May JOLTS report: as good as could be asked for

 - by New Deal democrat

The simple take on yesterday's JOLTS report for May is that it was excellent:

• Hires made a new high
• Quits made a new high
• Total separations made a new high
• Openings were just shy of their expansion high
• Discharges were just shy of their expansion low

In short, pretty much everything good that could happen during a positive labor market, happened.

So let's update where the report might tell us we are in the cycle.

Let's start with the simple metric of "hiring leads firing." Here's the long term relationship since 2000, quarterly through the end of March:

Here is the monthly update for the past several years through May:

In the 2000s business cycle, both turned down well in advance of the recession. That isn't the case now.

Hires had been within a 2% range since last May, and had not made a new high since last October, making YoY comparisons more challenging as of this month, but both hires and separations jumped considerably (interestingly, just like May last year, which makes me wonder if there is a little unresolved seasonality).

Further, in the previous cycle, after hires stagnated, shortly thereafter involuntary separations began to rise, even as quits continued to rise for a short period of time as well:

[Note: above graph show quarterly data, ending Q1, to smooth out noise]

Here is a close-up of the same data on a monthly basis for the last 2 years through May:

This in no way resembles a late cycle report from the 2000s cycle. Nevertheless, the large majority of overall economic data suggests we are late in the cycle. Thus, my anticipation remains that we will see weaker, and even negative YoY readings on hiring in particular at some point in the second half of this year. We'll see.

A business cycle theory of labor force participation and wage growth

 - by New Deal democrat

I've devoted a lot of time and thought, and typed a lot of pixels of commentary, about wage growth in the last few years. Some of it has panned out: based on past expansions,I expected YoY wage growth to bottom consistent with an unemployment rate of about 6%. A little later I refined that to an underemployment rate of 9%. In retrospect that is indeed about when wage growth bottomed out in this expansion.

But even three years ago, I expected wage growth to rather quickly reach 3% YoY once that level of underemployment was breached to the downside.  Obviously, that didn't happen.

Rather than ignore the call that didn't pan out, I have tried to understand why.

One important part is the changed behavioral set-points of both employers and employees. Ever since the 1980s, when unions were effectively broken, employers have found that they can get away with paying less and less to maintain employees. Those employees learned to expect less and less in the way of raises from employers. During each successive expansion, employers have tightened the screws more and more, until by now giving raises has become a taboo, where employers would rather sacrifice at the least short term profits from more production than give in to the necessity of raising pay.

But if the taboo against raising wages is a secularly increasing phenomenon, on another level I think we can still tease out a lot of information in terms of the order and direction of employment and wage trends.

To that end, I want to propose a general theory of labor force participation and wages within business cycles. To wit, at least in the modern era since 1982, the pattern has been:

1. the unemployment rate peaks, and begins to decline.

2. prime age labor force participation bottoms, and begins to rise
3. nominal wage growth bottoms, and begins to rise.

BUT...

4. If labor force participation grows too quickly, wage growth languishes.

In other words, as a recession deepens, not only are more people laid off, but an increasing number of people leave the labor force entirely. At some point, as more of the people remaining in the labor force get work, people who have been on the sidelines are drawn back into the labor force and look for work. As even a bigger share of this expanded pool of potential workers find employment, the wages needed to entice them to a job begin to rise. But sometimes the increased number of those entering the workforce causes the pool of available workers for hire to become temporarily saturated, and in that case the pressure for increased wage growth ebbs.

Now let me lay out the supporting graphs. All of these date from 1982 to the present.

First, the unemployment rate leads prime age labor force participation:

The unemployment rate (blue, inverted in the graph below) also leads wage growth:

Further, the prime age labor force force participation rate leads wage growth:

Thus, we have our progression: decreasing unemployment rate --> rising prime age participation --> increased wage growth. 

But while it seems pretty clear that, over an economic cycle, participation leads wages, within that cycle there may be waxing and waning rates of participation increase. That's what is shown in this next graph, which shows the YoY change in the prime age labor force participation rate:

Note that the last several years have shown the sharpest growth in prime age labor force participation since the 1980s, except for 1996.

Further to the point, in the below graph, prime age labor force participation in inverted, with any YoY rate of increase greater than +0.3% showing as a negative:

We can see that when there is a surge in labor force participation, wage growth tends to wane. In the 1980s, when there was persistent growth in participation YoY over more than 0.3%, wages actually declined.

