Monday, March 19, 2018

JOLTS revisions paint brighter labor market picture

 - by New Deal democrat

Last Friday's JOLTS report for January included some important revisions, particularly with regard to hiring.  So let's take a closer look.

As a refresher, unlike the jobs report, which tabulates the net gain or loss of hiring over firing, the JOLTS report breaks the labor market down into openings, hirings, firings, quits, and total separations.

I pay little attention to "job openings," which can simply reflect that companies trolling for resumes, or looking for the perfect, cheap candidate, and concentrate on the hard data of hiring, firing, quits and layoffs.

The first important relationship in the data is that historically, hiring leads firing.  While the one big shortcoming of this report is that it has only covered one full business cycle, during that time hires have peaked and troughed before separations.

And here, there has been an important revision.  Here is the historical relationship on a quarterly basis between hiring (red) and total separations (blue) as it existed through the end of the third quarter of 2017:

Note that hiring had just gotten around to equalling its peak from late 2015.

Now here is the same data, with revisions, through the fourth quarter of 2017:

Our update graph shows hiring exceeding its prior peak in the third quarter and clearly establishing a new high in Q4 2017.  That is unequivocal good news, since in the last expansion, hiring was the first metric to peak.

Here is the monthly breakdown over the last 2 years:

The positive trend in both hiring and total separations is clear.

Further, in the previous cycle, after hires stagnated, shortly thereafter involuntary separations began to rise, even as quits continued to rise for a short period of time as well:


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

Here are voluntary quits vs. layoffs and discharges on a monthly basis for the last 2 years:

With hiring increasing in the past few months, I expected the number of voluntary quits to improve as well, and they have:again, if the pattern from the last decade holds, I would expect quits to  improve somewhat as well.  As in the last business cycle, quits are still rising. The only divergence is that  involuntary separations remain off their bottom.

So while I continue to watch to see if hiring stagnates,the new highs in hiring are a very positive sign, consistent (though not necessarily) even with being before mid-cycle.

Sunday, March 18, 2018

A thought for Sunday: in which I pour some cold water on 2018 midterm overoptimism

 - by New Deal democrat

In the wake of Conor Lamb's election victory in Pennsylvania last Tuesday night, some Democratic partisans are suggesting that every GOP-held seat from a district that is less than trump +20% is in play.
Hold your horses. The results of last June's special election in Georgia, in which GOPer Karen Handel defeated Democrat Jon Ossoff show that there is a roadmap to the GOP minimizing their losses in this November's midterms.

Because while all of the legislative elections in 2017 and so far in 2018 have featured huge gains in Democratic turnout, the difference in Georgia was that there was a *similar* spike in GOP turnout.  And this playbook is going to be easier for the GOP to run in nationwide contests than in local special elections. 

Let's start with turnout in Pennsylvania last week. Here's the graph on point:

Democratic turnout in the PA special election approached that of Presidential election levels, while GOP turnout was much smaller. Simple point: when D's turn out, and R's don't, D's win.

Let's take a similar look at turnout in the Virginia legislative elections  last November:

What is noteworthy in this graph, and a point that was made at the time, is that it wasn't only Democratic turnout that exceeded the levels of the last state election. GOP turnout was *also* higher, although not by nearly so much. Even so, that slight increase in GOP turnout was enough for them to hold on to the Virginia House of Delegates (literally, by one vote!) even though more votes were cast statewide for Democratic candidates, by a margin of 54%-46%.

Finally, let's turn to the Georgia election from last June.  Here is the similar graph:

While there was sky-high Democratic turnout, turnout by GOPers was almost as high -- enough so that their candidate prevailed.  In other words, when both D's and R's turn out at near-Presidential levels, the outcome resembles that of the district's vote in the last Presidential election.  That's the point made in this analysis by Politico:

Pollsters say sky-high turnout drove Handel, the GOP nominee, to a nearly 4-point victory on Tuesday, despite most pre-election surveys showing Ossoff with a small-but-shrinking lead. 
... [I[t wasn’t because Democratic voters didn’t show up. More than 259,000 votes have been tallied as of Wednesday afternoon, considerably more than the 193,000 votes in the first round of voting in  April. 
In fact, turnout was much higher than for other off-year special elections in recent history.... 
John Anzalone, Ossoff’s pollster, said the Democrat’s campaign succeeded in turning out its voters — but they were swamped by Republicans who came out in numbers that ended up dwarfing previous high-profile special elections ....
“When turnout starts going up that high, and people start coming out of the woodwork to vote,” Cahaly said, “it moves back to the [natural] alignment of the district.”
Cahaly added that, in his view, Handel and Republican outside groups also drove turnout by nationalizing the race.

