Back in the Real Economy: Business Cycle Indicators, Mid-March

With industrial production for February (0% m/m vs +0.2% Bloomberg consensus), we have the following picture of key indicators followed by the NBER BCDC, plus S&P Market Intelligence monthly GDP.

Figure 1: Nonfarm payroll employment, NFP (dark blue), Bloomberg consensus of 3/17 (blue +), civilian employment (orange), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), consumption in Ch.2012$ (light blue), and monthly GDP in Ch.2012$ (pink), GDP (blue bars), all log normalized to 2021M11=0. Q3 Source: BLS, Federal Reserve, BEA 2022Q4 2nd release via FRED, S&P Global/IHS Markit (nee Macroeconomic Advisers) (3/1/2023 release), and author’s calculations.

Weekly Economic Indicators (Lewis-Mertens-Stock) for data available through March 11 indicates 0.96% for y/y growth. GDPNow as of yesterday indicates Q1 growth of 3.2% q/q SAAR, while S&P Market Intelligence/formerly IHS Markit has raised its tracking estimate to 0.6% (q/q SAAR), up from -0.5% a month ago.

11 thoughts on “Back in the Real Economy: Business Cycle Indicators, Mid-March

  1. Macroduck

    More banking stuff –

    Biden has proposed holding bank executives accountable in some material way for managerial failures. This addresses the moral hazard problem of deposit insurance, probably more directly than insurance caps. I’d recommend putting substantial parts of bank executives compensation into an escrow-like account for a number of years. That way, you avoid a musical chairs episode on the way to bank failure – running away from problems created on one’s own watch (very common executive behavior) wouldn’t avoid accountability.

    Of course, last time bank execs told us that holding them accountable would result in the end of days. And they wouldn’t lie.

    1. Ivan

      An excellent idea and long overdue. However, the idea of holding bank executives responsible appears to be dead on arrival in the GOP controlled house. After all we would not expect them to bite the hand that feeds them. They will hold Hunter Biden Laptop hearings every week for the next 2 years – but don’t expect them to try to do anything about the current ability of banksters to rob us all.

    2. JohnH

      It would address the issue of moral hazard of bank management…but it would not address the moral hazard of large depositors, who now have a risk free investment. Peter Thiel reportedly had $50 million parked at SVB. Does anyone really think that he received interest of 1% in return, like ordinary depositors? Probably not. Who knows what other perks he got as well? (Low interest rates on mortgages, margin loans, vineyards?)

      Bottom line is that a major investor who negotiates a good deal for himself should get a haircut if the asset goes bad. Deposit insurance should protect only the small saver who is getting hosed every day by very negative real interest rates. It’s the least the bank could do for him.

      1. Macroduck

        “Should” is great when sitting in a bar, telling everybody what’s what. But, if deposit insurance is worth having on larger deposits in the real world, then we should have deposit insurance for larger deposits. That was the calculation when the cap went from $100,000 to $250,000, and again when the cap was lifted. The lower the cap, the greater the risk of runs.

        Once we leave the bar and go back to making reasonable decisions, it may be that very high deposit caps, or no cap, is optimal. We then have to impose a cost on beneficiaries of the system commensurate with their share of the benefit. Fees, taxes, whatever makes sense. “Should” won’t get us where we need to be.

        1. JohnH

          What’s missing in this discussion of moral hazard is the element of fairness! What else is moral hazard about but ethics and fairness?

          Optimal is one thing and fairness is another. In any public policy discussion on any website that deals with public policy, fairness should be paramount. I don’t see how government policy privileging wealthy depositors is in any way fair or ethical.

          1. Macroduck

            There’s that “should” again. The world according to Johnny.

            Problem is, Johnny is wrong about how things work so often that the world according to Johny will generally fail to achieve its goals.

            For those who live in the real world, first, you set a goal – a stable banking system, for instance. Then you look for ways to reach that goal. Then you choose the best among the various ways of reaching the goal.

            That last step, when you choose the best way? Guys on soap boxes, like Johnny, always want to start there. Skip all the hard work and just insist on their own little “should”. That’s a terrible way to make decisions.

        2. Ivan

          Forcing sound business practices and discipline onto banks via costumers doing their own expert evaluations of all the banks intricacies, and following them in real time, is not working. If it did, we would not have had this crisis in the first place. All those >$250K depositors had the information to realize the risk, yet only in the very end did they move their money to safer/better banks. It is just impossible for the little guy with 10 employees to read and understand what is going on, no matter how much information is available. So he is still the one left sinking after the big guys have exited. Alternatively, no business dares using any bank below the too big to fail threshold, and we concentrate banking into the hands of a small number of huge companies.

          Since bank runs and panics are not acceptable for society (given the collateral damage), we have to give the professional bank regulators the tools they need to prevent it from happening. That includes serious personal and financial consequences for those running the bank into the ground. In contrast to most of the small and medium size costumers, they can be expected to know what they are doing.

          We probably need to consider another tier of depositor protection for businesses, but it has to be an insurance system where the cost is closely linked to the risk. There has to be a sliding scale penalty for taking risks and a reward for being prudent.

  2. Macroduck


    Menzie, the blog platform is still misbehaving. The front page show one number of comment, but clicking through shows a smaller number. Comment frequently fail to pist.

    1. Moses Herzog

      I have delays, but nothing out of the ordinary on my end.

      Frankly I’m amazed Menzie keeps up with it as well as he does. I had a blog I was running as kind of a side hobby mostly to entertain myself. All I did was basically link other people’s content, and even that seemed a bit of a burden when you want to try to do four or five posts per week. And guess what?? I had comments blocked after I saw it just wasn’t growing that much. Before I began disallowing comments I had two semi well known bloggers who made nice comments, both of them at one time managing large funds and I was jumping off the walls and the ceiling just to get that.

  3. rjs

    headline reports fail to capture how sharply industrial production is being revised down; the industrial production index, with the benchmark set for average 2017 production to equal to 100.0, was at 102.6 in February, after the January index was revised from the 103.0 reported last month to 102.6, the December index was revised down from 102.9 to 102.4, the November index was revised from the 104.0 reported last month to 103.6, the October index was revised from 104.6 to 104.4, and the September index was revised from 104.6 to 104.5…

    there were similar downward revisions with the January report..

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