Taking Extended Hiatus Until Economy Changes Significantly

When I launched this site back in July 2010, my mission was simple…to help everyone understand what was happening in the economy, no matter how much knowledge they had about it to begin with. It was also my own way of tracking the economy in a systematic way. Over time, I’ve had thousands and thousands of visitors, but my daily audience is very small. And the time it takes to analyze and publish reports on the myriad of economic reports often doesn’t feel like it is justified in light of my very small audience. I feel the pressure of being behind, and with a busy work/travel schedule, I’ve found myself beginning to fall further and further behind.

Perhaps even more importantly, the last five years have essentially seen a very similar overall story…sluggish growth. That is, our economy has been growing but not at historically average levels. And we haven’t been at risk of a recession or had significant events that changed our course much. So, in all honesty, it’s not the most exciting story to convey over and over again without some positive reinforcement. I basically see no comments or emails from my readers (other than spam), and my audience is small. So, it’s a largely repetitive story being told to a small group of people, none of whom say anything about what I write.

As such, I’ve made the difficult decision to put the site on hold until I see something meaningful develop in the economy, either in a good or bad direction. At that time, I will decide in what form to begin publishing again. But until then, you won’t see any updates here – unless I change my mind for some reason.

I do, however, have a Facebook page that I will try to write short updates more frequently than I have before. I’d love for you to follow me there and maybe comment on what you read. I’ll also announce there whether I’m getting close to starting up my blog again.

Thanks for your support over the years…I’m very hopeful that I’ll see you again here soon!

— Ali

Share

Easynomics On Hiatus Until Oct 22-ish

Note to my readers…

Last week, none of my regular reports were updated, so I didn’t post anything. The next 10 days or so will involve too many personal and business projects to allow for blogging. Sorry, but I won’t be back until probably Oct 22.

The overall state of the economy remains similar to where I last left off. It’s probably growing at a rate that is slower than historical averages. The third quarter is poised to show very lackluster growth, and company earnings are slowing. But there are no red flags signaling an economic recession anytime soon!

Thanks for your continued support…

Share

Factory Orders for Nondefense Capital Goods New Orders (Excluding Aircraft) – Easy Trends (thru August 2015)

Factory orders reports provide insight into how busy our factories will be in the coming months.  I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for the factory orders report and discuss whether it is currently going up, down or neither.  You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis.  Please visit my latest factory orders trend analysis for more info.

What are factory orders for nondefense capital goods?  From the USA Today / IHS Global Insight Economic Outlook Index (no longer published):

Key barometer of business owners’ confidence in the economy.  Tracks how much business owners plan to invest in machinery, computers and other goods.

Why do investors care about factory orders for nondefense capital goods?  Simple – it’s a leading indicator for the economy.  Changes seen in the level of new orders will often mirror changes in the economy several months later.  Why is it “excluding aircrafts” though?  Factory orders for aircrafts come in bursts, so the ups and downs obscure our ability to see the underlying trend in the data.  For that reason, we will subtract factory orders for aircraft out of the equation.

Here’s a graph of the Nondefense Capital Goods New Orders (Excluding Aircraft) from the Federal Reserve Bank of St. Louis for the past five years:

Nondefense Capital Goods Excluding Aircraft New Orders - August 2015 - FRED

Source: StLouisFed.org

Factory Orders Trends and Projections

Below, I will discuss whether factory orders for nondefense capital goods (excluding aircraft) is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. I generally start my analysis from about three years ago. continue reading…

Share

Employment Report – Nonfarm Payrolls – Easy Trends (thru September 2015)

Employment report figures are perhaps the most closely tracked economic numbers of all. I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for the nonfarm payrolls from the monthly employment report and discuss whether it is currently going up, down or neither. You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis. Please visit my latest Employment Report trend analysis for more info.

