For reference purposes, here is Total Household Net Worth from a long-term perspective (from 1945:Q4 through 2021:Q2).  The last value (as of the September 23, 2021 update) is $141.667529 Trillion:

(click on each chart to enlarge image)

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Also of interest is the same metric presented on a “Percent Change from a Year Ago” basis, with a current value of 19.6%:

Data Source: FRED, Federal Reserve Economic Data, Board of Governors of the Federal Reserve System; accessed September 23, 2021; 
http://research.stlouisfed.org/fred2/series/TNWBSHNO

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4456.07 as this post is written

The following chart is from the CalculatedRisk post of September 23, 2021 titled “Fed’s Flow of Funds: Household Net Worth Increased $5.9 Trillion in Q2.” It depicts Total Household Net Worth as a Percent of GDP.  The underlying data is from the Federal Reserve’s Z.1 report, “Financial Accounts of the United States“:

(click on chart to enlarge image)

As seen in the above-referenced CalculatedRisk post:

The net worth of households and nonprofits rose to $141.7 trillion during the second quarter of 2021. The value of directly and indirectly held corporate equities increased $3.5 trillion and the value of real estate increased $1.2 trillion.

As I have written in previous posts concerning this Household Net Worth (as a percent of GDP) topic:

As one can see, the first outsized peak was in 2000, and attained after the stock market bull market / stock market bubbles and economic strength.  The second outsized peak was in 2007, right near the peak of the housing bubble as well as near the stock market peak.

also:

I could extensively write about various interpretations that can be made from this chart.  One way this chart can be interpreted is a gauge of “what’s in it for me?” as far as the aggregated wealth citizens are gleaning from economic activity, as measured compared to GDP.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4465.14 as this post is written

On Wednesday, September 22, 2021 FOMC Chairman Jerome Powell gave his scheduled September 2021 FOMC Press Conference. (link of video and related materials)

Below are Jerome Powell’s comments I found most notable – although I don’t necessarily agree with them – in the order they appear in the transcript.  These comments are excerpted from the “Transcript of Chairman Powell’s Press Conference“ (preliminary)(pdf) of September 22, 2021, with the accompanying “FOMC Statement” and “Summary of Economic Projections” dated September 22, 2021.

Excerpts from Chairman Powell’s opening comments:

Today the Federal Open Market Committee kept interest rates near zero and maintained our current pace of asset purchases.  These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to support the economy until the recovery is complete.

Progress on vaccinations and unprecedented fiscal policy actions are also providing strong support to the recovery.  Indicators of economic activity and employment have continued to strengthen.  Real GDP rose at a robust 6.4 percent pace in the first half of the year, and growth is widely expected to continue at a strong pace in the second half.  The sectors most adversely affected by the pandemic have improved in recent months, but the rise in COVID-19 cases has slowed their recovery.  Household spending rose at an especially rapid pace over the first half of the year, but flattened out in July and August as spending softened in COVID-sensitive sectors, such as travel and restaurants.  Additionally, in some industries, near-term supply constraints are restraining activity.  These constraints are particularly acute in the motor vehicle industry, where the worldwide shortage of semiconductors has sharply curtailed production.  Partly reflecting the effects of the virus and supply constraints, forecasts from FOMC participants for economic growth this year have been revised somewhat lower since our June Summary of Economic Projections, but participants still foresee rapid growth.

Excerpts of Jerome Powell’s responses as indicated to various questions:

CHRIS RUGABER. Thank you. Thank you, thank you, Chair Powell. I have a question about jobs and the Fed’s schedule, the Fed’s policy framework that you laid out here. You and other Fed officials have often talked about expecting a job market pickup in September as more children return to school, freeing up more parents to work, COVID abating. You mentioned in the past the extra unemployment benefits expiring. There’s some real-time data suggesting that we may not be seeing much of a return of labor supply. So do you still expect to see that in the next couple of jobs reports? And how would a relatively weak jobs report in September affect your plans? Thank you. 

