Weekly Indicators for August 18 - 22 at XE.com

 - by New Deal democrat

My Weekly Indicator post is up at XE.com.  Summer is nearing its close and the data allows us to put our feet up, sip a libation, and enjoy the view.

The consumer fades further: real retail sales per capita for July

 - by New Deal democrat

With the release of the CPI the other day, I can update on of my new favorite economic measures, real retail sales per capita.  This takes the real, inflation adjusted sales number and adjusts it further by the number of consumers doing the buying. In the past, when the average individual consumer is puling back, it is an early (as in a year or more) signal of a downturn in  the economy:

This measure is slightly below its high from two months ago. I won't really be concerned unless it stays below its May peak for at least two more months.


Now let's look at it a second way, which is the YoY% change:

As I wrote last week in a post at XE.com, there has been a "slow fade" of the consumer since 2010.  July's real number continues that fade, although again I won't really be concerned unless the YoY measure turns negative and stays there for several months.

To put this in context of a number of indicators I continually study, there is a lot of evidence that the expansion is significantly past its halfway point (which ain't too bad after a 5 year expansion), but there is no imminent sign of any actual downtrun. My big fear remains the failure of wages to make any real progress in the last 15 years.

Prices of existing houses have probably made an interim peak

 - by New Deal democrat

I have a new post up at XE.com on this morning's report on existing home sales for July.

We have probably hit an interim peak for prices in the last two months.  More details in the article.

EU Weakness in Two Charts

This is over at XE.xom

We Might As Well Describe the EU's Economy As One in Permanent Recession

This is over at XE.com

http://community.xe.com/blog/xe-market-analysis/we-might-well-describe-eus-economy-one-permanent-recession

Lower mortgage rates = bottom in housing slowdown has probably passed

 - by New Deal democrat

I have a new post up at XE.com, looking at today's housing permits report. It looks like the decrease in interest rates that started at the beginning of this year is taking hold in new housing construction.

Weekly Indicators for August 11 - 15 at XE.com

 - by New Deal democrat

My Weekly Indicators piece is up at XE.com.

With increased geopolitical and international economic concerns, the US is benefitting once again from a flight to safety.

Industrial production and nonfarm payrolls: As Good as It Gets, Millennium edition

 - by New Deal democrat

The index of industrial production has grown at nearly a 5% rate in the past year (blue in the graph below), which is as good as it has been since the turn of the Millennium with the brief exception of 2010 vs. the 2009 depths of the recession:

Similarly, nonfarm payroll growth (red), at about 1.9% YoY, is also as good as it has been since the turn of the Millennium.

In other words, where we have been over the last 12 months is what passes for the economy firing on all cylinders at any point in the last 15 years.

Just to put that in perspective, here is the same data going back to 1983:

You can see that the last 15 years have been pathetic compared to the 15 years before that (and the 1980s and 1990s weren't as good as the 1960s and 1970s).

US consumers have been slowly tightening their pursestrings

 - by New Deal democrat

I have a new post up at XE.com, discussing the state of the American consumer in view of yesterday's flat retail sales report.  Time is running out on some fort of relief.

Weekly Indicators for August 4 - 8 at XE.com

 - by New Deal democrat

My Weekly Indicator column for this week is up at XE.com.  Here we are in the dog days of summer, and the numbers are like a lazily and happily snoozing pooch.

International Week in Review: The ECB Blows It Edition

This is over at XE.com

http://community.xe.com/blog/xe-market-analysis/international-week-review-ecb-blows-it-edition

A better measure of labor utilization

 - by New Deal democrat

Every month there seems to be a debate about the strength, or lack thereof, of the recovery in jobs since the depths of the Great Recession.  Professor Paul Krugman's back of the envelope measure has been the employment to population ratio in the 25 to 54 age group.  This takes care of the confounding issue of Boomer retirements, but on the other hand, it doesn't take into account changes in, for example, the trade off between work and child care costs in terms of employment decisions.

With that in mind, I've been working on a better, more detailed metric for labor utilization.

