Weekly Indicators for October 9 - 13 at XE.com

 - by New Deal democrat

My Weekly Indicators post is up at XE.com.

This week there was a significant change in one of the long leading indicators, and that is enough for me to downgrade my long term outlook from mildly positive to neutral.

They are monsters

 - by New Deal democrat

The President and his GOP majorities in Congress are monsters. As one commentator on NPR put it yesterday afternoon, the President's default mode is to toss an armed hand grenade into a room in order to create chaos.  He can then pick out the most vulnerable, and use that leverage to enter into a win-lose deal.

Meanwhile, having been emboldened by the 2011 Debt Ceiling Debacle, the Congressional GOP majorities, who haven't been able to legislate affirmatively, have become specialists in taking hostages and threatening to shoot them unless their agenda is enacted.

Trump and the GOP Congress combined have, as of this morning taken at least four hostages:

DREAMers - the DACA program is being terminated. After an initial claim that a deal had been made to protect young people who had been brought to the US as children and know of no other home, the malAdministration is now taking a hard line, refusing to protect the nearly 1 million enrollees from deportation unless it gets its entire immigration policy enacted.

SChip recipients - this program, which provides medical insurance coverage for over 8 million  lower income children, was allowed to expire on September 30.  Despite assurances from the Congressional GOP that it would be re instituted promptly, nothing has been done.

Puerto Ricans - Unlike Texas, Louisiana, and Florida, which are GOP majority states, the malAdministration never provided prompt aid to the over 3 million Puerto Ricans, and is threatening to withdraw the aid before basic services are restored.

Recipients of Obamacare subsidies - the malAdministration is refusing to make subsidy payments under the ACA to insurers who enroll those who have less than 2.5 times the income of the Federal poverty level, which includes about 7.5 million people who have enrolled under Obamacare.

That's a total of close to 19,000,000 hostages.

All four groups are not GOP constituencies.  Further, three of the four groups of hostages have in common that they aren't presently able to vote, although SChip children do grow up and Puerto Ricans can move to the mainland, and SChip children have parents and Puerto Ricans already have lots of relatives on the US mainland, all of whom can vote.

They are monsters. Real harm is being inflicted on a significant share of the US populace, out of little more than spite. People will die as a result.

Do you think those 19,000,000, or their parents, relatives, and friends, might be motivated to vote in 2018 and 2020?

-From Bonddad

These last 9 months have been incredibly disheartening.  I've watched as the toddler-in-chief (boy do I wish I coined that term) has continued to bully, threaten and in general do whatever he can to harm other people.

Today's executive action to eliminate insurance subsidies was unconscionable.  It will leave millions without health insurance.  It is a move that the entire health care complex voiced disapproval of.  Hospital stocks tanked on the market open.   

It is one of the worst policy decisions ever undertaken by a US President.

Real money supply: the slow deceleration continues

 - by New Deal democrat

I made the point a few weeks ago that the non-financial long leading indicators had turned at least neutral if not negative, while the financial ones were still positive.

But I've particularly had my eye on real money supply, especially M2.  This post is up at XE.com.

And in an update, as of this morning's consumer inflation number, Real M2 growth has fallen slightly below 3.0% YoY, which turns it from a positive to a neutral.

There Is No Commodity Based Inflation

Consider the following charts (the top three area daily; the bottom is weekly):

All prices are either declining or stable.  The only major ETF that is showing strength is the industrial metals ETF (this is a weekly chart):

This explains why non-food and energy prices are subtracting from prices:

This is one reason why overall inflation is so week globally.

Hurricane adjusted initial claims for the week of September 30: 243,000

 - by New Deal democrat

I am repeating an exercise I undertook in 2012 when Superstorm Sandy disrupted the initial claims data: estimating what the initial jobless claims would have been, but for the hurricanes.  Since this morning initial claims for the first week of October were reported at 243,000, this will probably be the last week in which this exercize is necessary.

In 2012, I created the hurricane adjustment by backing out the affected states (NY and NJ) from the non-seasonally adjusted data, which gave me the number of initial claims filed in the other 48 states.  I compared that with the same metric one year earlier, and multiplied by the seasonal adjustment to arrive at the number if the affected states had the same relative number of claims during the given week, as all of the unaffected states.

This tells us whether or not the hurricane disruptions are masking any underlying weakness in the economy.

