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 on this site concerning both ongoing and recent “negative developments.” These developments, as well as other exceedingly problematical 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 – will occur. [note: the “next crash” and its aftermath has paramount 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” label]
As reference, below is a daily chart since 2008 of the S&P500 (through December 6, 2024 with a last price of 6090.27), 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)
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The Special Note summarizes my overall thoughts about our economic situation
In the November 13, 2013 post (“Not In Labor Force Statistic“) I featured editorial commentary from the Wall Street Journal, as well as an accompanying long-term chart, with regard to the number of people not working.
Below is an updated chart regarding this statistic. The current figure, last updated on December 6, 2024 depicting data through November 2024, is 101.299 Million people (Not Seasonally Adjusted):
Data Source: U.S. Bureau of Labor Statistics, Not in Labor Force [LNU05000000], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed December 6, 2024: https://fred.stlouisfed.org/series/LNU05000000
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The Special Note summarizes my overall thoughts about our economic situation
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 = $35.61):
(click on chart to enlarge image)(chart last updated 12-6-24)
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 December 6, 2024: http://research.stlouisfed.org/fred2/series/CES0500000003
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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 12-6-24)
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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 = $30.57):
(click on chart to enlarge image)(chart last updated 12-6-24)
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 December 6, 2024: http://research.stlouisfed.org/fred2/series/AHETPI
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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 12-6-24)
I will continue to actively monitor these trends, especially given the post-2009 dynamics.
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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.
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The Special Note summarizes my overall thoughts about our economic situation
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 4.2% 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 December 6, 2024: http://research.stlouisfed.org/fred2/series/UNRATE
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Here is the U-6 chart, currently showing a 7.8% unemployment rate:
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 December 6, 2024: http://research.stlouisfed.org/fred2/series/U6RATE
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The Special Note summarizes my overall thoughts about our economic situation
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 = 10.5 weeks):
(click on charts to enlarge images)(charts updated as of 12-6-24)
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 December 6, 2024: http://research.stlouisfed.org/fred2/series/UEMPMED
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Here is the chart for Unemployed 27 Weeks and Over (current value = 1.661 million):
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 December 6, 2024: http://research.stlouisfed.org/fred2/series/UEMP27OV
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Here is the chart for Total Nonfarm Payroll (current value = 159.288 million):
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 December 6, 2024: https://research.stlouisfed.org/fred2/series/PAYEMS
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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” label. This commentary includes the page titled “U.S. Unemployment Trends,” which discusses various problematical issues concerning the present and future employment situation.
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The Special Note summarizes my overall thoughts about our economic situation
There are a variety of economic models that are supposed to predict the probabilities of recession.
While I don’t agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.
Please note that each of these models is updated regularly, and the results of these – as well as other recession models – can fluctuate significantly.
Currently (last updated December 4, 2024 using data through November 2024) this “Yield Curve” model shows a 33.5634% probability of a recession in the United States twelve months ahead. For comparison purposes, it showed a 42.045% probability through October 2024, and a chart going back to 1960 is seen at the “Probability Of U.S. Recession Predicted by Treasury Spread.” (pdf)
Smoothed recession probabilities for the United States are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales. This model was originally developed in Chauvet, M., “An Economic Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching,” International Economic Review, 1998, 39, 969-996. (http://faculty.ucr.edu/~chauvet/ier.pdf)
This model, last updated on December 3, 2024 currently shows a 1.48% probability using data through October 2024.
Here is the FRED chart:
Data Source: Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed December 5, 2024: http://research.stlouisfed.org/fred2/series/RECPROUSM156N
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The two models featured above can be compared against measures seen in recent posts. For instance, as seen in the October 14, 2024 post titled “The October 2024 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 26% probability of a U.S. recession within the next 12 months.
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The Special Note summarizes my overall thoughts about our economic situation
As one can see from the above chart, the average expectation is that the residential real estate market, as depicted by the Fannie Mae Home Price Index, will continually climb.
The detail of the survey is interesting. Of the survey respondents, none (of the displayed responses) forecasts a cumulative price decrease through 2029.
