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October jobs report: probably the best report of the entire expansion

October jobs report: probably the best report of the entire expansion


  • +250,000 jobs added
  • U3 unemployment rate unchanged at 3.7%
  • U6 underemployment rate declined -0.1% from 7.5% to 7.4%

Here are the headlines on wages and the broader measures of underemployment:

Wages and participation rates

  • Not in Labor Force, but Want a Job Now:  rose +72,000 from 5.237 million to 5.309 million
  • Part time for economic reasons: fell -21,000 from 4.642 million to 4.621 million
  • Employment/population ratio ages 25-54: rose +0.4% from 79.3% to 79.7%
  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $.07 from  $22.82 to $22.89, up +3.2% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
Holding Trump accountable on manufacturing and mining jobs

 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?  

  • Manufacturing jobs rose +32,000 for an average of +21,000/month in the past year vs. the last seven years of Obama’s presidency in which an average of +10,300 manufacturing jobs were added each month.
  • Coal mining jobs fell -200 for an average of -8/month vs. the last seven years of Obama’s presidency in which an average of -300 jobs were lost each month

August was revised upward by 16,000. September was revised downward by -16,000, for no net change.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mainly positive.

  • the average manufacturing workweek fell by -0.1 hours to 40.8 hours.  This is one of the 10 components of the LEI.
  • construction jobs rose by +30,000. YoY construction jobs are up +330,000.
  • temporary jobs rose by +3300.
  • the number of people unemployed for 5 weeks or less decreased by -8,000 from 2,065,000 to 2,057,000.  The post-recession low was set five months ago at 2,034,000.

Other important coincident indicators help  us paint a more complete picture of the present:

  • Overtime was unchanged at 3.5 hours.
  • Professional and business employment (generally higher-paying jobs) increased by +35,000 and  is up +516,000 YoY.
  • the index of aggregate hours worked for non-managerial workers rose by +0.2%.
  •  the index of aggregate payrolls for non-managerial workers rose by +0.5%.

Other news included:

  • the  alternate jobs number contained  in the more volatile household survey increased by  +600,000  jobs.  This represents an increase of 2,748,000 jobs YoY vs. 2,516,000 in the establishment survey.
  • Government jobs increased by +4,000.
  • the overall employment to population ratio for all ages 16 and up increased +0.2% from 60.4% m/m to 60.6% and is +0.4% YoY.
  • The labor force participation rate rose +0.2% from 62.7% to 62.9 and is up +0.2% YoY.


This was probably the single best report of the entire expansion. The only flies in the ointment were a slight increase in people not in the labor force who want a job now, and a slight decline in the manufacturing workweek. The headline unemployment rate was unchanged at its expansion low.

Aside from that, virtually everything moved in the right direction, in many cases to expansion highs. For the first time, wages for ordinary workers grew over 3% a year. Participation increased across the spectrum. The headline job growth number was excellent, and the more volatile household survey trend was even better.

If this were a Presidential election year, this would be awesome news for the incumbent. Even in a midterm year, this certainly can’t hurt as a closing economic argument for the majority party. Regardless of one’s ideology, however, this was simply an excellent report.

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Some good news on workers’ wages

Some good news on workers’ wages

There was some good news the other morning about workers wages. The quarterly employment cost index showed a q/q increase of +0.9% for wages (red in the graph below), and +0.8% for overall compensations (blue) (which includes things like medical benefits). Nominal YoY increases were +3.0% and 2.8%, respectively:

Unlike “average hourly earnings” (green in the graph above), which are reported monthly as part of the jobs report, the employment cost index is a median, rather than an average, measure. This avoids the distortion caused by a few high-wage earners. It also keeps the perecentage of workers in each occupation constant over time, in order to measure the change in compensation for the same job. In other words, as of the third quarter of this year, 50% of all occupations, as a weighted average, got an increase of +3.0% or more in wages over the past year.

Notice that recently the rate of annual growth in average hourly wages for nonsupervisory workers has also been increasing.  We’re still not at the best levels of the 2000s expansion, which itself was no great shakes — and in real, inflation-adjusted terms wages only outpaced inflation by +0.7% — but still, this is some unalloyed good news.

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Housing has peaked*

by New Deal democrat

Housing has peaked*

*(unless the Fed lowers interest rates)My comprehensive look at September housing data is up at Seeking Alpha. The downtrend in housing statistics has been sustained and severe enough for me to make the call that housing has peaked, by most measures, between last November and this past March.

This does not mean that I am calling for a recession at this time. But it does mean that this long leading indicator is now a firm negative. There are three constributing factors to this turn in the market:

1. Interest rates have risen (to roughly 5% for 30 year mortgages)
2. unlike 2014, when a similar but not quite so severe rise in interest rates only caused a temporary pasue in the market, house prices as a multiple of household income are at or near new peaks.
3. the capping of the Federal deduction for state and local taxes has really hit markets in California and the northeast megalopolis.

None of the three factors look likely to abate in the near future. Thus I expect the trend in housing to remain below the recent peaks.

