My Three Weekly Review Are Up At XE

International Week in Review

Equity Market Week in Review

Bond Market Week in Review

Weekly Indicators for October 5 - 9 at XE.com

 - by New Deal democrat

My Weekly Indicator piece is up at XE.com.

The US data got just a skosh weaker.

Whilesaler inventories and sales show shallow industrial recession ongoing

 - by New Deal democrat

I have a new post up at XE.com.  The shallow industrial recession is real, and is not abating yet.

Ruh roh: Labor Market Conditions Index forecasts further deterioration in monthly jobs growth

 - by New Deal democrat

As I wrote several months ago, the Labor Market Conditions Index is a good leading indicator for YoY growth in employment.  Based on its deceleration, I forecast that monthly jobs growth was likely to decline to less than 200,000 in the months ahead.

Here's the graph I ran at that time:

The LMCI was updated earlier this week, and the news isn't good, with the Index coming in at zero.  So here is an updated look at the same relationship, zoomed in on the last 10 years:

The LMCI is forecasting further YoY deterioration in jobs growth.  Even a few 5-digit increases cannot be ruled out.  The silver lining is, it is not forecasting an outright YoY decline in jobs.  Similar periods of weakness occurred in 1984, 1994, and 2002 without there being a recession. Even in those periods leading up to recession, generally speaking the LMCI crossed zero into negative territory well before the recession began.

Bottom line:  not good news, but this expansion isn't Doomed yet.

Population adjusted jobs growth: how weak (or not) is this recovery?

 -by New Deal democrat

I've long thought that the typical mode of presentation of the jobs recovery -- i.e., number of jobs created -- is unsatisfactory, because it fails to take into account demographics.  

Suppose, for example, you get 200,000 jobs created per month on average over a year.  Whether that is good or bad depends on whether the population in which those jobs are being created is growing by 100,000 or 300,000.  In the former case, 100,000 more members of the labor force have jobs; in the latter, 100,000 moe members of the labor force are unemployed!

Just adjusting for population isn't enough, since due to increased healthy longevity and demographics, the percentage of the population that is retired is growing strongly, and ought not to be counted.

So what we want to do is count the number of jobs as a percentage of the labor force, or alternatively by those of working age (below, I am using ages 16-64).  What does this jobs recovery look like under those conditions?  Below are 3 variations on that theme.  As we'll see, measured that way the jobs recovery still isn't great, but it is solidly in the middle of the pack.

First, let's look at the "employment rate" which is simply 100 minus the unemployment rate:

As an initial observation, the post-WW2 era of US economic dominance that ended in 1974 stands out.  Employment rates of 94%+ were the norm, and half of the time exceeded 95%.  Since then, our current level of 94.9% has only been exceeded during the tech boom of the late 1990s and briefly at the end of the housing boom 10 years ago.

But how strong has the current recovery been?  For that, let's see how the employment rate, as graphed above, changed on a YoY basis:

While the current recovery got off to a slow start, it has measured better YoY growth than since the early 1980s. In general, the post-WW2 job recoveries grew much faster YoY than those since 1983.  As we'll see below, however, that is tempered by the fact that many of them, especially in the 1950s, were short-lived.

Second, let's look at the YoY% change in employment growth compared against the working age population, age 16 through 64:

Here the current expansion does look very weak. But not quite so bad as it might first appear.  Here's the percentage of jobs added in this recovery, now 5 1/2 years old, as a share of population ages 16-64:

This growth of 5.7% is still better than the 1971-74 expansion, which added less than 5%, and 5 /12 years later was only up 1.6%:

It is also light years better than the George W. Bush expansion, which not only added a miserable 1.7% jobs at its best, but 5 1/2 years later was negative!

Finally, perhaps the best measure of all is the change in jobs vs. the labor force -- since this is basically all persons in the market for a job (I would also include those not in the labor force who want a job now, but that series only started in 1994):

Here the current jobs expansion looks pretty robust, not just improving strongly but lasting longer than many other recoveries.

Just as with our first measure, let's see how this has changed on a YoY basis:

With the exception of the year 1983, this expansion looks as strong as any other expansion since 1974, and stronger than the George W. Bush expansion. In fact, measured either compared with past peaks in employment, or 5 1/2 years from its start, this expansion is #5 out of 10 expansions since 1950:

Year start	Peak	5 1/2 years after start
1950	15%+	12.4%
1954	4%-	-0.8%
1957	5%+	5.4%
1961	15%	11.6%
1971	2%+	-1.2%
1975	5%+	3.3%
1982	9%+	8.2%
1992	10%+	7.6%
2003	2%-	-1.3%
2010	n/a	7.4%

As shown in the chart above,  the current jobs expansion is behind the expansions of 1950, and those of the 1960s, 80s, and 90s, but better than those of 1955, 1958, both expansions of the 1970s, and the George W. Bush expansion.

In summary, when we measure the number of jobs created in this expansion on relevant population-weighted bases, it is a middling expansion, not great, but not so slow as commonly represented.

"Low interest rates have failed to stimulate the economy"

 - by New Deal democrat

There's a persistent Doomer meme that "low interest rates/quantitative easing have failed to stimulate the economy."

