November JOLTS report shows surprising (relative) weakness

- by New Deal democrat

The JOLTS report on labor is noteworthy and helpful because it breaks down the jobs market into a more granular look at hiring, firing, and voluntary quits. Its drawback is that the data only goes back less than 20 years, so from the point of view of looking at the economic cycle, it has to be taken with a large dose of salt.

With that disclaimer out of the way, Monday's JOLTS report for November was surprisingly soft relative to the strength of the overall jobs gain for that month, as it show most of the series continuing to decline from their August peaks (in the case of hires, October):

• Quits declined for the 3rd month in a row, and are about 7% off peak.
• Hires declined were about 3% off their peak set one month ago.
• Total separations are off 5% from August.
• Job openings are a little less than 5% below August.
• Layoffs and Discharges are up 7% from their recent low (a bad thing), and had one of their three worst months in the last year.

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

First, below is a graph, averaged quarterly through the third quarter, of the *rates* of hiring, quits, layoffs, and openings as a percentage of the labor force since the inception of the series (layoffs and discharges are inverted at the 3% level, so that higher readings show fewer layoffs than normal, and lower readings show more):

During the 2000s expansion:

• Hires peaked first, from December 2004 through September 2005
• Quits peaked next, in September 2005
• Layoffs and Discharges peaked next, from October 2005 through September 2006
• Openings peaked last, in Spril 2007

By contrast during and after the last recession:

• Layoffs and Discharges troughed first, from January through April 2009
• Hiring troughed next, in March and June 2009
• Openings troughed next, in August 2009
• Quits troughed last, in August 2009 and again in February 2010

Now here's what the four metrics look like on a monthly basis for the last five years: 

As indicated above, job openings, quits, and hires all surged higher through August of this year. In the three months since then there's been at least a temporary downturn.

.

Next, here's an update to the simple metric of "hiring leads firing," (actually, "total separations"). Here's the long term relationship since 2000 through Q3 of this year: 

Here is the monthly update for the past two years measured YoY:

In the 2000s business cycle, hiring and then firing both turned down well in advance of the recession. Time will tell whether the recent decline in separations is just noise, or the start of a more significant downtrend. If it is significant, that would be a break from the pattern in the 2000s expansion. 

Finally, let's compare job openings with actual hires and quits. As you probably recall, I am not a fan of job openings as "hard data." They can reflect trolling for resumes, and presumably reflect a desire to hire at the wage the employer prefers. In the below graph, the *rate* of each activity is normed to 100 at its August 2018 value, since that has been the recent peak:

When I first presented this graph, I noted that while the rate of job openings is at an all time high, the rate of actual hires has only just reached its normal rate during the several best years of the 2000s expansion, and is below its rate at the end of the 1990s expansion. 

Through August both hires and quits have accelerated, with hiring decisively above its level from the last expansion -- although, as you can see in the first graph above, the *rate* of hiring remains below that of the 2000s expansion. My take has been that employees have reacted to the employer taboo against raising wages by quitting at high rates to seek better jobs elsewhere. If the dam is finally breaking, we should see the hiring rate increase, and quit rate level off. Since hires are the only metric that have made a new high since August, and have declined the least since that high, this may be happening.  

In summary, the November JOLTS report showed an employment market backing off its best levels. Is this the start of a trend? While my expectation is that this will start to cool down during the first six months of this year as a slowdown begins to take hold, in the near term that is balanced by the simple fact that the JOLTS report for December when it is released next month is going to reflect the roughly 300,000 net jobs gained last month, and so is likely to be equally strong.

My forecast for H1 2018 ...

 - by New Deal democrat

... is up at Seeking Alpha.

I've been using the "K.I.S.S." method for nearly a decade, and it has been flawless so far.

As usual, clicking on the link and reading, in addition to hopefully being educational for you, helps reward me with a little $$$ for my efforts.

Good news from the employment report: workers are finally getting raises!

 - by New Deal democrat

When it comes to jobs, if there is one trend that really set apart 2018 from any prior year of this expansion, it is that ordinary workers are finally getting decent raises.