This year I backed out Texas starting 4 weeks ago, added Florida 3 weeks ago, and Puerto Rico last week.

The state by state data is released with a one week delay.  So what follows is the analysis for the week of September 23, the number for which was reported at 272,000.

Here is the table for the Week of September 24 in 2016 vs. September 23 this year:

Metric                              2016                   2017

Seasonally adjusted:       248,000              258,000

Adjustment for total:       1.23                   1.26

Not seasonally adjusted: 200,456             204,662 

Florida claims:                 7,275                 18,902
Puerto Rico claims:         1,621                 328 (!)*
Texas claims:                   14,323               17,063               

NSA claims ex-FL,TX,PR:177,237           172,369

FL, TX, PR as % of total: 11.6%                   n/a

2017 w/ FL,TX, PR adjustment:  n/a          194,988

*Yes, Puerto Rico really was lower this year, presumably because offices were not open or claimants were otherwise unable to file.

In 2016 the weekly seasonal adjustment was 1.23. This year it was 1.26 Multiplying the non-seasonally adjusted total of 194,988 by 1.23 gives us 240,000. Multiplying by 1.26 gives us 246,000.

Thus the hurricane-adjusted initial jobless claims number for the week of September 23, 2017 is 243,000.

Here are the hurricane-adjusted numbers for previous four weeks:
Sept. 2:  239,000.
Sept. 9:  229,000.
Sept. 16: 237,000
Sept. 23: 246,000

The four week hurricane adjusted average is 239,500.

The underlying national trend in initial jobless claims has remained very positive during the period of hurricane disruptions. Unless the disruptions remain significant in next week's report, this will be my last hurricane-adjusted update. 

August JOLTS show strength in hiring, but continued slow deceleration in the labor market

 - by New Deal democrat

More and more commentators seem to be noticing that the disconnect between the "soft data" of openings in this survey and the "hard data" of actual hires is not a good thing. As I have pointed out many times, openings can be just chumming the water for resumes, or even laying the groundwork to hire foreign workers. The disconnect betrays an unwillingness to pay new hires more, or to engage in on the job training.

That disconnect continued in this week's report for August. Openings continued to run about 10% higher than actual hires:

The report does give us a very granular view of the labor market, with the major shortcoming that it has only covered one full business cycle.  To recap, in the last business cycle, hires peaked and troughed before separations: 

Further, hires stagnated, and shortly thereafter involuntary separations began to rise, even as quits continued to rise for a short period of time as well:

 

[Note: above graphs show quarterly data to smooth out noise]

Here are hires vs. separations on a monthly basis for the last several years:

Once again for this report, even while quits have continued to rise, involuntary separations bottomed a year ago, and have risen  on a quarterly basis ever since.  Here's the monthly view of the last several years: 

The recent surge in layoffs and discharges is actually similar in scale to that just before the last recession.

As I pointed out earlier this week, both the Establishment and Household employment surveys show a decelerating pace of job creation. The decelerating pace of hires and quits, and accelerating pace of layoffs and discharges, while still net positive, show a similar slow deterioration..

New Things are Afoot ... Soon

Hey all,

This is Bonddad.  Yes, the real bonddad (because, of course, there are thousands of people impersonating me on the web). 

I haven't really been around here for ... awhile.    That will be changing soon.  NDD and I (and some other people) have some new projects in the works that will be very cool.

Just wanted to give you a heads up, as it were.

BD

One more scene from the September jobs report: late cycle deceleration continues

 - by New Deal democrat

The rate of year over year job growth is probably the single best mid-expansion indicator, in part because there is very little noise in the Establishment survey jobs data YoY.  But, as the below graph shows, going back all the way to 1948, while it is noisier the Household survey YoY jobs data also traces out the same pattern with very few exceptions (notable the early 1950s and the mid 1960s):

Even a cursory glance at the graph shows that we are on the decelerating side of that indicator.  Here's a close-up of the last 10 years:

Although the Establishment and Household numbers moved in very different directions this month, viewed in context both show a significant downshift in 2017 from the last few years.

Yesterday I noted that if leisure and hospitality jobs had grown by their 12 month average of +27,000 in September vs. their actual -111,000, the September Establishment survey would have  grown by a relatively weak 105,000 (yes I know it is more complicated than that, but it is a good K.I.S.S. estimate). Since in September 2016 jobs grew by +249,000, even with that hurricane adjusted estimate, YoY job growth would have decelerated to 1.3%.

