Category Archives: Uncategorized

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…

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2553.17 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

Broad-Based Indicators Of Economic Activity

The Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index) are two broad-based economic indicators that I regularly feature in this site.

The short-term and long-term trends of each continue to be notable.

Doug Short, in his blog post of October 5, 2017, titled “The Philly Fed ADS Index Business Conditions Index Update” displays both the CFNAI MA-3 (3-month Moving Average) and ADS Index (91-Day Moving Average) from a variety of perspectives.

Of particular note, two of the charts, shown below, denote where the current levels of each reading is relative to the beginning of past recessionary periods, as depicted by the red dots.

The CFNAI MA-3:

(click on charts to enlarge images)

CFNAI-MA3

The ADS Index, 91-Day MA:

ADS Index 91dma

Also shown in the Doug Short’s aforementioned post is a chart of each with a long-term trendline (linear regression) as well as a chart depicting GDP for comparison purposes.

_________

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 2552.07 as this post is written

October 3, 2017 Gallup Poll Results On Economic Confidence – Notable Excerpts

On October 3, 2017 Gallup released the poll results titled “Confidence in U.S. Economy Dips to +4 in September.”

Notable excerpts include:

Americans’ confidence in the economy declined slightly in September, with Gallup’s U.S. Economic Confidence Index slipping to +4 from August’s reading of +6.

also:

Gallup’s U.S. Economic Confidence Index is the average of two components: how Americans rate current economic conditions and whether they believe the economy is improving or getting worse. The index has a theoretical maximum of +100 if all Americans were to say the economy is doing well and improving and a theoretical minimum of -100 if all were to say the economy is doing poorly and getting worse.

also:

The current conditions component measured +13 in September, the result of 34% describing the economy as “excellent” or “good” minus the 21% describing the economy as “poor.” September’s current conditions score essentially ties the +14 observed in August — the highest monthly reading in the 2008-2017 Gallup Daily tracking trend.

However, economic expectations dimmed slightly in September. Over the course of the month, half of Americans said economic conditions were “getting worse,” while 44% said conditions were “getting better,” resulting in an economic outlook score of -6. This is down four points from August’s -2 outlook score — but, as was the case with the overall metric, was no different from how this component performed in the final half of August. In the first half of August, by contrast, the economic outlook component was neutral, meaning it averaged a score of 0.

Here is an accompanying chart of the two components of the Gallup Economic Confidence Index, discussed above:

Gallup's U.S. Economic Confidence Index Components - Monthly Averages

Here is an accompanying chart of the Gallup Economic Confidence Index:

Gallup's U.S. Economic Confidence Index - Monthly Averages

 

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2531.87 as this post is written

Charts Indicating Economic Weakness – October 2017

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.

While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Overall Economic Activity

While the recently-released 2nd quarter GDP (Third Estimate)(pdf) was 3.1%, there are other broad-based economic indicators that seem to imply a weaker growth rate.  As well, it should be remembered that GDP figures can be (substantially) revised.

Currently, the consensus opinion for near-term growth is that the recent hurricanes will serve to depress economic growth.  As Janet Yellen stated at the September 20 FOMC Press Conference:

In the third quarter, however, economic growth will be held down by the severe disruptions caused by Hurricanes Harvey, Irma, and Maria.  As activity resumes and rebuilding gets underway, growth likely will bounce back.  Based on past experience, these effects are unlikely to materially alter the course of the national economy beyond the next couple of quarters.

There has been a (very) significant lowering of estimates for 3rd Quarter GDP growth.  This can be seen in various estimates, including the Federal Reserve Bank of Atlanta’s GDP Now (September 29 estimate of 2.3%) as well as the Federal Reserve Bank of New York’s Nowcast (September 29 estimate of 1.5%.)

However, is the recent reduction in economic growth estimates indeed due to the hurricanes?  There are many reasons to believe that overall weakening economic growth and/or contraction in some economic measures had been occurring previous to the hurricanes.

Among the broad-based economic indicators that have been implying weaker growth or mild contraction is the Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index).