Let's start by looking at the monthly % change in average hourly wages for non-managerial workers for the entire duration of this expansion. Since this has averaged about +0.2%/month, I've subtracted that so that any month above 0 is an above average increase in nominal hourly pay for ordinary workers:

Look at the far right. In ten of the last twelve months, average hourly wages have increased by more than the norm for this expansion.

As a result, YoY nominal wage growth in the last two months has been a little over 3.3%:

Average hourly wage growth accelerated YoY during almost all of 2018. The prrevious high mark of this expansion before late 2017 had been +2.7% YoY.

It certainly appears that employers have finally gotten the message, and the "taboo against raising wages" has been broken -- for now.

Note that from the long term view, Happy Days are not quite Here Again. Here's a graph of the YoY% increase in nominal (blue) and real (red) average wages for non-managerial workers over the last 35 years:

Note that nominal wage have continued to fall, or at least falter, for at least several years after the end of each of the recessions during this period. There have been several reasons for that, but the bottom line is that the "underemployment rate" has to fall to a certain level to put any kind of floor under wage growth. After that nominal wages growth tends to increase until the next recession starts.

But, even with the recent very low unemployment and underemployment rates, nominal wages have still not grown at the 4%+ rates of the last several expansions.

Real, inflation-adjusted wages (red) are of course a whole other story. Since the turn of the Millennium these mainly have had to do with fluctuations in the price of gas. The big "pop" in real wages in 2014-15 was when gas prices declined from close to $4/gallon to under $2/gallon. In the last few months there has been a similar dynamic.

In December, nominal non-managerial wages grew +0.4%.  Because of the government shutdown, CPI may not be reported timely. But we can estimate, since gas prices declined over -10% in December alone. In the past, this has been associated with a decline in overall CPI from -0.3% to -0.5%. This suggests that real, inflation-adjusted wages probably grew at close to +0.8% in December, bringing the YoY gain for all of 2018 to about 2%.

This is almost unalloyed good news.

Weekly Indicators for December 31 - January 4 at Seeking Alpha

 - by New Deal democrat

Forgot to do this earlier ....

My Weekly Indicator posts is up at Seeking Alpha.

The way that interest rates are behaving has a few surprising implications for other indicators.

December jobs report: 2018 goes out with a bang

 - by New Deal democrat

HEADLINES:

• +312,000 jobs added
• U3 unemployment rate rose +0.2% from 3.7% to 3.9% 
• U6 underemployment rate unchanged at 7.6% 

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:  declined -70,000 from 5.397 million to 5.327 million   
• Part time for economic reasons: declined - 124,000 from 4.781 million to 4.657 million 
• Employment/population ratio ages 25-54: unchanged at 79.7% 
• Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $.09 from  $22.95 to $23.05, up +3.4% 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 +32,000 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 +600 for an average of +175/month vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month

October was revised upward by +21,000. November was also revised upward by +37,000, for a net change of +56,000.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were positive.

• the average manufacturing workweek rose +0.1 hours from 40.8 hours to 40.9 hours. This is one of the 10 components of the LEI.
• construction jobs rose by +32,000. YoY construction jobs are up +284,000.  

• temporary jobs rose by +10,300. The strong YoY trend remains intact.
• the number of people unemployed for 5 weeks or less fell by -2,000 from 2,128,000 to 2,126,000.  The post-recession low was set seven months ago at 2,034,000.

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 +43,000 and  is up +583,000 YoY.
• the index of aggregate hours worked for non-managerial workers rose by 0.3%.

•  the index of aggregate payrolls for non-managerial workers rose by 0.7%.     

Other news included:            

• the  alternate jobs number contained  in the more volatile household survey increased by 180,000  jobs.  This represents an increase of 2,880,000 jobs YoY vs. 2,638,000 in the establishment survey.    
• Government jobs increased by +11,000.

• the overall employment to population ratio for all ages 16 and up remained at 60.6% m/m and is up 0.4% YoY.          
• The labor force participation rate rose +0.2% from 62.9% m/m to 63.1% and is up +0.4% YoY.