CHAIR POWELL. So you’re right, we have a, really I’ll call it a unique situation where by many measures the labor market is tight. And 11 million job openings, very widespread, reports from employers all over the economy saying it’s quite difficult to hire people, wages moving up and that. So quite a tight labor market. So our view, I think widespread view a few months ago was that several things were coming together in the fall, including kids back to school, which would, you know, which would lighten caregiving duties, including the expiration of unemployment, extra unemployment benefits, and other things would come together to provide an increase in labor supply, and so we’d get out of this strange world where there’s lots of unemployed people and a high unemployment rate, but a labor shortage. And so what happened was Delta happened. And you had this very sharp spike in Delta cases. And I think — so that affects, for example, when schools are open 60 percent of time or when they’re always at a threat of being closed because of Delta, the Delta variant, you know, you might want to wait rather than going ahead and taking a job and starting work only to have to quit it three weeks later. You’re going to wait until you’re confident of that. So some of that may not have happened. Also people didn’t, you know, as you know, hiring and spending in these face-to-face service industries, travel and leisure, it just kind of stopped during those months. So we — so that — really the big shortfall in labor, in jobs was largely in travel and leisure and because of, clearly because of Delta. So that all happened. And so what we, [inaudible] didn’t happen. I think there’s still — it may just be that it’s going to take more time. But it still seems that inexorably people will — these are people who were largely working back in February of 2020. They’ll get back to work when it’s time to do that. It just may take longer time. You’re right, though, it didn’t happen with any force in September, and a lot of that was Delta. In terms of the, you asked also about the test for November. I think if the economy continues to progress broadly in line with expectations, then I think — and also the overall situation is appropriate for this, then I think we could easily move ahead at the next meeting or not, depending on whether we feel like that, those tests are met. 

CHRIS RUGABER. Just a, If I could just quickly follow-up. I mean, what, how much of that will depend on what kind of jobs report we get for September? And, I mean, is it, you know, are you in a data-dependent phase here where you need to see certain numbers going ahead? Or are we at a point where you’ve accumulated enough progress that – 

CHAIR POWELL. So it is, it’s accumulated progress. So, you know, for me, it wouldn’t take a knockout, great, super strong employment report. It would take a reasonably good employment report for me to feel like that test is met. And others on the Committee, many on the Committee feel that the test is already met. Others want to see more progress. And, you know, we’ll work it out as we go. But I would say that, in my own thinking, the test is all but met. So I don’t personally need to see a very strong employment report, but I’d like it see a decent employment report. I mean, it’s not, it’s, again, it’s not to be confused with the test for liftoff, which is so much higher. 

also:

JEAN YUNG. Thank you, Michelle. Chair Powell, I wanted to ask about how the Fed would balance the two parts of its dual mandate if inflation stays elevated but we still have a labor shortage and participation remains lower than ideal? Would you hold off on raising rates? Or how would you think about that? Thank you. 

CHAIR POWELL. Well, let me say one thing, you’re looking for conditions consistent with maximum employment to liftoff, and those conditions can change over time. So you’re not necessarily bound by a particular level of the unemployment rate or the participation rate or anything else like that, which can change over time. But more to your point really, we actually have a paragraph in our framework, and something like this has been there for a long time. It’s, I think it’s paragraph six. And you’re talking about a situation in which the two goals are not complementary, they’re somehow in tension. And if we judge thats effect, that is the case, what it says is we take into account the employment shortfalls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with mandate. So, we used to call that the balanced approach paragraph because it had those words. So it’s a very difficult situation for any Central Bank to be, pardon me, to be in a situation where the two goals are in tension. And that paragraph tries to address it by saying we would sort of weigh the equities between the two. How long will it take? And how big are the gaps? And that kind of thing. We don’t really think we’re in that — we’re sort in that situation, I’d say, in a short-term way. But we think, we do expect that this is sort of because of the COVID shock and the reopening and all that, you’re seeing this temporarily.

also:

SCOTT HORSLEY. Thank you, Mr. Chairman. You talked a little bit about inflation expectations. And there does seem to be something of a divide between market expectations and the views of professional economists, which are pretty much in line with the FOMC members, and lay people’s expectations, at least as reflected in the recent New York Fed survey. How much weight do you put on lay people’s expectations? And what do you think accounts for that divide? 

