Tuesday, January 31, 2017

Employment Cost Index (ECI) – Fourth Quarter 2016

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 January 31, 2017, the ECI for the fourth quarter was released.  Here are two excerpts from the BLS release titled “Employment Cost Index - December 2016“:
Compensation costs for civilian workers increased 0.5 percent, seasonally adjusted, for the 3-month period ending in December 2016, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.5 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.4 percent.
also:
Compensation costs for civilian workers increased 2.2 percent for the 12-month period ending in December 2016. In December 2015, compensation costs increased 2.0 percent.
Below are three charts, updated on January 31, 2017 that depict various aspects of the ECI, which is seasonally adjusted (SA):
The first depicts the ECI, with a value of 128.0:
ECIALLCIV_1-31-17
source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian[ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed January 31, 2017:
The second chart depicts the ECI on a “Percent Change from Year Ago” basis:
ECIALLCIV_1-31-17 percent change from year ago
The third chart depicts the ECI on a “Percent Change” (from last quarter) basis:
ECIALLCIV_1-31-17 .5 percent change from prior quarter
_________
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 2269.70 as this post is written

Consumer Confidence Surveys – As Of January 31, 2017

Doug Short had a blog post of January 31, 2017 (“Consumer Confidence Retreated in January“) in which he presents the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:
(click on charts to enlarge images)
Conference Board Consumer Confidence
Michigan Consumer Sentiment
There are a few aspects of the above charts that I find highly noteworthy.  Of course, until the recent sudden upswing, the continued subdued absolute levels of these two surveys was disconcerting.
Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)
While I don’t believe that confidence surveys should be overemphasized, I find these readings to be very problematical, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2269.70 as this post is written

Monday, January 30, 2017

Another Recession Probability Indicator – Updated Through Q3 2016

Each month I have been highlighting various estimates of U.S. recession probabilities.  The latest update was that of January 5, 2017, titled “Recession Probability Models – January 2017.”
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 5.30%, for the third quarter of 2016, last updated on January 30, 2017 (after the January 27, 2017 Gross Domestic Product Q4 2016 Advance Estimate (pdf):
GDP-Based Recession Indicator Index
source:  Hamilton, James, GDP-Based Recession Indicator Index [JHGDPBRINDX], retrieved from FRED, Federal Reserve Bank of St. Louis on January 30, 2017:
_________
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 2275.91 as this post is written

Friday, January 27, 2017

Velocity Of Money – Charts Updated Through January 27, 2017

Here are three charts from the St. Louis Fed depicting the velocity of money in terms of the MZM, M1 and M2 money supply measures.
All charts reflect quarterly data through the 4th quarter of 2017, and were last updated as of January 27, 2017.  As one can see, one of the three measures is at an all-time low for the periods depicted:
Velocity of MZM Money Stock, current value = 1.297:
MZM money velocity
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 27, 2017:
Velocity of M1 Money Stock, current value = 5.655:
M1 Money Velocity
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 27, 2017:
Velocity of M2 Money Stock, current value = 1.436:
M2 money velocity
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 27, 2017:
_________
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 2294.69 as this post is written

Real GDP Chart Since 1947 With Trendline – 4th Quarter 2016

For reference purposes, below is a chart from Doug Short’s “Q4 GDP Advance Estimate: Real GDP at 1.9%, Worse Than Forecast ” post of January 27, 2017, depicting Real GDP, with a trendline, as depicted.  This chart reflects the Gross Domestic Product Q4 2016 Advance Estimate (pdf) of January 27, 2017:
Real GDP
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2293.93 as this post is written

Thursday, January 26, 2017

Updates Of Economic Indicators January 2017

Here is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:
The January 2017 Chicago Fed National Activity Index (CFNAI) updated as of January 26, 2017: (current reading of CFNAI is .14; current reading of CFNAI-MA3 is -.07):
CFNAI January 2017
As of January 20, 2017 (incorporating data through January 13, 2017) the WLI was at 145.0 and the WLI, Gr. was at 12.0%.
A chart of the WLI,Gr., from Doug Short’s ECRI update post of January 20, 2017:
ECRI WLI,Gr.
Here is the latest chart, depicting the ADS Index from December 31, 2007 through January 21, 2017:
ADS Index
The Conference Board Leading (LEI), Coincident (CEI) Economic Indexes, and Lagging Economic Indicator (LAG):
As per the January 26, 2017 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased,” (pdf) the LEI was at 124.6, the CEI was at 114.3, and the LAG was 123.4 in December.
An excerpt from the  release:
“The U.S. Leading Economic Index increased in December, suggesting the economy will continue growing at a moderate pace, perhaps even accelerating slightly in the early months of this year,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “December’s large gain was mainly driven by improving sentiment about the outlook and suggests the business cycle still showed strong momentum in the final months of 2016.”
Here is a chart of the LEI from Doug Short’s Conference Board Leading Economic Index update of January 16, 2017:
Conference Board LEI
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2299.51 as this post is written