The Median Cumulative Home Price Appreciation for years 2024-2029 is seen as 5.50%, 9.72%, 14.10%, 18.39%, 22.79% and 27.75%, respectively.
For a variety of reasons, I continue to believe that these forecasts will prove far too optimistic.
I have written extensively about the residential real estate situation. For a variety of reasons, it is exceedingly complex. While many people continue to have an optimistic view regarding future residential real estate prices, in my opinion such a view is unsupported on an “all things considered” basis. Residential real estate is an exceedingly large asset bubble. As such, from these price levels there exists potential for a price decline of outsized magnitude.
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The Special Note summarizes my overall thoughts about our economic situation
Throughout this site there are many discussions of economic indicators. This post is the latest in a series of posts indicating facets of U.S. economic weakness or a notably low growth rate.
The level and trend of economic growth is especially notable at this time. As seen in various sources, recession estimates have been at elevated levels.
Below is a small sampling of charts that depict weak growth or contraction, and a brief comment for each:
University of Louisville and Oklahoma State University: LoDI National Index (LODINIM066N)
The LoDI National Index is described in FRED as:
The LoDI Index uses linear regression analysis to combine cargo volume data from rail, barge, air, and truck transit, along with various economic factors. The resulting indicator is designed to predict upcoming changes in the level of logistics and distribution activity in the US and is represented by a value between 1 and 100. An index at or above 50 represents a healthy level of activity in the industry.
As seen in the long-term chart below, the index appears to have recently peaked.
Shown below is a chart with data through December 2024 (last value of 75.83143), last updated December 2, 2024:
Below is this measure displayed on a “Percent Change From Year Ago” basis with value -2.8%:
source: University of Louisville. Logistics and Distribution Institute and Oklahoma State University, University of Louisville and Oklahoma State University: LoDI National Index [LODINIM066N], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed December 4, 2024: https://fred.stlouisfed.org/series/LODINIM066N
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Job Openings (JTSJOL)
Job openings (Job Openings: Total Nonfarm [JTSJOL]), although still at a high level, have recently declined significantly. This “Job Openings” measure had a value of 7,744 (Thousands) through October 2024 as of the December 3, 2024 update, as shown below:
Below is this measure displayed on a “Percent Change From Year Ago” basis with value -10.8%:
source: U.S. Bureau of Labor Statistics, Job Openings: Total Nonfarm [JTSJOL], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed December 4, 2024: https://fred.stlouisfed.org/series/JTSJOL
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Motor Vehicle Retail Sales: Heavy Weight Trucks (HTRUCKSSA)
Sales of “Heavy Weight Trucks” (HTRUCKSSA) has recently been volatile. Shown below is this measure with last value of 32.486 Thousand through October 2024, last updated November 27, 2024:
Below is this measure displayed on a “Percent Change From Year Ago” basis with value -14.4%:
source: U.S. Bureau of Economic Analysis, Motor Vehicle Retail Sales: Heavy Weight Trucks [HTRUCKSSA], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed December 4, 2024: https://fred.stlouisfed.org/series/HTRUCKSSA
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Net Percentage of Domestic Banks Reporting Stronger Demand for Commercial and Industrial Loans from Large and Middle-Market Firms (DRSDCILM)
“The Net Percentage of Domestic Banks Reporting Stronger Demand for Commercial and Industrial Loans from Large and Middle-Market Firms” measure has been notably weak. The current value is -21.3% as of the November 12, 2024 quarterly update:
source: Board of Governors of the Federal Reserve System (US), Net Percentage of Domestic Banks Reporting Stronger Demand for Commercial and Industrial Loans from Large and Middle-Market Firms [DRSDCILM], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed December 4, 2024: https://fred.stlouisfed.org/series/DRSDCILM
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Other Indicators
As mentioned previously, many other indicators discussed on this site indicate weak economic growth or economic contraction, if not outright (gravely) problematical economic conditions.
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The Special Note summarizes my overall thoughts about our economic situation
