Disturbing Charts (Update 31)

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 – 109 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 June 19, 2018):

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/, July 13, 2018.

The Federal Deficit (last updated March 27, 2018):

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/, July 13, 2018.

Federal Net Outlays (last updated March 27, 2018):

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/, July 13, 2018.

State & Local Personal Income Tax Receipts (% Change from Year Ago)(last updated March 28, 2018):

ASLPITAX_3-28-18 407.037 6.2 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/, July 13, 2018.

Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated July 6, 2018):

TOTLL_7-6-18

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/, July 13, 2018.

Bank Credit – All Commercial Banks (% Change from Year Ago)(last updated July 6, 2018):

TOTBKCR_7-6-18 4.2 Percent 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/, July 13, 2018.

M1 Money Multiplier (last updated July 12, 2018):

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/, July 13, 2018.

Median Duration of Unemployment (last updated July 6, 2018):

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/, July 6, 2018.

Labor Force Participation Rate (last updated July 6, 2018):

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/, July 15, 2018.

The Chicago Fed National Activity Index (CFNAI) 3-month moving average (CFNAI-MA3)(last updated June 25, 2018):

CFNAIMA3_6-25-18 .18

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/, June 25, 2018.

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 2801.31 as this post is written

Charts Indicating Economic Weakness – July 2018

U.S. Economic Indicators

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.  This post is the latest in a series of posts indicating U.S. economic weakness or a notably low growth rate.

While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.  As seen in the July 2018 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for 2.9% GDP growth in 2018.  However,  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.

Charts Indicating U.S. Economic Weakness

Below are a small sampling of charts that depict weak growth or contraction, and a brief comment for each:

Total Federal Receipts

“Total Federal Receipts” growth continues to be intermittent in nature since 2015.  As well, the level of growth does not seem congruent to the (recent) levels of economic growth as seen in aggregate measures such as Real GDP.

“Total Federal Receipts” through June had a last value of $316,278 Million.  Shown below is  the measure displayed on a “Percent Change From Year Ago” basis with value -6.6%, last updated July 12, 2018:

MTSR133FMS

source:  U.S. Department of the Treasury. Fiscal Service, Total Federal Receipts [MTSR133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed July 12, 2018:

https://fred.stlouisfed.org/series/MTSR133FMS

__

The Yield Curve

Many people believe that the Yield Curve is a leading economic indicator for the United States economy.

On March 1, 2010, I wrote a post on the issue, titled “The Yield Curve As A Leading Economic Indicator.”

While I continue to have the stated reservations regarding the “yield curve” as an indicator, I do believe that it should be monitored.

As an indication of the yield curve (i.e. a yield curve proxy), below is a weekly chart from January 1, 1990 through July 11, 2018.  The top two plots show the 10-Year Treasury and 2-Year Treasury yields.  The third plot shows the (yield) spread between the 10-Year Treasury and 2-Year Treasury, with the July 11, 2018 closing value of .27%.  The bottom plot shows the S&P500:

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

Yield Curve proxy

__

U.S. Auto Sales

U.S. auto sales have experienced significant growth over the post-2009 period as seen in the chart shown below. The current reading (through June) is 17.381 million vehicles SAAR.  Of great economic importance is whether auto sales have peaked, which I believe has occurred, as well as other problematical characteristics of the light vehicle market.  A long-term chart is shown below:

Light Weight Vehicle Sales: Autos and Light Trucks

source:  U.S. Bureau of Economic Analysis, Light Weight Vehicle Sales: Autos and Light Trucks [ALTSALES], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed July 10, 2018:

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

__

Vehicle Miles Traveled

I find the flagging growth trend in the “Vehicle Miles Traveled” (NSA) measure since 2015 to be notable.

“Vehicle Miles Traveled” through April had a last value of 272,442 Million.  Shown below is  the measure displayed on a “Percent Change From Year Ago” basis with value -.2%, last updated July 2, 2018:

TRFVOLUSM227NFWA_7-2-18 -.2 Percent Change From Year Ago

source:   U.S. Federal Highway Administration, Vehicle Miles Traveled [TRFVOLUSM227NFWA], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed July 12, 2018:

https://fred.stlouisfed.org/series/TRFVOLUSM227NFWA

__

Alternate Growth Trend Measures

Another facet of economic activity is seen in the ratio of the Conference Board’s Coincident Composite Index to the Lagging Composite Index.  I interpret the trends seen in this measure to be disconcerting, as the ratio has generally been sinking for years:

Conference Board Coincident To Lagging Ratio

source:  Haver’s June 21, 2018 post (“U.S. Leading Economic Indicators’ Rate of Increase Eases“)

__

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 2798.29 as this post is written

The July 2018 Wall Street Journal Economic Forecast Survey

The July 2018 Wall Street Journal Economic Forecast Survey was published on July 12, 2018.  The headline is “Economists in New Survey See Federal Reserve on Autopilot.”

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:

Just about every economist surveyed said the next increase in the Fed’s benchmark federal-funds rate would come at the Sept. 25-26 meeting and 84% predicted the one after that would be at the Dec. 18-19 meeting.

Overall, economists see the rate ending the year at 2.33%, up from the current range of 1.75% to 2%. That is the equivalent to four quarter-percentage-point interest-rate increases in 2018. By the end of 2019, the economists see the federal-funds rate settling at 3%, which would represent two to three rate increases next year.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 17.71%. The individual estimates, of those who responded, ranged from 1% to 35%.  For reference, the average response in June’s survey was 15.83%.

As stated in the article, the survey’s respondents were 63 academic, financial and business economists.  Not every economist answered every question.