SUMMARY

This was a blockbuster report. About the only negative is the increase in the headline unemployment rate, which may be an artifact of the year-end household survey rebalancing (rather than revise each of the last 12 months, they simply add the revisions into the January number).

Everything else, including the leading portions of the report, was positive to strongly positive. At first glance, the gains look widespread, but I'll update if necessary once I am able to take a longer look. The gains to ordinary workers nominal wages are particularly welcome. UPDATE: The gains are widespread, but particularly so in education, healthcare,  leisure and hospitality, and somewhat in construction.

Needless to say, this report is in stark contrast to what many of the leading indicators are telling us. Since employment and production are the Queen and King of coincident indicators, respectively, I think workers will need to enjoy this while it lasts. Now would be a good time to start preparing for the downshift in trend that I think is inevitable at this point.

December ISM manufacturing points to sharp slowdown

 - by New Deal democrat

I need to publish my first half forecast for 2019, but before I do, I want to see how a few leading indicators for December pan out. These include motor vehicle sales, the manufacturing workweek, new unemployment claims less than 5 weeks old -- and this morning's ISM manufacturing report.

To breifly recap, my long leading indicators turned neutral 7 months ago and haven't improved since, even going negative for a few weeks. As a byproduct of that, I have been waitiing on short leading indicators to decelerate as well, which they have shown strong signs of doing recently.

As part of that, two months ago I wrote that "I expect slowing [in the ISM new orders index] to continue."

Today the ISM reported for December that:

Manufacturing expanded in December, as the PMI® registered 54.1 percent, a decrease of 5.2 percentage points from the November reading of 59.3 percent. “This indicates growth in manufacturing for the 28th consecutive month. The PMI®recorded a substantial softening in December and retreated to a level not seen since November 2016, when it registered 53.4 percent,” says Fiore. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

I have been using an average of the five regional Fed new orders indexes to forecast the direction of the ISM indicator.  Here's a comparison of the regional Fed averages (left) and ISM new orders (right) for all of 2018:

JAN   15   65.4
FEB   20   64.2
MAR   16   61.9
APR   17   61.2
MAY   28   63.7
JUN   24   63.5
JUL   24   60.2
AUG   17   65.1
SEP   20   61.8
OCT 18  57.4

NOV 15  62.1

DEC  8   51.1

October's 57.4 ISM reading, while very positive, was nevertheless the lowest since November 2016. Today's reading is not just below that, but is the lowest since August 2016. Here's the longer-term graph (not including this morning) from Briefing.com:

The sharp decelerating trend in the Fed new orders indexes since May's high is apparent. Now the ISM has confirmed the deceleration in spades. I suspect this reflects both the feeding through of the weakness in the long leading indicators, and also the nearly immediate impact of Trump's trade war policies. In other words, poor Administration economic policy may have taken a slowdown that was likely to happen in a few months, and moved it forward. The silver lining is that a slowdown, however sharp and however much "baked in the cake" at this point, is not a recession
  

Unhappy new year: bond yield curve inversion spreads

 - by New Deal democrat

A month ago, when the 2- through 5-year bond yield curve first inverted, I wrote that while it might be a case of "the camel's nose is in the tent," i.e., the rest of the camel (yield curve) was likely to follow, there were a bunch of caveats:

In short, a one-day inversion over a limited portion of the bond yield curve, while more often than not heralding a full-on inversion and bad consequences to come, is by no means dispositive.

Generally speaking, for a yield curve inversion to give a true signal, it should last longer than a few days, spread out further along the yield curve, especially towards shorter yields (e.g. 6 month or 1 year yields), and deepen.

As of this morning, here's what bond yields look like:

About a week ago, for the first time, the inversion spread out to the 1-vs.5-year yield, and a secondary inversion opened up between the 1 month and 3 month yield.  Then, on Monday, the inversion spread out to the 1-vs. 7-year yield. Further, as of this morning, the 1 year vs. 10 year yield spread has shrunk to .04%. That's a big move and about .07% tighter than it has been at any point in the last year.

