Weekly Indicators for September 12 - 16 at XE.com

 - by New Deal democrat

My Weekly Indicators post is up at XE.com.

There have been some subtle shifts in the last few weeks, suggesting another bout of relative global weakness compared with the US.

The Utter Bullshit of Trump's Economic Plan

I have to admit that I'm finding the presidential election extremely disheartening.  Trump is stupid, racist, xenophobic and utterly devoid of substance.  But as usual, the Republican political commentators are all pledging fealty.

      Let's look at one piece of Trump's economic plan as an example: he said he would get the economy growing at a 4% rate.  How?  He didn't say.  But rest assured it will involve some combination of tax cuts and deregulation.

     How feasible is this promise?  It's not.  Consider the following chart:

US real GDP grew at that pace during the 1980s and 1990s but isn't anymore.  Why?  because during the 1980s and 1990s the labor force participation rate was growing:

This occurred because women entered the labor force and the baby boomers moved through the system.  But now the boomers are retiring and women are leaving the labor force.  Put in broader terms, there are fundamental changes occurring in the U.S. that can't be altered through policy -- unless you want to increase immigration.  And we know how far that'll get in our new white power society. 

     In fact, this problem of slower growth is global -- it's occurring in Japan and the EU who are experiencing the exact same population dynamics.  For a really good discussion, read Larry Summers secular stagnation hypothesis or the latest speech from Fed President Lael Brainard.    

     This one piece of Trump's economic plan is bullshit and unattainable given his and Republicans hatred of non-whites.  But that no longer matters.  We are formally in a post-fact world where magical thinking reigns supreme.  And the bigger the lie, the better.  

       

     

August production and sales data disappoint

 - by New Deal democrat

This post is up at XE.com.

We've had a pattern of strong July and poor August data, which makes me think there may be a glitch in the seasonality.  In any event, the bottom of the shallow industrial recession remains last March.

Two young whippersnappers and their mobile phones

 - by New Deal democrat

I took this photo at my local Dunkin' Donuts while I was finishing the last post:

The real, timely "real median household income" just stood up: Sentier Research

 - by New Deal democrat

In April of this year, I wrote a piece entitled "Would the real real median household income please stand up?" discussing three separate measures from the Census Bureau, the BLS, and private think tank Sentier Research.

By now you have probably already read elsewhere that yesterday the Census Bureau reported that real median household income rose 5.2% in 2015 -- the biggest annual increase since the 1960s.  Here are the opening two paragraphs of the report, that pretty much say it all:

• household income in the United States was $56,516 in 2015, an increase in real terms of 5.2 percent from the 2014 median of $53,718. This is the first annual increase in median household income since 2007, the year before the most recent recession.
• In 2015, real median household income was 1.6 percent lower than in 2007, the year before the most recent recession, and 2.4 percent lower than the median household income peak that occurred in 1999. (The difference between the 2007 to 2015 and 1999 to 2015 percentage changes was not statistically significant.)

The problem is, this report is so tardy as to already be outdated.  After all, it is only issued once a year, so we just learned about the 2015 average -- but we are already only 3 1/2 months away from 2017!

A similar problem afflicts a second measure of median income, from the Consumer Spending Survey, which is released only once a year in April of the next year.  Pew Research wrote about the 2014 results just a couple of weeks before the 2015 report was issued, and here is what they found:

Two weeks later the 2015 report showed the biggest increase in years (but Pew has not updated their story):

As of June 2015, workers had made it all, or virtually all, back. According to my calculations, after falling nearly -7% from June 2009 through June 2014, in 2015 incomes in real terms were only 1% below their 2009 high ($62,138 vs. $62,857 in 2009 dollars). The bullet points:

• average  annual expenditures up +5.9% YoY (up +5.7% after inflation)

• average annual income up +6.6% YoY (up +6.4% after inflation)

But there is a third source of information as to real median household incomes:  Sentier Research, a private facility where two former Census Bureau researchers compile a monthly update from the Household Survey (the source of statistics like the unemployment rate and the employment to population ratio in the monthly jobs report).

One year ago, in September 2015, here is what the Census Bureau's 2014 report had just shown:

and here is what Sentier Research was showing at that time for 2015:

With only a one month delay, Sentier was already showing a huge increase in median household incomes in late 2014 continuing in 2015.