In the past-WW2 era, typically late-cycle deceleration was accompanied by (and generally caused by) an increase in inflation and an increase in Fed interest rates to chase after it. The few times there were multiple YoY peaks in job growth (the 1960s, 1980s, and 1990s), the Fed engineered "soft landings" where it lowered rates after initial raises.

Per Tim Duy, who has a good record of Fed-watching, even in the absence of rising inflation,  they seem bound and determined to raise rates again in December.  A December rate hike shouldn't be enough to push the economy into a later recession, but it should put further downward pressure on job growth in 2018.

Scenes from the September jobs report

 - by New Deal democrat

On Friday I highlighted the difference between the results of the establishment survey and the household survey.  A 2006 paper from the BLS (pdf) explaining the differences in how jobs are counted in the two surveys shows us why:

Interviewers from the Census Bureau contact households and ask questions regarding the labor force status of members of the household during the calendar week that includes the 12th day of the month. The broad coverage of the CPS encompasses ... workers temporarily absent from work without pay. 

.... 

[In the Establishment survey, b]usinesses report the number of persons on their payrolls who received pay during the pay period that includes the 12th day of the month. Workers who did not receive pay during the pay period are not counted.

Thus an employee at, say, Barnacle Bill's Seashore Restaurant, who wasn't paid during the week of Hurricane Irma because the restaurant was closed, doesn't get counted in the Establishment survey, but *does* get counted in the Household survey.

Thus, although the household survey is the smaller sample, and thus subject to much more noise, it probably gave us a much truer picture of the labor market for the whole of September.  While the employment gain itself (906 thousand!) was insane, and surely not accurate, the ratios of unemployment, underemployment, and participation in the survey probably picked up the true  trend of improvement.

So let's look at those.  First of all, here is the U6 underemployment rate.  I've subtracted 8.3% from the result, to better show how the present situation compares to the last two expansions:

In the last expansion, the underemployment rate newer got below 7.9%. The late 1990s was a genuine boom.

Next, here is the employment to population ratio for the prime age workforce of 25 to 54:

We are 1.3% below the peak of the last expansion.  Again, the figure for the 1990s shows what a real boom looks like. Since that demographic is about 125 million people, that 1.3% equates to a little over 1.6 million people.

So if we were to get another 1.6 million jobs over and above population growth, plus growth of about 400,000 full time jobs vs. part time jobs to convert the involuntarily part time employed, that would get us to full employment.

Finally, here's a graph of the last 12 months of leisure and hospitality employment from the Establishment survey:

In the 11 months before September, an average of 27,000 jobs were added each month. If we replace the -111,000 jobs lost last month with the +27,000 average of previous months, the Establishment survey would have shown a gain of 105,000 jobs.  Of course, this wasn't the only sector affected by the hurricanes, but that number, while still relatively weak, is probably closer to the actual trend.

Weekly Indicators for October 2 - 6 at XE.com.

- by New Deal democrat

My Weekly Indicators post is up at XE.com.

The slew of positive trends continues.

September jobs report: establishment survey stinks, but household survey rocks!

- by New Deal democrat

HEADLINES:

• -33,000 jobs lost
• U3 unemployment rate down -0.2% from 4.4% to 4.2% (new low)
• U6 underemployment rate down -0.3% from 8.6% to 8.3% (new low)

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 -216,000 from 5.844 million to 5.628 million   
• Part time for economic reasons: down -133,000 from 5.255 million to 5.122 million (new low)
• Employment/population ratio ages 25-54: up +0.5% from 78.4% to 78.9% (new high) 
• Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.0.09 from $22.14,  to $22.23, 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.) 

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 fell by -1,000 for an average of  +9,800 a month 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 by 500 for an average of +133 a month vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month

July was revised downward by -51,000. August was revised upward by +13,000, for a net change of -38,000.  

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

• the average manufacturing workweek was unchanged at 40.7 hours.  This is one of the 10 components of the LEI.
 
• construction jobs increased by +8,000. YoY construction jobs are up 184,000.  

• temporary jobs increased by +5,900.