Note that the inverted spread between the 1 year and 3 year bond yields has deepened to -0.155%.

So, all three of my criteria for a true signal have been met: (1) the inversion has persisted; (2) the inversion has spread out along the yield curve, especially towards shorter term maturities; and (3) the inversion has deepened. 

A recession in the next 12 to 24 months is still not a sure thing. There were deeper and more persistent inversions in 1966 and 1998 without a recession following in that time frame -- although 1966 was a very deep slowdown that just missed being a recession.

But there is simply a very strong possibility that we are looking, at very least, at a big slowdown soon.

Happy New Year 2019

 - by New Deal democrat

Best wishes for a happy, healthy, and prosperious New Year in 2019!

This year is shaping up to be a much more challenging one than 2018. And I'll continue the same old boring and nerdy, but tried and true, analysis starting tomorrow.

Among other things, in the next week or so I expect to post my first half forecast, and then, once preliminary GDP for Q4 is reported before the end of January, my forecast going forward all the way to the end of 2019.

On the government shutdown, Pelosi should go maximalist

 - by New Deal democrat

It's pretty clear that the House GOP has decided to simply punt the government shutdown into the new Democratic House majority's laps.

That new House Democratic majority will have two basic options: (1) go accomodationist; or (2) go maximalist.  I am here to write in support of option #(2).

To recap, before the government shutdown, the Senate had passed a stopgap measure by 100-0. When RW extremists got Trump's ear, he (as usual) welched and refused to sign any bill that did not include funding for his border "wall." The House GOP promptly passed a bill doing so, and there matters have stalled for the last 10 days.

The "accomodationist" option is for the new House majority to pass the bill that is identical to the one that already passed the Senate by 100-0. It is very unlikely that this will work.

In the first place, Mitch McConnell has announced that he will not bring to the Senate floor any bill that will be vetoed by Trump. Since Trump has already indicated he will veto the existing Senate bill, McConnell might simply refuse to bring it back up. Even if he does, it is almost certain that Trump will veto it. Even if the Senate GOP feels they cannot renege on their prior votes, a 2/3's majority must still be found in the House.

And that is where the problem is. It is simply unlikely that enough members of the House GOP are going to roll over so that the bill passes over Trump's veto.It is simply very unlikely that the House will be able to add on new demands once an "accomodationist" bill is defeated. In the far more likely event that the House fails to override Trump's veto, this puts him in the driver's seat, in the kind of negotiation he likes -- where the other side must agree to ever more escalating demands to get his assent.

The "maximalist" option is for the new Democratic House majority to lay out some new demands of their own.  Here are three good candidates, *all* of which might be added on to a House bill: (1) permanent legalization of the Dreamers; (2) permanent codification of DACA; and (3) undoing the piecemeal repealers of the ACA by the prior Congress. If they want to really be mean, they can announce that for every day that the GOP delays in approving the budget, they will deduct $1 Billion from agricultural subsidies in any budget resolution they will agree to. 

Will McConnell and Trump go ballistic? Of course! So what.

You will now have one demand on the GOP side (fund the wall) counterbalanced by three demands on the Democratic side (as stated above). This puts the Democrats in the position of being able to do some horse-trading in order to get a budget bill passed.

It is unlikely that Trump will sign a bill without being able to declare victory on funding for the "wall." Suppose the Democrats, behind closed doors, offer to approve $2.5 billion in funding (that might take over 2 years to be committed, wink wink hint hint), in return for dropping the ACA demand and tempering the DACA demand, while getting full legalization for Dreamers (which is *very* popular). This would be a very positive and doable outcome.

But the only way we are going to get a positive outcome, rather than one that involves incredible pressure being put on Democrats to cave and go crawling on their knees to Trump, is if the House Democratic majority under Pelosi starts out by going maximalist.

Weekly Indicators for December 24 - 28 at Seeking Alpha

 - by New Deal democrat

My Weekly Indicators column is Up at Seeking Alpha.

Ideally a change in trend in the long leading indicators should, over time, manifest in the short leading indicators.

Well, in the first half of 2018, the long leading indicators went from positive to weak positive to neutral, where they have generally remained ever since.