Now here is the updated 2015 data released by the Census Bureau yesterday:

Nearly one full year later, the official number showed what Sentier was reporting in nearly real time.

Yesterday's Census Bureau report was a major validation for the credibility and reliability of Sentier's monthly update.

So, what does Sentier show now?  Here is their graph through July 2016 (h/t Doug Short

Real median household income is higher still in 2016 than it was in 2015, but in the last several months it has stumbled.  One year from now, that is probably about what the Census Bureau will tell us.

To reiterate the conclusion from my April piece, however:

this is too important a statistic to leave to very delayed and problematic annual measures. An even more complete measure, average per capita adjusted gross income - which is generated from the complete tally of all tax returns filed in any given year, is only available through 2013!  Resources  should be devoted to producing more accurate and timely measures on a Quarterly basis at least.

Bonddad's Wednesday Linkfest

I'm traveling for the rest of the week.

JOLTS and Labor Market Conditions Index still unimpressive

 - by New Deal demorat

[Note: I'm still way too busy i.r.l.  So this is a tardy update on some news released last week.]

I reamin unimpressed with the Job Openings and Labor Turnover Survey (JOLTS), as I have been for for over a year, and like many others I have found the Labor Market Conditions Index a source of concern.

First, the LMCI, with the exception of one month ago, has been relentlessly negative all this year:

At the same time, in the past it has almost always taken an LMCI reading of -10 or worse to be consistent with a recession.  So the LMCI is just telling us that the labor market continues to decelerate.

The JOLTs report, which was updated for July, also shows continued deceleration.  For over a year I have noted that the pattern was similar to that in late in the last expansion, and the July report was more of the same.

First, here is a comparison of job openings (blue), hires (green), and quits (red).  Because there is only one compete past business cycle for comparison, lots of caution is required. But in that cycle, hires and quits peaked first and then openings continued to rise before turning down in the months just prior to the onset of the Great Recession:

Through July, 2016 continues to look very much like 2006, or even early 2007.   Although I won't post it this month, in the past I have pointed out that quits in particular seems to correlate well with the unemployment rate a few months later -- and since quits has gone nearly flat, I expect the unemployment rate to remain essentially steady.

Finally, I wanted to repost this self-explanatory graph from Barry Ritholtz:

This tells us that the ratio is about as it was at the peak of the last buisness cycle.  Which means that employers with job openings have a choice:  either pay better wages, or see the openings go unfilled.  Needlless to say, I am rooting for better wages.

Bonddad's Tuesday Linkfest

Fed President Brainard on Labor Market Slack

Second, and related, although we have seen important progress on employment, this improvement has been accompanied by evidence of greater slack than previously anticipated. This uncertainty about the true state of the economy suggests we should be open to the possibility of material further progress in the labor market. Indeed, with payroll employment growth averaging 180,000 per month this year, many observers would have expected the unemployment rate to drop noticeably rather than moving sideways, as it has done. It is true that today's unemployment rate of 4.9 percent is only 0.1 percentage point from the median SEP participant's estimate of the longer-run level of unemployment. However, the natural rate of unemployment is uncertain and can vary over time. Indeed, in the SEP, the central tendency of the projection for the longer-run natural rate of unemployment has come down significantly, from a range of 5.2 to 6.0 percent in June 2012 to 4.7 to 5.0 percent in June 2016--a reduction of 1/2 to 1 percentage point.5 We cannot rule out that estimates of the natural unemployment rate may move even lower.

In addition, the unemployment rate is not the only gauge of labor market slack, and other measures have been suggesting there is some room to go. The share of employees working part time for economic reasons, for example, has remained noticeably above its pre-crisis level. Of particular significance, the prime-age labor force participation rate, despite improvement this year, remains about 1‑1/2 percentage points below its pre-crisis level, suggesting room for further gains. While it is possible that the current low level of prime-age participation reflects ongoing pre-crisis trends, we cannot rule out that it reflects a lagged and still incomplete response to a very slow recovery in ‎job opportunities and wages.6 

This possibility is reinforced by the continued muted recovery in wage growth. Although wage growth has picked up to about a 2-1/2 percent pace in recent quarters, this pace is only modestly above that which prevailed over much of the recovery and well below growth rates seen prior to the financial crisis.7 

My main point here is that in the presence of uncertainty and the absence of accelerating inflationary pressures, it would be unwise for policy to foreclose on the possibility of making further gains in the labor market.

