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Disposable Personal Income vs. CPI

The following scatter chart compares annual disposable personal income per capita growth (bottom scale) to the annual increase in the consumer price index (left scale).


Click to enlarge.

From 1960 to 2013:

1. 2009 was the worst year for disposable personal income growth per capita. It was also the record low year for consumer price inflation.

2. 2013 was the second worst year for disposable personal income growth per capita. Once again, inflation came in below expectations.

The following chart shows recent annual disposable personal income per capita growth. I'm using the monthly data instead of the annual averages this time to more adequately show all the gory details.


Click to enlarge.

January 10, 2014
Fed's Bullard: Inflation to pick up in 2014

WASHINGTON (MarketWatch)-- St. Louis Fed President James Bullard said Friday he expects inflation to pick up this year, despite having been surprised by lower prices last year.

1. Good luck on that inflation theory!
2. Brace for more surprises!

jjchandler.com: Tombstone Generator

Click to enlarge.

This is not investment advice, but damn.

Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

JOLTS of Déjà Vu

The following chart shows the semiannual average of the number of job openings divided by the number of hires (as seen in the Job Openings and Labor Turnover Survey).


Click to enlarge.

Note that this ratio appears to be a leading indicator for the last two recessions (too bad there isn't more data to backtest it further).

When the view out the front window (job openings) looks worse than the view out the rear window (hires), then there may be reason for concern (again).

The next chart shows the annual percentage change in the semiannual data.


Click to enlarge.

Let me guess. We can blame the "recent" decline on two years of bad weather?

The financial experts are bracing for this economy to accelerate in 2014. I have but one question. Which direction? Sigh.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

Going Rogue, Part X: Americans just don’t properly appreciate the EPA

Going Rogue, Part X: Americans just don’t properly appreciate the EPA


Americans do not fully appreciate the efforts of government to protect them from a wide variety of threats to their health and safety. This effort occurs to some degree at the more local levels, but the real champion of this grand effort is the federal government.

While many federal agencies contribute to this effort, one goes far beyond the others at trying to keep us safe: the Environmental Protection Agency, the EPA.

The EPA is so concerned for the safety and protection of the citizens of the U.S. that it has issued thousands of regulations requiring specific steps be taken to reduce or eliminate actual or potential harm. This agency is so concerned for our welfare that it has even required, under penalty of heavy fines, the use of things that are unavailable.

As part of the Renewable Fuel Standard the EPA required gasoline producers to use cellulosic biofuels, and in its paternalistic effort to keep us safe from threats real and imagined, the EPA fines producers for not using the required quantities of biofuel ingredients, even though those quantities are unavailable.

Not everyone is on board with the EPA’s magnificent efforts on our behalf, such as Sen. Joe Manchin (D-WV) and Nebraska Attorney General Jon Bruning, whose office is suing the EPA over greenhouse gas standards for new power plants. These standards are, according to the AG and the Senator, “impossible” to meet.

The U.S. Chamber of Commerce and energy industry groups have jumped on the anti-EPA band wagon by urging the United States Circuit Court of Appeals for the District of Columbia last August to strike down a federal rule limiting mercury and other toxic emissions from coal- and oil-fired power plants, saying the Agency used flawed methods to create unachievable emissions standards.

Even the EPA’s fellow federal agency, the State Department, has shocked Americans by daring to disagree with the ideological environmental dogma of the Obama administration.

When the State Department was performing an environmental review of the Keystone XL pipeline project, the EPA intervened. The pipeline project would carry crude oil from Alberta, Canada to refineries in the U.S., which supporters say would provide a big step toward energy independence. The EPA argued, however, that this pipeline should be treated differently than every other pipeline ever constructed in the country.

The State Department’s report found that the project would create nearly 2,000 jobs lasting for two years and would support more than 40,000 jobs, and further finds that the pipeline provides enough positives to negate whatever negatives the EPA believes may result.