Now, the short leading indicators have .... Click over and read to find out!

Marking my 2018 forecast to market

At the beginning of every year, I give a forecast for each of the two halves of the year. And at the end of each year, I look back and mark my forecasts to market. In that way I try to be completely transparent, and to keep myself honest.  Since we're at the end of 2018, let's look back to last January and see how I did.

In my forecast for the first half of 2018, I wrote:

This year the call is pretty easy.  With the exception of a hurricane-induced whipsaw in September and October, for the last year the L.E.I. [Index of Leading Economic Indicators] has improved by about .4% a month. This strongly suggests clear sailing in the first half of 2018.

....  if you wanted an even easier, quick and dirty approach to a short term forecast, you can simply chart weekly initial jobless claims and the S&P 500 (both of which are components of the LEI).  If both of those are still making new lows/highs respectively (and they have been), then the economy should be in good shape for the next few months. 

....They're good and so is the near term economy.

As I wrote at the time, that was a pretty easy call, because there had been a surge last autumn of almost all of the leading indicators. 

Turning to the second half of 2018, last January after reviewing all of the long leading indicators, I wrote:

To summarize the results: 

• There is only one outright negative [long leading indicator], and mixed one at that: Corporate bond yields and mortgage interest rates.

• There are five positives: real M1, the yield curve, credit conditions, corporate profits, and real retail sales per capita.

• Housing is mixed, neutral to mildly negative for most of the year, but a positive late in the year. Real M2 is also positive for this year, having just turned negative.

My sense is that later 2018 will be weaker than 2017, as the housing market stagnation of Q2 and Q3 2017 feeds through into the coincident indicators. On the other hand, the clear majority of long leading indicators remain positive. Left to its own devices, I do not see any recession for the economy at any point in 2018. 

So now let's take a look at the biggest coincident indicators for the economy.  First, real GDP:

Next, Industrial production:

and finally, employment:

A year ago I thought the forecast for this year was pretty obvious: there would be no recession. And there wasn't.

Turning to the forecast that the first half would be stronger than the second half, Q1 GDP wasn't as strong as 2017 GDP Q2 and Q3 accelerated considerably. So in terms of GDP, the forecast for strength took one quarter longer than expected. Further, both industrial production and employment picked up in the first 8 months of the year (averaging +0.5% for production, and 200,000 jobs) before decelerating beginning in September. So by those two metrics, the forecast was pretty much spot on.

In summary, I think I did a pretty good job forecasting 2018.  I am expecting the 2019 forecast, which I'll post in two parts in January, to be considerably more challenging.

Light posting through year end

 - by New Deal democrat

Between now and New Year's Day, there are only two scheduled economic reports of any significance -- new home sales and the Case Shiller house price index -- and the former will likely not be posted if the government shutdown continues.

So expect light posting for the next 9 days at this here blog.

I'll still have my usual Weekly Indicators next Saturday. Also (no promises!), but I expect to do a comprehensive housing update, since I haven't done that in two months. And I should do my year end report card, in which I go back to my forecasts for 2018 that I posted last January, and see how well, or poorly, I did. If I am industrious, or if events warrant, a couple of other things might get posted. But that's probably about it.

You're reading the right blog: Trump and the Fed edition

 - by New Deal democrat

CNBC (and a whole bunch of other places), yesterday:

President Trump has discussed firing Federal Reserve Chairman Jerome Powell recently, with his frustration intensifying non recent days

Me, FOUR MONTHS AGO:

A new risk at the Fed: Donald Trump's power to fire Fed Governors

the Chairman and all of the other appointed governors of the Federal Reserve have exactly the protection against being fired, except "for cause," that covered FBI Director James Comey. 

So, if Trump thought Fed rate hikes were harming his re-election prospects by slowing the economy, and the Fed insisted on raising rates anyway, do I think Trump would fire the Federal Reserve Chair? Or even all of the Governors? 

In a heartbeat.

This has been another edition of "You're Reading the Right Blog."