CHAIR POWELL. So within, let’s just take the household surveys generally. The New York Fed survey, let me talk about that specifically, and this is from the New York Fed. It’s only an eight-year old survey, and it does seem as though the, they’re looking three years out. And it seems like there’s a high correlation between three year and one year. For the most part, surveys are showing that households expect higher inflation in the near-term, but not in the longer-term. And that’s also what expectations are showing. So there are many, many different inflation measures, of course. And that’s why we have this thing called the CIE, which is the, it’s an index of, it’s market-based measures. It’s professional forecasters and it’s household surveys. And you just put them all, it’s not, you know, it doesn’t have a lot of grand theory about it. You put them all in, and you measure the change. So you should be — and also you measure things like the dispersion and that sort of thing, so you can look at all that. And, you know, it tells a story of inflation expectations moving up. Many of the different measures will also show inflation expectations moving back up to where they were in, say 2013, which was before the really — the drop in inflation expectations broadly happened in ’14 and ’15, around then. So, that’s not a troubling thing. But, you know, inflation expectations are terribly important. We spend a lot of time watching them. And if we did see them moving up in a troubling way and running persistently above levels that are really consistent with our mandate, then, you know, we would certainly react to that. But we don’t really see that now. We see more of a moderate increase that is, the first part of which is welcome. And because, you know, inflation expectations had drifted down, and it was good to see them get back up a bit. But, again, we watch carefully. 

_____

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4460.74 as this post is written 

The following is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:

The September 2021 Chicago Fed National Activity Index (CFNAI) updated as of September 23, 2021:

The CFNAI, with a current reading of .29:

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, September 23, 2021; 
https://fred.stlouisfed.org/series/CFNAI

The CFNAI-MA3, with a current reading of .43:

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, September 23, 2021; 
https://fred.stlouisfed.org/series/CFNAIMA3

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The ECRI WLI (Weekly Leading Index):

As of September 17, 2021 (incorporating data through September 10, 2021) the WLI was at 153.3 and the WLI, Gr. was at 3.6%.

A chart of the WLI,Gr., from the Advisor Perspectives’ ECRI update post of September 17, 2021:

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The Aruoba-Diebold-Scotti Business Conditions (ADS) Index

The ADS Index as of September 16, 2021, reflecting data from September 11, 2020 through September 11, 2021, with last value .128961:

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The Conference Board Leading Economic Index (LEI), Coincident Economic Index (CEI), and Lagging Economic Index (LAG):

As per the September 23, 2021 Conference Board press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in August” the LEI was at 117.1 in August, the CEI was at 105.9 in August, and the LAG was at 106.3 in August.

An excerpt from the release:

“The U.S. LEI rose sharply in August and remains on a rapidly rising trajectory,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “While the Delta variant—alongside rising inflation fears—could create headwinds for labor markets and the consumer spending outlook in the near term, the trend in the LEI is consistent with robust economic growth in the reminder of the year. Real GDP growth for 2021 is expected to reach nearly 6.0 percent year-over-year, before easing to a still-robust 4.0 percent for 2022.”

Here is a chart of the LEI from the Advisor Perspectives’ Conference Board Leading Economic Index update of September 23, 2021:

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4452.88 as this post is written

Perhaps the main reason that I write of our economic situation is that I continue to believe, based upon various analyses, that our economic situation is in many ways misunderstood.  While no one likes to contemplate a future rife with economic adversity, current and future economic problems must be properly recognized and rectified if high-quality, sustainable long-term economic vitality is to be realized.

For long-term reference purposes, here is a chart of the Dow Jones Industrial Average since 1900, depicted on a monthly basis using a LOG scale (updated through September 17, 2021, with a last value of 34,584.88):

(click on chart to enlarge image)(chart courtesy of StockCharts.com)

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4377.91 as this post is written

On September 21, 2021, the Zillow Q3 2021 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

An excerpt from the press release:

Experts surveyed expect home prices nationwide to increase a cumulative 31.8% through 2025, the equivalent of an average annual rate of 5.7% — far below the current annual appreciation of about 17%.

