Monthly Archives: January 2017

Employment Cost Index (ECI) – Fourth Quarter 2016

While the concept of Americans’ incomes can be defined in a number of ways, many prominent measures continue to show disconcerting trends.

One prominent measure is the Employment Cost Index (ECI).

Here is a description from the BLS document titled “The Employment Cost Index:  what is it?“:

The Employment Cost Index (ECI) is a quarterly measure of the change in the price of labor, defined as compensation per employee hour worked. Closely watched by many economists, the ECI is an indicator of cost pressures within companies that could lead to price inflation for finished goods and services. The index measures changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. As a fixed-weight, or Laspeyres, index, the ECI controls for changes occurring over time in the industrial-occupational composition of employment.

On January 31, 2017, the ECI for the fourth quarter was released.  Here are two excerpts from the BLS release titled “Employment Cost Index – December 2016“:

Compensation costs for civilian workers increased 0.5 percent, seasonally adjusted, for the 3-month period ending in December 2016, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.5 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.4 percent.

also:

Compensation costs for civilian workers increased 2.2 percent for the 12-month period ending in December 2016. In December 2015, compensation costs increased 2.0 percent.

Below are three charts, updated on January 31, 2017 that depict various aspects of the ECI, which is seasonally adjusted (SA):

The first depicts the ECI, with a value of 128.0:

ECIALLCIV_1-31-17

source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian[ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed January 31, 2017:

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

The second chart depicts the ECI on a “Percent Change from Year Ago” basis:

ECIALLCIV_1-31-17 percent change from year ago

The third chart depicts the ECI on a “Percent Change” (from last quarter) basis:

ECIALLCIV_1-31-17 .5 percent change from prior quarter

_________

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 2269.70 as this post is written

Consumer Confidence Surveys – As Of January 31, 2017

Doug Short had a blog post of January 31, 2017 (“Consumer Confidence Retreated in January“) 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 recent sudden upswing, 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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2269.70 as this post is written

Another Recession Probability Indicator – Updated Through Q3 2016

Each month I have been highlighting various estimates of U.S. recession probabilities.  The latest update was that of January 5, 2017, titled “Recession Probability Models – January 2017.”

While I don’t agree with the methodologies employed or the probabilities of impending economic weakness as depicted by these and other estimates, I do believe that the results of these models and estimates should be monitored.

Another probability of recession is provided by James Hamilton, and it is titled “GDP-Based Recession Indicator Index.”  A description of this index, as seen in FRED:

This index measures the probability that the U.S. economy was in a recession during the indicated quarter. It is based on a mathematical description of the way that recessions differ from expansions. The index corresponds to the probability (measured in percent) that the underlying true economic regime is one of recession based on the available data. Whereas the NBER business cycle dates are based on a subjective assessment of a variety of indicators that may not be released until several years after the event , this index is entirely mechanical, is based solely on currently available GDP data and is reported every quarter. Due to the possibility of data revisions and the challenges in accurately identifying the business cycle phase, the index is calculated for the quarter just preceding the most recently available GDP numbers. Once the index is calculated for that quarter, it is never subsequently revised. The value at every date was inferred using only data that were available one quarter after that date and as those data were reported at the time.

If the value of the index rises above 67% that is a historically reliable indicator that the economy has entered a recession. Once this threshold has been passed, if it falls below 33% that is a reliable indicator that the recession is over.

Additional reference sources for this index and its construction can be seen in the Econbrowser post of February 14, 2016 titled “Recession probabilities” as well as on the “The Econbrowser Recession Indicator Index” page.

Below is a chart depicting the most recent value of 5.30%, for the third quarter of 2016, last updated on January 30, 2017 (after the January 27, 2017 Gross Domestic Product Q4 2016 Advance Estimate (pdf):

GDP-Based Recession Indicator Index

source:  Hamilton, James, GDP-Based Recession Indicator Index [JHGDPBRINDX], retrieved from FRED, Federal Reserve Bank of St. Louis on January 30, 2017:

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

_________

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 2275.91 as this post is written

Durable Goods New Orders – Long-Term Charts Through December 2016

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 December 2016, updated on January 27, 2017. This value is $227,018 ($ 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:

Durable Goods New Orders 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 January 27, 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 blog 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 2294.69 as this post is written

Velocity Of Money – Charts Updated Through January 27, 2017

Here are three charts from the St. Louis Fed depicting the velocity of money in terms of the MZM, M1 and M2 money supply measures.

