Tuesday, December 12, 2017

NFIB Small Business Optimism – November 2017

The November NFIB Small Business Optimism report was released today, December 12, 2017. The headline of the Small Business Economic Trends report is “Small Business Optimism Hits Near All-Time High.”
The Index of Small Business Optimism increased in November by 3.7 points to 107.5.
Here are some excerpts that I find particularly notable (but don’t necessarily agree with):
“We haven’t seen this kind of optimism in 34 years, and we’ve seen it only once in the 44 years that NFIB has been conducting this research,” said NFIB President and CEO Juanita Duggan. “Small business owners are exuberant about the economy, and they are ready to lead the U.S. economy in a period of robust growth.”
also:

LABOR MARKETS

After several solid quarters, job creation slowed in the small business sector as business owners reported a seasonally adjusted average employment change per firm of 0.0 workers. Thirteen percent (down 1 point) reported increasing employment an average of 3.0 workers per firm and 10 percent (down 1 point) reported reducing employment an average of 2.9 workers per firm (seasonally adjusted). Fifty-two percent reported hiring or trying to hire (down 7 points), but forty-four percent (85 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill.
Eighteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (down 2 points), second only to taxes. This is the top ranked problem for those in construction (33 percent) and manufacturing (22 percent), getting more votes than taxes and the cost of regulations. Thirty percent of all owners reported job openings they could not fill in the current period, down 5 points from the record-high level reached in July and October. Eleven percent reported using temporary workers, down 3 points. A seasonally adjusted net 24 percent plan to create new jobs, up 6 points to a record high reading. Hiring plans were strongest in professional services, manufacturing and construction.
also:

COMPENSATION AND EARNINGS

Reports of higher worker compensation were unchanged at a net 27 percent, historically very strong all year. Owners complain at record rates of labor quality issues, with 85 percent of those hiring or trying to hire reporting few or no qualified applicants for their open positions. Eighteen percent selected “finding qualified labor” as their top business problem, far more than cite weak sales. Plans to raise compensation fell 4 points in frequency to a net 17 percent, still a solid number, but a surprise as labor markets seem to be getting tighter. The frequency of reports of positive profit trends improved 2 points to a net negative 12 percent reporting quarter on quarter profit improvements, a solid reading historically, among the best since 2007.
Here is a chart of the NFIB Small Business Optimism chart, as seen in the December 12 Doug Short post titled “NFIB Small Business Survey:  Index Near All-Time High“:
NFIB Small Business Optimism
Further details regarding small business conditions can be seen in the full November 2017 NFIB Small Business Economic Trends (pdf) report.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2667.31 as this post is written

