Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – August 12, 2016 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

Below are three long-term charts, from Doug Short’s blog post of August 12, 2016 titled “ECRI Weekly Leading Index:  Unchanged from Last Week.”  These charts are on a weekly basis through the August 12, 2016 release, indicating data through August 5, 2016.

Here is the ECRI WLI (defined at ECRI’s glossary):

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This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

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This last chart depicts, on a long-term basis, the WLI, Gr.:

_________

I post various economic 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 2181.74 as this post is written

Philadelphia Fed – 3rd Quarter 2016 Survey Of Professional Forecasters

The Philadelphia Fed 3rd Quarter 2016 Survey of Professional Forecasters was released on August 12, 2016.  This survey is somewhat unique in various regards, such as it incorporates a longer time frame for various measures.

The survey shows, among many measures, the following median expectations:

Real GDP: (annual average level)

full-year 2016:  1.5%

full-year 2017:  2.3%

full-year 2018:  2.2%

full-year 2019:  2.2%

Unemployment Rate: (annual average level)

for 2016: 4.8%

for 2017: 4.6%

for 2018: 4.6%

for 2019: 4.7%

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Regarding the risk of a negative quarter in real GDP in any of the next few quarters, mean estimates are 10.6%, 15.6%, 18.5%, 19.0% and 21.0% for each of the quarters from Q3 2016 through Q3 2017, respectively.

As well, there are also a variety of time frames shown (present quarter through the year 2025) with the median expected inflation (annualized) of each.  Inflation is measured in Headline and Core CPI and Headline and Core PCE.  Over all time frames expectations are shown to be in the 1.4% to 2.3% range.

_____

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 2180.40 as this post is written

Long-Term Credit Spread Chart – August 12, 2016

In the October 6, 2015 post (“Comparisons Of Economic And Financial Aspects – 2008 And 2015“) I discussed credit spreads and featured a chart of the spread between Moody’s Seasoned Baa Corporate Bond and the 10-Year Treasury Constant Maturity.

For reference, here is an updated long-term chart of that measure, with a current reading (updated as of August 11, 2016 with a value from August 10) of 2.71%:

Federal Reserve Bank of St. Louis, Moody’s Seasoned Baa Corporate Bond Yield Relative to Yield on 10-Year Treasury Constant Maturity [BAA10Y], retrieved from FRED, Federal Reserve Bank of St. Louis on August 12, 2016:

https://research.stlouisfed.org/fred2/series/BAA10Y/

_________

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 2185.79 as this post is written

The August 2016 Wall Street Journal Economic Forecast Survey

The August 2016 Wall Street Journal Economic Forecast Survey was published on August 11, 2016.  The headline is “Economists See Election-Induced Uncertainty Harming U.S. Economy.”  As indicated in the article, 62 economists were surveyed, although not every economist answered every question.

I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the “Economist Q&A” section.

An excerpt:

The respondents trimmed their forecasts for economic growth over the course of 2016. The panel now expects growth of 1.8% over the course of 2016, down from an estimate of 2% last month and 2.5% at the beginning of the year. Their forecasts for the unemployment rate were little changed.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 20.95%. The individual estimates, of those who responded, ranged from 1% to 50%.  For reference, the average response in July's survey was 21.91%.

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The current average forecasts among economists polled include the following:

GDP:

full-year 2016:  1.8%

full-year 2017:  2.2%

full-year 2018:  2.1%

Unemployment Rate:

December 2016: 4.7%

December 2017: 4.6%

December 2018: 4.7%

10-Year Treasury Yield:

December 2016: 1.80%

December 2017: 2.34%

December 2018: 2.79%

CPI:

December 2016:  1.7%

December 2017:  2.2%

December 2018:  2.2%

Crude Oil  ($ per bbl):

for 12/31/2016: $46.15

for 12/31/2017: $51.78

for 12/31/2018: $54.98

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” label)

_____

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 necessarily 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 2186.24 as post is written

Zillow Q3 2016 Home Price Expectations Survey – Summary & Comments

On August 10, 2016, the Zillow Q3 2016 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

An excerpt from the Press Release:

Overall, the experts surveyed predict home price appreciation across the country will be up over 4 percent year-over-year by the end of 2016. They expect home prices to slow down over the next four years and by the end of 2020, they predict home prices will grow at an annual pace of just 2.9 percent.

"Panel-wide, the experts currently expect U.S. home values to finish 2016 with a healthy 4.5 percent year-over-year gain," said Pulsenomics founder Terry Loebs. "This projection implies a somewhat cooler, but still solid, second half of the year. Although further price moderation is expected next year, nearly 90 percent of the panel is projecting lower home value gains in 2017. The longer-run outlook for housing market performance remains steady. Overall, the expected five-year average annual growth rate for home values actually rose, albeit slightly, for the first time in three years."

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Various Q3 2016 Zillow Home Price Expectations Survey charts are available, including that seen below:

As one can see from the above chart, the average expectation is that the residential real estate market, as depicted by the U.S. Zillow Home Value Index, will continually climb.

The detail of the Q3 2016 Home Price Expectations Survey (pdf) is interesting.  Of the 100+ survey respondents, only one (of the displayed responses) forecasts a cumulative price decrease through 2020.  That forecast is from Mark Hanson, who foresees a 15.58% cumulative price decrease through 2020.