Let's now zoom in on the last 5 years:

Prime age labor force participation has grown by more than 0.3% YoY in 22 of the last 24 months. While there has been some acceleration in wage growth during the first part of this year, it has still not hit so much as 3%.

To put my whole theory together, I think employers increasingly developing a the behavior of a taboo against raising wages ("wages are also sticky to the upside" in econospeak) is a powerful explanation of the decades'-long secular trend; while the pattern I have set forth in this post is an equally good hypothesis to explain the within-cycle behavior of labor force participation and wages over the last 35 years. 

A teaser about wages and labor force participation

 - by New Deal democrat

I was going to put up a short piece about wages this morning, but it has turned into a longer, more comprehensive piece, so in the meantime, here are some teasers to ponder.

1. There is a direct relationship between the economy generally, and child care costs specifically, and couples' decisions about whether or not to have more children:

The below graph comes from Vox.com. It is the top eight reasons that couples give for not having (more) children:

Note that 6 of the 8 reasons have to do with the economy, and 4 of those specifically have to do with the costs of child care.

2. While correlation is not causation, nonetheless in the modern era, there has been a clear correlation whereby prime age labor force participation leads nominal wage growth:

3. Despite #2 above, in the shorter term there appears to be an inverse correlation between the rate of prime age employment growth and relative wage growth:

I'll flesh this out in the more comprehensive post.

Understanding the simple strategy for the 2018 elections

 - by New Deal democrat

It's Sunday, so I feel free to stray from nerdy economics ....

Pretend for a moment that you are a political strategist. Your party is the party in power. The opposition has been enraged since the moment of your standard-bearer's election. In the special and off-year elections since, they have been showing up in unprecedented droves for offices up and down the ticket, from Governor and US Senator to state representative and local council.

The mid-term election is bearing down, and you know very well that midterm elections are fundamentally referendums on how the party in power is doing. The odds look overwhelming that the opposition turnout tsunami, at least, is likely to continue.

As a strategist, what of the following courses of action do you recommend?

(a) make soothing noises, hoping that the anger of the opposition is mollified enough that your candidates squeak through

(b) engage in searingly divisive behavior that will rile up your base
(c) get rip-roaring drunk and hide under a table curled up in a fetal position until it's over, so that you don't remember anything

Whether or not you choose to do (c), it's pretty obvious that (b) is the correct answer, isn't it?

Opposition supporters already hate your with the heat of 1000 suns. So what if you repeatedly do such cruel and outrageous things that they become incandescent with rage. They're going to turn up anyway, regardless of what you do. 

Since the opposition is going to turn out in droves, your best option is to get your base to turn out in droves as well. You don't do that by disappointing your base, or putting them to sleep (Cf. Obama, 2010). Here's Rasmussen's poll of "strong approval vs. strong disapproval" from that time:

Note how enervated Obama's base was, with only about 27% +/-2% during that time.

No, you do that by getting your base incandescent with rage as well. You want to pick the bloodiest fights you can, so that your base feels they need to show up and support you and your allies, lest their enemies prevail. Here's Rasmussen's equivalent poll for Trump right now:

Note that the level of strong disapproval is about the same as for Obama, but the level of strong approval has been inching up, and is currently at about 33% +/-2%.

Once you understand this simple strategy, all of the horrible things that have been done by Trump and the GOP in the last few months make perfect sense. The more mean, cruel, divisive, bloody fights that are boiling over this November, the more the GOP base will turn up. Since the Democrats' base is going to turn up anyway, this gives you your best chance to preserve your majorities.

Weekly Indicators for July 2 - 6: long term forecast continues to deteriorate

 - by New Deal democrat

June data started out with another strong jobs report, but once again with weak wage growth. Motor vehicle sales and both the ISM manufacturing and nonmanufacturing indexes were very positive as well.  

May data included and increase in construction spending and factory orders.

My usual note: I look at the high frequency weekly indicators because while they can be very noisy, they provide a good Now-cast of the economy, and will telegraph the maintenance or change in the economy well before monthly or quarterly data is available. They are also an excellent way to "mark your beliefs to market."

In general I go in order of long leading indicators, then short leading indicators, then coincident indicators.

NOTE that I include 12 month highs and lows in the data in parentheses to the right. All data taken from St. Louis FRED unless otherwise linked.

