Catching up: November JOLTS report

Let me catch up on some data I didn’t examine last week: the November JOLTS report.

It decomposes the jobs numbers into a number of metrics, but is less than 20 years old, so only covers one full business cycle, so is of limited forecasting use.

To reiterate, here is the order in which the JOLTS series peaked during the 2000s expansion:

Hires peaked first, from December 2004 through September 2005
Quits peaked next, in September 2005
Layoffs and Discharges peaked next, from October 2005 through September 2006
Openings peaked last, in April 2007

So to start, here are YoY hires and quits for the entirety of the series, measured YoY

Hires has turned negative for some months in the past year, while quits remain

For MLK Day: unemployment by race

In observance of Martin Luther King’s birthday, almost all US markets are closed and there is no economic data.

So on this day let’s see the extent to which economic opportunity in several neutral metrics has improved since the passage of the Civil Rights Acts in the 1960s.

Here in unemployment for African Americans (blue) vs. whites (red) since the former began to be measured in 1972 (white unemployment had been measured since the 1950s – interesting that black unemployment wasn’t even deemed worthy of being separately measured before the 1970s!):

Unemployment for whites made a 50 year low at 3.1% earlier in 2019. It was only lower, at 3.0%, in 1969 (not shown). African American unemployment made its all time low,

Housing BOOM! 2
Housing is a very important long leading indicator, and it reflects both the consumer and producer sides of the economy. And this morning, at least in terms of starts, it hit a grand slam.

Total housing starts were 1.608 million units annualized, the highest number since the end of 2006. The less volatile and slightly more leading permits declined slightly to 1.416 million units annualized, but the three month average of each made new expansion highs:

The story is the same with the less volatile single family starts and permits:

Finally, one point of difference I have had with That Other Blogger who writes about housing is that, because multi-unit housing, especially for younger buyers, can be something of a “substitution good”

Real wages declined slightly in Q4 2019; nearly flat since last January

In December consumer inflation was +0.2%. Since in last Friday’s jobs report average hourly earnings also increased +0.1%, real average hourly earnings declined slightly:

In a longer term perspective, this means that real wages also declined from 97.8% to 97.5% of their all time high in January 1973:

The YoY measure of real average wages also declined sharply from +1.6% to +0.7%:

[Note however that this is subject to the same quirks as I discussed yesterday in terms of YoY nominal wage growth for December, so a rebound in January would hardly be a surprise]
Aggregate hours and payrolls improved significantly between July and September, but have declined slightly in the three

Scenes from the December jobs report: leading jobs sectors and wages
Let’s take a more detailed look at last Friday’s December jobs report.
First, as usual for the past few months, let’s look at the more leading jobs sectors. This month, let’s also take a more detailed look at wage growth and why it may have suddenly decelerated.
As an initial note, revisions going back to late 2017 are going to be available next month, and preliminarily it was already indicated that these will be strongly negative to the tune of several hundreds of thousands overall. In short, as weak as some of the numbers look now, they are likely to be even weaker when we see them next month.
Here is this month’s update to the three leading sectors of employment that I have been

Live-blogging the Fifteenth Amendment: January 7 and 11, 1869
January 7:  Remarks by Rep. Benjamin M. Boyer, Democrat from Pennsylvania:

Mr. Chairman, the issues supposed to have been settled by the election of General Grant to the Presidency formed the subject of an elaborate speech by the honorable gentleman from Maine [Mr. Blaine] a few days before the adjournment of the Congress for the holidays* in December….. I propose to make [a few brief remarks] upon this the first occasion I have had for reply.  [*Note: oh noes! The War on Christmas in 1869!] 
The late Presidential election decided, of course, that the Republican Party should continue to administer the government through the elected Chief Magistrate of their own choice and a majority of the

The 2020 Electoral College playing field expands for Democrats
Polling firm Morning Consult has an interactive graph measuring Trump approval by State for each month since January 2016. You can visit it here.

The map has some interesting insights for the 2020 Presidential election race. In the first place, while it would be too cumbersome to show here, in general Trump’s disapproval has spread and intensified over the course of his term. As the latest map, for December, does not include reaction to his reckless warmongering with Iran, I am going to guess that January’s map will be worse for him.

Anyway, while there is obviously some variation from month to month, the latest two months shown below in chronological order, November and December, show – in

January’s reports start out with a decidedly mixed picture for 2020
We have our first bits of forward-looking data for the year: November residential construction, December ISM manufacturing, and December light vehicle sales. They paint a decidedly mixed picture. Let’s take a look in order.