The current average forecasts among economists polled include the following:

GDP:

full-year 2018:  2.9%

full-year 2019:  2.3%

full-year 2020:  1.8%

Unemployment Rate:

December 2018: 3.7%

December 2019: 3.6%

December 2020: 3.9%

10-Year Treasury Yield:

December 2018: 3.17%

December 2019: 3.49%

December 2020: 3.47%

CPI:

December 2018:  2.5%

December 2019:  2.3%

December 2020:  2.3%

Crude Oil  ($ per bbl):

for 12/31/2018: $70.41

for 12/31/2019: $68.14

for 12/31/2020: $65.51

(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 2798.29 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 July 5, 2018 update (reflecting data through June 29, 2018) is -1.076.

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 July 11, 2018 incorporating data from January 8, 1971 through July 6, 2018, on a weekly basis.  The July 6, 2018 value is -.78:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 11, 2018:

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

The ANFCI chart below was last updated on July 11, 2018 incorporating data from January 8,1971 through July 6, 2018, on a weekly basis.  The July 6 value is -.51:

ANFCI_7-11-18 -.51

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 11, 2018:

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 2777.15 as this post is written

CEO Confidence Surveys 2Q 2018 – Notable Excerpts

On July 5, 2018, The Conference Board released the 2nd Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 63, down from 65 in the first quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this July 5 Press Release include:

CEOs’ assessment of current economic conditions was about the same as in the first quarter of 2018, with 74 percent saying conditions are better compared to six months ago. CEO sentiment was also virtually unchanged regarding the assessment of current conditions in their own industries, with about 51 percent saying conditions are better than six months ago.

Looking ahead, however, CEOs’ expectations regarding the economic outlook are much less optimistic than last quarter. Now, just 48 percent expect economic conditions to improve over the next six months, compared to 63 percent in the second quarter. CEOs’ expectations regarding short-term prospects in their own industries over the next six months were relatively flat, with only 42 percent anticipating an improvement in conditions.

Last month, The Business Roundtable also released its CEO Economic Outlook Survey for the 2nd Quarter of 2018.   Notable excerpts from the June 5, 2018 release, titled “Business Roundtable CEO Economic Outlook Index Eases, Remains Near Historic High“:

The Q2 2018 CEO Economic Outlook Index — a composite of CEO expectations for sales and plans for capital spending and hiring over the next six months — fell to 111.1 in the second quarter of 2018, declining 7.5 points from 118.6 in the first quarter. While this is the first time the Index has declined in nearly two years, the Index remains well above its historical average of 81.2 for the sixth straight quarter. This signals a continued positive direction for the U.S. economy despite modest declines in all three components of the Index. The new survey also shows a CEO projection of 2.7 percent U.S. GDP growth in 2018, a small decrease from the 2.8 percent projection last quarter.

CEO plans for hiring dipped slightly to 95.5, down 3.0 points from the previous quarter. Plans for capital investment fell to 107.6, a decrease of 7.8 points from Q1 2018. Expectations for sales fell to 130.3, a decrease of 11.6 points from last quarter.

Additional details can be seen in the sources mentioned above.

_____

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 2791.19 as this post is written

Building Financial Danger – July 10, 2018 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 July 9, 2018 with a last price of 2784.17), 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 chart

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2784.17 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 = $26.98):

(click on chart to enlarge image)(chart last updated 7-6-18)

CES0500000003_7-6-18 26.98

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 July 6, 2018:

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 7-6-18)

CES0500000003_7-6-18 26.98 2.7 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 = $22.62):

(click on chart to enlarge image)(chart last updated 7-6-18)

AHETPI_7-6-18 22.62

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 July 6, 2018:

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 7-6-18)

AHETPI_7-6-18 22.62 2.7 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 2761.07 this post is written

U-3 And U-6 Unemployment Rate Long-Term Reference Charts As Of July 6, 2018

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 4.0% unemployment rate:

(click on charts to enlarge images)(charts updated as of 7-6-18)

unemployment rate

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 July 6, 2018;

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

Here is the U-6 chart, currently showing a 7.8% unemployment rate:

U6RATE_7-6-18 7.8 percent

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 July 6, 2018;

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2761.62 as this post is written

3 Critical Unemployment Charts – July 2018

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 = 8.9 weeks):

(click on charts to enlarge images)(charts updated as of 7-6-18)

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 July 6, 2018;

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

Here is the chart for Unemployed 27 Weeks and Over (current value = 1.478 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 July 6, 2018;

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

Here is the chart for Total Nonfarm Payrolls (current value = 148.912 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 July 6, 2018;

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 page titled “U.S. Unemployment Trends,” 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 2761.41 as this post is written

Deflation Probabilities – July 5, 2018 Update

While I do not agree with the current readings of the measure – I think the measure dramatically understates the probability of deflation, as measured by the CPI – the Federal Reserve Bank of Atlanta maintains an interesting data series titled “Deflation Probabilities.”

As stated on the site:

Using estimates derived from Treasury Inflation-Protected Securities (TIPS) markets, described in a technical appendix, this weekly report provides two measures of the probability of consumer price index (CPI) deflation through 2022.

A chart shows the trends of the probabilities.  As one can see in the chart, the readings are volatile.

As for the current weekly reading, the July 5, 2018 update states the following:

The 2018–23 deflation probability was 5 percent on July 3, down from 6 percent on June 27. The 2017–22 deflation probability was 6 percent on July 3, unchanged from June 27. These deflation probabilities, measuring the likelihoods of net declines in the consumer price index over the five-year periods starting in early 2017 and early 2018, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2017 and April 2018 and the 10-year TIPS issued in July 2012 and July 2013.

_________

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 2733.70 as this post is written