“Across the U.S., home value appreciation rates and annual rent price increases are at historically high levels, and home price expectations are now the highest we’ve recorded in the 12-year history of this survey,” said Terry Loebs, founder of Pulsenomics, the independent research firm that fielded the survey. “The silver lining for aspiring homeowners is that the worst of the housing supply crunch looks to finally be behind us, and most experts believe that the past year’s rapid price boil has begun to simmer down.”     

–

Various Q3 2021 Zillow Home Price Expectations Survey charts are available, including that seen below:

As one can see from the above chart, the average expectation is that the residential real estate market, as depicted by the U.S. Zillow Home Value Index, will continually climb.

The detail of the Q3 2021 Home Price Expectations Survey is interesting.  Of the 111 survey respondents, only 3 (of the displayed responses) forecasts a cumulative price decrease through 2025.

The Median Cumulative Home Price Appreciation for years 2021-2025 is seen as 11.0%, 18.16%, 23.79%, 28.49%, and 33.27%, respectively.

For a variety of reasons, I continue to believe that these forecasts will prove far too optimistic in hindsight.

I have written extensively about the residential real estate situation.  For a variety of reasons, it is exceedingly complex.  While many people continue to have an optimistic view regarding future residential real estate prices, in my opinion such a view is unsupported on an “all things considered” basis.  Residential real estate is an exceedingly large asset bubble. As such, from these price levels there exists outsized potential for a price decline of severe magnitude. 

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4363.45 as this post is written

S&P500 earnings trends and estimates are a notably important topic, for a variety of reasons, at this point in time.

FactSet publishes a report titled “Earnings Insight” that contains a variety of information including the trends and expectations of S&P500 earnings.

For reference purposes, here are two charts as seen in the “Earnings Insight” report of September 17, 2021:

from page 24:

(click on charts to enlarge images)

from page 25:

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4432.99 as this post is written

As many are aware, Refinitiv publishes earnings estimates for the S&P500.  (My other posts concerning S&P earnings estimates can be found under the S&P500 Earnings label)

The following estimates are from Exhibit 24 of the “S&P500 Earnings Scorecard” (pdf) of September 17, 2021, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2014 value is $118.78/share; the Year 2015 value is $117.46/share; the Year 2016 value is $118.10/share; the Year 2017 value is $132.00/share; the Year 2018 value is $161.93/share; the Year 2019 value is $162.93/share; and the Year 2020 value is $139.72/share;

Year 2021 estimate:

$201.03/share

Year 2022 estimate:

$220.35/share

Year 2023 estimate:

$236.33

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4435.51 as this post is written

As many are aware, Standard & Poor’s publishes earnings estimates for the S&P500.  (My posts concerning their estimates can be found under the S&P500 Earnings label)

For reference purposes, the most current estimates are reflected below, and are as of September 15, 2021:

Year 2021 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $198.62/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $185.46/share

Year 2022 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $218.03/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $200.19/share

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4451.82 as this post is written

The St. Louis Fed’s Financial Stress Index (STLFSI2) is one index that is supposed to measure stress in the financial system. Its reading as of the September 16, 2021 update (reflecting data through September 10, 2021) is -.9710:

source: Federal Reserve Bank of St. Louis, St. Louis Fed Financial Stress Index [STLFSI2], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed September 16, 2021: https://fred.stlouisfed.org/series/STLFSI2

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on September 15, 2021 incorporating data from January 8, 1971 through September 10, 2021, on a weekly basis.  The September 10 value is -.69096:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 16, 2021:  
http://research.stlouisfed.org/fred2/series/NFCI

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The ANFCI chart below was last updated on September 15, 2021 incorporating data from January 8, 1971 through September 10, 2021, on a weekly basis.  The September 10, 2021 value is -.65438:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 16, 2021:  
http://research.stlouisfed.org/fred2/series/ANFCI

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4462.70 as this post is written

The August NFIB Small Business Optimism report was released today, September 14, 2021. The headline of the Economic Trends report is “Small Business Optimism Increased Slightly in August.”

The Index of Small Business Optimism increased by .4 points to 100.1.

Here is an excerpt that I find particularly notable (but don’t necessarily agree with):

“As the economy moves into the fourth quarter, small business owners are losing confidence in the strength of future business conditions,” said NFIB Chief Economist Bill Dunkelberg. “The biggest problems facing small employers right now is finding enough labor to meet their demand and for many, managing supply chain disruptions.”