All charts reflect quarterly data through the 4th quarter of 2016, and were last updated as of January 27, 2017.  As one can see, one of the three measures is at an all-time low for the periods depicted:

Velocity of MZM Money Stock, current value = 1.297:

MZM money velocity

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 27, 2017:

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

Velocity of M1 Money Stock, current value = 5.655:

M1 Money Velocity

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 27, 2017:

http://research.stlouisfed.org/fred2/series/M1V

Velocity of M2 Money Stock, current value = 1.436:

M2 money velocity

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 27, 2017:

http://research.stlouisfed.org/fred2/series/M2V

_________

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 2294.69 as this post is written

Real GDP Chart Since 1947 With Trendline – 4th Quarter 2016

For reference purposes, below is a chart from Doug Short’s “Q4 GDP Advance Estimate: Real GDP at 1.9%, Worse Than Forecast ” post of January 27, 2017, depicting Real GDP, with a trendline, as depicted.  This chart reflects the Gross Domestic Product Q4 2016 Advance Estimate (pdf) of January 27, 2017:

Real GDP

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2293.93 as this post is written

Updates Of Economic Indicators January 2017

Here is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:

The January 2017 Chicago Fed National Activity Index (CFNAI) updated as of January 26, 2017: (current reading of CFNAI is .14; current reading of CFNAI-MA3 is -.07):

CFNAI January 2017

The ECRI WLI (Weekly Leading Index):

As of January 20, 2017 (incorporating data through January 13, 2017) the WLI was at 145.0 and the WLI, Gr. was at 12.0%.

A chart of the WLI,Gr., from Doug Short’s ECRI update post of January 20, 2017:

ECRI WLI,Gr.

The Aruoba-Diebold-Scotti Business Conditions (ADS) Index:

Here is the latest chart, depicting the ADS Index from December 31, 2007 through January 21, 2017:

ADS Index

The Conference Board Leading (LEI), Coincident (CEI) Economic Indexes, and Lagging Economic Indicator (LAG):

As per the January 26, 2017 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased,” (pdf) the LEI was at 124.6, the CEI was at 114.3, and the LAG was 123.4 in December.

An excerpt from the  release:

“The U.S. Leading Economic Index increased in December, suggesting the economy will continue growing at a moderate pace, perhaps even accelerating slightly in the early months of this year,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “December’s large gain was mainly driven by improving sentiment about the outlook and suggests the business cycle still showed strong momentum in the final months of 2016.”

Here is a chart of the LEI from Doug Short’s Conference Board Leading Economic Index update of January 16, 2017:

Conference Board LEI

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2299.51 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 January 19, 2017 update (reflecting data through January 13, 2017) is -1.210.

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 January 25, 2017 incorporating data from January 5,1973 through January 20, 2017, on a weekly basis.  The January 20, 2017 value is -.79:

NFCI

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

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

The ANFCI chart below was last updated on January 25, 2017 incorporating data from January 5,1973 through January 20, 2017, on a weekly basis.  The January 20 value is -.15:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 25, 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 blog 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 2297.12 as this post is written

Money Supply Charts Through December 2016

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 January 20, 2017 depicting data through December 2016, with a value of $14,632.7 Billion:

MZM money supply

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis:

MZM money supply percent change from year ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 23, 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 January 19, 2017, depicting data through December 2016, with a value of $13,249.2 Billion:

M2 money supply

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis:

M2 money supply percent change from year ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 23, 2017:

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2261.93 as this post is written

Markets During Periods Of Federal Reserve Intervention – January 20, 2017 Update

In the August 9, 2011 post (“QE3 – Various Thoughts“) I posted a chart that depicted the movements of the S&P500, 10-Year Treasury Yield and the Fed Funds rate spanning the periods of various Federal Reserve interventions since 2007.

For reference purposes, here is an updated chart (through January 20, 2017) from Doug Short’s blog post of January 20 (“Treasury Yields:  A Long-Term Perspective“):

U.S. markets during Federal Reserve intervention

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2271.31 as this post is written