In November, it is going to be much easier for the GOP and their propaganda organs like Fox to "nationalize" local elections, arguing that a Democratic House is likely to impeach Trump (true) and veto new regulations on, e.g., Muslim and Latino immigratiion proposed by Trump's bureaucracy (true), while a Democratic Senate will refuse to confirm Trump's anti-gay and anti-abortion Judicial nominations, including any vacancies that may open up on the Supreme Court (also true).

At the same time, they probably will use social media accounts to try to drive down Latino turnout by arguing that the Congressional Democrats sold out Dreamers (as to which there is at least some merit).

If so, the vote in Congressional districts and Senate races is likely to come closer to mirroring that from 2016.  That strategy probably concedes that GOPers will lose any Congressional districts that voted more for Hillary Clinton than Trump. But under that result -- even one in which  Democrats "win" the number of ballots nationwide by something like 53%-47% -- the GOP nevertheless retains control of the House and Senate.

While as I pointed out several weeks ago, demographics alone should make the electorate less reddish, people shouldn't get carried away with over-optimism.

Saturday, March 17, 2018

Weekly Indicators for March 12 - 16 at

 - by New Deal democrat

My Weekly Indicators post is up at

This week most of the data that has been decelerating turned in a more positive performance.

Friday, March 16, 2018

Liveblogging housing, industrial production, and JOLTS

 - by New Deal democrat

This is one of those days when it seems every piece of economic data in the whole world is getting reported simultaneously.

So as the data gets reported, I'll give you three quick takes.

Housing permits and starts for February

While this was a decline from January, so far housing is holding up very well in the face of higher interest rates.

Single family housing permits -- the least volatile of all the numbers -- declined m/m but December remains the expansion high. The series remains very positive.

Overall housing permits -- less volatile than starts -- declined to their lowest level since September, but January remains the expansion high, so this trend remains positive as well.

Housing starts declined m/m from January's expansion high. To take out most of the volatility, I look at the three month moving average. This is the second highest during the entire expansion after last month. So these remain very positive as well.

Finally, there is a category of housing which has been authorizaed but not yet started. January remains the expansion high, and February is second, equal to December.  This tells us there is a lot of construction in the pipeline.

Bottom line: m/m negative, but longer term trend still (somewhat surprisingly) still very positive.

Industrial production

This was also a very positive report.

The overall number was up 1.1%.
Manufacturing was us 1.3%
Mining -- the big reason for last month's decline -- was up nearly 5%.

The DOOOMERS' meme that hard numbers haven't replicated the Fed and ISM surveys refuses to die.  And yet YoY overall production is up nearly 5%, and manufacturing up nearly 3%. That seems pretty good to me.


This data is from January. Like housing, it was generally down m/m, but very positive.  I don't bother anymore with openings, which I consider not just soft, but easily gamed data. As to the hard data:

Hires -- the second highest, but for last October, in the expansion.

Quits -- the second highest of the expansion, except for December's.

Total separations -- the highest of the expansion (which is a positive, since these also start to decline prior to a recession).

Layoffs and discharges -- increased sharply to levels seen in last summer. This is the one negative, since these bottomed in midcycle during the last expansion.

All in all, the three economic reports today painted a picture of continuing positive trends.

Thursday, March 15, 2018

February update: real wages and real spending

 - by New Deal democrat

Now that we have February inflation, let's take an updated look at real wages and real spending.

First of all, real average hourly wages increased slightly in February, but are still -0.6% under their July peak:

But, because the total hours worked surged so much in February, real aggregate wage earnings, which had stalled since July, rose to a new record:

If it's not revised away, this means that the middle and working classes have more income to spend, without dipping more into savings.

Turning to retail spending, real retail sales declined for the third month in a row:

But note that the big surge in sales from November has been untouched, and means that real retail sales remain higher than at any point before then.

This is true even if we adjust for population:

Since population-adjusted real retail sales have been a long leading indicator for the economy, I'm not terribly concerned about the recent small decline at this point.