29 December 2014 The Red Dots bubble chart is insightful to track imports. Size is the story. Tracking size of change in imports helps explain: Moderating price pressures as discussed in Pig tails and price levels – a tale of inflation and you, December 2014. Restraining worker wages and hours worked as discussed in Y2K – when workers hit the wall, August 2014. Darker red dots mark products with price decreases since 1995. Lighter red dots have had price increases less than 30% over the past 19 years, also less than the 44% of the Gross Domestic Product price deflator.…
Author: Brian Barnier
11 December 2014 Pig tails have sprouted on price level charts such as this one for Bolts, nuts, screws, rivets, and washers… Pig tails reflect moderation in price increases, and often volatility. Depending on price being measured, some reflect years of moderation. Other moderation is more recent. Both trends are seen in the U.S. Bureau of Economic Analysis Personal Consumption Expenditure Implicit Price Deflator that provides a picture of “inflation” as defined as a generalized increase in price levels. Generalized Prices Generalized increases in price levels are viewed as affects of monetary policy as described in Is this the Fed’s…
29 November 2014 Consumers spending cash with confidence is a sign of economic health. People digging deeper in debt is not. What’s the trend? Younger and higher income families are doing better than their peers from the past. Older and lower income families are not. For personal finances, this means benchmarking over decades. Once every three years the U.S. Federal Reserve Board conducts the Survey of Consumer Finances, the latest released in September. Following footsteps of family finances (November 2014) included SCF highlights of family financial assets and leverage ratio. Now, two more areas… Ratio of debt payments to family…
22 November 2014 Financial markets have been bubbly, but how about family financial assets? Once every three years the U.S. Federal Reserve Board conducts the Survey of Consumer Finances. The most recent survey of 6,026 families was released on 14 September 2014. Highlights include… MEDIAN value of total financial assets for those families who have financial assets decreased in 2013 compared to 2010 in most income groups except those in the 60-89.9 percentile of income groups. For a sense of variation within percentile of income groups, median (pictured above) can be compared to MEAN (pictured below). Median is the value…
November 20, 2014 Health of employee compensation by industry is illuminated by the recently released U.S. Bureau of Economic Analysis GDP by Industry data. This shines a light on wages, salaries and benefits paid by employers as opposed to job counts that don’t include hours worked and paycheck wages. For starters, below is the share of total compensation paid by each industry in 2013. Government is the largest employer. It is nearly 20% of the total and nearly 25% of private industry compensation pie. Data Source: U.S. Bureau of Economic Analysis, GDP by Industry, KLEMS Tables, please see release link…
October 13, 2014 Volatility, mixed fundamentals and global policy debates greet this earnings season. To find safety, focus on measures less likely to mislead and more tied to tangibles. More turbulence due to less thrust from monetary policy As thrust (growth) in U.S. Federal Open Market Committee (FOMC) large scale asset purchases (LSAPs) stops, market prices are back to being more vulnerable to turbulence, including trader psychology, fundamental and geopolitical (including monetary policy, exchange rates, unrest and disease). Note: Vertical separation has no meaning due to two vertical axes. Coefficients of determination (r-squared) that were about .8 for the 18…
2 October 2014 Across the pages of The Economic Picture Book and Feddashboard.com, 4 points are reinforced. 1. Domestic destiny derailed by deleveraging, demographics, dilution – and disjointed regulation Deleveraging includes household and government, and not only debt service, but also total levels Global includes: From a monetary policy perspective, stimulus being diluted if funds move to other countries From a fundamental perspective, skills & capacity, and price & quantity affecting domestic hours worked and wages Disjointed regulation produces drag on non-financial companies, banks and market structure These and other factors have combined to foster an environment in which: The…
13 September 2014 Mixed economic headlines miss the point of an underlying negative feedback cycle that includes difficulties in debt, wages and business sales. Debt Level View Debt level continues to overhang consumers. In 1982 debt rocketed up from the historical trend, dipped from 1995 to 2002 and continued to climb until 2009. While real debt per person is now declining, the level is still higher than any time before 2006. Notes: To compare over decades, adjusted for both inflation (using Personal Consumption Expenditures deflator, PCED) and total population. Federal Reserve reporting combines Households and Nonprofits. To provide a view…