Wednesday, January 25, 2017

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the January 19, 2017 update (reflecting data through January 13, 2017) is -1.210.
Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.
Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).
Here are summary descriptions of each, as seen in FRED:
The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.
The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.
For further information, please visit the Federal Reserve Bank of Chicago’s web site:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on January 25, 2017 incorporating data from January 5,1973 through January 20, 2017, on a weekly basis.  The January 20, 2017 value is -.79:
NFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 25, 2017:
The ANFCI chart below was last updated on January 25, 2017 incorporating data from January 5,1973 through January 20, 2017, on a weekly basis.  The January 20 value is -.15:
ANFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 25, 2017:
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2297.12 as this post is written

Monday, January 23, 2017

Money Supply Charts Through December 2016

For reference purposes, below are two sets of charts depicting growth in the money supply.
The first shows the MZM (Money Zero Maturity), defined in FRED as the following:
M2 less small-denomination time deposits plus institutional money funds.
Money Zero Maturity is calculated by the Federal Reserve Bank of St. Louis.
Here is the “MZM Money Stock” (seasonally adjusted) chart, updated on January 20, 2017 depicting data through December 2016, with a value of $14,632.7 Billion:
MZM money supply
Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis:
MZM money supply percent change from year ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 23, 2017:
The second set shows M2, defined in FRED as the following:
M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds (MMMFs). Seasonally adjusted M2 is computed by summing savings deposits, small-denomination time deposits, and retail MMMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.
Here is the “M2 Money Stock” (seasonally adjusted) chart, updated on January 19, 2017, depicting data through December 2016, with a value of $13,249.2 Billion:
M2 money supply
Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis:
M2 money supply percent change from year ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 23, 2017:
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2261.93 as this post is written

Markets During Periods Of Federal Reserve Intervention – January 20, 2017 Update

In the August 9, 2011 post (“QE3 – Various Thoughts“) I posted a chart that depicted the movements of the S&P500, 10-Year Treasury Yield and the Fed Funds rate spanning the periods of various Federal Reserve interventions since 2007.
For reference purposes, here is an updated chart (through January 20, 2017) from Doug Short’s blog post of January 20 (“Treasury Yields:  A Long-Term Perspective“):
U.S. markets during Federal Reserve intervention
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2271.31 as this post is written

The U.S. Economic Situation – January 23, 2017 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 January 20, 2017, with a last value of 19827.25):
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
DJIA 1900-January 20 2017
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2271.31 as this post is written

Thursday, January 19, 2017

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the January 19, 2017 update (reflecting data through January 13, 2017) is -1.210.
Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.
Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).
Here are summary descriptions of each, as seen in FRED:
The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.
The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.
For further information, please visit the Federal Reserve Bank of Chicago’s web site:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on January 19, 2017 incorporating data from January 5,1973 through January 13, 2017, on a weekly basis.  The January 13, 2017 value is -.78:
NFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 19, 2017:
The ANFCI chart below was last updated on January 19, 2017 incorporating data from January 5,1973 through January 13, 2017, on a weekly basis.  The January 13 value is -.18:
ANFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 19, 2017:
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2266.88 as this post is written

Wednesday, January 18, 2017

Trends Of S&P500 Earnings Forecasts

S&P500 earnings trends and estimates are a notably important topic, for a variety of reasons, at this point in time.
FactSet publishes a report titled “Earnings Insight” that contains a variety of information including the trends and expectations of S&P500 earnings.
For reference purposes, here are two charts as seen in the “Earnings Insight” (pdf) report of January 13, 2017:
from page 20:
(click on charts to enlarge images)
2016 and 2017 S&P500 earnings trends
from page 21:
S&P500 Annual Earnings
_____
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 2271.89 as this post is written