It's utter bunk.

Let me show you a period of really low interest rates:

We see Fed rates between 0.5% and 1.5% and long term rates generally between 2% and 2.5%.

Growth must have been pathetic, right?

Now let's add in real, inflation adjusted gross domestic product, and the dates:

That's some real pathetic, errr, umm, 10% and 15%+ growth!

Now let's take a look at how the Fed's low rates and quantitative easing since the Great Recession have played out:

Unsurprisingly, lower long term interest rates as helped along by quantitative easing sparked lots of purchase and refinance mortgage applications. The "taper tantrum" of let 2013 caused both to crater.  

So, yeah, low interest rates and quantitative easing have failed to stimulate the economy, as long as you ignore, you know, history.

No: Dodd Frank Did Not Cause the Slow Recovery

The latest piece of, well, CRAP from Powerline is that Dodd Frank Caused is solely responsible for the slow recovery.

The AEI originated this meme.  It comes from Peter Walliston, who propagated the argument that the CRA caused the financial collapse in 2007-2008.   The Federal Reserve debunked this argument a long time ago.

Thankfully, Barry Ritholtz over at Bloomberg has proved what a crock this most recent claim is.  

Why the US consumer expansion is still outweighing the industrial recession: houses and cars

 - by New Deal democrat

I have a new post explaining this up at XE.com .

Underemployment and wages: September 2015 update

 - by New Deal democrat

About the only bright spot in Friday's jobs report was the 400,000+ decline in the number of involuntary part time workers.  So far this year, the number of those employed part time involuntarily has declined by -754,000, or about 1/2% of the workforce.

The best way to look at this is as a percentage of the workforce:

In January 1994, when the modern series began, 3.788% of the labor force was involuntarily employed part time. As of September of this year ,it was 3.852%.  While this isn't too bad, a "good" number would be under 3%.

The changes in 1994 subtracted about 1% from the calculation of involuntary employment.  To give an idea how our present situation compares to pre-1994 data, here it is, subtracting 1%, and then another 3.788%, so that any situation better than currently shows as a negative number, and any worse than the present shows as a positive number:

This is consistent with the idea that we need to see about another 1% decline for this to  be a "good" number.

Next, here is the number for those Not in the Labor Force, but who Want a Job Now (NILFWJN):

The modern version of this series also started in January 1994.  We are currently at the same number as we were at the end of 1994.  Again, not terrible, but not "good" either.

Finally, let's look at the updated U6 underemployment rate (blue) and compare it with the YoY% of wage growth (red):

In the above graph, both are set to "0" at the latest values.  if this expansion is like the last 2, nominal wage growth should start to pick up about now. 

US Bond Market Week in Review: Did the Window Close, Edition?

This is over at XE.com

US Equity Market Week in Review: The Bulls Need Earnings, Edition

This is over at XE.com

Weekly Indicators for Semptember 28 - October 2 at XE.com

 - by New Deal democrat

My Weekly Indicator post is up at XE.com .

The consumer portion of the US economy continues to expand.  The industrial portion, most exposed to global weakness, continues to be negative.

International Economic Week in Review: Japan Flashing Warning Signs, Edition

This is over at XE.com

Told you so: weakening job growth edition

 - by New Deal  democrat

After averaging over 200,000 during 2014 and the first half of 2015, the last two months have featured job growth beginning with a "1."    A surprise? Well . . .

Here's me on August 11, 2015, The Lbbor Market Conditioins Index as a Leading Indicator:

"As shown in the graph below, the [Labor Market Conditions Index] consistently leads the YoY% growth in jobs by 6 - 12 months, but YoY job growth (red) is a much smoother measure:

"....

"Since  the LMCI does lead the much smoother YoY growth in jobs, it strongly suggests that YoY payroll growth is going to decline over the next 6 months or so.  And that can only happen if those payroll numbers generally come in under 225,000, and probably even below 200,000 through next winter."

And here I am two days later, More Evidence we are past the midpoint for jobs growth:

"[U]nsurprisingly housing permits lead jobs growth as well:

"While a steep decline to a stall in housing, as happened in 2014, has not always led to a stall in jobs, usually it has led to at least some weakening, sometimes slight, sometimes very marked.  Since the lead time varies between 6 to 18 months, we are about due for last year's weakness in housing to lead to some weakness in payrolls."

As I get to say from time to time, you are reading the right blog.

September jobs report: a downshift in the trend in employment growth

- by New Deal democrat

HEADLINES:

• 142,000 jobs added to the economy
• U3 unemployment rate unchanged at  5.1% 

With the expansion firmly established, the focus has shifted to wages and the chronic heightened unemployment.  Here's the headlines on those:

Wages and participation rates

• Not in Labor Force, but Want a Job Now: up 23,000 from 5.932 million to 5.935 million
• Part time for economic reasons: down  -447,000 from 6.483 million to 6.036 million
• Employment/population ratio ages 25-54: unchanged at 77.2% 
• Average Weekly Earnings for Production and Nonsupervisory Personnel: unchanged at $21.08 ,  up +1.9%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.)