4 September 2014 Confusion in corporate cash continues. Previously, we clarified who holds cash. This note is on cash compared to fixed investment – digging deeper than averages, some industries and companies are healthier than others. At the height of the 2012 London Olympics, we began a series of NYSE floor commentaries describing how most cash is in relatively few corporations. One summary was 34 Corporate Olympians in 2Q2013 Earnings Season. In April 2013, the WSJ quoted the insight that 50% of SP500 cash was held by only 22 companies. Today, 3 more insights… 1. Corporate to household cash ratio…
28 August 2014 Avoiding excessive distortions, rather than driving demand, is a growing monetary policy debate; this includes the rules-based monetary policy debate. Any approach is complicated by traps compared to available tools for managing prices. Sound bites confuse the conversation by confusing aspects of price changes. To clarify: “Inflation” – strictly speaking – is about general price increases across goods and services. This is in contrast to a specific price increase resulting from changes in supply and demand for a specific good or service. Specific supply and demand changes include scarcity of workers (i.e., right number, skills and place),…
14 August 2014 Housing is a personal story about micro-markets. This is why headlines about averages often confuse. How hot is housing? Before digging into dirt, dig into data (July 2014) pictured how housing investment and prices are still at historical highs, other than the big bubble. Differences between single and multi-unit are shown in these pictures… First, notice that 5+ unit starts are strong compared to 1990-2007 ranges. Single family is historically low. Second, multi-unit housing is growing as home ownership rates fall. Yet, home ownership rates started to fall 2 years before the bubble burst and are historically…
5 August 2014 In Y2K, we feared a bug in our computers. We should have feared a bug in our labor markets. In Y2K, real wages and salaries per person began stagnating. Fourteen years later, this aggravates the recovery. Today’s real wages and salaries per person are at 2006 levels and about 4% above 2000 levels.* For more, see Measures to know of healthy jobs and paychecks, March 2014. Although real wages and salaries stagnated, labor productivity grew from 2000 to 2014 at about the same average quarterly pace as 1988-2001. The combined Productivity-Real Wage Plot shows workers hitting a…
25 July 2014 In the mystery of labor force restructuring, the “Part Rate” is often misunderstood. Understanding differences in worker groups, especially by age, can improve financial planning and public policy. Cleaning out the cobwebs starts by clarifying that the “Part Rate” has nothing to do with employers and employees parting ways. Civilian Labor Force Participation Rate (“Rate” to save words in this post) is the number of persons classified as Employed plus Unemployed but looking for a job divided by the Civilian Noninstitutional Population. The Rate is an estimate based on the Current Population Survey (CPS). CPS is a…
14 July 2014 “Why isn’t housing growing faster?” and “Housing will jump next month” are frequent sound bites. Housing is important because of both direct benefits to construction, real estate and related workers, and “wealth effect” on consumption. Yet, the key question is whether housing is already too hot. To support predictions of housing growth, data points are offered such as this post-crash chart of housing starts: Trend lines are up. That’s good, right? Looking back 10 years, here’s a housing price index trending up… Interest rates for 30 year fixed mortgages have trended down to about 4.2% from 4.5%…
7 July 2014 As an investor in a public company, have you ever received a check for your share of earnings? No. Investors primarily receive dividends per share and price appreciation. Why do earnings per share (EPS) matter to investors? In theory, EPS is an indicator of price appreciation and dividend payouts. Why do EPS matter to day traders? The news release itself is tradable information against expectations. For a day trader, the fact that about 70% of companies beat expectations doesn’t matter. What matters is the actual compared to expectations. 3 insights emerge from digging into the data with…
3 July 2014 Dateline: April 30 — ADVANCE estimate US Real GDP +0.1% from the fourth quarter of 2013 to the first quarter of 2014 May 29 – SECOND estimate US Real GDP -1.0% June 25 – THIRD estimate US Real GDP -2.9% The nearly 3 percentage point change is significant compared to the typical change from advance to third estimate of about 0.5% (See “GDP all over again — where estimates come from” 11 March 2014). Markets were surprised. The surprise was more important to traders who can gain/lose immediately from news of any type. It was more of…