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 estimates, the probability of recession has grown significantly.

As seen in the January 2023 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for .17% GDP in 2023, 1.86% GDP in 2024, and 2.22% GDP in 2025.

Charts Indicating U.S. Economic Weakness

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

The Yield Curve (T10Y2Y)

Many people believe that the Yield Curve is a leading economic indicator for the United States economy.

On March 1, 2010, I wrote a post on the issue, titled “The Yield Curve As A Leading Economic Indicator.”

While I continue to have the stated reservations regarding the “Yield Curve” as an indicator, I do believe that it should be monitored.

The U.S. Yield Curve (one proxy seen below) is negative and is (all things considered) notably very low when viewed from a long-term perspective. Below is the spread between the 10-Year Treasury Constant Maturity and the 2-Year Treasury Constant Maturity from June 1976 through the February 3, 2023 update, showing a value of -.77% [10-Year Treasury Yield (FRED DGS10) of 3.40% as of the February 3 update, 2-Year Treasury Yield (FRED DGS2) of 4.09% as of the February 3 update]:

source: Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity [T10Y2Y], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed February 6, 2023: https://fred.stlouisfed.org/series/T10Y2Y

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Real Average Hourly Earnings

Various measures of (nominal) average hourly earnings continue to show significant growth. However, due to continuing high inflation, Real Average Hourly Earnings continues to decline and has done so for a relatively prolonged period. Shown below is a chart of earnings measures as seen in The Economics Daily of January 18, 2023 titled “Real average hourly earnings down 1.7 percent from December 2021 to December 2022”:

source: Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Real average hourly earnings down 1.7 percent from December 2021 to December 2022 at https://www.bls.gov/opub/ted/2023/real-average-hourly-earnings-down-1-7-percent-from-december-2021-to-december-2022.htm (visited February 06, 2023).

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All Employees, Temporary Help Services (TEMPHELPS)

I have written extensively about many facets of employment and unemployment, as the current and future unemployment issue is of tremendous importance yet is in many ways misunderstood.

One theory regarding employment is that hiring cycles typically begin with an uptake in temporary employment.

Shown below is this measure with last value of 3,077.9 (Thousands) through January, last updated February 3, 2023:

Below is this measure displayed on a “Percent Change From Year Ago” basis with value -.4%:

source: U.S. Bureau of Labor Statistics, All Employees, Temporary Help Services [TEMPHELPS], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed February 6, 2023: https://fred.stlouisfed.org/series/TEMPHELPS

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Job Openings (JTSJOL)

Job openings (Job Openings: Total Nonfarm [JTSJOL]), although still at a (very) high level, have recently declined significantly. This Job Openings measure had a value of 11,012 (Thousands) through December 2022, as of the February 1, 2023 update, as shown below:

Shown below is this measure displayed on a “Percent Change From Year Ago” basis with value -3.8%:

source: U.S. Bureau of Labor Statistics, Job Openings: Total Nonfarm [JTSJOL], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed February 6, 2023: https://fred.stlouisfed.org/series/JTSJOL

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Other Indicators

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

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Other Indicators

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4107.50 as this post is written

For reference purposes, below are five charts that display growth in payroll employment, as depicted by the Total Nonfarm Payroll measures (FRED data series PAYEMS).

PAYEMS, which is seasonally adjusted, is defined in Financial Reserve Economic Data [FRED] as:

All Employees: Total Nonfarm, commonly known as Total Nonfarm Payroll, is a measure of the number of U.S. workers in the economy that excludes proprietors, private household employees, unpaid volunteers, farm employees, and the unincorporated self-employed. This measure accounts for approximately 80 percent of the workers who contribute to Gross Domestic Product (GDP).

This measure provides useful insights into the current economic situation because it can represent the number of jobs added or lost in an economy. Increases in employment might indicate that businesses are hiring which might also suggest that businesses are growing. Additionally, those who are newly employed have increased their personal incomes, which means (all else constant) their disposable incomes have also increased, thus fostering further economic expansion.

Generally, the U.S. labor force and levels of employment and unemployment are subject to fluctuations due to seasonal changes in weather, major holidays, and the opening and closing of schools. The Bureau of Labor Statistics (BLS) adjusts the data to offset the seasonal effects to show non-seasonal changes: for example, women’s participation in the labor force; or a general decline in the number of employees, a possible indication of a downturn in the economy. To closely examine seasonal and non-seasonal changes, the BLS releases two monthly statistical measures: the seasonally adjusted All Employees: Total Nonfarm (PAYEMS) and All Employees: Total Nonfarm (PAYNSA), which is not seasonally adjusted.

The series comes from the ‘Current Employment Statistics (Establishment Survey).’

The source code is: CES0000000001

The first chart shows the monthly change in Total Nonfarm Payroll from the year 2000 through the current January 2023 report (January 2023 value of 517 (Thousands)):

(click on charts to enlarge images)

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 February 3, 2023; https://fred.stlouisfed.org/series/PAYEMS

The second chart shows a longer-term chart of the same month-over-month change in Total Nonfarm Payroll (reports of February 1939 through the present report of January 2023):

The third chart shows the aggregate number of Total Nonfarm Payroll, from the reports of January 1939 – January 2023 (January 2023 value of 155.073 million):

The fourth chart shows this same measure of aggregate number of Total Nonfarm Payroll as seen above but presented on a LOG scale:

Lastly, the fifth chart shows the Total Nonfarm Payroll number on a “Percent Change from Year Ago” basis from January 1940 – January 2023: (January 2023 value of 3.3%)

_________

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 4176.15 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 = $33.03):

(click on chart to enlarge image)(chart last updated 2-3-23)

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 February 3, 2023: 
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 2-3-23)

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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 = $28.26):