The Percent of People Marginally Attached is Still Very High

Labor Utilization is Still Weak

Wage Growth is Still Paltry

S&P Warns on the UK

While the news is encouraging, we believe it has no bearing on the cloudy longer-term outlook for the U.K. economy… The uncertainty surrounding the U.K’s future outside of the E.U. and the associated economic risks, which we think are pronounced and predominantly skewed to the downside, will gradually take its toll, particularly on investment, as businesses start dealing with the new Brexit reality.

All Three Markit PMIs rebounded sharply in their latest report

Bonddad's Monday Linkfest

I'm a financial adviser with Thompson Creek Wealth as well as a tax and business attorney with The Law Office of Hale Stewart.

Relative Strength of the Sector ETF 

1-Year Chart of the XLF

1-Year Chart of the 10 Largest XLF Members

1-Year Chart of the XLK

1-Year Chart of the 10 Largest XLK Members

Two thoughts for Sunday: on the economic and political situation

 - by New Deal democrat

First of all, my apologies for the light posting the last few weeks.  This is one of those periods where I am incredibly busy i.r.l. and don't have a lot of time to spare for putting together any in-depth posts. 

If there were any sea change in the economy, though, I would let you know.  But there isn't.     

• Energy prices, and the profits of energy companies, have bottomed, and the US$ has been going sideways for over half a year, so the dynamic behind the shallow industrial recession has largely disappeared. 
• There is still international weakness.  It is likely that part of the run-up after 2009 in commodity prices and production was Chinese stockpiling.  The stockpiling appears to have ended, and that  continues to feed through into weakness in things like shipping.  
• Recent lows in interest rates are helpful to borrowers.  This should feed through into improvement in housing and consumer spending generally (I've taken to calling it "Indian Summer.")  

We are past mid-cycle, so the next recession is out there.  But it doesn't look imminent.

Which makes for a nice segue into the political environment.

Because almost certainly we are not in a recession, by the simplest metric the Presidential candidate of the incumbent party is favored.  But not by much:  when we look at growth in the most historically accurate economic series over the last 3.5 years, they forecast something close to a nail-biter -- a 51/49 election.  Since there no significant ongoing casualties in war, and no large scale civil unrest, those factors (like the "Bread and Peace" election model) aren't in play. 

Which means that the variance from the 51/49 scenario is the personalities of the candidates.  And this year, we have the two most disliked candidates ever running.  The election result is going to boil down to, who is the most disliked.

Here, there has been a sea change -- that began on or about August 19.  And Trump played Clinton and the media like violins in so doing.

Remember that Donald Trump is first and foremost a salesman/entertainer.  He actually participated in WWE wrestling!  The scenario there is that there are "good guys" and "bad guys" but they can occasionally switch sides.

For the last year, Trump's persona was the "bad guy" wrestler.  That all changed on August 19, when Trump suddenly changed from being bombastic to magnanimous.  It began with his 63-word long nonspecific statement of "regret"

Sometimes, in the heat of debate and speaking on a multitude of issues, you don't choose the right words or you say the wrong thing. I have done that. And believe it or not, I regret it. And I do regret it, particularly where it may have caused personal pain. Too much is at stake for us to be consumed with these issues.

From that day forward, from his "reaching out" to blacks and Latinos, to his visit to Baton Rouge, to his Presidential-sounding statements in Mexico City, to his statement yesterday that he "respects" all Clinton supporters, he has suddenly switched to being the consummate "good guy."  The mask has only dropped twice: in his Phoenix speech on immigration, and his promise to commit an act of war against Iran if the people in their "little boats" use rude gestures. 

While Trump has been playing the wrestling "good guy," his surrogates are providing a drip-drip-drip of allegations about Clinton's use of emails and the Clinton Foundation, allegations which will probably continue right up until election day.

This has ensured that the personality of Clinton, not Trump, is the narrative.  

Meanwhile, Clinton, who blew a massive lead in 2008 to Obama, and nearly blew a massive lead in the primaries this year to Sanders, started to measure the White House draperies, announcing her Transition Team headed by Ken Salazar on August 16.

It was famously said in football that the only thing a "prevent defense" prevents, is victory.  In this case, Clinton and all of her surrogates went almost completely quiet in the latter part of August, allowing the focus to completely shift from Trump's negatives to Hillary's negatives.  Meanwhile Trump seized the positive initiative, for example with his August 19 visit to Baton Rouge while Clinton and Obama both remained passive.