It seems to me that a better, more granular view of labor utilization can be obtained by measuring the hours of work available in the economy to those who are  working or want to work.  This can be obtained by dividing aggregate hours worked by the total of the civilian labor force plus those not in the labor force but want a job now. Here's what that looks like:

Even that can be improved slightly.  There are some people who only want to work part time (for example, older persons who no longer need a full time job for medical benefits, or to put aside money for their children's education).  This metric has changed slightly over time, and depending on economic conditions.  When we adjust by subtracting those people who only want to work part time, here's what our measure of hours available to those who want to work full time:

Even this measure isn't perfect, since we don't know how the average number of hours desired, or worked, by those who only want part time work, has changed over time. But as you can see, there is very little difference between the two graphs.

Both graphs show that, as compared with the tech boom in the late 1990s, even at its peak, the last economic expansion had a shortfall of 4% of hours available to work, and our current expansion is about 2% below that, or 6% less than the peak of a bona fide economic boom.  On the other hand, its current measure is equivalent to early 1996 or 2006, which weren't exactly awful.

In summary, not awful, but not a boom either.   We probably need to add at least 2% to the total hours available, i.e., exceed the 2007 peak, before we have a reasonably comfortable employment situation.

UPDATE:  Since series "Not in labor force, want a job now" only goes back to 1994, we can't trace the exact metrics back before that time.  But if we simply divide aggregate hours by the civilian labor force, we get a similar metric that takes us all the way back into the 1960s:

The net result is that we are probably about 2% shy of the aggregate hours that would be consistent with strong labor utilization.

Don't Expect a Rate Cut In Australia Anytime Soon

This is over at XE.com

http://community.xe.com/blog/xe-market-analysis/dont-expect-rate-reduction-reserve-bank-australia

DEATHMATCH! Hurricane vs. volcanoes

 - by New Deal democrat

As many of you probably recall, I frequently check the webcams at Kilauea volcano in Hawaii.  Usually the summit and the outlet cone quietly steam away, and the lava politely flows downhill towards the Pacific Ocean, but a few times a year, something of more interest like the opening of a new vent happens.

As to which, enter Hurricane Iselle.  Not only is this the first full fledged hurricane forecast to hit the Big Island since about forever, its currently forecast track takes it directly over Kilauea. Since Kilauea isn't having an explosive eruption, we won't see how a full fledged ash cloud interacts with hurricane wall clouds.  But, assuming the webcams stay in operation, we may see plenty of steam from the interaction with the lava flows and underground hot spots.

The bigger Deathmatch will probably be won by Mauna Kea and Mauna Loa, the two 15,000 foot high volcanoes that dominate the island. I imagine they will rip apart much of the upper architecture of the hurricane.

Anyway, tomorrow should be an interesting day to watch!

The apartment boom of 2014: more building, low vacancies, higher rents

 -by New Deal democrat

I have a new post up at XE.com taking a detailed look at the apartment boom, which is the only part of the housing market that has been growing in the last year.

My table didn't transfer correctly to XE, so read the story over there, and then come back and look at the table below:

Year	Median Asking Rent	Usual weekly earnings	Rent as % of earnings	Real median asking rent
1988	330	382	86	649
1992	401	437	92	677
1993	422	450	88	690
2000	478	568	84	658
2002	545	607	90	717
2004	620	629	99	777
2009	723	732	99	797
2012	721	765	94	740
2013   Q1	718	770	93	722
2013  Q2	735	776	95	741
2013  Q3	736	778	95	738
2013  Q4	746	782	95	746
2014  Q1	766	791	97	763
2014  Q2	756	782	97	746

The REAL "real unemployment rate" for July 2014

 - by New Deal democrat

This is a slow week for data.  That being said, there is some worthwhile updated information on labor utilization, the housing market, and wages.  There's actually a lot on wages, but I want to wait for Friday, when 2Q unit labor costs are reported, before writing up that grand tour.

Today, let's update the "real real unemployment rate" for July.  This is my corrective for those commentators who have put together metrics that either assume there is no retiring Baby Boom, or rely upon nearly decade-old estimates.  There's simply no need for doing so, when every month the Census Bureau publishes the seasonally adjusted number of people who have completely stopped looking for work, but would nevertheless like a job now.