Residential construction spending improved by a strong 1.9% in November. Further, October, which had originally been reported as a decline, was revised to a 0.7% increase:

Housing is recovering from its early 2019 slump thanks to the decline in interest rates. This is a tailwind for the economy as we get into the second half of this year.

On the other hand, the ISM manufacturing index, and its more leading new orders component, declined to critical levels in

Republics and the war-making power
In view of the militry carrying out Trump’s order to kill an Iranian general, I thought I would weigh in on the issue of the war-making power historically by republics.

I don’t have much to add to the substance of the immediate debate. Killing an Iranian general was certainly an act of war. It was also a big escalation on the US side. At the same time, the US’s economic blockade of Iran, which it has been attempting to enforce against third parties as well, has been if not an act of war itself, at least tiptoeing up to the very line. Similarly, Iran’s conducting of low-grade hostilities by proxies against the US has also really been an act of war. So I’m not sure that the line-crossing is as bright as it may appear at

Initial jobless claims still negative, but no recession signal
As you know, I’ve been monitoring initial jobless claims closely for the past several months, to see if there are any signs of a slowdown turning into something worse. Simply put, if businesses aren’t laying employees off, those same people are consumers who are going to continue to spend, which is 70% of the total economy. So the lack of any such increase has been the best argument that no recession is imminent.
Yesterday morning’s report of 222,000 initial claims continues the string of numbers above the 2018-19 average. Superficially the four week average of 233,250 is also enough for a recession flag, but as we will see below this is really an artifact of seasonality.
To reiterate, my two

The chart of the decade
Today doesn’t just mark the end of 2019, but the end of the 2010’s as well. So it’s only suitable that I post the one chart that I think most explains the economy over the past 10 years.
In terms of public policy, that chart would be of the continual explosion of income and wealth inequality, particularly at the very top 0.1% or 0.01% of the distribution.
But in terms of explaining why the economy has chugged along at roughly 2% GDP growth every year for 10 years, with no recession, the below graph, that was part of my year-end review last week, sums it up nicely. Here it is again, the YoY changes in the Fed funds rate and the YoY% change in the price of gas:

What generally kills economic growth is either a sharp change in the cost

A roadmap to a Democratic Senate supermajority
A worthy criticism made by many observers on the Democratic side is that most of the plans being painstakingly described by the Presidential candidates will come to nothing, because the filibuster in the Senate will kill them all. The GOP will then run on the “do nothing” socialist democrats in 2022 and 2024 to retake the Congress and Presidency. As things now stand, that is a reasonable position.

Bear in mind the Mitch McConnell and the GOP are perfectly happy with a Senate that still employs a filibuster for legislation: they don’t want to pass any! Seriously, when was the last time you heard a GOPer tout any sort of legislation at all? Now that the GOP has packed the courts (full of judges who will

Happy [insert name of preferred religious holiday here]! 3 quick hits

I’ll be traveling and enjoying the holiday for a few days, so … light to non-existent posting!

In the meantime, three quick hits for you:

1. New home sales – continued strength in this very forward looking sector. Even though sales declined m/m, the upward trend is pretty clear:

Figure 1
2. Durable goods – flat (blue), except for Boeing (red), which is bad:

Since Boeing is part of the economy, this is just more bad news for the short leading manufacturing sector.

3. Trucking falls off a cliff in November – the ATA Trucking Index fell -3.5%:

The accompanying note says “there is no way to sugar-coat this.” This is the worst move except for late 2012 since the Great

Run75441: Catching up something we missed. NDD pointed out AB had missed a post on the 15th Amendment which happened two days before the last posted (17th) “Live Blogging  the 15th. “
Live-blogging the Fifteenth Amendment: December 15, 1868
Sen Orrin S. Ferry (R-Conn), in the course of offering a joint resolution to lift the disabilities mandated by the 3rd Section of the Fourteenth Amendment against those who participated in the rebellion:
[I]t does seem to me as if the experience of the last fifty years ought to enlighten us as to the chimerical character of the dangers which have been apprehended from the extension of suffrage and to eligibility to office at one time and another.
It has been thought once, even in this land, that poverty disqualified a

The consumer vs. producer divergence widens at year end
My economic theme for about the past half year has been the contrast between the floundering producer sector vs. the decent consumer sector. With two of the last important reports of the year out this morning, that divergence has been highlighted.

First, the good news: real personal income rose +0.4% in November, and real personal spending rose +0.3%. Here’s a look at the past five years:

Figure 1

No perceptible slowdown here!