Clinton and Obama have even failed to make an issue over Trump's threat to start a war with Iran over their sailor's rude hand gestures -- proof positive if ever it was needed that he is unfit to be Commander in Chief.

Unsurprisingly, the race has tightened ever since.  The race will continue to tilt in Trump's direction unless and until 2 things happen:

1. Hillary develops an "elevator pitch" of broad policy goals that benefit average Americans, and 
2. She and her surrogates get out of "prevent defense" mode and aggressively go after Trump on his myriad of what should be fatal weaknesses.

Update.  One other comment:  Americans have almost always preferred candidates -- from Jefferson to Jackson to FDR to Truman to Kennedy to Bill Clinton to W. -- who appeared to be happy political warriors, to candidates -- from John and John Quincy Adams, to Hoover to Dewey to Nixon to George H.W. Bush to Gore -- who appeared wooden and wonkish.  I think we know who is who in this race.

Update 2:  Here's another thing that went completely unremarked by both the media and the Clinton campaign. During his August 31 speech on immigration Trump said:

in several years [ ] we [will] have accomplished all of our enforcement and deportation goals and truly ended illegal immigration for good, including the construction of a great wall which we will have built in record time and at a reasonable cost, which you never hear from the government

Now, if Mexico were going to pay for the wall, why would "we" build it "at a reasonable cost?"  Obviously Trump was recognizing at any border wall would be built at US taxpayer cost, not paid for by Mexico. This is a major flip-flop on one of his central tenets.  And the press couldn't be bothered to notice, and Hillary was too busy taking the election for granted to make it an issue.

Weekly Indicators for September 5 - 9 at XE.com

 - by New Deal democrat

My Weekly Indicators piece is up at XE.com.

Last week I noted some wobbles in the recent paradigm of positive leading indicators, negative coincident indicators.  This week the wobbles continued to fluctuate in various directions.

The road to the next recession has gotten more "long and winding"

 - by New Deal democrat

A few months ago I posted a "road map to the next recession."  So are we closer or futher away?  Hint:  Thank you, Brexit!!!

This post is up at XE.com.

Bonddad's Thursday Linkfest

I'm a financial adviser with Thompson Creek Wealth as well as a tax and business attorney with The Law Office of Hale Stewart.

Fed President Williams on Rate Policy

So, what does this mean for interest rates? In the context of a strong economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later. Let me be clear: In arguing for an increase in interest rates, I’m not trying to stall the economic expansion. It’s just the opposite: My aim is to keep it on a sound footing so it can be sustained for a long time.5

History teaches us that an economy that runs too hot for too long can generate imbalances, potentially leading to excessive inflation, asset market bubbles, and ultimately economic correction and recession. A gradual process of raising rates reduces the risks of such an outcome. It also allows a smoother, more calibrated process of normalization that gives us space to adjust our responses to any surprise changes in economic conditions. If we wait too long to remove monetary accommodation, we hazard allowing imbalances to grow, requiring us to play catch-up, and not leaving much room to maneuver. Not to mention, a sudden reversal of policy could be disruptive and slow the economy in unintended ways.

Beige Book 

Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest pace on balance during the reporting period of July through late August. Most Districts reported a "modest" or "moderate" pace of overall growth. However, Kansas City and New York reported no change in activity, and Philadelphia and Richmond noted that, while still expanding, activity slowed from the previous period. Contacts across the twelve Districts generally expect moderate economic growth in coming months. Overall consumer spending was little changed in most Districts, and auto sales declined somewhat but remained at high levels. Tourism activity was flat from the previous report but above year-earlier levels. Sales of nonfinancial services gained further momentum. Manufacturing activity rose slightly in most Districts. Activity in residential real estate markets grew at a moderate pace, but the pace of sales was constrained in a few Districts by shortages of available homes. Commercial real estate activity expanded further. Demand for business and consumer credit varied across Districts but appeared to expand at a moderate pace overall, with stable credit quality. Agricultural conditions were mixed, with price declines largely offsetting growing volumes. Overall demand for energy-related products and services weakened. 

The 5 primary coincident indicators

NYSE and NASDAQ AD Lines are Rising

 EU GDP Steady

Notice the drop in exports and imports over the last 4 quarters.  In contrast, household spending the business investment have been stead for the EU 19.