Below is a chart of the NFIB Small Business Optimism chart, from the Advisor Perspectives’ September 14, 2021 post titled “NFIB Small Business Survey…“:

Further details regarding small business conditions can be seen in the full August 2021 NFIB Small Business Economic Trends (pdf) report.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4450.62 as this post is written

“Stock market capitalization to GDP” is a notable and important metric regarding stock market valuation.  In February of 2009 I wrote of it in “Does Warren Buffett’s Market Metric Still Apply?”

On the Advisor Perspectives’ site there is an update depicting this “stock market capitalization to GDP” metric.

As seen in the September 9, 2021 post titled “Market Cap to GDP: August Buffett Valuation Indicator” two different versions are displayed, varying by the definition of stock market capitalization. (note:  additional explanation is provided in the post.)

For reference purposes, here is the first chart, with the stock market capitalization as defined by the Federal Reserve:

(click on charts to enlarge images)

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Here is the second chart, with the stock market capitalization as defined by the Wilshire 5000:

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As one can see in both measures depicted above, “stock market capitalization to GDP” continues to be at notably high levels from a long-term historical perspective.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4458.58 as this post is written

U.S. Economic Indicators

Throughout this site there are many discussions of economic indicators.  This post is the latest in a series of posts indicating facets of U.S. economic weakness or a notably low growth rate.

The level and trend of economic growth is especially notable at this time. As seen in various measures and near-term projections, the U.S. economy had undergone an outsized level of economic contraction in 2020. However, most people believe (and virtually all prominent economic forecasts indicate) that this historic level of contraction will prove ephemeral in nature; i.e. an economic expansion will continue. 

As seen in the July 2021 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for 6.89% GDP growth in 2021, 3.24% GDP growth in 2022, and 2.30% GDP growth in 2023. 

Charts Indicating U.S. Economic Weakness

Below are a small sampling of charts that depict weak growth or contraction, and a brief comment for each:

Personal Income (PI)

Personal Income has recently been volatile and its growth rate may be waning. Below is the Personal Income chart with last value of $20,667.7 Billion through July, last updated August 27, 2021:

Shown below is this same measure from a “Percent Change” basis, with current value of 1.1%:

Shown below is this same measure from a “Percent Change From Year Ago” basis, with current value of 2.7%:

source: U.S. Bureau of Economic Analysis, Personal Income [PI], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed September 10, 2021: https://fred.stlouisfed.org/series/PI

__

Personal Consumption Expenditures (PCE)

“Personal Consumption Expenditures” (PCE) has advanced strongly after substantial 2020 weakness. Shown below is this measure with last value of $15,832.3 through July, last updated August 27, 2021:

However, when viewed from a “Percent Change” perspective the growth appears to be volatile. Below is this measure displayed on a “Percent Change” (from prior month) basis with last value of .3%:

Below is this measure displayed on a “Percent Change From Year Ago” basis with value 12.1%:

source: U.S. Bureau of Economic Analysis, Personal Consumption Expenditures [PCE], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed September 12, 2021: https://fred.stlouisfed.org/series/PCE

__

Advance Retail Sales: Retail Trade and Food Services (RSAFS)

Advance Retail Sales: Retail Trade and Food Services (RSAFS), when viewed from a long-term perspective, has also recently been volatile. While the trend as viewed from a “Percent Change From Year Ago” basis remains – as one might expect – robust, when viewed from a “Percent Change” basis the growth trend appears less robust.

