Friday, October 30, 2026

Employment Cost Index (ECI) – September 2026

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 October 30, 2026, the latest ECI report was released.  Here are two excerpts from the BLS release titled “Employment Cost Index – September 2026“:

Compensation costs for civilian workers increased 0.8 percent, seasonally adjusted, for the 3-month period ending in September 2026, the U.S. Bureau of Labor Statistics reported today. Wages and salaries increased 0.7 percent, and benefit costs increased 0.9 percent from June 2026. (See chart 1 and tables A, 1, 2, and 3.)

Compensation costs for civilian workers increased 3.4 percent, not seasonally adjusted, for the 12-month period ending in September 2026. Wages and salaries increased 3.1 percent, and benefit costs increased 3.9 percent over the year. (See chart 2 and tables A, 4, 8, and 12.) 

Below are three charts, updated on October 30, 2026 that depict various aspects of the ECI, which is seasonally adjusted (SA):

The first depicts the ECI, with a value of 178.574:


source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian [ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed October 30, 2026:  https://fred.stlouisfed.org/series/ECIALLCIV/#

The second chart depicts the ECI on a “Percent Change from Year Ago” basis, with a value of 3.4%:


The third chart depicts the ECI on a “Percent Change” (from last quarter) basis, with a value of .8%:


_________

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 7613.14 as this post is written

Another Recession Probability Indicator – Through Q2 2026

Each month I have been highlighting various estimates of U.S. recession probabilities.  The latest update was that of September 9, 2026, titled “Recession Probability Models – September 2026.”

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 3.50000% for the second quarter of 2026, last updated on October 29 (after the October 29, 2026 Gross Domestic Product, Third Quarter 2026 (Advance Estimate)):


source:  Hamilton, James, GDP-Based Recession Indicator Index [JHGDPBRINDX], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 30, 2026: 
https://fred.stlouisfed.org/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 7720.39 as this post is written

Thursday, October 29, 2026

U.S. Deflation Probability Chart Through October 2026

For reference, below is a chart of the St. Louis Fed Price Pressures Measures – Deflation Probability [FRED STLPPMDEF] through October 2026.

While I do not necessarily agree with the current readings of the measure, I view this as a proxy of U.S. deflation probability.

A description of this measure, as seen in FRED:

This series measures the probability that the personal consumption expenditures price index (PCEPI) inflation rate (12-month changes) over the next 12 months will fall below zero.

The chart, on a monthly basis from January 1990 – October 2026, with a last reading of .00000, last updated on October 29, 2026:


Here is this same U.S. deflation probability measure since 2008:


source:  Federal Reserve Bank of St. Louis, Deflation Probability [STLPPMDEF], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 29, 2026: https://fred.stlouisfed.org/series/STLPPMDEF

_________

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.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 7720.39 as this post is written

Kevin Warsh’s October 28, 2026 Press Conference – Notable Aspects

On Wednesday, October 28, 2026 FOMC Chair Kevin Warsh gave the scheduled October 2026 FOMC Press Conference. (link of video and related materials)

Below are Kevin Warsh’s comments I found most notable – although I don’t necessarily agree with them – in the order they appear in the transcript.  These comments are excerpted from the “Transcript of Chair Warsh’s Press Conference“ (preliminary)(pdf) of October 29, 2026, with the accompanying “FOMC Statement” dated October 29, 2026.

Excerpts from Chair Warsh’s opening comments:

This morning the FOMC decided to maintain the target rate for the federal funds rate at 3¾ to 4 percent, in support of the Federal Reserve’s dual mandate.  

Economic activity is expanding at a strong pace.  While uncertainty remains—owing, in part, to geopolitical developments—domestic spending has been resilient.  Productivity growth is strong, and capital investment robust.  Job gains have kept pace with the workforce, and the unemployment rate has changed little.

But inflation remains elevated.  The Committee believes that the accumulation of more information will help it determine the policy stance appropriate to ensure a timely return of inflation to the 2 percent goal.  The Committee will deliver price stability.

Excerpts of Kevin Warsh’s responses as indicated to various questions:

COLBY SMITH. Colby Smith with the New York Times. There’s been essentially no progress toward the 2 percent inflation target. The labor market remains stable as you suggested in your opening statement, and most of your colleagues seem to be on board with raising rates in December. So why not just raise rates today?

CHAIRMAN WARSH. So it’s a good question. I will say I read your stories the last day or two, so I must admit I sort of saw that question coming. What I said in my prepared statement was information coming in the coming period will help us tell us where we want to be, but I suspect you want a little more than that. So let me give it a shot. Ensuring price stability, Colby, quashing inflation is not about some fixed individual date on a calendar. Same way it’s not about some isolated data point. If it were about those two things, this job would be easier, and we wouldn’t be suffering from nearly six years of inflation above target. So what’s this about? It’s about ensuring we have clear objectives and it’s about a monetary policy strategy, which might sound to your ear, and others, like a change from the last several years. So let me step back. In the five months or so that I’ve been around, we’ve put in place what I describe as new monetary medicine. Well what’s been in that package of medicine? The first thing we did when we showed up, with my colleagues, is we doubled down on the 2 percent inflation target. We said, we own it, we’re taking responsibility for it, and if you think that we’re tolerating some inflation target somewhere in the 2’s, let us disabuse you of it. That was the first part of this new monetary medicine. Second part is we took responsibility, no anguish of central banking here, no blaming others. So the third thing that we’ve done, we laid out for you and the world our framework. I did it in Jackson Hole. It was part of the discussion the last couple days. It is the framework that many of my colleagues hew to as well. This is how we think about how monetary policy should work. These are the transmission mechanisms. And this is how we’re going to deliver. Then what do we do? We interrogate reality. We do that periodically. That’s a very useful thing to do. But we don’t just talk, we act. And so in September when we last met, we acted. We removed a dose of accommodation. So what are the signposts about how this new strategy is going? Inflation compensation as measured by swaps prices, many other measures, inflation compensation is going in the right way. Inflation expectations, the world is quite unsettled. If you’d say absent the Fed, what would have happened to expectations, they might have gone the wrong way. They’ve gone the right way too. So I feel good about those signposts. The period right in front of us is information rich. There is a lot that’s happening in the world. My colleagues and I are keen to take notice of it. So in this coming period, what do I think we’re going to be able to do? We’re going to be able to figure out what’s the appropriate protocol as part of this package that we started to deliver five months ago, to deliver price stability. I’m encouraged by the progress we’ve made in a short period of time. But if the crux of your question is, you haven’t delivered yet, you haven’t achieved price stability, you’re right about that. But we’re working on it.