Charts Indicating Economic Weakness – December 2017

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.  This post is the latest in a series of posts indicating U.S. economic weakness or a low growth rate.
While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.  The Gross Domestic Product Q3 2017 Second Estimate (pdf) of November 29, 2017 was 3.1%, and as seen in the November 2017 Wall Street Journal Economic Forecast Survey the consensus among various economists is for 2.5% GDP growth in 2017 & 2018.  However, there are other broad-based economic indicators that seem to imply a weaker growth rate.  As well, it should be remembered that GDP figures can be (substantially) revised.
Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:
Total Private Construction Spending
Various measures of construction continue to show weak growth and/or contraction.
Shown below is “Total Private Construction Spending,” through October with last value of $949,946 Million, displayed on a “Percent Change From Year Ago” basis with value 3.2%, last updated December 1, 2017:
Total Private Construction Spending
source:  U.S. Bureau of the Census, Total Private Construction Spending [TLPRVCONS], retrieved from FRED, Federal Reserve Bank of St. Louis accessed December 6, 2017:
Total Federal Receipts
“Total Federal Receipts” growth continues to be intermittent in nature.
Shown below is “Total Federal Receipts,” through October with last value of $235,341 Million, displayed on a “Percent Change From Year Ago” basis with value 6.2%, last updated November 13, 2017:
Total Federal Receipts Percent Change From Year Ago
source:  U.S. Department of the Treasury. Fiscal Service, Total Federal Receipts [MTSR133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis December 6, 2017:
Manufacturer’s New Orders – Durable Goods
Shown below is “Manufacturer’s New Orders -Durable Goods,” through October with last value of $237,375 Million, displayed on a “Percent Change From Year Ago” basis with value 1.6%, last updated December 4, 2017:
Durable Goods New Orders Percent Change From Year Ago
source:  U.S. Bureau of the Census, Manufacturers’ New Orders: Durable Goods [DGORDER], retrieved from FRED, Federal Reserve Bank of St. Louis December 6, 2017:
Commercial And Industrial Loans, All Commercial Banks
Shown below is “Commercial And Industrial Loans, All Commercial Banks” through October with last value of $2,122.6193 Billion, displayed on a “Percent Change From Year Ago” basis with value of 1.2%, last updated December 1, 2017:
Commercial And Industrial Loans Percent Change From Year Ago
source:  Board of Governors of the Federal Reserve System (US), Commercial and Industrial Loans, All Commercial Banks [BUSLOANS], retrieved from FRED, Federal Reserve Bank of St. Louis December 6, 2017:
The Yield Curve
Many people believe that the Yield Curve is a leading economic indicator for the United States economy.
On March 1, 2010, I wrote a post on the issue, titled “The Yield Curve As A Leading Economic Indicator.”
While I continue to have the above-stated reservations regarding the “yield curve” as an indicator, I do believe that it should be monitored.
Below is a yield-curve proxy chart showing the spread between the 10-Year Treasury and 2-Year Treasury using constant maturity securities.  This daily chart is from June 1, 1976 through December 7, 2017, with recessionary periods shown in gray. This chart shows a value of .57%:
T10Y2Y_12-8-17
source:  Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity [T10Y2Y], retrieved from FRED, Federal Reserve Bank of St. Louis December 10, 2017:
Population Growth
Shown below is a long-term chart of population growth on a “Percent Change From A Year Ago” basis with value .7%.  The declining nature of the growth rate is notable and may in itself may deserve consideration as an economic indicator:
Total Population Percent Change From Year Ago
source:  U.S. Bureau of the Census, Total Population: All Ages including Armed Forces Overseas [POP], retrieved from FRED, Federal Reserve Bank of St. Louis December 10, 2017:
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2659.99 as this post is written

Monday, December 11, 2017

2018 Estimates For S&P500 Earnings & Price Levels

In the December 11, 2017 edition of Barron’s, the cover story is titled “2018 Outlook:  The Bull Market’s Next Act.”
Included in the story, 10 investment strategists give various forecasts for 2017 including S&P500 profits, S&P500 year-end price targets, GDP growth, and 10-Year Treasury Note Yields.
A couple of excerpts:
Given synchronized global growth and rising corporate profits, 2018 could be another good year for stocks, notwithstanding the bull’s advancing age. The S&P 500 could gain about 7%, mirroring similar gains in corporate profits, according to the consensus forecast of 10 investment strategists at major U.S. investment banks and money-management firms surveyed by Barron’s each December. The group’s predictions range from 2675 to 3100, with a mean estimate of about 2840.
Also:
OUR PROGNOSTICATORS EXPECT S&P 500 earnings to climb to $145 in 2018 from an expected $131.45 this year. Most estimates assume that global growth will spur earnings gains, with an additional boost coming from U.S. tax cuts. Depending on the final tax bill, they figure that lower corporate taxes could be worth 5% to 10% of earnings growth, or anywhere from $7 to $14 a share. But in the unlikely event that no tax cuts are passed, the market could drop sharply.
Industry analysts forecast S&P earnings of $146.20 for next year, not including tax cuts. If analysts revise their estimates higher in coming months to account for the positive impact of lower taxes, stocks could get a further boost.
As seen in the article, the investment strategists expect an average 2018 GDP growth of 2.595%.
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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2658.04 as this post is written

“Not In Labor Force” Statistic – As Of December 2017

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.
Also, on February 9, 2015 I wrote another post titled Unemployment And The ‘Not In Labor Force’ Statistic,” in which I discussed various facets of this measure.
Below is an updated chart regarding this statistic.  The current figure, last updated on December 8, 2017 depicting data through November 2017, is 95.483 million people (Not Seasonally Adjusted):
Not In Labor Force chart
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Not In Labor Force [LNU05000000] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed December 11, 2017;
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2651.50 as this post is written