S&P500 EPS Annual Estimates For Years 2016 Through 2018

As many are aware, Thomson Reuters publishes earnings estimates for the S&P500.  (My other posts concerning S&P earnings estimates can be found under the S&P500 Earnings label)
The following estimates are from Exhibit 20 of the “S&P500 Earnings Scorecard” (pdf) of January 17, 2017, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2014 value is $118.78/share and the Year 2015 value is $117.46:
Year 2016 estimate:
$118.02/share
Year 2017 estimate:
$132.66/share
Year 2018 estimate:
$148.60/share
_____
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 2267.89 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2016 & 2017 – As Of January 12, 2017

As many are aware, Standard & Poor’s publishes earnings estimates for the S&P500.  (My posts concerning their estimates can be found under the S&P500 Earnings label)
For reference purposes, the most current estimates are reflected below, and are as of January 12, 2017:
Year 2016 estimates add to the following:
-From a “bottom up” perspective, operating earnings of $108.82/share
-From a “top down” perspective, operating earnings of N/A
-From a “bottom up” perspective, “as reported” earnings of $99.26/share
Year 2017 estimates add to the following:
-From a “bottom up” perspective, operating earnings of $130.78/share
-From a “top down” perspective, operating earnings of N/A
-From a “bottom up” perspective, “as reported” earnings of $122.13/share
Year 2018 estimates add to the following:
-From a “bottom up” perspective, operating earnings of $147.27/share
-From a “top down” perspective, operating earnings of N/A
-From a “bottom up” perspective, “as reported” earnings of N/A
_____
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 2267.89 as this post is written

Tuesday, January 17, 2017

Disturbing Charts (Update 25)

I find the following charts to be disturbing.   These charts would be disturbing at any point in the economic cycle; that they (on average) depict such a tenuous situation now – 91 months after the official (as per the September 20, 2010 NBER BCDC announcement) June 2009 end of the recession – is especially notable.
These charts raise a lot of questions.  As well, they highlight the “atypical” nature of our economic situation from a long-term historical perspective.
All of these charts are from the Federal Reserve, and represent the most recently updated data.
(click on charts to enlarge images)
Housing starts (last updated 12-16-16):
Housing Starts
US. Bureau of the Census, Housing Starts: Total: New Privately Owned Housing Units Started [HOUST], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/HOUST/, January 16, 2017.
The Federal Deficit (last updated 1-9-17):
The Federal Deficit
US. Office of Management and Budget, Federal Surplus or Deficit [-] [FYFSD], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYFSD/, January 16, 2017.
Federal Net Outlays (last updated 1-9-17):
Federal Outlays
US. Office of Management and Budget, Federal Net Outlays [FYONET], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYONET/, January 16, 2017.
State & Local Personal Income Tax Receipts  (% Change from Year Ago)(last updated 7-29-16):
US. Bureau of Economic Analysis, State and local government current tax receipts: Personal current taxes: Income taxes [ASLPITAX], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/ASLPITAX/, January 16, 2017.
Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated 1-13-17):
total loans and leases
Board of Governors of the Federal Reserve System (US), Loans and Leases in Bank Credit, All Commercial Banks [TOTLL], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTLL/, January 16, 2017.
Bank Credit – All Commercial Banks (% Change from Year Ago)(last updated 1-13-17):
Total Bank Credit percent change from year ago
Board of Governors of the Federal Reserve System (US), Bank Credit of All Commercial Banks [TOTBKCR], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTBKCR/, January 16, 2017.
M1 Money Multiplier (last updated 1-12-17):
M1 Money Multiplier
Federal Reserve Bank of St. Louis, M1 Money Multiplier [MULT], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MULT/, January 16, 2017.
Median Duration of Unemployment (last updated 1-6-17):
Median Duration Of Unemployment
US. Bureau of Labor Statistics, Median Duration of Unemployment [UEMPMED], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/UEMPMED/, January 16, 2017.
Labor Force Participation Rate (last updated 1-6-17):
Civilian Labor Force Participation Rate
US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CIVPART/, January 16, 2017.
The Chicago Fed National Activity Index (CFNAI) 3-month moving average (CFNAI-MA3)(last updated 12-22-16):
CFNAI-MA3
Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CFNAIMA3/, January 16, 2017.
I will continue to update these charts on an intermittent basis as they deserve close monitoring…
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2274.64 as this post is written