Business Cycle Indicators, End-2019

Here are some key indicators tracked by NBER’s Business Cycle Dating Committee:

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), all log normalized to 2019M01=0.  Source: BLS, Federal Reserve, BEA, via FRED, Macroeconomic Advisers (12/30 release), and author’s calculations.

Industrial production remains nearly a percentage point below December 2018 levels, while manufacturing and trade sales are even with January 2019 levels. The other indicators’ growth rates have decelerated.

What about some other indicators. First, consider the Chicago Fed National Activity Index:

Figure 2: Chicago Fed National Activity Index (black), and three month trailing moving average (chartreuse). Source: Chicago Fed via FRED. 

November registered a big jump, but the 3 month trailing moving average remains mired in negative territory. Further discussion here.

Keeping in mind manufacturing is only a portion of aggregate activity in advanced and emerging economies, it is worrisome that manufacturing PMI’s have declined worldwide (US is orange).

Source: Merk.

Finally, for some unconventional measures: (1) freight activity and (2) RV sales. I use the Cass indices for the former:

Figure 3: Cass Freight Index – Shipments (blue, left log scale); Expenditures deflated by CPI-all (brown, right log scale). Source: Cass Information Systems via FRED.

From the October report (the November one is not online, but the November figures were not an improvement, so I assume that the general conclusions stand):

Continued deterioration in the Cass Freight Shipments Index concerns us:

• With the –5.9% decline in October, following the string of declines in May through September (ranging from -3.0% to -6.0%), we repeat our message from the previous five months: the shipments index has gone from “warning of a potential slowdown” to “signaling an economic contraction.”
• We acknowledge that: all of these negative percentages were against tough comparisons (some extremely tough), and the Cass Shipments Index has gone negative before without being followed by a negative GDP. However, demand is weaker across almost all modes of transportation, both domestically and internationally.
• Several key modes, and key segments of modes, are suffering material increases in the rates of decline, signaling the contraction is getting worse.
• We know that freight flows are a leading indicator, so by definition there is a lag between what they are predicting and when the outcome is reported.

Nevertheless, we see a growing risk that GDP will go negative by year’s end.

For more on recession probabilities imputed through freight indices, see this post.

What about RV sales? Except September, monthly sales are down.


Cumulative through November 2019 are down 16.9% relative to 2018. For more on imputing recession probabilities, see this post from August (notice in that post, a 30% decline is used, which is greater than the 16.9% YTD).

Final note: It is hard to argue for a decided slowdown as long as nonfarm payroll (NFP) employment continues to rise consistently. Latest estimates indicate deceleration, but not decline.

Figure 4: Nonfarm payroll employment, November 2019 release (blue), stochastic trend 2014-2016 (red), and March preliminary benchmark revision from August 21, 2019 (blue inverted triangle), all on log scale. Light green shading denotes Trump administration. Source: BLS via FRED, BLS, and author’s calculations.

One cautionary note: Employment figures from October 2018 onward have not been benchmark-revised. The March preliminary benchmark is shown as a inverted blue triangle in Figure 4. In other words, employment growth might be less than currently believed.

22 thoughts on “Business Cycle Indicators, End-2019

  1. Moses Herzog

    All of your posts are solid Menzie, but some rank higher than others. This post ranks in the great post category. Great stuff.

    1. spencer

      In discussing the long run decline and rebound in the New England economy
      I always make the point that the old industries of shoes and textiles
      finally became so minor that continued contraction did not have much of
      an economic impact. So do we now have to watch for things like autos,steel
      and nonelectrical machinery to become so minor that further declined
      have little impact.

  2. Willie

    My non-technical tea leaf prediction is noticeable slowdown if not outright recession by mid 2020. Trade war fallout isn’t over, and won’t be for a while. It won’t fall off a cliff like it did in the late zeros, but the economy will slow.

    1. dilbert dogbert

      My failing engineer’s eyeball of the curves see an inflection point at 2019. It is interesting that the NFP keeps chugging along while the others bounce around and to my eye change slope at 2019.