But now, let’s look at the producer side, where the Kansas City Manufacturing Survey was the last of three regional surveys to be reported this week.  Here is the moving monthly average of all five regions that I update in my weekly post:

Regional Fed New Orders

Political leanings through time for birth cohorts
A chart on “political preferences by generation” from Pew Research has been making the rounds in the past few days. Here it is:
Figure 1
This chart tells the simplistic story that older generations are more conservative than young ones. It’s considerably misleading.

After all, how did the democrats ever win if older generations, who vote in higher percentages, are always more conservative than younger ones? The answer is, it’s not true.

Although Pew’s chart does not show the now-passed “greatest generation,” the simple fact is, that generations which came of age during the Great Depression and World War 2, and revered FDR, voted Democratic their whole lives.

As I’ve posted before, better way of looking

The oncoming generational UK and US political tsunamis

No big economic news today, so let me put up a couple of striking charts about the UK election last week.

First, the change in party results in 2019 (left) vs. 2017 (right) in millions:

Tories:   13.9. 13.6
Labour: 10.3. 12.9 (a 20% decline!)
Lib Dems: 3.7  2.4
SNP:        1.2  1.0

Total turnout was down 1.5%. As should be obvious, as the accompanying commentary said, the Tories didn’t win; Labour lost, and terribly. Apparently having a leader (Jeremy Corbyn) with a -44% approval rating, and no substantive position at all on the most important issue in decades, Brexit, was a loser. Hoocoodanode?!?

Second – and this is really stunning – which party won seats based on age group:

The conservatives

Live-blogging the Fifteenth Amendment: December 17, 1868
In the Senate, Senators Dixon and Ferry, both Republicans from Connecticut, continued the debate from several days prior concerning a federal imposition of African-American voting rights on the States:
Dixon:
[M]y colleague … proposes to amend the Constitution of the United States in a manner which to me is very revolting, not because I hate negro suffrage, but, sir, I do desire that the proud old State of Connecticut, shall not be humbled in the dust. Having enjoyed the right of suffrage and of regulating her own right of suffrage for over two hundred years — longer, I believe, than any State in the Union — I do not desire that at this late day she should be compelled to submit to the demands … of

Initial claims turn neutral on seasonality, but no red flag
As you know, I’ve been monitoring initial jobless claims closely for the past several months, to see if there are any signs of a slowdown turning into something worse. Simply put, if businesses aren’t laying employees off, those same people are consumers who are going to continue to spend, which is 70% of the total economy. So the lack of any such increase has been the best argument that no recession is imminent.
This morning’s report of 252,000 initial claims is enough to signal a caution, but historically has more often coincided with slowdowns rather than recessions.
To reiterate, my two thresholds for initial claims are:

1. If the four week average on claims is more than 10% above its

November real retail sales show consumption still weakly positive

Retail sales are one of my favorite indicators, because in real terms they can tell us so much about the present, near term forecast, and longer term forecast for the economy.
This morning retail sales for November were reported up +0.2%, while October was also revised up +0.1%. Since consumer inflation increased by +0.3%, however, real retail sales were down less than -0.1%. Real retails sales remain slightly below their August peak.

Here is what the longer term absolute trend looks like.

A closer view shows that the last three months’ decline remains well within the range of noise:

Others may use other deflators. I use overall CPI because:
1. I’ve been doing it this way for

Off topic: two solutions to home delivery theft
By now we all know that theft of packages delivered to people’s home doorstep is a big problem. Here are pictures of two solutions:1. Massive 1984-style and easily hackable home monitoring. Or even worse, the ability of the delivery person to open the homeonwer’s garage to leave the package inside.

2. A large 1950’s style milkbox:

For those of you who may not know what I am talking about, the milkbox was built into the side wall of a garage and had doors that could be opened and locked from the inside on each side.
The homeowner unlocked the outside door. When the milk was delivered and the milkman closed the outside door, it would lock from the inside. When the homeowner wanted to retrieve the milk,

November average real wage growth stable, but aggregate growth now puts expansion in second place behind 1990s
November consumer inflation came in at +0.3%. Since in last Friday’s jobs report average hourly earnings also increased +0.3%, real average hourly earnings were unchanged:

In a longer term perspective, this means that real wages remain at 97.9% of their all time high in January 1973:

Since in November 2018 consumer inflation came in a 0%, the YoY measure of real average wages declined from +2.0% to +1.6%:

Aggregate hours and payrolls have improved significantly since July, so even though they declined -0.1% in October, real aggregate wages – the total amount of real pay taken home by the middle and working classes – are up 30.4%  from their

Scenes from the November jobs report
Let’s take a more detailed look at last Friday’s November jobs report, in particular a discussion of the more leading sectors.
First, let’s update the three leading sectors of employment that I have been tracking: temporary help (blue in the graph below), manufacturing (gold), and residential construction (red). Here’s what they look like compared with 2018, showing the slowdown this year (Note: the big decline in manufacturing in October was the GM strike, which as expected was reversed in November):

Residential construction looks like it has rebounded from its losses earlier this year, more confirmation of the rebound in the long leading housing sector.

