Saturday, October 10, 2015

Weekly Indicators for October 5 - 9 at

 - by New Deal democrat

My Weekly Indicator piece is up at

The US data got just a skosh weaker.

Friday, October 9, 2015

Whilesaler inventories and sales show shallow industrial recession ongoing

 - by New Deal democrat

I have a new post up at  The shallow industrial recession is real, and is not abating yet.

Ruh roh: Labor Market Conditions Index forecasts further deterioration in monthly jobs growth

 - by New Deal democrat

As I wrote several months ago, the Labor Market Conditions Index is a good leading indicator for YoY growth in employment.  Based on its deceleration, I forecast that monthly jobs growth was likely to decline to less than 200,000 in the months ahead.

Here's the graph I ran at that time:

The LMCI was updated earlier this week, and the news isn't good, with the Index coming in at zero.  So here is an updated look at the same relationship, zoomed in on the last 10 years:

The LMCI is forecasting further YoY deterioration in jobs growth.  Even a few 5-digit increases cannot be ruled out.  The silver lining is, it is not forecasting an outright YoY decline in jobs.  Similar periods of weakness occurred in 1984, 1994, and 2002 without there being a recession. Even in those periods leading up to recession, generally speaking the LMCI crossed zero into negative territory well before the recession began.

Bottom line:  not good news, but this expansion isn't Doomed yet.

Thursday, October 8, 2015

Population adjusted jobs growth: how weak (or not) is this recovery?

 -by New Deal democrat

I've long thought that the typical mode of presentation of the jobs recovery -- i.e., number of jobs created -- is unsatisfactory, because it fails to take into account demographics.  

Suppose, for example, you get 200,000 jobs created per month on average over a year.  Whether that is good or bad depends on whether the population in which those jobs are being created is growing by 100,000 or 300,000.  In the former case, 100,000 more members of the labor force have jobs; in the latter, 100,000 moe members of the labor force are unemployed!

Just adjusting for population isn't enough, since due to increased healthy longevity and demographics, the percentage of the population that is retired is growing strongly, and ought not to be counted.

So what we want to do is count the number of jobs as a percentage of the labor force, or alternatively by those of working age (below, I am using ages 16-64).  What does this jobs recovery look like under those conditions?  Below are 3 variations on that theme.  As we'll see, measured that way the jobs recovery still isn't great, but it is solidly in the middle of the pack.

First, let's look at the "employment rate" which is simply 100 minus the unemployment rate:

As an initial observation, the post-WW2 era of US economic dominance that ended in 1974 stands out.  Employment rates of 94%+ were the norm, and half of the time exceeded 95%.  Since then, our current level of 94.9% has only been exceeded during the tech boom of the late 1990s and briefly at the end of the housing boom 10 years ago.

But how strong has the current recovery been?  For that, let's see how the employment rate, as graphed above, changed on a YoY basis:

While the current recovery got off to a slow start, it has measured better YoY growth than since the early 1980s. In general, the post-WW2 job recoveries grew much faster YoY than those since 1983.  As we'll see below, however, that is tempered by the fact that many of them, especially in the 1950s, were short-lived.

Second, let's look at the YoY% change in employment growth compared against the working age population, age 16 through 64:

Here the current expansion does look very weak. But not quite so bad as it might first appear.  Here's the percentage of jobs added in this recovery, now 5 1/2 years old, as a share of population ages 16-64:

This growth of 5.7% is still better than the 1971-74 expansion, which added less than 5%, and 5 /12 years later was only up 1.6%:

It is also light years better than the George W. Bush expansion, which not only added a miserable 1.7% jobs at its best, but 5 1/2 years later was negative!

Finally, perhaps the best measure of all is the change in jobs vs. the labor force -- since this is basically all persons in the market for a job (I would also include those not in the labor force who want a job now, but that series only started in 1994):

Here the current jobs expansion looks pretty robust, not just improving strongly but lasting longer than many other recoveries.

Just as with our first measure, let's see how this has changed on a YoY basis:

With the exception of the year 1983, this expansion looks as strong as any other expansion since 1974, and stronger than the George W. Bush expansion. In fact, measured either compared with past peaks in employment, or 5 1/2 years from its start, this expansion is #5 out of 10 expansions since 1950:
5 1/2 years
after start











As shown in the chart above,  the current jobs expansion is behind the expansions of 1950, and those of the 1960s, 80s, and 90s, but better than those of 1955, 1958, both expansions of the 1970s, and the George W. Bush expansion.

In summary, when we measure the number of jobs created in this expansion on relevant population-weighted bases, it is a middling expansion, not great, but not so slow as commonly represented.

Wednesday, October 7, 2015

"Low interest rates have failed to stimulate the economy"

 - by New Deal democrat

There's a persistent Doomer meme that "low interest rates/quantitative easing have failed to stimulate the economy."

It's utter bunk.

Let me show you a period of really low interest rates:

We see Fed rates between 0.5% and 1.5% and long term rates generally between 2% and 2.5%.

Growth must have been pathetic, right?

Now let's add in real, inflation adjusted gross domestic product, and the dates:

That's some real pathetic, errr, umm, 10% and 15%+ growth!

Now let's take a look at how the Fed's low rates and quantitative easing since the Great Recession have played out:

Unsurprisingly, lower long term interest rates as helped along by quantitative easing sparked lots of purchase and refinance mortgage applications. The "taper tantrum" of let 2013 caused both to crater.  

So, yeah, low interest rates and quantitative easing have failed to stimulate the economy, as long as you ignore, you know, history.

No: Dodd Frank Did Not Cause the Slow Recovery

The latest piece of, well, CRAP from Powerline is that Dodd Frank Caused is solely responsible for the slow recovery.

The AEI originated this meme.  It comes from Peter Walliston, who propagated the argument that the CRA caused the financial collapse in 2007-2008.   The Federal Reserve debunked this argument a long time ago.

Thankfully, Barry Ritholtz over at Bloomberg has proved what a crock this most recent claim is.  

Tuesday, October 6, 2015

Monday, October 5, 2015

Underemployment and wages: September 2015 update

 - by New Deal democrat

About the only bright spot in Friday's jobs report was the 400,000+ decline in the number of involuntary part time workers.  So far this year, the number of those employed part time involuntarily has declined by -754,000, or about 1/2% of the workforce.

The best way to look at this is as a percentage of the workforce:

In January 1994, when the modern series began, 3.788% of the labor force was involuntarily employed part time. As of September of this year ,it was 3.852%.  While this isn't too bad, a "good" number would be under 3%.

The changes in 1994 subtracted about 1% from the calculation of involuntary employment.  To give an idea how our present situation compares to pre-1994 data, here it is, subtracting 1%, and then another 3.788%, so that any situation better than currently shows as a negative number, and any worse than the present shows as a positive number:

This is consistent with the idea that we need to see about another 1% decline for this to  be a "good" number.

Next, here is the number for those Not in the Labor Force, but who Want a Job Now (NILFWJN):

The modern version of this series also started in January 1994.  We are currently at the same number as we were at the end of 1994.  Again, not terrible, but not "good" either.

Finally, let's look at the updated U6 underemployment rate (blue) and compare it with the YoY% of wage growth (red):

In the above graph, both are set to "0" at the latest values.  if this expansion is like the last 2, nominal wage growth should start to pick up about now.