Healthy economy equals quiet bulletin board

[Giant Communist Robot]

Disappointing economic news today. It's a familiar narrative; two steps forward, one step back. Poor Durable Goods numbers, drop in sales, home prices are still dropping. Strong coverage for Treasury auction, yield curve shows nothing new. Regional manufacturing reports are still strong, implying the economy still has life. The big manu. report comes out Thursday.

[Giant Communist Robot]

Speaking before Congress, uh, it's Ben Bernanke this weak.

[Haggis@wk]

Speaking before Congress, uh, it's Ben Bernanke this weak.

Bernanke said the job market is still "far from normal" and may require the Fed to launch more stimulus measures,

I like Drudge's graphic

[Giant Communist Robot]

It's interesting...every single regional manufacturing report is up.

[Giant Communist Robot]

Bernanke's testimony is often nearly as opaque as Greenspan's. He lacks Alan's ability to craft memorable phrases, though. Here's my summary:

"We observe our mandate, we keep our options open, and just when are Congress and the White House going to do something, anyway?"

[Haggis@wk]

Only 54% Of Young Adults In America Have A Job.

“When it comes to young adults (18-24) in the US, the employment rate is just barely above half, or 54%, which just happens to be the lowest in 64 years, and 7% worse than when Obama took office promising a whole lot of change 3 years ago.”

The military recruiters used to benefit when the job market was tight but now with huge downsizing of the military on the horizon even that avenue to a better life is being reduced.

[Haggis@wk]

Why Aren’t Young People Buying More Houses?

When older generations wonder what’s the matter with Millennials, they often judge their younger cohorts against such financial and social benchmarks as finding a job, getting married, and buying a home. These observations often come wrapped in weak science — “blame Facebook for their indolence” — or dripping with judgment — “blame their parents for making them weak.” The science is weak, but the observations are true. Fewer young people are finding jobs. Fewer young people are getting married. Fewer young people are buying homes.

Between 1980 and 2000, the share of late-twenty-somethings owning homes had declined from 43% to 38%. The share of early-thirty-something home owners slipped from 61% to 55% in that time. After the boom and bust were over, both rates kept falling. The rate of young people getting their first mortgage between 2009 and 2011 was chopped in half from just 10 years ago, according to a recent study from the Federal Reserve.

One headwind is student debt.

It’s hard to take on a mortgage when you basically already have one.

Momentous changes are on the horizon that will challenge how we have interacted with “our” world in our lifetimes. For most of us our world, our life experiences, doesn’t go back further than the end of WWII.

That world is about to change and probably will change as dramatically as the world changed before and after WWII. It seems that the "modern" world, the world since at least the 19th century, change dramatically every 60-70 years.

I suspect that those of us alive today are going to be viewed as we viewed our grandparents; irrelevant.

[Giant Communist Robot]

Today's uninspiring ISM number, combined with the weak Durable Goods point to a slowdown in manufacturing. This has been the only promising part of the economy. Consumer spending has been up, but Personal Income has declined; an unsustainable relationship. These last two measures, though, are descriptive rather than predictive.

[Haggis@wk]

Consumer spending has been up, but Personal Income has declined; an unsustainable relationship. These last two measures, though, are descriptive rather than predictive.

CBS reports that inflation, real inflation, on things we buy every day is really at 8%. And that's the real story here. I've been whinning about that for awhile, regardless of the CPI people are feeling the pinch as the stuff they have to buy every day, food, fuel, etc, to survive is soaring and there's no relief in sight, especially as fuel costs soar.

[Giant Communist Robot]

Of course you must have known I was going to read the link. From there I went to the original source, the American Institute for Economic Research. Early in the AIER's article they mention their basket is different than the one used for CPI. Their rationale is that these are the thing that people really buy. In a previous post I've said this is a problem for the BLS and they are constantly adjusting the basket to keep the numbers meaningful.

My first reaction was "when you measure different things you get different numbers". By itself that doesn't mean one method produces a more "real" measure. Then I saw their graph of their version of prices, EPI, vs. CPI. The EPI has much more volatility, and when I checked their basket I saw why--they include food and energy. I'll try this again: those two series have wild swings in prices, those swings tend to mask the underlying trend by distorting the data. This is why the BLS emphasizes the core rather than the headline.

If you check a few posts back you'll see I did express worry over inflation, noting that core is over target. My source was the BLS and the Fed. The data I look at comes from the government and industry sources. I do look at opinions, such as ECRI and the Conference Board. The AIER is a Libertarian organization. If you can't see they have an agenda then you should try to understand the BLS's point of view. It's not an intellectual or ethical flaw to try.

[Giant Communist Robot]

Looking at worldwide manufacturing data, one sees China and EU contracting; the EU is likely headed for recession and China is slowing too--the U.S. is the only economy whose growth is accelerating.