Interest rates and credit spreads

• BAA corporate bond index 4.79% down -.05% w/w (1 yr range: 4.15 - 4.94) 
• 10 year treasury bonds 2.82% down -.04% w/w (2.05 - 3.11) 
• Credit spread 1.97% down -.01% w/w (1.56 - 2.30)

Yield curve, 10 year minus 2 year:

• 0.28%, down -0.05% w/w (0.28 - 1.30) (new expansion low)

30 year conventional mortgage rate

• 4.69%, up +0.03% w/w (3.84 - 4.79) 

BAA Corporate bonds remain neutral. If these go above 5%, they will become a negative. Mortgage rates and treasury bonds are still both negatives. The spread between corporate bonds and treasuries has now gone above 1.85%, and so I have switched it from positive to neutral. The only remaining positive is the yield curve, and if that declines to +0.25%, that too will become a neutral.

Housing

Mortgage applications 

• Purchase apps down +1% to 244 w/w (225 - 262)
• Purchase apps 4 week avg. -2 to 248
• Purchase apps YoY -1%, 4 week YoY avg. +1%
• Refi app down -2% w/w

Real Estate loans

• Up +.1% w/w 

• Up +3.8% YoY ( 3.3 - 6.5) (re-benchmarked, adding roughly +0.5% to prior comparisons) 

Refi has been dead for some time. Purchase applications were strong almost all last year, began to falter YoY in late December, but rebounded during spring, ultimately making new expansion highs. The 4 week average declined from the peak enough to qualify as neutral for most of the past month, including this week. If it drops below 240 and is negative YoY, it will become a negative.

With the re-benchmarking of the last year, the growth rate of real estate loans changed from neutral to positive. If the YoY rate falls below +3.25%, I will downgrade back to neutral.

Money supply

M1

• -0.1% w/w 
• -0.7% m/m 
• -0.8% Real M1 last 6 months
• +0.9% YoY Real M1 (0.9 - 6.9) (new expansion low) 

M2

• +0.1% w/w 
• +0.5% m/m 
• +1.9% YoY Real M2 (0.9 - 4.1)

Since 2010, both real M1 and real M2 were resolutely positive. Both decelerated substantially in 2017. Real M2 growth has fallen below 2.5% and is thus a negative. Real M1 growth this week was again below 3.5% YoY, and again on a 6 month basis was negative, so real M1 overall is scored as neutral. Note that it is less than 1% above the point where it will turn outright negative.

Credit conditions (from the Chicago Fed)

• Financial Conditions Index up +0.03 to -0.78
• Adjusted Index (removing background economic conditions) up +.02 to -0.51
• Leverage subindex up +.05 to -0.26 (2 year high)

The Chicago Fed's Adjusted Index's real break-even point is roughly -0.25. In the leverage index, a negative number is good, a positive poor. The historical breakeven point has been -0.5 for the unadjusted Index. All three metrics presently show looseness and so are positives for the economy; HOWEVER, in the last two months, leverage has turned up by roughly +0.2 to a two year high.

Trade weighted US$ 

• Up +0.15 to 124.12 w/w +2.3% YoY (last week) (broad) (116.42 -128.62) 
• Down -0.49 to 94.00 w/w, -2.08% YoY (yesterday) (major currencies) 

The US$ appreciated about 20% between mid-2014 and mid-2015. It went mainly sideways afterward until briefly spiking higher after the US presidential election. Both measures had been positives since last summer, but in the last month the broad measure turned neutral.

Commodity prices

Bloomberg Commodity Index

• Up +0.68 to 86.21 (81.67 - 91.94)
• Up +5.38% YoY

BBG Industrial metals ETF

• 124.23 down -5,81 w/w, up +9.28% YoY (112.03 - 149.10) 

Commodity prices bottomed near the end of 2015. After briefly turning negative, metals also surged higher after the 2016 presidential election. The overall commodity index (which includes oil) is neutral. Industrial metals had been strongly positive and recently made a new high, but have declined significantly in the past several weeks, enough to change their rating to neutral.

Stock prices S&P 500

• Up +1.5% w/w at 2759.82 

After being neutral for several months, by an ever-so-slight margin stock prices made a new 3 month high on June 12, and so have returned to being positive.

Regional Fed New Orders Indexes

(*indicates report this week) (no reports this week)

• Empire State up +5.3 to +21.3 
• Philly down -22.7 to +17.9 
• Richmond up +6 to +22
• Kansas City down -11 to +27
• Dallas up +1.9 to +29.6
• Month over month rolling average: unchanged at +24

The regional average has been more volatile than the ISM manufacturing index, but has accurately forecast its month over month direction. After being very positive for most of this year, it has moderated slightly in the last few weeks.