Weekly Indicators for December 17 - 21 at Seeking Alpha

 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

Continued deterioration in some of the short leading indicators (like, say, the stock market!) is masking some marginal improvement in the long leading forecast. Sentiment on the economy is so negative that it reminds me of the *non*-recession that was telegraphed by weakening data at the end of 1994.

As usual, clicking over and reading should be informative, and it also helps reward me for my efforts.

Could an Oil Patch decline turn a 2019 slowdown into an outright recession?

 - by New Deal democrat

One of the items I mentioned in my piece yesterday at Seeking Alpha was the recent big decline in oil prices. Please go read the piece, it puts a couple of pennies in my pocket! But in that article I referenced the decline in industrial production that was caused by the 2014-15 decline in gas prices. I wanted to follow up a little here. 

In 2014 into early 2015, Oil prices declined by almost 75%, from a little under $110/barrel to a little under $30/barrel. Gas prices declined from close to $4/gallon to about $1.75/gallon:

The recent decline in oil and gas prices, while significant, is less than half of that.

Energy extraction is counted in the "mining" component of industrial production, but even the "manufacturing" component declined between the end of 2014 and mid-2016:

At the time I called it the "shallow industrial recession." While GDP never turned outright negative, real GDP slowed to 1% annualized in Q3 2016 and 0.4% in Q4 of that year. That's a real slowdown!

So, why wasn't there an actual recession?  Because employment, sales, and income continued to rise. As I and almost everybody else said at the time, the big decline in gas prices was a boon to consumers.  And indeed it was, as shown in the below graph of real personal income (red) and real personal spending (blue)(note: in the graph both series are normed to 100 as of the bottom of the recession in 2009):

In fact, as you can see in the graph, both series not only rose, but, especially for spending, both rose a little more steeply in 2016. In other words, the decline in gas prices, which showed up as a decline in inflation, put more "real" money in consumers' pockets, and they spent it, and then some. (Note: the graph does not include this morning's +0.1% increase in real personal income and +0.3% increase in real personal spending for November),

This shows up in the next graph, which is the personal saving rate:

Preliminarily, note that in 2012 there was a 2% FICA tax rebate, which shows up as an increase in the savings rate, which then reversed in January 2013. But notice that consumers kept savings constant in 2015, and then dug into their pockets and spent a little more vs. saving in early 2016. (Note: graph does not show this morning's small decline in the savings rate).

While I claim no expertise whatsoever it what will happen to the price of gas and oil from here, what I can say is that, if prices remain low or continue lower, a smaller version of the 2015-16 pattern in both production and consumption is a good simple model. That in turn suggests that there would be pain in the Oil Patch, flatness in manufacturing production, and a mild increase in income and consumption.

The problem, of course, is that these consequences are piled on top of the slowdown that has already been strongly suggested by the flatness in the long leading indicators for the past 7 months, and the haphazard and generally negative effects of Trump's trade wars that were initiated since then.

In other words, the effects of a knock to "Saudi America" together with the effects of the trade wars, might be enough to turn a slowdown next summer that already looks "baked in the cake" into a recession. I'm not changing my opinion yet, but the argument is powerful, and I'm chewing it over.

The Fed scrapes Scylla after careening into Charybdis

 - by New Deal democrat

In the past several years, I have described the Fed as trying to steer in between the Scylla of a yield curve inversion and the Charybdis of higher rates wounding the housing market.

Recently several trends have reversed. This offers some relief to housing, but more risks to the economy as a whole. This post is Up at Seeking Alpha.

By the way, several times yesterday and today, the yield curve inversion has spread to the one year vs. five year yield.

The Transportation Slowdown

 - by New Deal democrat

Well over 100 years ago, Charles Dow (he of the Dow Jones Industrial Average) posited a theory that industrial and transportation stock prices should move in tandem. Why? Because everything that factories produced had to be transported to market for delivery.

So it is of interest that FedEx said yesterday that its business has been slowing down. And an important trucking transportation metric softened in November, as reported last week.

But readers of my "Weekly Indicators" columns got a heads up over two months ago.

I explain why in a post over at Seeking Alpha.