Shown below is this measure with last value of $617,719 Million through July, last updated August 17, 2021:

Displayed below is this same RSAFS measure on a “Percent Change” (from prior month) basis with value -1.1%, last updated August 17, 2021:

Below is this measure displayed on a “Percent Change From Year Ago” basis with value 15.8%, last updated August 17, 2021:

source: U.S. Census Bureau, Advance Retail Sales: Retail and Food Services, Total [RSAFS], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed September 10, 2021: https://fred.stlouisfed.org/series/RSAFS

__

Auto Sales (ALTSALES)

Auto sales have an extensive impact on economic activity. Recent auto sales appear to be (highly) impacted by vehicle availability. Shortages, most notably in semiconductors, has curtailed vehicle supply. Auto sales, according to the current reading (through August 2021, updated on September 3, 2021) is 13.047 million vehicles SAAR. As shown below, this is a substantial decline when viewed against recent sales trends:

As seen below, this same measure on a “Percent Change From Year Ago” basis, with value -14.4%:

__

Other Indicators

As mentioned previously, many other indicators discussed on this site indicate economic weakness or economic contraction, if not outright (gravely) problematical economic conditions.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4458.58 as this post is written

 As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

Below are three long-term charts, from Advisor Perspectives’ ECRI update post of September 10, 2021 titled “ECRI Weekly Leading Index Update.”  These charts are on a weekly basis as of the September 10, 2021 release, reflecting data through September 3, 2021.

Here is the ECRI WLI (defined at ECRI’s glossary):

–

This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

–

This last chart depicts, on a long-term basis, the WLI, Gr.:

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4476.62 as this post is written

There are a variety of economic models that are supposed to predict the probabilities of recession.

The first is the “Yield Curve as a Leading Indicator” from the New York Federal Reserve.  I wrote a post concerning this measure on March 1, 2010, titled “The Yield Curve as a Leading Indicator.” 

Currently (last updated September 3, 2021 using data through August 2021) this “Yield Curve” model shows a 9.4854% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 9.0649% probability through July 2021, and a chart going back to 1960 is seen at the “Probability Of U.S. Recession Predicted by Treasury Spread.” (pdf)

The second model is from Marcelle Chauvet and Jeremy Piger.  This model is described on the St. Louis Federal Reserve site (FRED) as follows:

Smoothed recession probabilities for the United States are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales. This model was originally developed in Chauvet, M., “An Economic Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching,” International Economic Review, 1998, 39, 969-996. (http://faculty.ucr.edu/~chauvet/ier.pdf)

Additional details and explanations can be seen on the “U.S. Recession Probabilities” page.

This model, last updated on September 1, 2021 currently shows a .10% probability using data through July 2021.

Here is the FRED chart (last updated September 1, 2021):

Data Source:  Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed September 8, 2021:  
http://research.stlouisfed.org/fred2/series/RECPROUSM156N

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The two models featured above can be compared against measures seen in recent posts.  For instance, as seen in the July 11, 2021 post titled “The July 2021 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 11.56% probability of a U.S. recession within the next 12 months.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4514.07 as this post is written

In the November 13, 2013 post (“Not In Labor Force Statistic“) I featured editorial commentary from the Wall Street Journal, as well as an accompanying long-term chart, with regard to the number of people not working.

Below is an updated chart regarding this statistic.  The current figure, last updated on September 3, 2021 depicting data through August 2021, is 99.823 million people (Not Seasonally Adjusted):

Data Source: U.S. Bureau of Labor Statistics, Not in Labor Force [LNU05000000], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed September 8, 2021: 
https://fred.stlouisfed.org/series/LNU05000000

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4520.03 as this post is written

My overall analysis indicates a continuing elevated and growing level of financial danger which contains many worldwide and U.S.-specific “stresses” of a very complex nature. I have written numerous posts on this site concerning both ongoing and recent “negative developments.”  These developments, as well as other exceedingly problematical conditions, have presented a highly perilous economic environment that endangers the overall financial system.

Predicting the specific timing and extent of a stock market crash is always difficult, and the immense complexity of today’s economic situation makes such a prediction even more challenging. With that being said, my analyses continue to indicate that a near-term exceedingly large (from an ultra long-term perspective) stock market crash – that would also involve (as seen in 2008) various other markets – will occur. [note: the “next crash” and its aftermath has paramount significance and implications, as discussed in the post of January 6, 2012 titled “The Next Crash And Its Significance“ and various subsequent posts in the “Economic Depression” label]

As reference, below is a daily chart since 2008 of the S&P500 (through September 7, 2021 with a last price of 4520.03), depicted on a LOG scale, indicating both the 50dma and 200dma as well as price labels:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4520.03 as this post is written 

I have written many blog posts concerning the worrisome trends in income and earnings.