The first important thing to note is that, since the US Congress cut off extended unemployment benefits at the end of last year, this number, which had been in significant decline in 2013, has completely stopped and in fact has started to rise again:

This means that the "real real unemployment rate" (red) has declined less than the official U3 unemployment rate (blue) as shown in the graph below:

Since last November, while U3 has declilned by -0.8% from 7.0% to 6.2%, the "real" unemployment rate has only declined -0.5% from 10.3% to 9.8%.  Here's the close-up of that:

 Aside from the thoroughly preventable human tragedy, this has negative multiplier effect on consumer spending, and so is a self-inflicted drag on the economy.  The U6 calculation of underemployed vs. the "real underemployment rate" follows the same trajectory.

Has the Russell 2000 ETF Formed a Double Top?

Weekly Indicators for July 28 - August 1 at XE.com

 - by New Deal democrat

This week's installment is up at XE.com.  The news remains positive, but less so in comparison with recent weeks.

July 2014 jobs report: excellent job creation, poor wage and participation omens

- by New Deal democrat

HEADLINES:

• 205,000 jobs added to the economy
• U3 unemployment rate rose from 6.1% to 6.2%

Wages and participation rates

• Not in Labor Force, but Want a Job Now: up 144,000 to 6.259 million
• Employment/population ratio ages 25-54: down from 76.7% to 76.6%
• Average Weekly Earnings for Production and Nonsupervisory Personnel: up +0.2% or $.04 from $20.58 to $20.61, up 2.0% YoY

May was revised upward by 5,000 to 229,000. June was also revised upward by 10,000 to 298,000. 

Since the economic expansion is well established, in recent months my focus has shifted to wages and the chronic heightened unemployment.  The headline numbers for July show little progress being made on those two fronts.

Those who want a job now, but weren't even counted in the workforce were 4.3 million at the height of the tech boom, and were at 7.0 million a couple of years ago.  They have actually slightly risen this year. As noted above they were 6.3 million in July.  This is almost certainly due to the cutoff in extended unemployment benefits by Congress at the end of last year.

After inflation, real hourly wages for nonsupervisory employees were probably unchanged from June to July. The YoY change in average hourly earnings is +2.0%, essentially equal to the inflation rate, so workers are making no real progress at all.

Finally, while the unemployment rate rose, it rose for the "good" reason.  The civilian labor force rose measured by the household survey rose by 329,000, while the number of new jobs in the same survey rose by 131,000.

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

• the average manufacturing workweek fell by -2 hours from 41.1 to 40.9.  This is one of the 10 components of the LEI, and will have a significant negative impact.


• construction jobs increased by 22,000. YoY construction jobs are up 211,000, or about 4%.  This is good news.


• manufacturing jobs  increased by 28,000, and are up about 144,000 YoY.


• temporary jobs - a leading indicator for jobs overall - increased by 8,500.


• the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by 177,000 to 2,587,000 compared with December's 2,255,000 low.

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

• The average workweek for all nonsupervisory workers was unchanged at 33.7 hours.


• Overtime hours fell 0.1 hour to 3.4 hours.


• the index of aggregate hours worked in the economy rose by 0.2% from 108.5 to 108.7. 


• The broad U-6 unemployment rate, that includes discouraged workers increased from12.1% to 12.2.


• The workforce creased by 329,000.  Part time jobs for economic reasons decreased by -33,000.

Other news included:

• the alternate jobs number contained in the more volatile household survey increased by 131,000 jobs.  The household survey jobs numbers had been lagging the establishment survey numbers, but as expected this difference has now been almost entirely made up, with the household survey showing a 2,066,000 increase in jobs YoY. 


• Government jobs increased by 11,000.

• the overall employment to population ratio for all ages 16 and above rose 0.1% from 58.9 to 59.0%, and has risen by +0.3% YoY. The labor force participation rate rose from 62.8% to 62.9, and has fallen by -0.5% YoY (but remember, this includes droves of retiring Boomers).

In summary, the excellent news is that the headline employment number was good once again.  Jobs are increasing so far this year at the rate of 2.76 million, or nearly 2% of the workforce.  This is the 12th best rate in the last 40 years, and the best since 1999.

The bad news is that no progress at all is being made on the discouraged long term unemployed, or on wages.  Only the prime working age participation rate is increasing.  The likelihood of a return to decent wage growth and full employment before the next recession hits is fading.

Russell Index Down For the Month