Even the International Brotherhood of Boilermakers found reason to criticize the EPA’s zealous efforts to protect us from every conceivable negative influence in our lives. The Boilermakers’ President Emeritus Charles W. Jones states in a commentary on the union’s Web site, “particle and ozone standards will damage the economy without significantly helping the environment.”

The EPA has moved to make ozone and airborne particle standards so strict, in fact, “that former EPA administrator William Ruckelshaus has called them ‘an impossible standard of perfection,’" the commentary continues. “So strict that many U.S. electrical power plants, pulp mills, cement kilns, chemical plants, smelters, and manufacturing plants are expected to close down rather than try to meet them. Thousands of American workers could lose their jobs. So strict that many of the scientists on the Clean Air Scientific Advisory Committee (CASAC) cannot support them,” Mr. Jones states, citing the effects on his organization’s members.

Thirty-nine Congressional Republicans led by Senate Minority Leader Mitch McConnell (R -KY) are attempting to use a rare legislative tactic to block planned Environmental Protection Agency greenhouse gas standards that would limit the amount of carbon new power plants can emit. The rarely used Congressional Review Act enables the filing of a formal resolution of disapproval that allows Congress to block executive branch regulations that it considers onerous.

Last month, a federal court dealt a serious blow to the EPA's renewable fuels push by ruling that the agency exceeded its authority by mandating refiners use cellulosic biofuels because of their commercial scarcity, a determination that should not require legal action.

It is encouraging to see opposition to the tyranny of the EPA growing, and at last see meaningful opposition coming from Congress. However, the majority of this opposition comes from Republicans, while the timid Democrats mostly sit on their hands, allowing the executive branch to run roughshod over the legislative branch, while their constituents get crushed under the federal boot.

The Democrats simply look the other way, likely because the lead perpetrator of this unconstitutional behavior is one of their own. They ought to think a little (for a change) and realize that someday it may be a Republican in the position to abuse the office, and the Congress.

It is doubtful that any of this will have much of a positive effect on this out-of-control agency, which, because of its ideological blinders and the infection of uncontrolled zealotry that is the hallmark of the Obama administration, ignores the damage its policies and regulations do to the country it is supposed to serve.

The Sarcasm Report v.185


Click to enlarge.

The blue line shows the annual average of the St. Louis Fed Financial Stress Index and the Kansas City Financial Stress Index.

The red line shows the negative of the annual average of the real S&P 500 Index (December 2013 dollars).

1. The key to maintaining the stock market's currently lofty level is to keep the financial stress at a near record low. That's right. Keep it there permanently. Just say no to stress.

2. The key to maintaining the financial stress at a near record low is to keep the stock market at its currently lofty level. That's right. Keep it there permanently. Just say no to stress.

What could possibly go wrong with this circular reasoning strategy? As seen in the chart, there hasn't been this little financial stress in the system since the top of the housing bubble in the mid 2000s! Oh, what a carefree time that was!

I am very optimistic about our long-term future!! ZIRP! Employment growth! Real GDP growth! Real median household income growth! Uncharted territory growth! You name it! It's going to be an adventure.

February 11, 2014
ASX bets on derivatives clearing

"We don't even celebrate trillions any more," the Englishman recently elevated to the top job of global clearing house LCH Clearnet, told The Australian on a recent visit to Sydney.

It's not quite so flippant a comment as it might seem. The arcane world of over-the-counter derivatives such as interest rate swaps that Davie inhabits turns over $600 trillion of notional value a year, so a trillion is not far off being a rounding error.

This concludes the sarcasm report.

Source Data:
St. Louis Fed: Custom Chart

A Great Disturbance in the Civilian Labor Force


Click to enlarge.

The blue line (left scale) shows the civilian labor force participation rate of those aged 25 to 54. It peaked in the late 1990s and it has been pretty much going down ever since.

The red line (left scale) shows the civilian labor force participation rate of those aged 55 and over. It bottomed in the early 1990s and it has been generally going up ever since (recent flattening notwithstanding).

The green line (right scale) shows the civilian labor force participation rate of those aged 25 to 54 divided by the civilian labor force participation rate of those aged 55 and over.