November housing permits boosted by multifamily dwellings

 - by New Deal democrat

November was a *relatively* good month for housing permits, as in, improved *relative* to most of this year, although not at the heights of last winter.

Most importantly, the least volatile number, single family permits, was flat compared with last month, and down -2% from a year ago:

There's no change of trend here.

Total permits did increase decently, and are up (less than 1%) YoY, although below their previous highs of January, March, and April:

The improvement came in multi-unit dwellings, which had a nice pop this month:

These are somewhat of an "alternative good" to single family homes, so the improvement may well reflect the stress of higher sales and mortgage costs.

Starts, which tend to lag permits by a month or so, still reflect the poor readings of the last few months there:

Probably some of the improvement in permits in November was due to mortgage rates, which declined a little at both the beginning and end of November:

Note, however, that mortgage rates are still above where they were when we had the housing peak last winter, and prices are higher as well. So, while I expect continued improvement in December, I don't think there's enough of a boost to push housing to significant new highs.

The US economy did not boom in 2018

 - by New Deal democrat

At the beginning of each year, I try to identify economic series that I think will be most important in the next 12 months.  This year I asked: Is the US economy going to enter a Boom in 2018?

There is no standard definition of a Boom. But in my lifetime there have been two occasions when the "good times" feeling was palpable, and the economy was working extremely well on a very broad basis: the 1960s and the late 1990s tech era. During both times,  employment was rampant and average people felt that their situations were going well.

Back in January I identified five markers that, taken together, marked off the two eras as unique: 

•  the low unemployment rate 
•  the duration of a very good rate of growth of industrial production
•  strong growth in real average hourly wages
•  strong growth in real aggregate hourly wages, and 
•  increasing inflation.

Now that the year is ending, let's update all of these.

1. Unemployment remains very low

In both the 1960s and late 1990s, the unemployment rate (note that the U6 underemployment rate wasn't reported in its current configuration until 1994, and so is not helpful), hit 4.5% or below for extended periods of time:

While these weren't the only two periods of low unemployment, they are among those that stand out.

We had already hit that marker at the beginning of the year, and through the course of the year, it has only improved:

The unemployment rate is now the lowest in 48 years, since 1970.

2. Industrial production did briefly boom, but has backed off.

During both the 1960s and 1990s, production grew at or over 4% a year for extended periods of time, not just right after the end of a recession.  At the beginning of this year, production was under 4%:  

It did surge above 4% during the three months of the third quarter, but for the last two months YoY growth in industrial production is back below 4%:

3.  Real average hourly wages failed to ignite

In contrast to other expansions, during the 1960s and the late 1990s, real average hourly earnings also grew at roughly 1% YoY or better, and even exceeded 2.5% growth for significant periods:

During the current expansion, by contrast, real wages have only grown by more than 1% when gas prices have declined dramatically. In 2018, the situation continued: real average hourly wages grew by no more than 0.3% YoY until the last three months, when a big decline in gas prices caused consumer inflation to subside, leading to a YoY rate of growth of exactly 1% in November:

4. Real aggregate payrolls continue to grow modestly

 During the 1960s and 1990s booms (as well as some other expansions), real aggregate earnings grew at a rate of 4% YoY or better, for extended periods of time:

By contrast, during this expansion, and continuing this year, real aggregate payrolls have averaged growth of about 2.5% a year:

This is decent, but it's simply not a boom.

5. Inflation has waned

The fifth and final  marker of a Boom -- probably as the byproduct of the first four -- is an increase in the YoY rate of inflation:

A boom means that resources are getting constrained, so bidding for them intensifies.

The rate of consumer inflation did increase throughout the first half of this year, but since July has waned, and with one month's data left to go, is only 0.1% higher (2.2% vs. 2.1%) than the rate of inflation at the beginning of the year:

To sum up, the production side of US economy, which was doing well at the beginning of 2018, did briefly boom during the summer, but the consumer side never joined it. Only one of the five markers of a boom -- low unemployment -- persisted through the year. The US economy did not boom in 2018, and if anything is likely to decelerate sharply in 2019.