Quick ‘n Easy

Nonfarm payrolls, a component of the employment report called “Employment Situation Summary,” is meant to measure the number of jobs in the economy except for those in the farming industry. The large ups and downs in farming make it harder to see the true underlying trend, so jobs in that sector are excluded. What people usually focus on is the change in nonfarm payrolls from the previous month. We typically want to see something above 150,000 during average economic times. (Easy Intro to Nonfarm Payrolls)

Nonfarm payrolls from the employment report is meant to measure the number of jobs in the economy except for those in the farming industry. The large ups and downs in farming make it harder to see the true underlying trend, so jobs in that sector are excluded. What people usually focus on is the change in nonfarm payrolls from the employment report for the previous month. We typically want to see something above 150,000 during average economic times. You can read more in my Easy Intro to Nonfarm Payrolls.

I have decided to analyze the two different methods the Bureau of Labor Statistics uses in estimating the number of new nonfarm payroll jobs added per month in its employment report. The one that most articles quote is from the “Payroll Survey” (a survey of businesses). The second one is from the “Household Survey” (survey of households, duh!). Because the “Household Survey” includes a whole bunch of workers who aren’t included in the “Payroll Survey” the BLS has to adjust the data a bit to help them match up. In the end, they should track each other fairly well. Nevertheless, I felt it would be helpful to look at the trends from both of them. In fact, my personal preference is to look at the average of the two surveys to get a better estimate of the true trend of job creation.

Below is a graph showing the trends in both the “Payroll Survey” and the “Household Survey” after adjustments were made to the latter to represent a similar population. As you can see, they track each other fairly well after adjustments (see the unadjusted data in a line that’s way above the others):

Employment Report - Nonfarm Payrolls Payroll and Household thru September 2015

Source: Bureau of Labor Statistics

 

Employment Report Trends and Projections

Below, I will discuss whether the nonfarm payrolls number from the employment report is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. I typically start my analysis from three years ago. continue reading…

Share

Residential Investment – Easy Trends (Q2 2015 – Final Estimate)

Residential investment is one of the best leading indicators for the general economy, meaning that what happens to residential investment typically ends up happening to the general economy a few months later. I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for residential investment and discuss whether it is currently going up, down or neither. You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis.  Please visit my latest residential investment trends analysis for more info.

Quick ‘n Easy

Residential investment refers to money that people spend on buying homes (either to live in or to rent out), home improvements and money people make on the sale of homes. There is also some inclusion of equipment that come with many homes. We care about how much private residential investment is taking place because it is a great leading indicator for what will happen to the general economy several months down the line.

The Bureau of Economic Analysis (BEA), the same group that publishes the GDP for every quarter, defines “residential fixed investment” as the following:

Consists of purchases of private residential structures and residential equipment that is owned by landlords and rented to tenants. Investment in residential structures consists of new construction of permanent-site single-family and multi-family units, improvements (additions, alterations, and major structural replacements) to housing units, expenditures on manufactured homes, brokers’commissions on the sale of residential property, and net purchases of used structures from government agencies. Residential structures also include some types of equipment that are built into residential structures, such as heating and air-conditioning equipment.

In other words, residential investment refers to money that people spend on buying homes (either to live in or to rent out), home improvements and money people make on the sale of homes. There is also some inclusion of equipment that come with many homes.

Why do we care about residential investment? It just so happens to be a fantastic leading indicator, which means that whatever happens to this indicator generally happens to the general economy several months down the road. One more thing – we care most about private residential fixed investment, not so much what the government spends. That’s what shows us the real trend in the economy.

