Author Archives: Ted Kavadas

Disturbing Charts (Update 28)

I find the following charts to be disturbing.   These charts would be disturbing at any point in the economic cycle; that they (on average) depict such a tenuous situation now – 100 months after the official (as per the September 20, 2010 NBER BCDC announcement) June 2009 end of the recession – is especially notable.

These charts raise a lot of questions.  As well, they highlight the “atypical” nature of our economic situation from a long-term historical perspective.

All of these charts are from the Federal Reserve, and represent the most recently updated data.

(click on charts to enlarge images)

Housing starts (last updated 9-19-17):

Housing Starts

US. Bureau of the Census, Housing Starts: Total: New Privately Owned Housing Units Started [HOUST], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/HOUST/, October 14, 2017.

The Federal Deficit (last updated 8-8-17):

Federal Deficit

US. Office of Management and Budget, Federal Surplus or Deficit [-] [FYFSD], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYFSD/, October 14, 2017.

Federal Net Outlays (last updated 8-8-17):

Federal Net Outlays

US. Office of Management and Budget, Federal Net Outlays [FYONET], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYONET/, October 14, 2017.

State & Local Personal Income Tax Receipts (% Change from Year Ago)(last updated 7-28-17):

State & Local Personal Income Tax Receipts Percent Change From Year Ago

US. Bureau of Economic Analysis, State and local government current tax receipts: Personal current taxes: Income taxes [ASLPITAX], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/ASLPITAX/, October 14, 2017.

Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated 10-13-17):

Total Loans and Leases of Commercial Banks % Change from Year Ago

Board of Governors of the Federal Reserve System (US), Loans and Leases in Bank Credit, All Commercial Banks [TOTLL], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTLL/, October 14, 2017.

Bank Credit – All Commercial Banks (% Change from Year Ago)(last updated 10-13-17):

Bank Credit – All Commercial Banks % Change from Year Ago

Board of Governors of the Federal Reserve System (US), Bank Credit of All Commercial Banks [TOTBKCR], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTBKCR/, October 14, 2017.

M1 Money Multiplier (last updated 10-5-17):

M1 Money Multiplier

Federal Reserve Bank of St. Louis, M1 Money Multiplier [MULT], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MULT/, October 14, 2017.

Median Duration of Unemployment (last updated 10-6-17):

Median Duration Of Unemployment

US. Bureau of Labor Statistics, Median Duration of Unemployment [UEMPMED], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/UEMPMED/, October 14, 2017.

Labor Force Participation Rate (last updated 10-6-17):

Labor Force Participation Rate

US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CIVPART/, October 14, 2017.

The Chicago Fed National Activity Index (CFNAI) 3-month moving average (CFNAI-MA3)(last updated 9-25-17):

CFNAIMA3 -.04

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CFNAIMA3/, October 14, 2017.

I will continue to update these charts on an intermittent basis as they deserve close monitoring…

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2553.17 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – October 13, 2017 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

Below are three long-term charts, from Doug Short’s ECRI update post of October 13, 2017 titled “ECRI Weekly Leading Index…”  These charts are on a weekly basis through the October 13, 2017 release, indicating data through October 6, 2017.

Here is the ECRI WLI (defined at ECRI’s glossary):

ECRI WLI,Gr.

This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

This last chart depicts, on a long-term basis, the WLI, Gr.:

ECRI WLI,Gr.

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2556.32 as this post is written

The October 2017 Wall Street Journal Economic Forecast Survey

The October 2017 Wall Street Journal Economic Forecast Survey was published on October 12, 2017.  The headline is “Economists See GOP Tax Plan Producing Growth Spurt, But Split Over Long-Term Effect.”

I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the “Economist Q&A” section.

An excerpt:

An overwhelming majority of forecasters in The Wall Street Journal’s monthly survey of economists said the GOP tax plan unveiled last month would, if implemented, raise the growth rate for U.S. gross domestic product over the next two years. Some 60% saw a modest lift to output compared with its current trend, while 27% said the annual growth rate would jump by more than half a percentage point.

The announced framework, which lacks some details and could change as lawmakers flesh it out in the coming weeks, features lower tax rates on corporate profits, incentives for business investment and fewer individual income tax brackets, among other changes.

But roughly half of the economists said any growth spurt would fade over time. Asked about the tax plan’s likely effect on the economy’s long-run growth rate, 48% predicted a modest increase while 38% said the U.S. would remain on its current trajectory. Just 4% said the tax plan would boost the GDP growth rate by more than 0.5 percentage point a year, while 10% said growth would be slower than if there had been no tax changes.

also:

As for the federal budget deficit, 85% of economists said the GOP tax plan would cause it to widen over the next decade.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 15.85%. The individual estimates, of those who responded, ranged from 0% to 33%.  For reference, the average response in September’s survey was 16.08%.

As stated in the article, the survey’s respondents were 59 academic, financial and business economists.  Not every economist answered every question.  The survey was conducted October 6-10.