• the number of people unemployed for 5 weeks or less increased by +4,000 from 2,222,000 to 2,226,000.  The post-recession low was set al,ost two years ago at 2,095,000.

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

• Overtime was flat at 3.3 hours.
• Professional and business employment (generally higher- paying jobs) increased by +13,000 and  is up +528,000 YoY.


• the index of aggregate hours worked in the economy fell  by  -0.1 from 107.4 to 107.3   

•  the index of aggregate payrolls rose  by +0.5 from 134.7 to 135.2.   

Other news included:           

• the  alternate jobs number contained  in the more volatile household survey increased by  906,000 (!)   jobs.  This represents an increase of 2,419,000  jobs YoY vs. 1,777,000 in the establishment survey.     
    
• Government jobs rose by +7,000 .     

• the overall  employment to  population ratio for all ages 16 and up rose +0.3% from 60.1% to  60.4  m/m  and is  up +0.6%  YoY.      
• The  labor force participation  rate rose +0.2% m/m and is up +0.2% YoY from 62.9% to 63.1%.       

 SUMMARY  

 This report was certainly affected by Hurricanes Harvey and Irma, but what is surprising is all of the areas of strength, especially in the household report.

Both the U3 and U6 unemployment and underemployment rates fell to new lows for this expansion. Involuntary part-time employment also fell to a new low. Prime age labor force participation rose to a new high.

Even in the establishment survey, but for the huge decline in  leisure and hospitalityworkers, the headline number would have been +78,000. And the l eading category of temporary jobs increased.

The only cautions to my surprisingly upbeat take on this report are that net revisions to July and August were lower, which has become increasingly common this year; and the household survey, which included a gain of over 900,000 jobs ( ! ) was likely something of an outlier.

But despite the negative headline number of jobs, the totality of the two reports show an underlying strong labor market -- with of course the dismal and chronic exception of lackluster wage growth.

Hurricane adjusted initial jobless claims for the week of September 23: 246,000

 - by New Deal democrat

I am repeating an exercise I undertook in 2012 when Superstorm Sandy disrupted the initial claims data: estimating what the initial jobless claims would have been, but for the hurricanes.

I created that adjustment by backing out the affected states (NY and NJ) from the non-seasonally adjusted data, which gave me the number of initial claims filed in the other 48 states.  I compared that with the same metric one year earlier, and multiplied by the seasonal adjustment to arrive at the number if the affected states had the same relative number of claims during the given week, as all of the unaffected states.

This tells us whether or not the hurricane disruptions are masking any underlying weakness in the economy.

This year I backed out Texas starting 3 weeks ago, and added Florida two weeks ago.  This week I have added Puerto Rico.

The state by state data is released with a one week delay.  So what follows is the analysis for the week of September 23, the number for which was reported at 272,000.

Here is the table for the Week of September 24 in 2016 vs. September 23 this year:

Metric                              2016                   2017

Seasonally adjusted:       252,000              272,000

Adjustment for total:       1.27                   1.26

Not seasonally adjusted:  198,455             215,031 

Florida claims:                 7,255                 18,477
Puerto Rico claims:          1,229                 2,489*
Texas claims:                   14,694               20,104                

NSA claims ex-FL,TX,PR:175,277           173,961

FL, TX, PR as % of total: 11.7%                   n/a

2017 w/ FL,TX, PR adjustment:  n/a          194,314

*The Department of Labor estimated the number of claims for Puerto Rico last week.

In 2016 the weekly seasonal adjustment was 1.27. This year it was 1.26 Multiplying the non-seasonally adjusted total of 194,314 by 1.27 gives us 247,000. Multiplying by 1.26 gives us 245,000.

Thus the hurricane-adjusted initial jobless claims number for the week of September 23, 2017 is 246,000.

Here are the hurricane-adjusted numbers for previous three weeks:
Sept. 2:  239,000.
Sept. 9:  229,000.
Sept. 16: 237,000

The four week hurricane adjusted average is 237,750.

The underlying national trend in initial jobless claims remains very positive.

ISM manufacturing and vehicle sales: surprising signs of short term strength

 - by New Deal democrat

Just a quick note about two data releases this week, one of which was (apparently) whipsawed by the hurricanes, and the other (surprisingly) was not.

