Saturday, February 14, 2015

US Equity Market Week in Review: Upside Break-Out Edition

This is over at

International Week in Review: Hope for the EU and Concern About Australia Edition

This is over at

Weekly Indicators for February 9 - 13 at

 - by New Deal democrat

My Weekly Indicator post is up at

While the overall tone is positive, negatives in the coincident indicators increased considerably this week.  With inventories high, we may be starting a correction.

Thursday, February 12, 2015

"It's just a recovery in low wage jobs." Not anymore

 - by New Deal democrat

Here is something I've been meaning to post for the last 6 months!  Over the last 5 years, from time to time the National Employment Law Project has posted periodic updates on the types of jobs created since the bottom for jobs in the beginning of 2010.  Each graph is cumulative, i.e., each graph includes the time frame included in the previous graph.  Note what happens over time, in particular with higher paying jobs.

The first update covered the period only through July 2010:

Note that only about 5% of all jobs created in the first few months after the bottom were in the top 2 quintiles.

The next update extended the period through January 2011, and divides into 3 rather than 5 wage brackets:

Note that now, 179,000 of 1,270,000 jobs, or 14% of all jobs created, are in the top 1/3.

The next update was in August 2012:

According to the NELP report accompanying the graph, high wage jobs accounted for 20% of all recovery growth, while mid-wage jobs accounted for 22%, and low wage jobs accounted for 58%.

The next update was February 2014:

By now, according to the NELP, 30% of all jobs created since the bottom in February 2010 were high wage jobs, 26% were mid-wage jobs, and 44% were low wage jobs.

Finally, in August 2014, the NELP published the following graph which covered only the period from July 2013 through July 2014:

According to their report, 33% of all jobs created in that period were high wage jobs, with only 26% mid-wage jobs, and 41% low wage jobs. In an accompanying footnote, they stated that 38% of all jobs created in the first 7 months of 2014 were high wage jobs.

In case it isn't already clear, here is the percentage of high wage jobs created over each time frame:

2/10 - 7/10* 5%
2/10 - 1/11 14%
Q1 2010 - Q1 2012 20%
2/10 - 2/14 30%
7/13 - 7/14 33%
1/14 - 7/14 38%

*(measured by top 2 quintiles)

Since all but the last two measures are cumulative, that means that the most recent job growth in each was even better than reported.  For example, the figures from February 2010 through January 2011 and through February 2014 make it easy to calculate the period from January 2011 to February 2014, which I've calculated for the list below:

1/11 - 2/14:
High wage jobs (2.424 million) 33%
Mid-wage jobs  (1.814 million) 24%
Low wage jobs  (3.211 million) 43%

While low wage jobs in this period predominated over mid-wage jobs, high wage jobs were created at a normal rate.

On the other hand, it is fair to say that since the NELP calculated that higher paying  jobs were disproportionately lost during the Great Recession - chiefly in manufacturing and government - the net change including both the recession and the recovery has still been from high paying towards low paying jobs.

One of my theories has been that this jobs recovery isn't so much different in kind from past job recoveries, but rather different in scale. The limited data I have been able to access suggests that lower wage jobs always come back first, with higher wage jobs increasing later in a recovery. The Great Recession was so deep that it took a long time for lower wage jobs to come back on for higher wage jobs to begin filling in.

On a similar note, here is Prof. Menzie Chinn at Econbrowser posting a graph from Torsten Slok of Deutsche Bank questioning whether it has been a low wage recovery at all:

Discusing Slok's work, Shane Ferro at Business Insider wrote:

What's the difference here? It's all in the methods. 
In the NELP analysis, the division of low, medium, and high jobs is made by lining up each industry's median wage, then dividing that into three equal groups. . . . . 
On the other hand, Slok's buckets aren't equal. He breaks down high, medium, and low wage jobs by occupational groups . . . . 
This delineation means that Slok puts far fewer workers in the low wage bucket than the other two, therefore the number of jobs created in that bucket is necessarily going to be smaller. It's not perfect, but breaking it down by occupation, rather than industry, gets a little more granular about how incomes correlate to each bucket.
I mentioned last week that median wage growth in the fourth quarter, as measured by the Employment Cost Index, outpaced average (mean) wage growth as measured in the monthly jobs reports.  That might just be an anomaly, or it might be the relative increase in higher wage jobs showing up in the official data.

Weak retail sales are a gas

 - by New Deal democrat

I have a new post up at about this morning's retail sales report.

Strip out gas, and retail sales have basically been flat for 3 months. So far, it looks like consumers are saving the money they have saved at the gas station.