Friday, December 8, 2017

Average Hourly Earnings Trends

I have written many blog posts concerning the worrisome trends in income and earnings.
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 = $26.55):
(click on chart to enlarge image)(chart last updated 12-8-17)
CES0500000003
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 8, 2017:
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 12-8-17)
CES0500000003 Percent Change From Year Ago
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 = $22.24):
(click on chart to enlarge image)(chart last updated 12-8-17)
AHETPI
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 8, 2017:
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 12-8-17)
AHETPI Percent Change From Year Ago
I will continue to actively monitor these trends, especially given the post-2009 dynamics.
_________
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 2647.03 this post is written

U-3 And U-6 Unemployment Rate Long-Term Reference Charts As Of December 8, 2017

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 4.1% unemployment rate:
(click on charts to enlarge images)(charts updated as of 12-8-17)
U-3 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 8, 2017;
Here is the U-6 chart, currently showing a 8.0% unemployment rate:
U-6 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 8, 2017;
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2648.68 as this post is written

3 Critical Unemployment Charts – December 2017

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 = 9.6 weeks):
(click on charts to enlarge images)(charts updated as of 12-8-17)
Median Duration Of Unemployment
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 8, 2017;
Here is the chart for Unemployed 27 Weeks and Over (current value = 1.581 million):
unemployed 27 weeks and over
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 8, 2017;
Here is the chart for Total Nonfarm Payrolls (current value = 147.241 million):
Total Nonfarm Payrolls
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 8, 2017;
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” category.  This commentary includes the April 24, 2012 five-part post titled “The Unemployment Situation Facing The United States”, 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
SPX at 2647.43 as this post is written

Building Financial Danger – December 8, 2017 Update

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 in this site concerning both ongoing and recent “negative developments.”  These developments, as well as other exceedingly problematic 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 as well – will occur.
(note: the “next crash” and its aftermath has great 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” category)
As reference, below is a daily chart since 2008 of the S&P500 (through December 8, 2017 with a last price of 2636.98), 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)
S&P500 since 2008 chart
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2636.98 as this post is written

Thursday, December 7, 2017

Total Household Net Worth As Of 3Q 2017 – Two Long-Term Charts

In the last post (“Total Household Net Worth As A Percent Of GDP 3Q 2017“) I displayed a long-term chart depicting Total Household Net Worth as a percentage of GDP.
For reference purposes, here is Total Household Net Worth from a long-term perspective (from 1945:Q4 through 2017:Q3).  The last value (as of the December 7, 2017 update) is $96.93918 Trillion:
(click on each chart to enlarge image)
U.S. Total Household Net Worth
Also of interest is the same metric presented on a “Percent Change from a Year Ago” basis:
Total Household Net Worth Percent Change From Year Ago
Data Source: FRED, Federal Reserve Economic Data, Board of Governors of the Federal Reserve System; accessed December 7, 2017:
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2636.98 as this post is written

Total Household Net Worth As A Percent Of GDP 3Q 2017

The following chart is from the CalculatedRisk post of December 7, 2017 titled “Fed’s Flow of Funds:  Household Net Worth increased in Q3.” It depicts Total Household Net Worth as a Percent of GDP.  The underlying data is from the Federal Reserve’s Z.1 report, “Financial Accounts of the United States“:
(click on chart to enlarge image)
Household net worth as a percentage of GDP
As seen in the above-referenced CalculatedRisk post:
The net worth of households and nonprofits rose to $96.9 trillion during the third quarter of 2017. The value of directly and indirectly held corporate equities increased $1.1 trillion and the value of real estate increased $0.4 trillion.
also:
The Fed estimated that the value of household real estate increased to $24.2 trillion in Q3. The value of household real estate is now above the bubble peak in early 2006 – but not adjusted for inflation, and this also includes new construction.
As I have written in previous posts concerning this Household Net Worth (as a percent of GDP) topic:
As one can see, the first outsized peak was in 2000, and attained after the stock market bull market / stock market bubbles and economic strength.  The second outsized peak was in 2007, right near the peak of the housing bubble as well as near the stock market peak.
also:
I could extensively write about various interpretations that can be made from this chart.  One way this chart can be interpreted is a gauge of “what’s in it for me?” as far as the aggregated wealth citizens are gleaning from economic activity, as measured compared to GDP.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2636.98 as this post is written