Employment metrics

Initial jobless claims

• 231,000 up +4.000
• 4 week average 224,500 up +2,500 

Initial claims have recently made several 40+ year lows and so are very positive. The YoY% change in these metrics had been decelerating but is now back on its multi-year pace. 

The American Staffing Association Index

• Unchanged at 97 w/w
• Up +1.1% YoY

This index was generally neutral from May through December 2016, and then positive with a few exceptions all during 2017. It was negative for over a month at the beginning of this year, but returned to a positive since then.

Tax Withholding 

• $181.0 B for the last 20 reporting days vs. $184.2 B one year ago, down -$3.2 B or -1.7%
• 20 day rolling average adjusted for tax cut [+$4 B]: up +$0.8 B or +0.4%

With the exception of the month of August and late November, this was positive for almost all of 2017. It has generally been negative since the effects of the recent tax cuts started in February.

I have discontinued the intramonth metric for the remainder of this year, since the kludge to guesstimate the impact of the recent tax cuts makes it too noisy to be of real use.

I have been adjusting based on Treasury Dept. estimates of a decline of roughly $4 Billion over a 20 day period. Until we have YoY comparisons, we have to take this measure with a big grain of salt.

Oil prices and usage

• Oil down -$0.46 to $73.93 w/w, up +61.1% YoY
• Gas prices up +$.01 to $2.84 w/w, up $0.58 YoY 
• Usage 4 week average up +1.2% YoY 

The price of gas bottomed over 2 years ago at $1.69. With the exception of last July, prices generally went sideways with a slight increasing trend in 2017. Usage turned negative in the first half of 2017, but has almost always been positive since then. The YoY change went back above 40% recently, so the rating has turned negative.

Bank lending rates

• 0.429 TED spread down -0.028 w/w 
• 2.010 LIBOR up +0.001 w/w (tied for new expansion high)

Both TED and LIBOR rose in 2016 to the point where both were usually negatives, with lots of fluctuation. Of importance is that TED was above 0.50 before both the 2001 and 2008 recessions. The TED spread was generally increasingly positive in 2017, while LIBOR was increasingly negative. This year the TED spread has whipsawed between being positive or negative. This week it was positve.

Consumer spending 

• Johnson Redbook up +4.4% YoY
• Goldman Sachs up +0.3% w/w, up +3.6% YoY

Both the Goldman Sachs and Johnson Redbook Indexes generally improved from weak to moderate or strong positives during 2017 and have remained positive this year.

Transport

Railroad transport

• Carloads up +0.7 YoY
• Intermodal units up +8.5% YoY
• Total loads up +4.6% YoY

Shipping transport

• Harpex down -5 to 668 (440 - 678)
• Baltic Dry Index up +258 to 1567 (~700 - 1700)

Rail was generally positive since November 2016 and remained so during all of 2017 with the exception of a period during autumn when it was mixed. After some weakness in January and February this year, rail has returned to positive.

Harpex made multi-year lows in early 2017, then improved, declined again, and then improved yet again to recent highs. BDI traced a similar trajectory, and made 3 year highs near the end of 2017, declined early this year, but recently has hit multiyear highs.

I am wary of reading too much into price indexes like this, since they are heavily influenced by supply (as in, a huge overbuilding of ships in the last decade) as well as demand.

Steel production

• Up +0.5% w/w
• Up +1.9% YoY

Steel production improved from negative to "less bad" to positive in 2016 and with the exception of early summer, remained generally positive in 2017. It turned negative in January and early February, but with the exception of three weeks recently has been positive since then. 

SUMMARY: 

Among the long leading indicators, the Chicago Fed Adjusted Financial Conditions Index,  real estate loans, and the yield curve remain positives -- but the the Chicago Fed Financial Leverage Index, while still positive, is significantly less so than in the last two years. Corporate bonds, credit spreads,mortgage rates, and real M1 are neutral, rejoined this week by purchase mortgage applications. Real M1 is on the cusp of turning negative. Treasuries, refinance applications, and real M2 are all negative.

Among the short leading indicators, the regional Fed new orders indexes, the Chicago National Conditions Index, jobless claims, stock prices (just barely), and staffing are all positive. Gas prices, the commodities indexes, and the spread between corporate and Treasury bonds are neutral. The US$ is mixed. Oil prices are strongly negative.