July was revised downward by -22,000.  August was also revised downward by -37,000, for a net change of -59,000.

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

• the average manufacturing workweek fell -0.2 hours from 41.8 hours to 41.6 hours.  This is one of the 10 components of the LEI and so will affect it negatively.
 
• construction jobs increased.by 8,000.  YoY construction jobs are up 199,000.  


• manufacturing jobs decreased by -9,000, and are up 92,000 YoY.

• Professional and business employment (generally higher-paying jobs) increased by 31,000 and are up 604,000 YoY.


• temporary jobs - a leading indicator for jobs overall - rosse by 4,600.


• the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - rose by 268,000 from 2,095,000 (the post-recession low) to 2.363,000.

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

• Overtime declined -0.2 hours from 3.3 hours to 3.1 hours.


• the index of aggregate hours worked in the economy declined by 0.2 from  104.0 to 103.8. 
 
• The broad U-6 unemployment rate, that includes discouraged workers fell by -0.3% from 10.3% to 10.0%. 

•  the index of aggregate payrolls declined by -0.3% from 124.6  to 124.3 .

Other news included:      

• the alternate jobs number contained in the more volatile household survey decreased by  -236,000  jobs.  This represents an increase of 2,193,000 jobs YoY vs. 2,708,000 in the establishment survey.  


• Government jobs rose  by 24,000. 

• the overall employment  to population ratio for all ages 16 and above fell -0.2%  from 59.4% to 59.2%,  and has risen by 0.2%  YoY. The labor force participation rate also fell -0.2% from  62.6% to 62.4% and is down -0.5% YoY (remember, this incl udes droves of retiring Boomers). 

SUMMARY: 

Last month we had a "meh" headline jobs number with great internals.  This month we had a "meh" headline number with poor internals.  From a second month of sub-200,000 job growth to manufacturing hours to revisions of past months to declining e/p and labor force participation ratios to declining aggergate hours and payrolls, this was a poor report -- which basically took back last month's great report.

If you want a bright spot, it was the continued big decline in involuntary part time workers, which also drove down the U6 unemployment rate to 10.0%.  Below this number is where I expect nominal wage growth to finally improve.

This decline in employment trend growth is something I have seen for a number of months, as last year's poor housing market feeds through the rest of the economy this year.  This decline is also obviously about the continuing international deterioration feeding through the strong US$ to  a shallow industrial recession (but a continuing consumer expansion) here.

Watching the housing market python digest interest rates through sales, then prices, and then inventory

 - by New Deal democrat

I have a new post showing trends in the housing market up at XE.com .

Right now is a good time to show how changes in intrest rates feed through first to sales, then prices, and finally inventory.  It's the econo-geek version of watching a python digesting a meal.

Oil May be Forming A Double Bottom on the Weekly Chart

This is over at XE.com

Corporate Yields Are Widening

This is over at XE.com

Atrios publishes a misleading graph

 - by New Deal democrat

I'm just never going to score well on the "plays well with other progressives" conduct rating. The use of misleading or dishonest, cherry-picked statistics sets me off, whether it is done by a right wing nut case or a left winger.  Hell, my coblogger Bonddad has made a cottage industry of calling out John Hinderacker for that stuff.

Anyway, what got my blood boiling this morning was a post from Atrios, entitled "Recovery," making use of the following graph:

Originally I was going to call this dishonest, but I'll settle for "misleading."

To be sure, I don't dispute the overall point, which is that the wealthy have disproportionately gained during this 6+ year expansion, while wages for the middle/working classes have remained stagnant.  Outside of Bernie Sanders, I know of no candidate for President seriously making an issue out of this.

So why am I so annoyed with Atrios?  Because he chose the cheap shot with a misleading statistic rather than honest analysis.

The source of the above graph is Pavline Tcherneva of the Levy Institute.  I have no beef with her whatsoever, and I had a perfectly civil and helpful exchange with her earlier this year.

But here is what the graph does.  It measures the growth in incomes over *ENTIRE* previous expansions (measure from income peak to income peak), vs. the first 3 years of Obama's. The last bar in the graph indicates that it runs through 2012.

In other words, the graph compares one apple with a bunch of oranges.  To be comparable, it should have compared the first three years of income growth in other expansions vs. Obama's.  That's the first gripe.

But above and beyond that, it isn't even current, by a factor of nearly 3 years!

As it happens, since Tcherneva based her graph on the work of Emanuel Saez, and he has already published a preliminary update through 2014, I can show you what the distribution of income gains since the start of the expansion looks like more currently:

Through 2014, the wealthy had seen a share of income gains comparable with both the Clinton and Bush 2 expansions.  The bottom 90% fared much better during the Clinton years than either Bush 2 or Obama.  And of course, the Obama expansion isn't over yet.

BTW, Saez should be publishing his final 2014 report shortly. Since from Clinton peak to Bush 2 peak, the lower 90% only saw a 1% income gain, it should be interesting to see if that has was surpassed in 2014.

US Equity and Economic Review: The Market Continues to Meander, Edition

This is at XE.com