[Haggis@wk]

My first reaction was "when you measure different things you get different numbers". By itself that doesn't mean one method produces a more "real" measure. Then I saw their graph of their version of prices, EPI, vs. CPI. The EPI has much more volatility, and when I checked their basket I saw why--they include food and energy. I'll try this again: those two series have wild swings in prices, those swings tend to mask the underlying trend by distorting the data. This is why the BLS emphasizes the core rather than the headline.

Well, I did say I'd been whining about it~

But my reaction remain "core, smore" I, and apparently many Americans, don't care what the CPI says, they care about what it costs to feed, clothe, and transport their family. Just because the CPI doesn't include those items doesn't mean the real cost to live isn't up. The CPI can go down 10% tomorrow and it will still cost more to live. After all, one of the CPI indices is the price of large appliances, if you are not prepared or have enough to buy those items then the "core" declines. It never takes into account that people today might not be able afford those items to begin with.

If it cost the average American family 8% more to live this year than it did last year then the "official" CPI is nonsense.

I've never disputed your posts about the CPI I just believe it, and the government reports surrounding it, are simply irrelevant to the majority of Americans and therefore ignored.

[Shapley]

I've never disputed your posts about the CPI I just believe it, and the government reports surrounding it, are simply irrelevant to the majority of Americans and therefore ignored.

Not me. Everytime I stick the gas nozzle in the tank and see that the price of gasoline has risen another $.10 or so, I think to myself: "Thank God the core CPI is down..." ; )

[dai bread]

I feel the same way when I look at prices in my supermarket. It seems our CPI is as meaningless as yours.

[Giant Communist Robot]

they care about what it costs to feed, clothe, and transport their family

The core does indeed include clothes, and the cost has gone down. Ultimately cost must be measured across a wider spectrum of items in order to represent the general trend. Since inflation is a general trend, noise must be removed. And so on.

one of the CPI indices is the price of large appliances, if you are not prepared or have enough to buy those items then the "core" declines.

Unless it's a price hedonics adjustment the index goes down when the price goes down.

If it cost the average American family 8% more to live this year than it did last year then the "official" CPI is nonsense.

The idea behind this is disputable. According to Monetarists a rise in cost for energy and food, when accompanied by appropriate monetary tightening, will result in a decline in price for other items. If the policy is correct the net result will be zero, if it's too tight we'll see deflation. If you want to dispute this point that's fine with me--I won't even have to think, I'll just look it up in Milton Friedman's textbook.

[Giant Communist Robot]

. Everytime I stick the gas nozzle in the tank and see that the price of gasoline has risen another $.10 or so, I think to myself: "Thank God the core CPI is down..."

Ah! A joke at my expense! Good one! Actually the core is up, and over target.

I feel the same way when I look at prices in my supermarket. It seems our CPI is as meaningless as yours.

I'm beginning to realize not too many people here understand CPI.

[Haggis@wk]

I'm beginning to realize not too many people here understand CPI.

I understand CPI, I also understand astronomical units, taxonomy classification, and Roman numerals, none of which ameliorates or reflects the pain of rising food and gas prices affecting the lives of average Americans

[Haggis@wk]

According to the president comments last week the labor market is in full-blown recovery mode right now, with the economy adding more than 200,000 net new workers each month for the past three months. At this rate, we'll close the jobs gap in roughly ... eight years.

[Giant Communist Robot]

For the last year, corporate profits have not just been high, they've been at all time historic highs. I think it's reasonable to assume earnings, or perceived earnings, are the engine behind the market. Yet the market only had a lackluster performance over the same period. Treasury yields on the near term are low, even negative sometimes, with strong coverage. This isn't evidence of the Fed's policy, as they have been buying on the long term end. It looks like a prima facie case for bond guys expecting trouble.

Adding to the idea is the well known tendency of earnings to revert to the mean. The St. Louis Fed's FRED offers some quick data and charts on the economy that show GDP, Employment, and Earnings lagging behind the typical recovery and Spending is above average. How long can that last? The CPI suggests a good portion of our spending is on Energy and Food. Today's Retail Sales report is up, but that does include things like gasoline.

GDP growth is anticipated by most ~3%. Recent inflation measures along with some other key series point to a tightening of monetary policy. On it's first blush, I'd guess this would hinder growth in jobs. Our large and growing Import/Export gap can help, as the received opinion among economists is that imports eventually must be paid with exports. That means jobs in those industries. It's a long trek up that J curve.

[dai bread]

The CPI suggests a good portion of our spending is on Energy and Food.

Interesting. Those two items have the fastest-rising prices here. Electicity has just gone up substantially, the suppliers citing the new 400kv line to Auckland. Food prices rise more steadily. Petrol varies a lot, but has stabilised lately at about $2.10 a litre.