Along these lines, one of the measures showing disconcerting trends is that of hourly earnings.

While the concept of hourly earnings can be defined and measured in a variety of ways, below are a few charts that I believe broadly illustrate problematic trends.

The first chart depicts Average Hourly Earnings Of All Employees: Total Private (FRED series CES0500000003)(current value = $30.73):

(click on chart to enlarge image)(chart last updated 9-3-21)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of All Employees:  Total Private [CES0500000003] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed September 3, 2021: 
http://research.stlouisfed.org/fred2/series/CES0500000003

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This next chart depicts this same measure on a “Percentage Change From A Year Ago” basis.   While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 9-3-21)

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There are slightly different measures available from a longer-term perspective. Pictured below is another measure, the Average Hourly Earnings of Production and Nonsupervisory Employees – Total Private (FRED series AHETPI)(current value = $25.99):

(click on chart to enlarge image)(chart last updated 9-3-21)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of Production and Nonsupervisory Employees:  Total Private [AHETPI] ; U.S. Department of Labor: Bureau of Labor Statistics;  accessed September 3, 2021: 
http://research.stlouisfed.org/fred2/series/AHETPI

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Pictured below is this AHETPI measure on a “Percentage Change From A Year Ago” basis.   While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 9-3-21)

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I will continue to actively monitor these trends, especially given the post-2009 dynamics.

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I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4527.46 this post is written

Shortly after each monthly employment report I have been posting a continual series titled “3 Critical Unemployment Charts.”

Of course, there are many other employment charts that can be displayed as well.

For reference purposes, below are the U-3 and U-6 Unemployment Rate charts from a long-term historical perspective.  Both charts are from the St. Louis Fed site.  The U-3 measure is what is commonly referred to as the official unemployment rate; whereas the U-6 rate is officially (per Bureau of Labor Statistics) defined as:

Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

Of note, many economic observers use the U-6 rate as a (closer) proxy of the actual unemployment rate rather than that depicted by the U-3 measure.

Here is the U-3 chart, currently showing a 5.2% unemployment rate:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Civilian Unemployment Rate [UNRATE] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed September 3, 2021: 
http://research.stlouisfed.org/fred2/series/UNRATE

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Here is the U-6 chart, currently showing a 8.8% unemployment rate:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons  [U6RATE] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed September 3, 2021:  
http://research.stlouisfed.org/fred2/series/U6RATE

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4534.57 as this post is written

As I have commented previously, as in the October 6, 2009 post (“A Note About Unemployment Statistics”), in my opinion the official methodologies used to measure the various job loss and unemployment statistics do not provide an accurate depiction; they serve to understate the severity of unemployment.

However, even if one chooses to look at the official statistics, the following charts provide an interesting (and disconcerting) long-term perspective of certain aspects of the officially-stated unemployment (and, in the third chart, employment) situation.

The three charts below are from the St. Louis Fed site.  Here is the Median Duration of Unemployment (current value = 14.7 weeks):

(click on charts to enlarge images)(charts updated as of 9-3-21)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Median Duration of Unemployment [UEMPMED] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed September 3, 2021:  
http://research.stlouisfed.org/fred2/series/UEMPMED

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Here is the chart for Unemployed 27 Weeks and Over (current value = 3.179 million):

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Civilians Unemployed for 27 Weeks and Over [UEMP27OV] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed September 3, 2021: 
http://research.stlouisfed.org/fred2/series/UEMP27OV

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Here is the chart for Total Nonfarm Payroll (current value = 147.190 million):

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: All Employees: Total Nonfarm [PAYEMS] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed September 3, 2021:  
https://research.stlouisfed.org/fred2/series/PAYEMS

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Our unemployment problem is severe.  The underlying dynamics of the current – and especially future – unemployment situation remain exceedingly worrisome.  These dynamics are numerous and complex, and greatly lack recognition and understanding.

My commentary regarding unemployment is generally found in the “Unemployment” label.  This commentary includes the page titled “U.S. Unemployment Trends,” which discusses various problematical issues concerning the present and future employment situation.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4536.95 as this post is written