Thursday, July 20, 2017

Trump's presidency is 1/8 done. The economy is still on Obama's autopilot. Where's the DOOOM?!?

 - by New Deal democrat

Today marks half a year since Donald Trump took the Oath of Office as President.  I just wanted to note that, so far, absolutely nothing of significance has been enacted to affect the economy.  It's still basically Barack Obama's expansion.

Of note, where have all the Doomers gone?  Zero Hedge has turned into a Trump + Putin fanboi club. The left-wing purists who were sure that everything stunk and the next crash is right around the corner have moved on to other things.  The writers who had been bleating about imminent recessions - almost every year since 2009 - are now just talking about very slow GDP growth.  I'm almost tempted to become a contrarian!

Basically, everything of note is positive, although much has been or is decelerating.  Over the next 6-12 months, if Washington leaves the economy alone, I expect job growth to continue, the unemployment rate to decline a little, prime age labor force participation to increase, and nominal wage growth to remain steady if participation increases a lot, and maybe increase more if participation only increases a little, although the positivity of most of these things will probably decelerate.

One eighth of the way through Trump's presidency, Obama's autopilot is still engaged.

Wednesday, July 19, 2017

June housing permits and starts: an improvement, BUT...


 - by New Deal democrat

Both housing permits and starts popped nicely in June compared with May. But in comparison to the last 12 months overall ..... I take a look over at XE.com.

Tuesday, July 18, 2017

A quick and dirty approach to short leading indicators


- by New Deal democrat

Although I have downgraded my longer term forecast to neutral, my shorter term forecast remains positive.

The easiest quick and dirty way to look at short leading indicators is to simply consider initial jobless claims and stock prices. They are updated weekly and daily, respectively, and except for one revision the following week to jobless claims, neither are revised. If both are positive, you're fine. If both are negative, you're in trouble. Here's what they look like for the last 10 years (with jobless claims inverted):



Jobless claims made a new low in May. Stocks made a new high last week. The short term economic forecast is positive.

How long can these series go without new highs/lows before we might be concerned?  While stock prices can be very noisy and volatile, that's not the case with initial jobless claims. Even less volatile is the unemployment rate, which initial jobless claims tend to lead by several months.  So I've compared the YoY changes in each in the below graph going back 50 years:



Generally speaking, the economy isn't in trouble unless YoY jobless claims are negative (meaning the 4 week average is higher now than one year ago). Trouble is confirmed when the unemployment rate follows.

The system isn't perfect (hey, it's quick and dirty, right!). It gives us some false positives, and in 2 cases (1974 and 1981) doesn't signal until the recession is already starting.

But, as a general rule, if YoY jobless claims are lower,  absent a big extraneous shock (like the oil embargo in 1974 or the Fed embarking on steep raising of rates in 1981), there is no recession on the near term horizon.

Here's a close-up of where we are now:



*IF* initial jobless claims stop declining, the earliest the "yellow flag" on our quick and dirty system will trigger is probably this autumn, if not the beginning of next year.  Unless, of course, there is an exogenous shock like Congress triggering a  partial default on our debts by failing to raise the debt ceiling in the next 60 days.

Monday, July 17, 2017

Measuring underemployment as a share of the working age population


 - by New Deal democrat

I wanted to follow up on several items from this month's employment report: namely, part time for economic reasons, and those people who are not in the labor force at all, but say they want a job.

Below I show each, both as raw numbers, and as a share of the working age population, ages 16-64 -- which makes sense, because the working age population has grown by about 25% over the last 25 years:



In 1994 there were about 165 million people between ages 16 and 64. As of April of this year (the last date available), there were about 205 million.

Here is the number of people who are part time for economic reasons (blue, right scale), and as a percentage of the aged 16-64 population (red, left scale):



While last month this ticked up, the trend as continued to the positive.

Here is "not in labor force, want a job now" (blue, right scale ), and as a percentage of the aged 16-64 population (red, left scale):



The raw number made a significant post-recession low in June.  It is not yet shown in the percentage number.

When we adjust for the working age population, both of these are roughly where they were in 1996, or at the worst point after the 2001 recession, in 2002-03. Both still need improvement of about 0.4%, or 800,000 apiece, to get within what I would consider a "normal" range.

Saturday, July 15, 2017

Weekly Indicators for July 10 - 14 at XE.com


 - by New Deal democrat

My Weekly Indicators post is up at XE.com

One week ago I downgraded my longer term forecast. That remains this week.