Here’s a historical chart of private residential fixed investment over the last five years provided by the Federal Reserve Bank of St. Louis:

Residential Investment - Real Private Residential Fixed Investment - Q2 2015 Final Estimate - FRED

Source Data: Bureau of Economic Analysis

Residential Investment Trends and Projections

Below, I will discuss whether residential investment is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. I usually start my analysis from three years ago. continue reading…

Share

Economic Indicators Roundup (September 28, 2015)

Economic indicators are everywhere, so this is kind of like a dashboard that I like to follow.  For each indicator, I will try to give you a brief description, the latest reading and what I understand to be its implications.  For simplicity, I will assign each a rating of positive, neutral or negative.  For the economic indicators, I will denote in each one’s section how I decide which rating to give it.  At the end, I assign an overall rating, but this is just to guide me in my takeaway of where things stand.  It’s not scientifically rigorous or anything.

  • Positive – indicative of a healthy, growing economy.
  • Neutral – indicative of a slow or no growth economy but not a contracting (recession) economy.
  • Negative – indicative of a shrinking economy or recession.

(NOTE: For a “Quick ‘n Easy” read, just review the labeled white boxes, then skip to my “Easy Take” summary at the end.  You can review any charts/graphs afterward.  I want to make sure no one is intimidated by the length of my posts, even though I’m trying to making them easy …)


Quick Summary

Indicator (Click for details – only works if full article is open) Current Rating (change from previous roundup)
GDPNow (GDP Forecast from Atlanta Fed) Neutral
ADS Business Conditions Index Neutral   (Downgrade)
Bloomberg Financial Conditions Index Neutral
Big Four Economic Indicators Positive   (Upgrade)
Daily Consumer Leading Indicators Negative
Employment Trends Index Positive
Chicago Fed National Activity Index Neutral
Easynomics Real Estate Price Stability Index Positive
 Citigroup Economic Surprise Index Reports a little worse than expectations
Easy Trends Dashboard   (min/max -3 to +3) +2.11 = Very likely moving in a positive direction with a few unconfirmed trends or trends in a bad direction

NOTE: You may be reading an outdated analysis.  Please visit my latest economic indicators roundup.



Economic Indicator: GDPNow   |   NEUTRAL
Easy Intro: None yet   |   Link to Source   |   Latest Date This Info Represents: 3rd Quarter 2015 (i.e., three months ending September 2015)

Quick ‘n Easy

The current forecast for real GDP growth in the 3rd quarter of 2015 is 1.8 percent – below-average growth by historical standards. The Federal Reserve Board of Atlanta combines a whole bunch of public data to mimic what the government does when reporting Gross Domestic Product (GDP), which is the broadest and most comprehensive measure of the economy that is widely accepted. It basically measures the value of all goods and services produced in the country, regardless of industry. In a sense, that’s what economics is all about, the value of things. The rate at which GDP is growing tells us whether our economy is strong or not. Historically, the average has been about 3.25 percent per year. It would be great to see at least that rate of growth.

Economic Indicators - GDPNow from Atlanta Fed - Sep 28 2015

Source: FRBAtlanta.org

Easy Description: GDPNow is a frequently updated estimate of the growth rate of the economy (GDP growth) as opposed to having to wait for quarterly estimates from the Bureau of Economic Analysis for “official” figures.

Latest Readings:

3rd Quarter of 2015: On September 28, GDPNow is positive (+) 1.8 percent annualized growth rate (versus 1.2 percent on Aug 28)

NOTE: “Annualized growth rate” is how much growth we would see over a full year if economic growth continued at the same pace as it did in the latest quarter being forecast.

Implications: After revisions,  the 1st quarter of 2015 wasn’t negative after all but barely grew, and we predictably saw a bounce back in the 2nd quarter. Now, it’s very early, but the latest indications of 3rd quarter growth suggest the bounce back was short lived. As I predicted, this forecast has slowly been improving as we get actual data coming in, so don’t be too worried.

Easynomics Rating Methodology: For this index, I will use data on the most recent quarter available. If the latest GDPNow estimate refers to a quarter for which there is already an official BEA reading, then I will go with the BEA reading. I will rate anything between zero and (+) 3.25 as “neutral” – anything above or below that will be rated “positive” or “negative” respectively.

continue reading…

Share