The current average forecasts among economists polled include the following:

GDP:

full-year 2017:  2.3%

full-year 2018:  2.4%

full-year 2019:  2.0%

Unemployment Rate:

December 2017: 4.2%

December 2018: 4.0%

December 2019: 4.1%

10-Year Treasury Yield:

December 2017: 2.46%

December 2018: 3.00%

December 2019: 3.30%

CPI:

December 2017:  1.8%

December 2018:  2.2%

December 2019:  2.4%

Crude Oil  ($ per bbl):

for 12/31/2017: $50.26

for 12/31/2018: $52.51

for 12/31/2019: $53.64

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” category)

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2553.80 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the October 5, 2017 update (reflecting data through September 29, 2017) is -1.552.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on October 12, 2017 incorporating data from January 8, 1971 through October 6, 2017, on a weekly basis.  The October 6, 2017 value is -.89:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 12, 2017:

http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on October 12, 2017 incorporating data from January 8,1971 through October 6, 2017, on a weekly basis.  The October 6 value is -.64:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 12, 2017:

http://research.stlouisfed.org/fred2/series/ANFCI

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2554.82 as this post is written

October 2017 IMF Report – Probabilities Of Recession And Deflation

The International Monetary Fund (IMF) recently published the October 2017 “World Economic Outlook.”  The subtitle is ”Seeking Sustainable Growth:  Short-Term Recovery, Long-Term Challenges.”

One area of the report is Figure 1.19 on page 26.  While I do not agree with the current readings of the two measures presented – Probability of Recession and the Probability of Deflation – I do find them to be notable, especially as one can compare these estimates across various global economies.

As one can see, the report states that the U.S. is estimated to have a roughly 23% probability of recession and roughly a 2% probability of deflation for the periods indicated.

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2550.23 this post is written

CEO Confidence Surveys 3Q 2017 – Notable Excerpts

On October 5, 2017, The Conference Board released the 3rd Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 59, down from 61 in the second quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this October 5 Press Release include:

CEOs’ assessment of current economic conditions was mixed. Currently, 56 percent say conditions are better compared to six months ago, down from 60 percent in the second quarter. Business leaders, however, are more positive in their appraisal of current conditions in their own industries. Now, 53 percent say conditions in their own industries have improved, up from 47 percent last quarter.

Looking ahead, CEOs’ optimism regarding the short-term outlook for the economy is slightly more pessimistic. Currently, 39 percent expect economic conditions to improve over the next six months, compared to 41 percent last quarter. However, 14 percent expect economic conditions to worsen, compared to 3 percent last quarter. About 36 percent of CEOs anticipate an improvement in their own industries over the next six months, down from 48 percent in the second quarter of this year.

The Business Roundtable last month also released its CEO Economic Outlook Survey for the 3rd Quarter of 2017.   Notable excerpts from the September 19, 2017 release, titled “Business Roundtable CEO Economic Outlook Index Shows Signs of Continued Confidence in Economy“ (pdf):

The Business Roundtable CEO Economic Outlook Index — a composite of CEO projections for sales and plans for capital spending and hiring over the next six months — stood at 94.5 for the third quarter of 2017, edging up from 93.9 in the second quarter.

For the second quarter in a row, the Index reached its highest level since the second quarter of 2014 (95.4). The Index has also significantly exceeded its historical average of 80.3 for three quarters in a row and remains well above 50, suggesting CEOs’ continued confidence in the U.S. economy.

CEO plans for hiring jumped from the previous quarter, up 9.9 points to 80.2 in the third quarter – the highest reading in more than six years. Expectations for sales dipped by 7.4 to 116.9 for the third quarter, while plans for capital investment moderated slightly from 87.2 to 86.4.

CEOs project 2.1 percent GDP growth in 2017, up 0.1 percent from their projection for 2017 made in June.

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2546.60 as this post is written

Building Financial Danger – October 9, 2017 Update

My overall analysis indicates a continuing elevated and growing level of financial danger which contains many worldwide and U.S.-specific “stresses” of a very complex nature. I have written numerous posts in this site concerning both ongoing and recent “negative developments.”  These developments, as well as other exceedingly problematic conditions, have presented a highly perilous economic environment that endangers the overall financial system.

Also of ongoing immense importance is the existence of various immensely large asset bubbles, a subject of which I have extensively written.  While all of these asset bubbles are wildly pernicious and will have profound adverse future implications, hazards presented by the bond market bubble are especially notable.

Predicting the specific timing and extent of a stock market crash is always difficult, and the immense complexity of today’s economic situation makes such a prediction even more challenging. With that being said, my analyses continue to indicate that a near-term exceedingly large (from an ultra-long term perspective) stock market crash – that would also involve (as seen in 2008) various other markets as well – will occur.