EU Markets are Improving Relative to the SPYs

U.S. Data Raising Doubts About Rate Hike (Capital Spectator)

The surprisingly sharp drop in yesterday’s release of the ISM Non-Manufacturing Index for August has unleashed new worries that the US economy is weakening as it heads into the final months of 2016. It doesn’t help that the Federal Reserve’s broadly defined Labor Market Conditions Index (LMCI) dipped back into negative territory last month. Neither of these soft numbers present a smoking gun for arguing that the US is slipping into a new recession, but the news raises more doubts about the wisdom of raising interest rates at the Fed’s monetary policy meeting that’s scheduled for Sep. 20-21.

Bonddad's Wednesday Linkfest

I'm a financial adviser with Thompson Creek Wealth as well as a tax and business attorney with The Law Office of Hale Stewart.

ISM Services Drops But is Still Positive

Homebuilders Are Facing a Construction Labor Shortage

Eight years after the housing bust drove an estimated 30 percent of construction workers into new fields, homebuilders across the country are struggling to find workers at all levels of experience, according to the National Association of Homebuilders. The association estimates that there are approximately 200,000 unfilled construction jobs in the U.S. - a jump of 81 percent in the last two years.

The ratio of construction job openings to hiring, as measured by the Department of Labor, is at its highest level since 2007.

"The labor shortage is getting worse as demand is getting stronger," said John Courson, chief executive of the Home Builders Institute, a national nonprofit that trains workers in the construction field.

The impact is two-fold. Without enough workers, residential construction is trailing demand for homes, dampening the overall economy.

And with labor costs rising, homebuilders are building more expensive homes to maintain their margins, which means they are abandoning the starter home market. That has left entry-level homes in tight supply, shutting out may would-be buyers at a time when mortgage rates are near historic lows.

Chart of Total Construction Employees

Chart of New Home Sales

Financials Margins of the 20 Largest Homebuilders by Market Capitalization

Only 2 Mid-Cap Dividend Aristocrats (Mid-Cap Stocks That Have Increased Dividends for 25+ years) Have Outperformed the SPYs over the Last 10 Weeks

Bonddad's Tuesday Linkfest

I'm a financial adviser with Thompson Creek Wealth as well as a tax and business attorney with The Law Office of Hale Stewart.

U.S. Sector Performance Relative to the SPYs

Right now, technology and financials look attractive relative to the SPYs.  Financials are especially attractive due to the high possibility of an upcoming rate hike.

The Financial Sector's Relative Performance

1-Year Cangleglance Charts

My Weekly Columns Are Up at XE

US Equity Week in Review

US Bond Market Week in Review

International Week in Review

Weekly Indicators for August 29 - September 2 at XE.com

 - by New Deal democrat

My Weekly Indicators post is up at XE.com.

Some wobbles appeared in several previously positive data series.

August Jobs report: another month of later expansion deceleration

- by New Deal democrat

HEADLINES:

• +151,000 jobs added
• U3 unemployment rate unchanged at 4.9%
• U6 underemployment rate unchanged at 9.7%

Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates

• Not in Labor Force, but Want a Job Now:  down -53,000 from 5.886 million to 5.833 million  
• Part time for economic reasons: up +113,000 from 5.940 million to 6.053 million
• Employment/population ratio ages 25-54: down -0.2% from 78.0% to 77.8% 
• Average Weekly Earnings for Production and Nonsupervisory Personnel: up +$.04 from $21.60 to $21.64,  up +2.5% 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.)

June was revised down by -21,000, and July was revised up by +20,000, for a net change of -1,000. 

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

• the average manufacturing workweek fell -0.2 from 42.0 to 41.8 hours.  This is one of the 10 components of the LEI, and is a negative.
 
• construction jobs fell by -6,000 YoY construction jobs are up +199,000.  
 
• manufacturing jobs fell by -14,000, and are down -37,000 YoY

• temporary jobs - a leading indicator for jobs overall decreased by -3,100 (this made a peak in December, but had been stabilizing).


• the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by +130,000 from 2,160,000 to 2.290,000.  The post-recession low was set 1 year ago at 2,095,000.

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

• Overtime was unchanged at 3.3 hours.
• Professional and busines s employment (generally higher- paying jobs) increased by +22,000 and are up 542,000 YoY.