The Median Cumulative Home Price Appreciation for years 2016-2020 is seen as 4.50%, 8.47%, 11.94%, 14.75%, and 18.58%, respectively.

For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in Mark Hanson’s above-referenced forecast) will prove too optimistic in hindsight.  From a longer-term historical perspective, such a decline is very mild in light of the wild excesses that occurred over the “bubble” years.

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.  Furthermore, from these price levels there exists outsized potential for a price decline of severe magnitude, unfortunately.  I discussed this downside, based upon historical price activity, in the October 24, 2010 post titled “What’s Ahead For The Housing Market – A Look At The Charts.”

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2176.80 as this post is written

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 August 4, 2016 update (reflecting data through July 29) is -1.13.

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:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on August 10, 2016 incorporating data from January 5,1973 to August 5, 2016, on a weekly basis.  The August 5, 2016 value is -.67:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 10, 2016:

http://research.stlouisfed.org/fred2/series/NFCI

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The ANFCI chart below was last updated on August 10, 2016 incorporating data from January 5,1973 to August 5, 2016, on a weekly basis.  The August 5 value is .29:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 10, 2016:

http://research.stlouisfed.org/fred2/series/ANFCI

_________

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 2176.74 as this post is written

Two Other Views Of Employment Growth

In the last post ("Monthly Changes In Total Nonfarm Payrolls - August 8, 2016") I featured five long-term charts showing the monthly change in the Total Nonfarm Payrolls measure.  While the monthly change in this measure, as well as the official Unemployment Rate (U-3),  are the most prevalent statistics regarding employment and unemployment levels respectively, there are many other lesser-known measures - and associated dynamics - that deserve much greater recognition.  Some of these other unemployment measures have been featured on this site.

Among these lesser-known measures that deserve (much) greater recognition are the Employment-Population Ratio and the "percent change in employment" measure compared to other past economic recoveries [as defined by the NBER BCDC.]

I have discussed the Employment-Population Ratio in the August 11, 2010 post ("Employment-Population Ratio - Chart And Comments") as well as the February 10, 2016 post ("The Employment-Population Ratio.")

Below is an updated chart (from January 1948 through July 2016) of the ratio.  The July 2016 value is 59.7%:

source: US. Bureau of Labor Statistics, Civilian Employment-Population Ratio [EMRATIO], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed August 8, 2016;

https://research.stlouisfed.org/fred2/series/EMRATIO

The second measure is the "percent change in employment" measure compared to other past economic recoveries.  This is one comparison of job creation since the economic recovery as compared against similarly-defined past recovery periods.

Below is a chart from the Federal Reserve Bank of Minneapolis (last updated August 5, 2016) that shows the "Change In U.S. Employment" on a percentage basis of both the current recovery (red line) as well as those previous, as shown:

_________

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 2180.89 as this post is written

Monthly Changes In Total Nonfarm Payrolls – August 8, 2016 Update

For reference purposes, below are five charts that display growth in payroll employment.

Total nonfarm payrolls (data series PAYEMS, which is seasonally adjusted) is defined in Financial Reserve Economic Data [FRED] as:

All Employees: Total Nonfarm, commonly known as Total Nonfarm Payroll, is a measure of the number of U.S. workers in the economy that excludes proprietors, private household employees, unpaid volunteers, farm employees, and the unincorporated self-employed. This measure accounts for approximately 80 percent of the workers who contribute to Gross Domestic Product (GDP).

This measure provides useful insights into the current economic situation because it can represent the number of jobs added or lost in an economy. Increases in employment might indicate that businesses are hiring which might also suggest that businesses are growing. Additionally, those who are newly employed have increased their personal incomes, which means (all else constant) their disposable incomes have also increased, thus fostering further economic expansion.

Generally, the U.S. labor force and levels of employment and unemployment are subject to fluctuations due to seasonal changes in weather, major holidays, and the opening and closing of schools. The Bureau of Labor Statistics (BLS) adjusts the data to offset the seasonal effects to show non-seasonal changes: for example, women's participation in the labor force; or a general decline in the number of employees, a possible indication of a downturn in the economy. To closely examine seasonal and non-seasonal changes, the BLS releases two monthly statistical measures: the seasonally adjusted All Employees: Total Nonfarm (PAYEMS) and All Employees: Total Nonfarm (PAYNSA), which is not seasonally adjusted.

The series comes from the 'Current Employment Statistics (Establishment Survey).'

The source code is: CES0000000001

The first chart shows the monthly change in total nonfarm payrolls since the year 2000:

(click on charts to enlarge images)

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 August 7, 2016;

https://research.stlouisfed.org/fred2/series/PAYEMS

The second chart shows a long-term chart of the same month-over-month change in total nonfarm payrolls (reports of January 1940 through the present report of July 2016):

The third chart shows the aggregate number of total nonfarm payrolls, from January 1939 – July 2016 (July 2016 value of 144.448 million):

The fourth chart shows this same aggregate number of total nonfarm payrolls measure as seen above but presented on a LOG scale:

Lastly, the fifth chart shows the total nonfarm payrolls number on a “percent change from year ago” basis from January 1940 – July 2016:

_________

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 2182.87 as this post is written