  3. Moses Herzog

    I’m wondering if after the attack on the exterior of the US embassy by Iran, which has now made Iraq their proxy, If Jews feel safer now under donald trump and corrupt Netanyahu?? Has that worked out well for the orthodox Israelis who went out to vote for Netanyahu after he glad-handed trump?? Do the Orthodox and conservative Israelis feel life is safer with an Iran controlled Iraq?? Because that is what they have now under Netanyahu and donald trump. Congratulations. Did you remember to say an Amidah when you voted for Netanyahu, a man who laughs it up with donald trump?? Very clever move. Thanks for caring for America as your nearly only ally in the MidEast by praising our new sham leader every chance you get. Make sure to tell your nearby Rav you love donald trump. It’s a real show of affection for your best ally in the world to praise a leader who disdains his own populace. Thanks for that.

  4. Barkley Rosser

    What is the greenish item that is going down most recently? Cannot figure that one out. All others going up most recently, even industrial production, which had been falling until recently.

    Happy hew year everybody.

    1. Moses Herzog

      You’re talking about Menzie’s “Figure 1” here correct?? (this is an earnest question, no sarcasm). If so, that’s manufacturing and trade sales.

      I wish you were here Barkley, because it’s the first time since August I’ve had any alcohol in this God-forsaken house, and if you were here I could make a fun game of hiding the bottle from you. Don’t worry it’s champaign manufactured for mostly suburban douche p*ssies, so you’re actually not missing much. If you’re drinking tonight don’t play with your Confederate musket gun ok Barkley?? It’s not a toy.

      On the good news front, the weird people I share this home with are under the badly mistaken impression we live in some F’ing nutjob Mormon commune, so I get all this p*ssy crap to myself. No, I haven’t started yet, waiting for it to get cold so I don’t end up feeding half of it to the carpeting.

      I’m praying I can at least get a buzz from this while listening to some good music, but my big fear is it’s only going to be like “low point” beer which only leaves me feeling like a have the flu and is my life goal to avoid ever consuming to the day I die.

      1. Rick Stryker


        They probably allow alcohol once a year at the “house” you are staying in because it’s New Years.

        Over the coming year, a very important New Years resolution for you should be that when the nice lady in the white uniform hands you your medicine, you should take it; don’t try to hide it or spit it out when she’s not looking. Despite what you and your housemates believe, she is only trying to help you feel better.

        1. pgl

          “you should be that when the nice lady in the white uniform hands you your medicine, you should take it; don’t try to hide it or spit it out when she’s not looking.”

          Spoken by someone who knows this routine by heart now!

      2. Barkley Rosser

        Thanks, Moses. Looking at it on a bigger screen, I think you are right about which one going down. I guess nobody has a story on that one.

        Oh, and while the city in Illinois is “Champaign,” the alcoholic beverage consumed by many on New Year’s Eve is “champagne.”

  5. Moses Herzog

    Here’s a nice one, when you’re not the one starting fights or getting angry, you’re just the sloshed guy at the end of the bar in your stool thinking about something:

    You’ll have to play it your head at the bar though, ‘cuz most people don’t wanna listen to that “downer” shit in a bar. One of the best bands or “groups” ever by the way. A “supergroup” before people knew what the hell a “supergroup” was. Davis was in at least two supergroups, another with Bill Evans, and Bill Evans stole a lot of his style from Nat King Cole. A guy my Dad saw play at a small community college up in Iowa before people decided it was cool to consume black music made by—wait for it….. wait for it….. wait for it…… black people. Lots of empty seats—in a “college town”

  6. Moses Herzog

    It’s easy to find American music in China in 2001–2008 period, if it reflected the worst and most degenerate parts of American/western culture that verified their own thoughts, but it was hard to find quality American music, here’s one I found on CD in a downtown underground shop in Dalian city and played alot while I was over there:

    That’s a nice one. They’re doing the same thing with Xinjiang people now, that they like to use as cheap labor to enrich Han people, just look for whatever verifies Xinjiang people being treated like crap and run it on TV or Whatsapp or “App-X” —whatever

    1. baffling

      how did you like dalian? i might spend some time there in the future, but it may be a little too far from beijing for me. they have high speed rail, but still takes forever. may be too far for a weekly commute. assuming the air is cleaner than beijing.

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