Among the coincident indicators, positives include consumer spending, Harpex, and rail, steel, the TED spread, and tax withholding. The Baltic Dry Index also turned positive this week.  LIBOR remains negative.

As has been the case for many months, both the nowcast and the short term forecast remain positive. Manufacturing in particular is doing very well. 

The longer term forecast, however, led by real M1, the yield curve, the credit spread,  purchase mortgage applications, and now one financial conditions index, continues to deteriorate. The first three are all very close to downgrades.  About a month ago the deterioration was enough to downgrade the forecast from positive to neutral. *IF* this trend continues, it is within the range of reasonable possibility that the forecast turns negative within the next month.

Have a nice weekend!

June jobs report: another strong late cycle reading

 - by New Deal democrat

HEADLINES:

• +213,000 jobs added
• U3 unemployment rate up +0.2% from 3.8% to 4.0%
• U6 underemployment rate up +0.2% from 7.6% to 7.8%

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:  up +75,000 from 5.183 million to 5.258 million   
• Part time for economic reasons: down -205,000 from 4.948 million to 4.743 million
• Employment/population ratio ages 25-54: up +0.1% from 79.2% to 79.3% (tied for expansion high)
• Average Weekly Earnings for Production and Nonsupervisory Personnel: rose $.04 from  $22.58 to $22.62, up +2.7% 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 +36,000 for an average of +24,000/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 rose +100 for an average of +100/month vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month

April was revised upward by 16,000. May was also revised upward by 21,000, for a net change of 37,000.   

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 0.1 hour from 40.8 hours to 40.9 hours.  This is one of the 10 components of the LEI.
 
• construction jobs increased by 13,000. YoY construction jobs are up 282,000.  

• temporary jobs increased by 9300. 
 
• the number of people unemployed for 5 weeks or less increased by 193,000 from 2,034,000 to 2,227,000.  The post-recession low was set one month ago.

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

• Overtime rose 0.1 hour from 3.5 hours to 3.6 hours.
• Professional and business employment (generally higher-paying jobs) increased by 50,000 and  is up 521,000 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 0.3%.     

Other news included:            

• the  alternate jobs number contained  in the more volatile household survey increased by  132,000  jobs.  This represents an increase of 2,326,000 jobs YoY vs. 2,374,000 in the establishment survey.      
     
• Government jobs increased by 11,000.       

• the overall employment to population ratio for all ages 16 and up was unchanged at 60.4%  m/m and is up 0.3% YoY.          
• The labor force participation rate rose 0.2% from 62.7%  m/m to 62.9% and is 0.1% YoY  

SUMMARY

This was another very good report, with the exception of wages. The majority of the leading components rose, as did employment in the most economically sensitive blue-collar industries.

The unemployment and underemployment rates rose, but that was only because participation in the labor force rose strongly.

There were only a couple of weak points. Although they remain very positive, the number of new, higher-paying professional and business jobs as been fading slightly over the past year. Involuntary part time employment, which fell significantly last year, has not made any progress since early this year.  And of course, wages remain problematic. Nominal wage growth for non-managerial workers has been rising YoY, but so has inflation. In real terms, non-managerial wages are doing no better than treading water.

I continue to view the recent wage reports as a run of good numbers that were telegraphed by strong short leading indicators late last year, but nevertheless consistent with a late cycle.

At the start of the second half, all clear in the near term

 - by New Deal democrat

Second half data has started out continuing to be positive.

On Monday, the ISM manufacturing index continued to be very strong. Of note, the new orders subindex, which leads the overall number, remains above 60 (h/t Briefing.com):

This tells me that manufacturing should remain very positive, at least for the next few months.

On Tuesday, motor vehicle sales continued at roughly 17 million vehicles at an annualized rate (h/t Calculated Risk):

This series tends to plateau during expansions, and start to decline significantly in the year before a recession. If it were to fall to 16 million or below, I would be concerned. I'm not now.

This morning, initial jobless claims were reported at 231,000. This was -8.0% below the equivalent date last year:

Initial claims go neutral YoY before rising YoY into a recession. So for the short term, these are also forecasting growth.

Finally, for a note of some caution, here is the "quick and dirty" short term indicator of initial claims (blue, inverted) and stock prices (red, right scale):

Both of these have been going more or less sideways since February (stocks did ever so slightly make a new 3 month high in mid-June). It's not the first time this has happened during the expansion -- take a look at late 2016 -- but it does suggest there might be a slowdown before the end of the year, something that the long leading indicators were forecasting one year out at the end of last year.  And of course, a full-scale trade war could upend this analysis pretty quickly.