Motor vehicle sales appears to have been whipsawed by Hurricane Harvey, showing a very strong 18.4 million units annualized after a very weak 16.0 units in August:

(Note the FRED data, by contract, is delayed one month so does not yet show September). It's pretty clear these two months should be averaged to get a better idea of the trend, which is a little over 17 million units.  Even so, that is an improvement from earlier this year. More importantly, it takes the notion of an immediate recession signal off the table.

ISM manufacturing came it at a very strong 60.8, which is not just the highest reading of this entire expansion, it is the highest since 2004. Meanwhile the new upstart Markit PMI posted at 53.1, a moderately positive number (h/t Doug Short):

The ISM figure once again confirmed the strength shown in the regional Fed indexes, which surprisingly even included Texas. Even PMI's more tepid reading did not appear to be affected by the Texas and Florida hurricanes.

While the regional Fed indexes and ISM manufacturing have been running a little "hot" this year, they do generally correlate well with the manufacturing component of industrial production.

The bottom line is that these are two short leading signals that the economy is doing very well.

Construction spending and the housing slowdown

 - by New Deal democrat

Is residential construction spending confirming the slowdown apparent in housing permits and new home sales?

This post is up at XE.com.

A thought for Sunday: of basic decency and humanity, and how the economy is shoring up the GOP

 - by New Deal democrat

A few threads of the Trump malAdministration came rogether this past week.

The latest attempt to overturn Obamacare confronted Trump with a choice between his two main goals: basking in a Trump triumph vs. erasing all of Obama's programs from the history books (in retaliation for Obama humiliating him at the White House correspondents' dinner in 2011).

At the beginning of his presidency, Trump opposed the "repeal and run away" Congressional GOP objectives for Obamacare, telling them he wanted a "replacement" plan with more coverage and lower premiums. He wanted, in short, a Trump triumph.

After 3 failures, however, Congress's 4th try at dismantling Obamacare has no replacement features. Things like guaranteed coverage of pre-existing conditions were stripped away. The bill in essence simply repealed Obamacare, punted the issue to the States with instructions to not even think about enacting something like universal coverage, and gutted Medicaid to boot. In short, it was very much "repeal and run away" (with a fig leaf).

Trump's support for the bill showed that he will even eschew a Trump triumph if the alternative obliterates an Obama accomplishment.

Another thread of the Trump  presidency is its nearly constant failure on the test of basic decency and humanity.

One of the places where it had been safe to avoid the rancid circus of Washington was The Weather Channel.  Not this past week, where it more than any other media outlet highlighted the humanitarian crisis in Puerto Rico, which appears to be approaching Katrina x 10. When an outlet as innocuous as The Weather Channel feels compelled to implore Washington to DO SOMETHING! you know that those in power  have plumbed a new low in the banality of evil.

I have a feeling, however, that conditions in Puerto Rico are going to get much worse -- and maybe finally noticed by the actual news media -- before they get better.

Which brings me to the final thread. Polling for Trump has been waxing and waning within a limited range for half a year now. It waxes when there he rails against foreign or domestic enemies, like North Korea or uppity nonwhite malcontents, and wanes when his basic lack of decency and humanity is in the forefront.  To wit, here is the latest update from Gallup:

Why hasn't it sunk any lower?

Paradoxically, Trump and the GOP are benefitting from the pretty decent Obama economy -- which is still in place, on autopilot, because the GOP has accomplished exactly zero legislatively on economic matters.

And the ongoing Obama economy at the moment has a 4.4% unemployment rate, is still adding about 150,000 new jobs a month, has real median household income at its highest in a decade, if not forever, and real hourly wages for nonsupervisory workers at their highest in 4 decades. In short, civil society may be going to hell, but the economy?  Not too shabby.  

Historically, in the absence of either war or civil unrest generating a real death toll that dominates the headlines  (like Korea, Vietnam, or the race riots of the late 1960s), an economy with these numbers generates reasonably good numbers for the incumbent political party. The benefit of that -- of Obama's economy -- is currently going to the GOP!

But if Trump's approval is in the 35%-40% range with a decent economy -- and the Congressional GOP polling at the worst ever -- just imagine what the polling is going to be like when the economy as it must ieventually turns down.

Weekly Indicators for September 25 - 29 at XE.com

 - by New Deal democrat

My Weekly Indicators post is up at XE.com.