What *is* a possibility (and for what it’s worth I believe this plays a role in Bill McBride’s belief that housing hasn’t peaked yet) is that, if inflation remains subdued, the Fed could react to a softening economy next year by reversing course and lowering interest rates, thus breaking the downtrend.

In any event, as usual, heading on over to Seeking Alpha to read my long article should hopefully be informative for you, and it rewards me with a little $$$ for my efforts.

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The Housing Affordability Crisis

The Housing Affordability Crisis

This morning both the Case-Shiller House Price Indexes for September, and Third Quarter Median Asking Rent were reported, as was the rental vacancy rate.  Together they reveal that all types of shelter costs, whether housing or apartments, are at or near record levels.

The Case Shiller 20 City index was reported up 5.5% YoY, and the National Index was up 5.8% YoY. Meanwhile median household income, as reported by Sentier Research one month ago, was only up 2.8% YoY.  So while the media is generally reported the “good news” that house prices are appreciating less than the 6%+ rate they had been recently, “real” homeownership costs continue to be near a record multiple of household income, as shown in this graph from Political Calculations:

Meanwhile median asking rent increased about 5% just in the last Quarter, and is up over 10% from one year ago:



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Q3 2018 update: “Kasriel Recession Warning Indicator”

by New Deal democrat

Q3 2018 update: “Kasriel Recession Warning Indicator”

One of the methods I incorporate into my long leading indicators is the “Kasriel Recession Warning Indicator.” This is something I first read about in 2007, when the eponymous Paul Kasriel, then of Northern Trust and now of Legacy Private Trust Co., wrote that it forecast a recession within the next year. Needless to say, his call was on the mark!

The indicator consists of a monetary and a yield curve component. Kasriel issued another forecast based on the model two months ago. I took a detailed look  over at Seeking Alpha.

As always, clicking over and reading should be worthwhile for you, and also for me by way of rewarding me for my efforts.

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When the stock market headlines the political blogs . . .

When the stock market headlines the political blogs . . .

Here is a graph I saw on Digby’s blog this morning:

There was also a highly-recommended, heavily-commented piece at Daily Kos.

Here’s a pro tip: when you see a daily stock market move leading the political blogs, it’s a sign of a bottom, not a  top.

That’s because it’s a sign of emotion, and it means that amateurs are paying close attention. By the time that happens, the big move is over, or at least almost over.


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A follow-up on the reasons for prime age labor force non-participation

A follow-up on the reasons for prime age labor force non-participation

Here is something interesting I found in an article by staffers at the Kansas City Fed a couple of weeks ago.

They broke down the 25-54 prime age labor force participation group for men into 10 year slices, by education, and by reason for not participating in the labor force. They focused on men, because including women confounds the results by the secular societal change whereby women entered the labor force en masse between the 1960s and 1990s.

First of all, it turns out that the prime decade driving the increase in non-participation is the 25-34 age group:

That finding is amplified by breaking down each prime age decade by education level:


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An update on yield curve dynamics

An update on yield curve dynamics

So I submitted this wonderful piece to Seeking Alpha Tuesday morning, and figured I would just link to it today. But as in the best laid plans of mice and men, somehow it reverted to a draft without ever being reviewed by the site’s editors, which means it isn’t up there yet and there is no big economic news today.

Sigh.  So in the meantime, consider this ….

The bond market is behaving in totally typical fashion in response to the Fed raising interest rates.  Typically the yield curve doesn’t invert because long duration yields come down to short duration yields. Rather, *all* durations of yields rise. It’s just that shorter duration yields rise faster, and ultimately overtake longer duration yields.  Here’s the relevant graph for the past 40 years

If we think of interest rates as “the cost of renting money,” then the economy slows because that cost increases across all time frames, and enough producers and consumers decide to put off “renting money” in order to purchase things that the economy slows down or goes into reverse.

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New home sales bombed in September

New home sales bombed in September

Needless to say, this morning’s report on new home sales was another big miss in the housing sector. Not only were sales a new 12 month low, they were the lowest in nearly 2 years, and are off over -150,000 from their peak 10 months ago:

Typically new home sales are down about -200,000 when a recession starts.

That median prices have fallen in sync with sales, and not with their typical lag:

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Absolute Decoupling and Relative Surplus Value: Rectification of Names

Jargon is a heck of a drug:

If names be not correct, language is not in accordance with the truth of things. If language be not in accordance with the truth of things, affairs cannot be carried on to success.

The discourse of global warming/climate change is lousy with jargon. This rampant obfuscation gives science deniers rhetorical leverage and induces hallucinations about “Green New Deals” and “Environmental Kuznets Curves.” “Decoupling,” “rebound effects” and “externalities” are three terms that invite systematic incomprehension. The first two are dead metaphors and the third is an outright fraud — there is nothing “external” about an externality.

A little reflection on what these terms actually refer to can help clarify what can and cannot be done about carbon dioxide emissions. From the perspective of shameless self-promotion, it can also help show why my policy proposal makes sense and others don’t.

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