Saturday, November 12, 2016

Weekly Indicators for November 7 - 11 at

 - by New Deal democrat

My Weekly Indicator post is up at

The big story this week was the upward spike in stock prices aind interest rates that presumably was a result of the US presidential election.  These have different ramifications for the near and further future.

Friday, November 11, 2016

September JOLTS report: this cycle diverges from the last

 - by New Deal democrat

The JOLTS Survey, like the Labor Market Conditions Index and the Senior Loan Officer Survey that I discussed yesterday, has great promise, but like those surveys, does not have a long enough real-time history to use with full confidence.

That shortcoming is on display in the September report, released earlier this week. 

The below graph shows hires (blue), job openings (red), and quits (green, right scale) from the inception of the series nearly 20 years ago:

In the one and only complete cycle since the series began, hires and quits peaked first, while openings continued to increase until shortly before the onset of the 2008 recession.  During this cycle, hires have gone sideways for over a year, while openings continued to rise until recently.  Meanwhile quits just spiked to a new high. 

Another way to look at this is YoY.  Here's the YoY% change in from 2004-07:

Here is the YoY% change in the last several years:

In the last cycle, YoY job openings held up until nearly the end.  This time around, it appears at least for now that openings may be turning before quits.

In other words, unless job openings make new highs in the months ahead, this cycle will not match the last one.  We just don't have enough history with the JOLTS series to know which resolution is more likely.

One related point is that, generally, hiring slows down before firing increases shortly before the expansion ends.  Here it is, comparing the quarterly average of the m/m% change in employment growth vs. the quarterly average of new jobless claims (right scale, inverted):

Note that employment growth (which is the net of hiring over firing) decelerates markedly before layoffs begin to increase (shown as a downturn in the graph).

JOLTS decomposes this into hiring (blue) vs. firing (red, right scale)(averaged quarterly):

We can see in the 2002-07 cycle that hiring decelerated before firing turned up. It appears that the same thing is happening now.

So the bulk of the evidence from JOLTS is that we continue to have late cycle deceleration, but with no imminent downturn.  But take this with an extra grain of salt.

Thursday, November 10, 2016

Lending and Labor market conditions flash yellow (still)

  • - by New Deal democrat

... and, rather than kill myself, it is back to econmic blogging ....

Two data series that are good candidates for long leading indicators, but don't have a long enough real-time records to rely on them too much, were updated earlier this week, and they continue to flash caution.

This post is up at

Trump's First 100 Days: No Growth Here

Let's take a look at Trump's proposed economic plan to see if increased growth is in the cards.

In the first 100 days, he's promised two things: trade renegotiation and tax cuts.

“We don’t win on trade” was a frequent refrain heard at Trump rallies, and in response, the real estate mogul has said he will renegotiate NAFTA and withdraw from the Trans-Pacific Partnership. He said he will direct his secretary of the treasury to pursue action against Chinese currency manipulation.

Below are 2 charts: the first shows total Canadian and Mexican imports while the second shows Chinese imports:

The top chart is seasonally adjusted while the bottom chart isn't.  That's actually an unimportant point.  Instead simply note that trade with both countries has risen at a very strong pace for several decades.

     Trump wants to renegotiate NAFTA, which creates a huge problem: companies have incorporated NAFTA into their operations for the last 20 years.  For example, car companies have already moved plants across the border, as have other manufacturers.  As for China, it too has been incorporated into the global value chain; companies have already transferred their facilities and operations to the mainland for a variety of reason.  Renegotiating treaties with both won't undo that change; it's already built into the global system.  

     What it will do is potentially lead to a traded war, where countries begin to increase tariffs on imports as well as adding quotas to imports.  This is a very bad idea; in fact, just such a situation (the passage of Smmot Hawley in 1930) greatly exacerbated the Great Depression.

     Next, we have taxes:

On taxes, Trump pledged “the biggest tax cut since Ronald Reagan.” The Economic Recovery Tax Act of 1981 and Tax Reform Act of 1986, passed during Reagan’s presidency, simplified the tax code and lowered marginal tax rates by more than 20 percent for most citizens. Trump indicated that he will seek to reduce tax brackets from seven to three and called for business tax rates to be reduced to 15 percent.

Once again, supply side economics enters our political discussion.  And it won't work as advertised.  Republicans will point to the Reagan tax cut as proof that it does.  But  what they'll fail to mention is that in the 1980s, the labor force participation rate started to increase, which it continued to do until the late 1990s.  This development was primarily responsible for our economic growth in the 80s and 90s.  And as our population has aged our growth has slowed.  This exact same situation is also occurring in Japan and the EU (they also have agin populations and slower labor force growth; it's a big reason why Germany was so emphatic about letting refugees in).  So, unless we start increasing our labor force (by increasing immigration), we're pretty much stuck in Secular Stagnation mode.

     Also consider: Kansas implemented supply side tax cuts a few years ago. The results have been disastrous (see this post from Menzie Chen for further information)  

     And finally, a massive tax cut will increase wealth inequality, which will exacerbate the economic environment that led to Trumpism in the first place.

    So, to recap, Trump's policies so far show no increased growth potential.  But he could start a debilitating trade war and increase wealth inequality.  


Wednesday, November 9, 2016

The 2016 election economy: (nearly) final result

 - by New Deal democrat

About an hour ago as I type this, Hillary Clinton pulled ahead of Donald Trump in the popular vote, 59.2 M vs. 59.0 M.  

I have been saying for months that the economy forecast a narrow popular vote win for the incumbent party, on the order of 51%/49% (although with the recent good GDP and employment reports, I did up that to 52%/48%).  IF the current numbers hold up, that will have been pretty close.  As of this moment, the percentages are:

Clinton 47.7% 
Trump 47.5%
others 4.8%

Certainly closer than my personal prediction of 49.5%, 46.0%, and 4.5% respectively, but also certainly consistent with the plodding economic expansion, and well within the range of error of most economic electoral models -- which of course to not forecast the Electoral College.

Tuesday, November 8, 2016

Economics tomorrow, civic duty today

 - by New Deal democrat

Regular economic blogging, featuring the senior loan officers survey and the labor market conditions index, will resume tomorrow.

Today, after doing my civic duty, I will buy a nice bottle of red wine.  

After that I plan on in-depth viewing of The Weather Channel's "Escape the Election No Coverage," with a dollop or two of the Investigative Discovery channel.  A little after 9 I will check in on the Electoral Map for a bit.  If the outcome isn't clear I'll tune in for a bit after 10.  If it still isn't decided I will be polishing off the bottle.

See you on the other side.