Deceleration

As noted by Jim. Over the last week, we’ve received new readings on employment, income, sales, and monthly GDP:

Figure 1: Nonfarm payroll employment (blue), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink bold), all log normalized to 2019M01=0.  Source: BLS, Federal Reserve, BEA, via FRED, Macroeconomic Advisers (10/28 release), and author’s calculations.

While there is no clear downturn (save in industrial output), deceleration is apparent. This is most obvious in the smoothest series, nonfarm payroll employment.

Figure 2: Nonfarm payroll employment excluding temporary Census workers (blue), October value adding in striking GM workers at 50,000 (blue +), and 2017-18 stochastic trend (red). Source: BLS, and author’s calculations.

This deceleration has shown up in the Chicago Fed National Activity Index (CFNAI).

Source: Chicago Fed.

The 3 month moving average is at -0.24, which is not at the threshold of -0.70 that is identified with recession.

13 thoughts on “Deceleration

  1. Moses Herzog

    Atlanta’s NowCast calling 1.1–1.5% GDP. Unless there’s a drastic decline in equities between now and December end that seems about right to me, leaning towards 1.1% on the reality end. But my guess is the quoted BEA number will tilt closer to 1.5%–2% when the finalized numbers are in. That is to clarify, I don’t believe the quoted BEA numbers to be dead accurate.
    https://www.frbatlanta.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf

    Reply
  2. Willie

    The jobs report was above low expectations today. It was still not a barn burner. Deceleration is happening but we have another few months before the brick wall.

    Reply
    1. macroduck

      Don’t forget to add back GM strikers and related job cuts. The October hiring count would have been in the 160,000 to 210,000 range if not for the strike – kind of a barn-burner at the top of that range.

      November’s hiring data will show the effect of resolving the strike as an exaggerated pace of hiring.

      Reply
      1. pgl

        Trump tweeted that the job increase was 303,000. I know, I know – he did not lie. He was told that by village idiot Lawrence Kudlow.

        Reply
        1. pgl

          “400000 census related jobs have been created”.

          This is the same claim made by a troll over at Angrybear named Bert. Hey Bert – you have been exposed as trolling under two different names. Try sourcing your claims sometime – OK? Oh wait – a reliable sourcing would expose you for the liar you are. Never mind!

          Reply
        2. pgl

          “Bert Schlitz
          November 3, 2019 3:39 pm
          Just for reference, 400000 jobs are so jobs have been created with census, many other government employees moving over while temps replace them.”

          Over at Angrybear as a comment to the October employment report post. Gee Rage – you are Bert too? Say hello to Ernie for us!

          Reply
  3. Ed Hanson

    Looking at all the charts above.

    Nonfarm payroll employment – Up.
    industrial production – Up the last few months.
    personal income excluding transfers – Up (nicely).
    manufacturing and trade sales – Up
    monthly GDP – Up
    Chicago Fed National Activity Index 3 (or 5) month moving average trending Up.

    CFNAI does show deceleration but improvement. For perspective open this

    https://fred.stlouisfed.org/series/CFNAIMA3

    and note the three years of President Trump look better than the previous 8 years. We will just have to see how the next 5 of President Trump look.

    But enough of that. Besides wage growth, perhaps the most important chart is non farm employment.
    Question: What should the chart look like when the economy reaches its natural employment level?

    In simple terms, it should decelerate to the population growth of working age adults. Considering that and with the knowledge that 3.6% percent was not even a dream of socialist policy of the dems, the economy is doing just find. As for the next few months, as the realization that the do-nothing dem majority House of Representative will be voted out in 2020, the economy will revitalize.

    Ed

    Reply
    1. macroduck

      You are kidding, right? You must be. Choosing the Chicago index over all other measures of economic activity is cherry picking at the level of high comedy. Ignoring the fact that the index, now that Trump has been president long enough that his policies can be expected to have an impact, has weakened gives the whole exercise an extra giggle factor.

      Comparing all of Trump’s presidency to all of Obama’s presidency is silly on a Monty Python scale. Obama inherited a massive recession. Trump inherited a healthy economy. What we need to know to evaluate performance is how presidential policies work out over time. At this point in Obama’s presidency, the index you have chosen was positive, vs negative now for Trump.

      One of my favorite kinds of humor is the type perfected by Emily Latella – total, detailed misunderstanding of the topic. Thanks, Ed,, for this moment of levity.

      Reply
      1. macroduck

        By the way, to really nail an Emily Latella impression, you should smile and say “Never mind” after your wild misunderstanding has been pointed out.

        Reply
    2. pgl

      “Besides wage growth, perhaps the most important chart is non farm employment.”

      Now Ed – please note it is real wage growth not nominal wage growth that matters. It seems this White House confuses these two. Now on nonfarm employment, BLS said it increased by 128 thousand but your boy (Trump) claimed the increase was 303 thousand! Now Trump would never lie to us – right?

      Reply
    3. 2slugbaits

      Ed Hanson First, let me correct you with respect to industrial production. It has not been trending up the last few months, but has been drifting down.

      the three years of President Trump look better than the previous 8 years.

      The economy had a couple of very good quarters immediately after Trump’s tax cuts kicked in, just as CBO predicted. But just as CBO predicted, as the effect of those tax cuts waned, so too did economic growth. Currently the economy is doing slightly worse than it did over the post-recession Obama years. The economy has settled into its long run steady state. It will continue to do so until there is some negative shock that comes out of the blue and tilts the economy into recession. I hate to burst your bubble, but Trump didn’t sprinkle the economy with magic fairy dust. It’s just plodding along at more or less the same pace it’s been running at for the last 10 years.

      But what strikes me most about your post is how you and a lot of Trump supporters have moved the goalposts without even being aware of it. Team Trump was promising to permanently raise growth rates to at least 4%. Remember that? That promise was the justification for those tax cuts. Some of us argued that all we would get from those tax cuts was a transient bump in growth followed by a return to the same long run steady state growth rate we saw over the Obama years. And in exchange for that temporary bump in growth we bought ourselves a permanent bump in the debt-to-GDP ratio and even worse income inequality. But now you’ve changed your tune. You no longer talk about that promised 4% growth rate. Now you praise Trump for giving us the same 2% growth rate over the last year that we saw during the Obama years. If you were critical of Obama’s economic performance, why aren’t you also critical of Trump’s? And why aren’t you judging Trump’s performance by what Trump promised?

      the do-nothing dem majority House of Representative

      You’ve been watching too much Fox Noise. In case you hadn’t noticed, the House has passed a lot of very substantive bills. Nancy Pelosi can’t help it if Mitch McConnell and his minions love playing the role of the Grim Reaper for House bills. McConnell even brags about how his Senate is a “do nothing” branch of government. The only thing McConnell intends to pass are Trump’s unqualified judicial nominees. BTW, since Fox Noise has been losing so many of their good reporters, maybe they should think about luring North Korea’s “Pink Lady” out of retirement. Trump even thinks she should come over here and work for his favorite cable news outlet:
      https://www.businessinsider.com/who-is-ri-chun-hee-north-koreas-pink-lady-news-reader-kim-jong-un-2018-6

      Reply
  4. Baffling

    Spoke with rick stryker the other day, and he was appalled at all of the anti-trump data floating about the internet. He argued we should simply stick with the alternative facts as described by dear leaders trump and putin. He also argued we should continue to defile ukrain, per putins commands. And leave trump alone, he is only using us resources to support his reelection campaign. Its not like his actions are beneficial to russia and it’s propaganda. Rick was adamant we should protect trumps ability to defile the presidency and constitution. Only traitors disagree.

    Reply

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