• the index of aggregate hours worked in the economy declined by-0.3  from  113.1 to 112.8 

•  the index of aggregate payrolls fell -0.1 from 163.2 to  163.1. 

Other news included:        

• the alternate jobs number contained  in the more volatile household survey increased by  97,000 jobs.  This represents an increase  of 2,571,000  jobs YoY vs. 2,447,000 in the establishment survey.    
   
• Government jobs rose by +25,000.     

• the overall employment  to  population ratio for all ages 16 and above was unchanged at   59.7%  m/m and is up +0.3% YoY.   
• The  labor force participation rate was unchanged at  62.8% and is up +0.2% YoY (remember, this includes droves of retiring Bsoomers).     

 SUMMARY

This was a decent report which is positive in most absolute terms, but relatively continues to show late expansion deceleration. Little outside of the headline jobs number was outright positive.  Most of the internals were unchanged or declined.  Of particular note is that the measures of peripheral underemployment -- part time for economic reasons and those outside of the labor force who want a job now -- have barely made any progress this year.  Wage gains are among the best of this cycle, but that is an extremely low bar.

So, no cause for immediate concern, but no reason to think there will be much further improvement either.

From Bonddad

     First, a few points. 

1    1.)   The economy is already near full employment of 5%.  This means we should accept some deceleration in establishment job growth.

2    2.)   Depending on which Fed governor you ask, the economy needs job growth of somewhere between 70,000-150,000 to absorb population growth.  My best estimate is that that figure is actually around 110,000,120,000.

3     

3    3.)   This is a noisy data series, subject to numerous revisions.  For example, this report adjusts the previous 2 reports up ~20,000 and down ~20,000.  While we should keep track of the monthly report because the market does, we always need to remember there are issues with month data collection and estimates that are corrected throughout time.

     This month, total jobs decreased 99,000.  Goods producing jobs declined 35,000, due to drops in construction and manufacturing hiring.  Service producing jobs declined 64,000 thanks to a fall in professional, leisure/hospitality and health care hiring. 

     While hourly earnings increased 3 cents/hour, weekly hours worked decreased .1, so average weekly earnings were $1.54 lower.

     Finally, this isn’t anywhere weak enough to push the Fed away from a rate hike. 

An economy in Indian Summer

 - by New Deal democrat

Let me get the bad news out of the way first.  This morning's ISM Manufacturing report was disappointing to say the least.  Not only did the overall number fall below 50, but so did the leading new orders index, for the first time all year:

This mirrors the poorer regional Fed reports we got during August.

Still, it is only one month, and ISM readings between 48 and 50 have generally been consistent with slowdowns, not recessions.

But in general the news in the last few months has been better than in the earlier part of this year,  most notably industrial production which likely bottomed in March:

And here's a graph from Matt Trivisonno that Barry Ritholtz put up this morning of the 90 day average of tax withholding payments YoY:

And here is real personal income and spending:

So the dominant coincident indicators of the economy have all shown improvement in the last few months. 

I think the best paradigm for this improvement is compare it with the nice warm autumn days of Indian Summer.  The real summer has passed, and winter is still a ways off, but this is a nice episode.

This was brought to mind by a post I read from Lee Adler of the Wall Street Examiner.  Adler's headlines are typically Doomish, but he tracks real indicators, doesn't cherry pick which onces get attention,  and lets the data speak, even when it contradicts his narrative.  So this was a graph he put up a few days ago comparing real retail sales YoY and real personal consumption expentitures:

Note that for the first few years of this expansion, YoY retail sales were higher than PCE's.  This reversed about 18 months ago.  This is a typical mid-cycle reversal that I have previously pointed out has been a consistent pattern for over 50 years.

The index of leading indicators turned flat in July 2015, and didn't really recover until April of this year:

But the US$ has a history of being a leading indicator as well, and it probably has more relevance as the US economy becomes more globally enmeshed.  So here is what the monthly change, inverted, of the US$ look like, inverted so that strength in the dollar means a drag on the economy:

The dollar drags down the LEI from summer 2014 through January of this year.  If we assign a -.1% contribution to the LEI for every 1% increase in the US$, it makes the downturn in late 2015 through January of this year more intense, and begins the abatement in February -- on time to start showing improvement by now.

So while this morning's ISM report wasn't so hot, I expect the generally positive and improving news to continue for the remainder of this year -- i.e., a period of late cycle Indian Summer.