As for temporary help, it continues to defy the gloomy weekly

The endowment effect and the taxation of wealth
As you may recall, I am reading the histories of a number of past Republics which have had various levels of success. Without getting too far ahead of myself, it appears that one constant is that, once plutocratic oligarchies are entrenched, they will refuse to yield power or money, even to the point of destroying democratic or republican institutions.  In other words, David Frum‘s observation that “If conservatives become convinced that they can not win democratically, they will not abandon conservatism. They will reject democracy” is true not just at the present, but across history.

I raise this in the context of Elizabeth Warren’s proposal for a “wealth tax.” Leaving aside its practicality or even

Live-blogging the Fifteenth Amendment: December 7, 1868
In the Senate:

“Mr. Craving asked, and by unanimous consent obtained, leave to introduce a joint resolution proposing an amendment to the Constitution of the United States: . . .
“No State shall deny the right of suffrage or abridge the same to any male citizens of the United States twenty-one years of age or upwards except for participation in rebellion or other crime and also excepting Indians not taxed; but any State may exact of such citizen a specific term of residence as a condition of voting therein, the condition being the same for all classes.”
. . . .

“Mr. Pomeroy asked and by unanimous consent obtained, leave to introduce a joint resolution proposing an amendment to the Constitution of

December starts out with a thud

The first reports in December are in, and both were negative.
Let’s start with construction spending. Overall construction spending declined -0.8% in October. The more leading residential construction spending declined -0.9%, the second decline in a row (blue in the graph below):
Figure1
Since actual spending on residential construction doesn’t take place until the house is started, it lags building permits (red in the graph above). So given the strong rebound in permits, I’m not concerned at this point about a renewed decline in construction, as I expect it will follow permits as well.
The same can’t be said for the second negative piece of news this morning, in the ISM manufacturing index. The overall index came in at

Forecasting the 2020 election: the economic baseline (or, don’t count on a recession)

Four years ago, I decided to use my set of “long leading indicators” to forecast the 2016 election. The indicators were very weakly positive, and pointed to a narrow popular vote win for the incumbent party one year out. This prompted Nate Silver to huff and puff that nobody knew anything about what the economy would look like so far off. One year later, the economy was very weak, the downward move in the unemployment rate had stalled, and the incumbent won the popular vote narrowly (but obviously not the Electoral College vote).

Well, the 2020 election is 11 months away. So it’s time to do the impossible again.

As I wrote four years ago, going back 160 years, roughly

Live-blogging the End of the Republic
The title of this piece is increasingly my feeling about the times we are living in. Almost everywhere it has been implemented, the Madisonian system has ultimately failed, ending in presidential autocracy. All of the tools are now in place for the US to fail as well. If Trump doesn’t succeed in a second term, then the Sulla or Caesar who ends our republican experiment is alive now and has learned the necessary lessons. All that is missing is their competent and strategic implementation.
The bottom line is: provided a President has 34 Senators and a majority of the Supreme Court who will back him, he can do anything he wants. And I’m not even sure the Supreme Court majority is necessary. If Trump were to defy the

A few thoughts while you are digesting Thanksgiving dinner
There was a bunch of data released Wednesday, while yours truly was on the road along with everybody else. So here are a couple of thoughts for you as you sit there with your loosened belt figuring out what leftovers you’re going to be eating for the next few days . . .

Initial jobless claims declined back to their recent baseline last week, so the four week average declined slightly, further back into its normal range. The YoY% change averaged monthly also is lower:

And the four week average of continuing claims, while slightly higher YoY, is also well below the point where it would be a serious concern:

Bottom line: the economy is simply not going to be in recession this quarter.

Housing rebound continues; price appreciation stabilizes

Just a quick note, as I am traveling today.New home sales declined slightly in October from September, but remain at the high end of this expansion. The renewed uptrend in housing sales, due to lower mortgage rates, is clearly intact:

Meanwhile house prices, as measured by the Case Shiller index, also increased at a slightly faster YoY rate, 3.2% for September vs. 3.1% in August (blue):

As I have said many times, sales (permits, red in the graph above) lead prices. Now that the sales rebound is firmly intact, price appreciation has stabilized and is likely to begin accelerating again.