60% of the vote in, Taylor leads 52%-48%
VA-5 Leslie Cockburn (D) vs. Denver Riggleman (R) -UPDATE 8 pm EST: NBC projects Riggleman victory. 8:20 with 80% of the vote in, Riggleman leads by 10% 
VA-7 Abigail Spanberger vs. Dave Brat (R) - Brat leading by 1% with 80% of the votes counted

Here are the East Coast races I am especially keeping an eye on.

It'll be a bad night for the Democrats if they don't win the following races:

NJ senator - Bob Menendez (D) vs. Bob HUgin (R)

Maine governor- Janet Miils (D) Shawn Mills (R)

In the House:
ME-2 Janet Golden (D) vs. Bruce Poloquin (R)
NY-19 Antonia Delgado (D) vs. John Faso (R) 

On the other hand, it'll be a long night for the GOP if they don't win these races:

In the House:
GA-8 Lucy McGrath  (D) vs. Karen Handel (R) 
NC-13 Kathy Manning (D) vs. Ted Budd (R) 
VA-2 Elaine Luria (D) vs. Scott Taylor (R) 

Here are the toss-ups and slight leans:

Toss up
Georgia - Stacey Abrams (D) vs. Brian Kemp (R)

D-slight favorite
Florida governor - Andrew Gillum (D)  vs. Ron DiSantis (R) 

D-slight favorite
Florida senator -  Bill Nelson (D) vs. Rick Scott (R)

House of Representatives

D-slight favorite
FL-26 Debbie Mucarsel-Powell vs. Carlos Curbelo (R)

NY-22 Anthony Brindisi (D) vs. Claudia Tenney (R)
NJ-3 Andy Kim (D) vs. Tom MacArthur (R) 

R-slight favorites
VA-5 Leslie Cockburn (D) vs. Denver Riggleman (R) -UPDATE 8 pm EST: NBC projects Riggleman victory
NC-9 Dan McCready (D) vs. Mark Harris (R) 
VA-7 Abigail Spanberger vs. Dave Brat (R) 
PA-1 Scott Wallace (D) vs. Brian Fitzpartrick (R) 
FL-15 Kristen Carlson (D) vs. Ross Spano (R)

I'll update these as we start to see results.

Monday, November 5, 2018

Trump's final pre-midterm job approval

 - by New Deal democrat

As promised, following up on yesterday's post, here is Gallup's final Trump job approval rating, as of the last weekend before Election Day:

At very least, it sure looks like his fear-mongering about immigrants hasn't helped, and it may have backfired.

I will blog on the election results tomorrow night. Regular economist blogging should resume Wednesday.

Sunday, November 4, 2018

As predicted, a deeply unpopular Trump stomped on the GOP message; early races I'll be watching Tuesday night

 - by New Deal democrat

As I wrote a few weeks ago, whatever message Congressional GOPers might have wanted to put out (like, "our tax cuts helped spur the best economy in years!") got stomped on by Donald Trump.

As it turns out, (please be sitting down for this) he was being truthful when he talked about momentum having been going his way. Here's Gallup's weekly polling through last Sunday:

Until the bomb attempts and several mass shootings derailed things, his approval ratings in the weeks following the Kavanaugh confirmation were the best since spring 2017.

Then, during the week of actual and attempted mass murder he went down 4 points. 

Trump being Trump, he had to grab back the limelight, so he blamed the press (and even the victims for not having armed guards in their place of worship!), and amped up the anti-immigrant volume, thus guaranteeing the the ugliest face of the GOP is what has been last shown to the public before Tuesday's polling.

I'll update this post with Gallup's final pre-midterms weekly number when it comes out tomorrow.

By the way, Gallup also supplied a nifty chart of Presidential and Congressional approval for each of the last 10 midterms in addition to current polling:

Only George W. Bush had worse numbers in 2006, and only the Congressional democrats had worse numbers in 2014.

Just based on those numbers, I would expect the incumbent President's party to take a pasting.

We ought to get some clues from some east coast races early Tuesday night. So here's a handy list of the tightest ones, that I will be particularly watching:


Toss up
Georgia - Stacey Abrams (D) vs. Brian Kemp (R)

D-slight favorite
Florida governor - Andrew Gillum (D)  vs. Ron DiSantis (R) 

D-higher favorite
Maine governor- Janet Miils (D) Shawn Mills (R)

D-slight favorite
Florida senator -  Bill Nelson (D) vs. Rick Scott (R)

D-higher favorite
NJ senator - Bob Menendez (D) vs. Bob HUgin (R)

Most of the contested races for governor or senator are in the midwest and mountain west, so the issue in the East is whether there are any upsets. Florida, of course, is perennially tight. Meanwhile NJ voters have been asked to hold their noses and "vote for the crook, it's important." If there is a race where bashful voters lied to pollsters, the NJ senate race is it.

House of Representatives

D higher favorites
ME-2 Janet Golden (D) 5/8 vs. Bruce Poloquin (R)
NY-19 Antonia Delgado (D) 5/8 vs. John Faso (R) 

D-slight favorite
FL-26 Debbie Mucarsel-Powell 5/9 vs. Carlos Curbelo (R)

NY-22 Anthony Brindisi (D) 1/2 vs. Claudia Tenney (R)
NJ-3 Andy Kim (D) 1/2 vs. Tom MacArthur (R) 1/2

R-slight favorites
VA-5 Leslie Cockburn (D) vs. Denver Riggleman (R) 5/9
NC-9 Dan McCready (D) vs. Mark Harris (R) 5/9
VA-7 Abigail Spanberger vs. Dave Brat (R) 4/7
PA-1 Scott Wallace (D) vs. Brian Fitzpartrick (R) 3/5
FL-15 Kristen Carlson (D) vs. Ross Spano (R) 3/5

R-higher favorites
GA-8 Lucy McBarth (D) vs. Karen Handel (R) 5/8
NC-13 Kathy Manning (D) vs. Ted Budd (R) 7/10
VA-2 Elaine Luria (D) vs. Scott Taylor (R) 5/7

Outside of California and a few seats in the upper midwest, the east is really where most of the action is in the House of Representative races. If there are upsets in the "slight favorites," that will give us a lot of information as to whether or not there is a "blue wave." Meanwhile, if democrats lose both "higher favorited" races, their ability to take the House is in real trouble. Contrarily, if the GOP loses one or more the the races where they are "higher favorites," be on the lookout for a blue tsunami!

I plan on watching the returns and following these races Tuesday night, so I will update this post with  results as they come in.