also:

EDWARD LAWRENCE. Thank you, Mr. Chairman. Edward Lawrence with Fox Business. So do you see a direct line correlation between oil prices and the inflation we’re seeing in the United States? And if so, how fast could inflation fall or react to falling oil prices?

CHAIRMAN WARSH. So I don’t want to engage in hypotheticals, but I can look out our window and see what’s happened. There have been a stable correlation between oil prices as they’ve moved up this year, generally, and interest rates. Not the interest rates that we control, but interest rates set in the market. That correlation has been quite strong, until very recently where you’ve seen oil prices continue to move up, largely due to geopolitical events. We’ve seen crack spreads between oil and refined products continue to stay elevated. But what’s happened? Interest rates have rolled over to the downside. I — not a Wall Street newsletter, I’m just telling you when I look out the window over the last several months, that is what we’ve seen. To the extent that oil prices were to move lower, again, probably due to geopolitical events, that’s something that we’re going to have to interrogate. What are the effects on the Fed’s dual mandate? What are the effects on financial market prices, and what are we going to do about it? But that’s a hypothetical, and in fact, if we look at financial market prices, futures prices for oil, they’ve moved up over the course of the last several weeks, and I can’t help but take note of that too.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 7714.97 as this post is written

Velocity Of Money – Charts Updated As Of October 29, 2026

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

All charts reflect quarterly data through the 3rd quarter of 2026, and were last updated as of October 29, 2026.

Velocity of M1 Money Stock, current value = 1.653:


Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 29, 2026:
http://research.stlouisfed.org/fred2/series/M1V

–

Velocity of M2 Money Stock, current value = 1.417:


Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 29, 2026: 
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 7713.69 as this post is written

Real GDP Chart Since 1947 – 3rd Quarter 2026

For reference purposes, below is a chart reflecting Real GDP, as depicted, with value $24,611.077.  This chart incorporates the Gross Domestic Product, 3rd Quarter 2026 (Advance Estimate) of October 29, 2026:


source: U.S. Bureau of Economic Analysis, Real Gross Domestic Product [GDPC1], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 29, 2026: https://fred.stlouisfed.org/series/GDPC1

_________

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 7743.98 as this post is written

Tuesday, October 27, 2026

Money Supply Charts Through September 2026

For reference purposes, below are two sets of charts depicting growth in the money supply.

The first shows the M1, defined in FRED as the following:

Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.

Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.

Here is the “M1 Money Stock” (seasonally adjusted) chart, updated on October 27, 2026 depicting data through September 2026, with a value of $20,061.2 Billion:


Here is the “M1 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 6.2%:


Data Source: Board of Governors of the Federal Reserve System (US), M1 Money Stock [M1SL], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 27, 2026: https://fred.stlouisfed.org/series/M1SL

The second set shows M2, defined in FRED as the following:

Before May 2020, M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs.

Beginning May 2020, M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

Here is the “M2 Money Stock” (seasonally adjusted) chart, updated on October 27, 2026, depicting data through September 2026, with a value of $23,413.9 Billion:


Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 5.7%:


Data Source: Board of Governors of the Federal Reserve System (US), M2 Money Stock [M2SL], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 27, 2026: https://fred.stlouisfed.org/series/M2SL

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 7722.60 as this post is written

Friday, October 23, 2026

The U.S. Economic Situation – October 23, 2026 Update

Perhaps the main reason that I write of our economic situation is that I continue to believe, based upon various analyses, that our economic situation is in many ways misunderstood.  While no one likes to contemplate a future rife with economic adversity, current and future economic problems must be properly recognized and rectified if high-quality, sustainable long-term economic vitality is to be realized.

There are an array of indications and other “warning signs” – many readily apparent – that current economic activity and financial market performance is accompanied by exceedingly perilous dynamics.

I have written extensively about this peril, including in the following:

“Building Financial Danger” (ongoing updates)

My analyses continues to indicate that the growing level of financial danger will lead to the next stock market crash that will also involve (as seen in 2008) various other markets as well.  Key attributes of this next crash is its outsized magnitude (when viewed from an ultra-long term historical perspective) and the resulting economic impact.  This next financial crash is of tremendous concern, as my analyses indicate it will lead to a Super Depression – i.e. an economy characterized by deeply embedded, highly complex, and difficult-to-solve problems.

For long-term reference purposes, here is a chart of the Dow Jones Industrial Average since 1900, depicted on a monthly basis using a LOG scale (updated through October 21, 2026 with a last value of 52,856.09):

(click on chart to enlarge image)(chart courtesy of StockCharts.com)


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The Special Note summarizes my overall thoughts about our economic situation

SPX at 7,652.43 as this post is written