In a truly healthy economy, should those aged 25 to 54 really be dropping out of the labor force at faster pace than those aged 55 and over (as seen in that green line since the early 1990s)?



Wikipedia: Giant Sucking Sound

The "giant sucking sound" was United States Presidential candidate Ross Perot's colorful phrase for what he believed would be the negative effects of the North American Free Trade Agreement (NAFTA), which he opposed.

In space no one can hear you scream suck.

Source Data:
St. Louis Fed: Custom Chart

If Credit Is the Lifeblood of Our Economy...

...then we are officially @#$%ed.



Credit growth (in red) is slowing.
Savings growth (in blue) is slowing.

Without either of those two, I guess we'll just have to rely on wage growth. Good luck on that one. Sigh.

This is not investment advice.

See Also:
Low CD Rates: Lending Drought and Savings Monsoon

Source Data:
St. Louis Fed: Custom Chart

Restaurant Employment Prosperity (Musical Tribute)

The following chart shows annual food services and drinking places employment growth.


Click to enlarge.

3.7% annual growth! Very impressive. Each time we get a recession (the deeper the recession the better), we get more growth. More recessions for the win! Genius!

We just need to stay in that strong, resilient, predictable, and consistent trend channel long-term, preferably near the top. The long-term trend is so obvious that I don't even feel the need to add a trend line. Did I mention how stable and sustainable the channel is? Just look at it! A few more years of this and it will be almost impossible to leave the channel no matter what happens. Who doesn't love certainty?

The annual data in the first chart doesn't include 2014 yet, but I can give you a glimpse of how the year is starting off using monthly data.


Click to enlarge.

There are a whopping 10.5 million people employed in this rapidly growing industry. Growth appears to have peaked back in July. As of January, the growth is still above 3% though and there's nothing but biscuits and gravy on the horizon! Can't you see it? And with average hourly earnings of production and nonsupervisory workers in this industry coming in at $10.96 (December 2013), what's not to like?

In honor of the charts, I suggest we all try to work Chipotle into our conversations (more than we already do). Start the day off right. When we wake up each morning we should exclaim, "What a great day to Chipotle!" Or alternatively, "The future's so bright I gotta Chipotle!"

January 30, 2014
Traffic jump boosts Chipotle restaurant sales, stock soars

(Reuters) - Chipotle Mexican Grill Inc (CMG.N) said on Thursday an increase in customer visits contributed to bigger-than-expected growth in quarterly sales at established restaurants, and its shares rose nearly 13 percent in extended trading.

People braved the extreme weather to eat burritos? It's a frickin' polar vortex miracle!



See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

Interesting Divergence Between ADP and Establishment Survey

The following chart compares ADP's version of employment (in blue) with the government's establishment survey version (in red, minus government jobs).


Click to enlarge.

There is a clear divergence lately. Let's take a closer look.


Click to enlarge.

I haven't been following this divergence long enough to form a theory on why it is there, and without that it is difficult to offer useful commentary. Won't stop me from trying though! Here are two potential reasons off the top of my head.

1. The divergence is always there but it gets revised away over time (the older data is corrected). If that's the case, no big deal.

2. The divergence is valid and the establishment survey is coming down to close the gap. There was a weak establishment report in December and, as seen in the chart, that certainly closed the gap to some degree.

In any event, I would suggest that there is headline risk for tomorrow's employment report. If the gap closes more, then the report will disappoint.

Here's the most optimistic thing I've said on this blog in a long time. If the report is much weaker than expected (big if) and if everyone points out how exceedingly weak the report therefore is, then I would say that they may be overreacting. It might just be a correction to close a divergence and little more. It's not like the ADP report itself looks all that awful (not great either for that matter).

That said, no single straw on a camel's back thinks it is responsible for the collapse. Things could get ugly. Real ugly. Perhaps all it takes is an illusionary straw to break the camel's illusionary prosperity? Who can say for sure?

This is definitely not investment advice, nor is it a prediction of any sort. I can say that I have never been more interested in a government payroll report though. Never.

Source Data:
St. Louis Fed: Custom Chart