As seen in the charts shown below, such trends have been in existence for a number of months:

The September 2017 Chicago Fed National Activity Index (CFNAI) updated as of September 25, 2017:

The CFNAI, with current reading of -.31:

CFNAI_9-25-17 -.31

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, September 25, 2017;

https://fred.stlouisfed.org/series/CFNAI

The ADS Index, from the year 2000 through September 16, 2017:

 

ADS Index

Inflation Trends

Current inflation levels and the possibility of deflation  is a vastly complex topic, and as such isn’t suitably discussed in a brief manner.  I have discussed the issue of deflation extensively as I continue to believe that prolonged and deep U.S. deflationary conditions are on the horizon, and that such deflationary conditions will cause, as well as accompany, inordinate economic hardship. [note: to clarify, for purposes of this discussion, when I mention “deflation” I am referring to the CPI going below zero. Also, I have been using the term “deflationary pressures” as a term to describe deflationary manifestations within an environment that is still overall inflationary but heading towards deflation.]

Of note, the shortfall between the Federal Reserve’s stated inflation target (2% on the (Core) PCE Price Index) and the actual inflation reading continues.  For years there has been a continued inability for the 2% inflation target to be sustained.

Below is a chart of the “Core PCE” price measure as of the September 29, 2017 update, showing data through August, with a current reading of 1.3%:

PCEPILFE_9-29-17 1.3 Percent Change From Year Ago

source:  U.S. Bureau of Economic Analysis, Personal Consumption Expenditures Excluding Food and Energy (Chain-Type Price Index) [PCEPILFE], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 1, 2017:

https://fred.stlouisfed.org/series/PCEPILFE

While there appears (as seen in forecasts and surveys) to be little if any general concern about deflation, recent commentary, including that from Janet Yellen in the September 20 FOMC Press Conference and in the September 26 speech concerning inflation is notable.  A couple of excerpts from the September 26 speech titled “Inflation, Uncertainty, And Monetary Policy” (pdf):

As I will discuss, this low inflation likely reflects factors whose influence should fade over time.  But as I will also discuss, many uncertainties attend this assessment, and downward pressures on inflation could prove to be unexpectedly persistent.  My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation.

also:

Based on analyses of this sort, my colleagues and I currently think that this year’s low inflation is probably temporary, so we continue to anticipate that inflation is likely to stabilize around 2 percent over the next few years.  But our understanding of the forces driving inflation is imperfect, and we recognize that something more persistent may be responsible for the current undershooting of our longer-run objective.  Accordingly, we will monitor incoming data closely and stand ready to modify our views based on what we learn.

Although we judge that inflation will most likely stabilize around 2 percent over the next few years, the odds that it could turn out to be noticeably different are considerable.

Consumer Spending

In the March 23, 2017 post (“‘Hidden’ Weakness In Consumer Spending?“) I wrote of various indications that consumer spending may be (substantially) less than what is depicted by various mainstream indicators, including overall retail sales.  This weakness (including the implications stemming from the substantial number of retail store closures) has widespread consequences for the U.S. economy as discussed in previous posts, including the June 13, 2011 post titled “The Changing Nature Of Retail – Economic Implications.”

While I continue to believe that the various retail sales figures are overstated, one tangential long-term indicator that is notable in its current trend is that of “All Employees:  Retail Trade” as depicted below on a “Percent Change From Year Ago” basis, through August with last value of -.2 Percent, last updated September 1, 2017:

All Employees: Retail Trade percent change from year ago

source:  U.S. Bureau of Labor Statistics, All Employees: Retail Trade [USTRADE], retrieved from FRED, Federal Reserve Bank of St. Louis; September 29, 2017:

https://fred.stlouisfed.org/series/USTRADE

Another worrisome aspect is the peaking in auto sales and the (current-era) dynamics and structure of the auto industry with the accompanying widespread economic implications.

Rail Freight Carloads

Another notable measure is that of “Rail Freight Carloads,” as depicted below, through July with last value of 1,099,399, last updated September 15, 2017:

U.S. Rail Freight Carloads

source:  U.S. Bureau of Transportation Statistics, Rail Freight Carloads [RAILFRTCARLOADSD11], retrieved from FRED, Federal Reserve Bank of St. Louis;  September 29, 2017:

https://fred.stlouisfed.org/series/RAILFRTCARLOADSD11

Here is the same measure on a “Percent Change From Year Ago” basis:

U.S. Rail Freight Carloads Percent Change From Year Ago

Other Indicators

As mentioned previously, many other indicators discussed on this site indicate economic weakness or economic contraction, if not outright (gravely) problematical economic conditions.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2519.36 as this post is written

Consumer Confidence Surveys – As Of September 29, 2017

Doug Short had a blog post of September 29, 2017 (“Michigan Consumer Sentiment:  September Final Down from August“) in which he presents the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:

(click on charts to enlarge images)

Conference Board Consumer Confidence

Michigan Consumer Sentiment

There are a few aspects of the above charts that I find highly noteworthy.  Of course, until the sudden upswing in 2014, the continued subdued absolute levels of these two surveys was disconcerting.

Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)

While I don’t believe that confidence surveys should be overemphasized, I find these readings to be very problematical, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2516.90 as this post is written

Durable Goods New Orders – Long-Term Charts Through August 2017

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, below are two charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through August 2017, updated on September 27, 2017. This value is $232,798 ($ Millions):

(click on charts to enlarge images)

Durable Goods New Orders

Second, here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis:

DGORDER Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Manufacturers’ New Orders:  Durable Goods [DGORDER]; U.S. Department of Commerce: Census Bureau; accessed August 28, 2017;

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

_________

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 2508.75 as this post is written

Money Supply Charts Through August 2017

For reference purposes, below are two sets of charts depicting growth in the money supply.

The first shows the MZM (Money Zero Maturity), defined in FRED as the following:

M2 less small-denomination time deposits plus institutional money funds.
Money Zero Maturity is calculated by the Federal Reserve Bank of St. Louis.

Here is the “MZM Money Stock” (seasonally adjusted) chart, updated on September 22, 2017 depicting data through August 2017, with a value of $15,056.6 Billion:

MZMSL_9-22-17 15056.5

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 4.4%:

MZMSL_9-22-17 15056.5 4.4 Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 25, 2017:

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

The second set shows M2, defined in FRED as the following:

M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds (MMMFs). Seasonally adjusted M2 is computed by summing savings deposits, small-denomination time deposits, and retail MMMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

Here is the “M2 Money Stock” (seasonally adjusted) chart, updated on September 21, 2017, depicting data through August 2017, with a value of $13,649.7 Billion:

M2SL_9-21-17 13649.7

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 5.3%:

M2SL_9-21-17 13649.7 5.3 Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 25, 2017:

https://research.stlouisfed.org/fred2/series/M2SL

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2502.22 as this post is written

Total Household Net Worth As Of 2Q 2017 – Two Long-Term Charts

In the last post (“Total Household Net Worth As A Percent Of GDP 2Q 2017“) I displayed a long-term chart depicting Total Household Net Worth as a percentage of GDP.

For reference purposes, here is Total Household Net Worth from a long-term perspective (from 1945:Q4 through 2017:Q2).  The last value (as of the September 21, 2017 update) is $96.19559 Trillion:

(click on each chart to enlarge image)

TNWBSHNO_9-21-17

Also of interest is the same metric presented on a “Percent Change from a Year Ago” basis:

TNWBSHNO_9-21-17

Data Source: FRED, Federal Reserve Economic Data, Board of Governors of the Federal Reserve System; accessed September 22, 2017:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2500.60 as this post is written

Total Household Net Worth As A Percent Of GDP 2Q 2017

The following chart is from the CalculatedRisk post of September 21, 2017 titled “Fed’s Flow of Funds:  Household Net Worth increased in Q2.” It depicts Total Household Net Worth as a Percent of GDP.  The underlying data is from the Federal Reserve’s Z.1 report, “Financial Accounts of the United States“:

(click on chart to enlarge image)

Household Net Worth As A Percentage Of GDP

As seen in the above-referenced CalculatedRisk post:

According to the Fed, household net worth increased in Q2 2017 compared to Q1 2017:

The net worth of households and nonprofits rose to $96.2 trillion during the second quarter of 2017. The value of directly and indirectly held corporate equities increased $1.1 trillion and the value of real estate increased $0.6 trillion.

also:

The Fed estimated that the value of household real estate increased to $23.8 trillion in Q2. The value of household real estate is now above the bubble peak in early 2006 – but not adjusted for inflation, and this also includes new construction.

As I have written in previous posts concerning this Household Net Worth (as a percent of GDP) topic:

As one can see, the first outsized peak was in 2000, and attained after the stock market bull market / stock market bubbles and economic strength.  The second outsized peak was in 2007, right near the peak of the housing bubble as well as near the stock market peak.

also:

I could extensively write about various interpretations that can be made from this chart.  One way this chart can be interpreted is a gauge of “what’s in it for me?” as far as the aggregated wealth citizens are gleaning from economic activity, as measured compared to GDP.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2503.99 as this post is written