Despite the disruptions of three major hurricanes, the underlying economy remains in pretty strong shape.

Ex-hurricane trend in September industrial production is positive

 - by New Deal democrat

As I outlined earlier this week, a reasonable temporary workaround for industrial production unaffected by the recent hurricanes is to average the 4 regional Fed surveys, minus Dallas, plus the Chicago PMI.  Over the long run, each +5 in the average of the indexes is consistent with a +.1 in the manufacturing component of industrial production.  Because these indexes have been running "hot" this year compared with industrial production, I further suggested subtracting .3 from the result to be confident in a positive trend.

All of these indexes have been reported for September.  Here are the numbers:

Empire State: 24.4

Philadelphia Fed: 23.8

Richmond Fed: 19

Kansas City Fed: 17

Chicago PMI: 30.4 (adjusted)*

Interestingly, even the Dallas Fed's index was positive, at 19.5!

*Since Chicago is on a 0 to 100 scale with 50 being neutral, we subtract 50 from the raw number of 65.2, which gives us 15.2, and then double the result.

The average of the 5 is 22.9. 

Dividing that by 5 gives us +.5.

Subtracting .3 gives us +.2.

We can be reasonably confident that underlying trend in industrial production in September, despite the hurricanes, has been positive.

Hurricane-adjusted initial claims for the week of September 16: 237,000

 - by New Deal democrat

I am repeating an exercise I undertook in 2012 when Superstorm Sandy disrupted the initial claims data: estimating what the initial jobless claims would have been, but for the hurricanes.

In 2012 I created that adjustment by backing out the affected states (NY and NJ) from the non-seasonally adjusted data.  That gave me the number of initial claims filed in the other 48 states.  I compared that with the same metric one year earlier, and multiplied by the seasonal adjustment.

That gave me the number if the affected states had the same relative number of claims during the given week, as all of the unaffected states.  In 2012, it showed that Sandy was not masking any underlying weakness in the economy.

I backed out Texas starting 2 weeks ago, and also Florida beginning last week.

The state by state data is released with a one week delay.  So what follows is the analysis for the week of September 16, the number for which was reported at 259,000 one week ago and revised upward today to 260,000.

Here is the table for the Week of September 17 in 2016 vs. September 16 this year:

Metric                              2016                   2017

Seasonally adjusted:       252,000              260,000

Adjustment for total:       1.23                   1.22

Not seasonally adjusted:  205,649             212,962 

Florida claims:                 7,603                 10,052
Texas claims:                   14,817               28,387                

NSA claims ex-TX+FL    183,229             174,523

TX+FL as % of total:       10.9%                   n/a

2017 w/ TX+FL adjustment:  n/a              193,546

In 2016 the weekly seasonal adjustment was 1.23. This year it was 1.22 Multiplying the non-seasonally adjusted total of 193,546 by 1.23 gives us 238,000. Multiplying by 1.22 gives us 236,000.

Thus the hurricane-adjusted initial jobless claims number for the week of September 16, 2017 is 237,000.

The previous adjustment for Sept. 2 was  239,000.
Sept. 9 was 229,000.
The average of the three hurricane adjusted weeks so far is 235,000.

The underlying national trend in initial jobless claims remains very positive.

Wow! Yellin confirms 2% inflation is the Fed's ceiling

 - by New Deal democrat

You may have already seen this elsewhere, but in case you didn't, Janet Yellin all but officially confirmed the other day that 2% isn't in fact the Fed's target, it's their ceiling. Per the New York Times:

Given that monetary policy affects economic activity and inflation with a substantial lag, it would be imprudent to keep monetary policy on hold until inflation is back to 2 percent,” Ms. Yellen told the National Association for Business Economics .

Let me just remind you one more time that in the past 50 years, during recessions the inflation rate has typically fallen by more than 2%.   That means that if the Fed is "successful," the next recession will tip over into outright deflation, including deflation in even nominal wages.

Now imagine a wage-price deflationary spiral beginning with Donald Trump as president and the GOP in control of both houses of Congress.

Home sales decline -- even leaving out the hurricane-affected South

 - by New Deal democrat

As promised yesterday, I put together the graphs and charts to show you that, even when we take out Florida and Texas, new home sales have still turned down slightly since their last peak in March.

The trend in prices is still slightly -- very slightly -- higher.

This post is up at XE.com.