(note: the “next crash” and its aftermath has great significance and implications, as discussed in the post of January 6, 2012 titled “The Next Crash And Its Significance“ and various subsequent posts in the “Economic Depression” category)

As reference, below is a daily chart since 2008 of the S&P500 (through October 6, 2017 with a last price of 2549.33), depicted on a LOG scale, indicating both the 50dma and 200dma as well as price labels:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

S&P500 since 2008

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2547.81 as this post is written

Average Hourly Earnings Trends

I have written many blog posts concerning the worrisome trends in income and earnings.

Along these lines, one of the measures showing disconcerting trends is that of hourly earnings.

While the concept of hourly earnings can be defined and measured in a variety of ways, below are a few charts that I believe broadly illustrate problematic trends.

The first chart depicts Average Hourly Earnings Of All Employees: Total Private (FRED series CES0500000003)(current value = $26.55):

(click on chart to enlarge image)(chart last updated 10-6-17)

CES0500000003

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of All Employees:  Total Private [CES0500000003] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 6, 2017:

http://research.stlouisfed.org/fred2/series/CES0500000003

This next chart depicts this same measure on a “Percentage Change From A Year Ago” basis.   While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 10-6-17)

CES0500000003 Percent Change From Year Ago

There are slightly different measures available from a longer-term perspective. Pictured below is another measure, the Average Hourly Earnings of Production and Nonsupervisory Employees – Total Private (FRED series AHETPI)(current value = $22.23):

(click on chart to enlarge image)(chart last updated 10-6-17)

AHETPI_10-6-17 22.23

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of Production and Nonsupervisory Employees:  Total Private [AHETPI] ; U.S. Department of Labor: Bureau of Labor Statistics;  accessed October 6, 2017:

http://research.stlouisfed.org/fred2/series/AHETPI

Pictured below is this AHETPI measure on a “Percentage Change From A Year Ago” basis.   While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 10-6-17)

AHETPI_10-6-17 22.23 2.5 Percent Change From Year Ago

I will continue to actively monitor these trends, especially given the post-2009 dynamics.

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2545.06 this post is written

U-3 And U-6 Unemployment Rate Long-Term Reference Charts As Of October 6, 2017

Shortly after each monthly employment report I have been posting a continual series titled “3 Critical Unemployment Charts.”

Of course, there are many other employment charts that can be displayed as well.

For reference purposes, below are the U-3 and U-6 Unemployment Rate charts from a long-term historical perspective.  Both charts are from the St. Louis Fed site.  The U-3 measure is what is commonly referred to as the official unemployment rate; whereas the U-6 rate is officially (per Bureau of Labor Statistics) defined as:

Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

Of note, many economic observers use the U-6 rate as a (closer) proxy of the actual unemployment rate rather than that depicted by the U-3 measure.

Here is the U-3 chart, currently showing a 4.2% unemployment rate:

(click on charts to enlarge images)(charts updated as of 10-6-17)

U.S. unemployment rates

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Civilian Unemployment Rate [UNRATE] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 6, 2017;

http://research.stlouisfed.org/fred2/series/UNRATE

Here is the U-6 chart, currently showing a 8.6% unemployment rate:

U-6 rate

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons  [U6RATE] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 6, 2017;

http://research.stlouisfed.org/fred2/series/U6RATE

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2546.58 as this post is written

3 Critical Unemployment Charts – October 2017

As I have commented previously, as in the October 6, 2009 post (“A Note About Unemployment Statistics”), in my opinion the official methodologies used to measure the various job loss and unemployment statistics do not provide an accurate depiction; they serve to understate the severity of unemployment.

However, even if one chooses to look at the official statistics, the following charts provide an interesting (and disconcerting) long-term perspective of certain aspects of the officially-stated unemployment (and, in the third chart, employment) situation.

The three charts below are from the St. Louis Fed site.  Here is the Median Duration of Unemployment (current value = 10.3 weeks):

(click on charts to enlarge images)(charts updated as of 10-6-17)

median duration of unemployment

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Median Duration of Unemployment [UEMPMED] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 6, 2017;

http://research.stlouisfed.org/fred2/series/UEMPMED

Here is the chart for Unemployed 27 Weeks and Over (current value = 1.733 million)

unemployed 27 weeks and over

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Civilians Unemployed for 27 Weeks and Over [UEMP27OV] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 6, 2017;

http://research.stlouisfed.org/fred2/series/UEMP27OV

Here is the chart for Total Nonfarm Payrolls (current value = 146.659 million):

Total Nonfarm Payrolls

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: All Employees: Total nonfarm [PAYEMS] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 6, 2017;

https://research.stlouisfed.org/fred2/series/PAYEMS

Our unemployment problem is severe.  The underlying dynamics of the current – and especially future – unemployment situation remain exceedingly worrisome.    These dynamics are numerous and complex, and greatly lack recognition and understanding.

My commentary regarding unemployment is generally found in the “Unemployment” category.  This commentary includes the April 24, 2012 five-part post titled “The Unemployment Situation Facing The United States”, which discusses various problematical issues concerning the present and future employment situation.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2548.75 as this post is written