The Remarkable Depth and Breadth of Deflation

This is over at

Wednesday, February 11, 2015

Gas having typical February rebound so far

 - by New Deal democrat

I have a new post up at

So far, gas prices are behaving as they have in the past coming off bottoms.


 - by New Deal democrat

I'm going through a bout of blogger ennui. Not much dramatic is happening, and there's no big, changed insight into the immediate future.

I suspect retail sales will disappoint tomorrow, because the weekly numbers for January weren't very strong - it looks like consumers are saving a lot of their gas money.

The latest Eurocrisis is playing out as anticipated. Germany and the Euro institutions are squeezing Greece like a boa constrictor squeezes prey.  They will succeed unless Greece has the will to actually leave the Euro.  If so, then there will be a collective gasp from the rest of the EU as it sinks in that the Euro might actually fracture. That is the point at which a deal might be made.  From the US viewpoint, the Eurocrisis isn't enough to derail our economic expansion, although it will have an impact. The US interest is that there not be a disorderly dissolution of the Euro. An orderly dissolution might even be preferable to the continuation of an intact Euro in its present form.

Almost nobody except for the permabears is calling for a US recession this year.  Mish ridiculously based his call on residential construction, even though residential construction lags permits and starts by about a year. So we know where construction is going to go this year, and it isn't to recessionary levels.

The rest of the usual Doomer crew has moved on to other topics. Since jobs aren't cooperating, the best they've been able to come up with to whine about a scarequote "recovery" is the stagnation in wages (except, of course, we made a 35 year high in average real hourly wages in December).

 Politically, the Democrats aren't going to bother proposing anything serious. So far, the Republicans have accomplished exactly zero - which is the best we can hope for there. Obama has shown no sign of being willing to lift a finger to sign an order raising the maximum pay subject to overtime rules (entirely within his power). So, unless the Supreme Court decides to hold the 20th century unconstitutional (for which, let's face it, there are at least 4 votes),  the economy will probably follow its course undisturbed by Washington.

Which leaves me with nothing big to report to you. I'm still trying to get a better leading indicator for wage growth - without much success.  Aside from that, I've got a bunch of little things I can update, so I will probably inundate you with them.

Just How Sick Is the EU?

This is over at

Monday, February 9, 2015

Five graphs to watch in 2015: first update

 - by New Deal democrat

At the end of last year, I highlighted 5 graphs to watch in 2015.  Now that we have the January jobs report, and some significant developments in gas prices and mortgage rates, let me update them.

#5.  Mortgage refinancing

The Mortgage Bankers Association reported that refinancing applications soared by about 50% in the last month, as mortgage rates reached new 18 month lows.  Bill McBride has the graph:

Refinancing is coming back to life.  This puts more money in the pockets of the homeowners who get lower monthly mortgage payments.

#4 Gas prices

Here is a graph of gas prices (blue) compared with average hourly earnings (red) since the turn of the Millennium:

With the exception of a few months in the worst of the Great Recession and late 2001 through 2003, an hour's wage now buys more gas than at any time in the last 15 years.  Again, this puts more money in the pockets of virtually all consumers.

#3 Part time employment for economic reasons

This is a graph of part time workers for economic reasons expressed as a percentage of the labor force:

In January this ratio improved slightly, bringing us equivalent to its levels in 1988, but still 2% (about 3 million) above the boom level of 1999 and about 1.5% (2.25 million) above the level of 2007.

#2 Not in Labor force but want a job now:

This also moved in the right direction in January, although it is still about 600,00 above its post-recession low of November 2013 (just prior to Congress's cutoff of extended unemployment benefits) and some 1.9 million above its 1999 and 2007 lows.

#1 Nominal wage growth

After an anomalous decline in average hourly wages in December, between revisions and a big increase in January we have seen the best reading for real average wages since 1979, but nominal wages came in at 2% or less for the second month in a row:

This is the only metric among the 5 I think are most important this year, that has moved in the wrong direction.  The decline in the last 5 months is frankly troubling.

 Here is the same graph, but normed so that this month's YoY% wage growth and unemployment rate = 0:  

Compare our present expansion with the previous three.  In the 1980s and 1990s, by the time we improved to 5.7% unemployment, nominal wage growth was approaching 3% YoY.  On the other hand, the 2000s expansion had similar numbers to the present - in fact, YoY growth in nominal wages was still declining. Nominal wage growth only approached 3% YoY as the unemployment rate fell to 5%.  If that is the pattern we are following, then even with if the declining trend in the unemployment rate continues, we won't see a marked improvement in wage growth until the second half of this year.