But for now, the signs are all clear for continued short term positivity. 

On July 4, a consideration of Dred Scot

 - by New Deal democrat

On a 4th of July on which the President has expressed open longing for a lifetime term, and murmurings that a significant share of enlisted men in the military would be willing to overturn the Constitutional order should he call on them to do so, I'm not too interested in empty sloganeering celebrations.

With the obvious exception of African slaves, the Constitution was a very forward looking document for most people when it was adopted. But the Founders could not anticipate every shortcoming, and some of them are so entrenched that it would be nearly impossible to obtain the required supermajority to change them. How many saeculums must such shortcomings be sacrosanct against the will of the majority? 

For example, in nearly every country that adopted the Madisonian Presidential system, the result has been a degeneracy into Presidential dictatorships. The only counterexamples are some hybrid systems like France which have both Presidents and Prime Ministers. I never cast a vote for a Presidential (vs. Parliamentary) system. Did you?

Meanwhile, in our own country, in two of the last five Presidential elections, the popular vote loser has been crowned the winner. I never signed up for the Electoral College. Did you? Even so, if 200 years ago, the Congress had placed the Florida panhandle in Alabama, and the upper peninsula of Michigan in Wisconsin, both Al Gore and Hillary Clinton would have won. I never agreed that such accidents of history should be so dispositive. Did you? Have votes on such been held in our lifetimes, or indeed the last three or four lifetimes?

Which brings me to Dred Scot. When I was a kid, I was taught that the Dred Scot decision held that negro slaves had no rights. . But it was actually much, much worse. For, as I learned, the Supreme Court invalidated the Missouri Compromise. I was never taught what that really meant. What the Supreme Court said was that the Congress did not have the power to regulate slavery within the Territories. Thus it could not force a Territory to enter the Union as a free State. Worse, the reasoning openly invited the interpretation that States couldn't forbid slavery, either. If a slaveowner took his slaves from, say, Alabama to Massachusetts, then Massachusetts was bound to respect his contract rights of ownership in the slave.

Beyond that, there was political meddling in the handling of the case between President-elect Buchanan and several members of the Court. Buchanan wanted the matter settled before he assumed office, so that he could just throw up his hands and declare himself helpless. Taney's correspondence openly indicated that he wanted the to settle the matter of slavery for all time, in favor of the South.

In the 1800s, lifespans being what they were, the average Supreme Court only served about 10 years on the Court. The new Republican party adopted on its platform that slavery should not be extended to any new States. The method by which such progress would be made was one Justice's funeral at a time. Needless to say, that wasn't how it happened.

As a kid, I was taught that the passage of the Thirteenth, Fourteenth, and Fifteenth Amendments meant that Congress took over from the States the protection of civil rights in the country, the States having obviously proven inadequate to the task. Fundamentally, I think that is exactly the correct interpretation. 

Each of the three Amendments contains a section that states, "The Congress shall have power to enforce this article by appropriate legislation." In reaction to Dred Scot, this explicit grant to Congress is a direct rebuke to the Courts. In other words, even if the Courts do not believe that a particular form of protection is necessary, or that it steps on the previously granted rights of the States, the Congress has the power to Act for such protection anyway. This fundamental truth was marginalized and ignored by the Roberts Court in the Shelby County case.

On July 4, 2018, we find ourselves on the precipice of a Court which, with the begrudging acceptance that slavery is not permissible, seems bent upon returning us to the jurisprudence of 1857. 

May residential construction: decelerating trend continues

 - by New Deal democrat

May residential construction was reported yesterday. This series lags permits, starts, and new home sales, but has the virtue of being the least volatile of any housing measure. So let's take an updated look.

The first thing to notice is that the positive trend is continuing:

That being said, there has been noticeable deceleration of that positive trend since the beginning of 2017.

This becomes apparent when we look at the data YoY (blue), and compare with single family permits (red):

Note the tight fit, but that construction spending is much less volatile. Further, residential spending turning negative YoY has been indicative of at very least a slowdown (1994) if not outright recession.

Here is a close-up of the last 6 years:

Based on continued positivity of permits, I'm not expecting residential construction to decelerate further over the near term, but a sideways trend is more likely.