(click on chart to enlarge image)(chart last updated 2-3-23)

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 February 3, 2023: 
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 2-3-23)

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

_________

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 4163.62 as 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 3.4% 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 February 3, 2023: 
http://research.stlouisfed.org/fred2/series/UNRATE

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Here is the U-6 chart, currently showing a 6.6% 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 February 3, 2023:  
http://research.stlouisfed.org/fred2/series/U6RATE

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4151.23 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 = 9.1 weeks):

(click on charts to enlarge images)(charts updated as of 2-3-23)

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 February 3, 2023:  
http://research.stlouisfed.org/fred2/series/UEMPMED

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Here is the chart for Unemployed 27 Weeks and Over (current value = 1.111 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 February 3, 2023: 
http://research.stlouisfed.org/fred2/series/UEMP27OV

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Here is the chart for Total Nonfarm Payroll (current value = 155.073 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 February 3, 2023:  
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” category.  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 4147.07 as this post is written

On Wednesday, February 1, 2023 FOMC Chair Jerome Powell gave his scheduled February 2023 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 February 1, 2023, with the accompanying “FOMC Statement.”

Excerpts from Chairman Powell’s opening comments:

Today, the FOMC raised our policy interest rate by 25 basis points.  We continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.  In addition, we are continuing the process of significantly reducing the size of our balance sheet.  Restoring price stability will likely require maintaining a restrictive stance for some time.  I will have more to say about today’s monetary policy actions after briefly reviewing economic developments.  

The U.S. economy slowed significantly last year, with real GDP rising at a below-trend pace of 1 percent.  Recent indicators point to modest growth of spending and production this quarter.  Consumer spending appears to be expanding at a subdued pace, in part reflecting tighter financial conditions over the past year.  Activity in the housing sector continues to weaken, largely reflecting higher mortgage rates.  Higher interest rates and slower output growth also appear to be weighing on business fixed investment.  

Despite the slowdown in growth, the labor market remains extremely tight, with the unemployment rate at a 50-year low, job vacancies still very high, and wage growth elevated. Job gains have been robust, with employment rising by an average of 247,000 jobs per month over the last three months.  Although the pace of job gains has slowed over the course of the past year and nominal wage growth has shown some signs of easing, the labor market continues to be out of balance.  Labor demand substantially exceeds the supply of available workers, and the labor force participation rate has changed little from a year ago.

Inflation remains well above our longer-run goal of 2 percent.  Over the 12 months ending in December, total PCE prices rose 5.0 percent; excluding the volatile food and energy categories, core PCE prices rose 4.4 percent.  The inflation data received over the past three months show a welcome reduction in the monthly pace of increases.  And while recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path.

Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets.  But that’s not grounds for complacency.  Although inflation has moderated recently, it remains too high.  The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched.

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

COLBY SMITH. Just as a quick follow-up. How are you viewing the kind of balance of risk between those two options of, you know, the likelihood of maybe falling short of that or going beyond that level? 

CHAIR POWELL. I guess I would say it this way. I continue to think that it’s very difficult to manage the risk of doing too little and finding out in 6 or 12 months that we actually were close but didn’t get the job done, inflation springs back and we have to go back in. And now, you really do worry about expectations getting unanchored and that kind of thing. This is a very difficult risk to manage, whereas I — of course, we have no incentive and no desire to overtighten. But we — You know, if we feel like we’ve gone too far, we can certainly — if we could certain — and inflation is coming down faster than we expect, then we have tools that would work on that. So, I do think that in this situation where we have still the highest inflation in 40 years, you know, the job is not fully done. As I mentioned — started to mention earlier, we have a sector that represents 56 percent of the core inflation index where we don’t see this inflation yet. So, we don’t see it. It’s not happening yet. The inflation in the core services X housing is still running at 4 percent on a 6- and 12-month basis. So, there’s not — nothing happening there. In the other two sectors representing, you know, less than 50 percent, you actually, I think, now have a story that is credible, that’s coming together, although you don’t actually see this inflation yet in housing services, but it’s in the pipeline, right? So, for the third sector, we don’t see anything here. So, I think it would be premature, it would be very premature to declare victory or to think that we’ve really got this. We need to see — Our goal, of course, is to bring inflation down. And how do we get that done? There are many, many factors driving inflation in that sector and they should be coming into play to have inflation — the disinflationary process begin in that sector. But so far, we don’t see that. And I think until we do, we see ourselves as having a lot of work left to do. 

also:

MICHAEL MCKEE. Michael McKee from Bloomberg TV and Radio. I’d like to pick up on what you were just saying about a substantial downturn and ask with the full weight of your tightening not in place yet and with the progress against inflation, there’s still a lot of talk about very, very slow growth going forward in 2023. And the recession indicators are all suggesting that we are going to see recession this year. So, I’m wondering if you’ve changed your view or you have a more nuanced view of what you think the danger to economic growth is going forward and whether you’re very close to perhaps tipping it into the wrong place, which calls for more restraint on your part. 

CHAIR POWELL. So, I do think you most forecast and, you know, my own assessment would be that that growth will continue, positive growth will continue, but at a subdued pace as it did last year. We had growth of — GDP growth of 1 percent last year and also final sales growth, which we think is a better indicator of about 1 percent. I think, you know, most forecasts, and certainly, my assessment would be that growth will continue at a fairly subdued level this year. There are other factors, though, that need to be considered. You will have seen that the global picture is improving a bit and that will matter for us, potentially. The labor market remains very, very strong and that’s job creation, that’s wages. As inflation does come down, sentiment will improve. You also, state local governments are really flush these days with, you know, money and many of them are considering tax cuts or even sending checks. So, I think that’s going to support. They’re also spending a lot. There’s a lot of spending coming in the construction pipeline, both private and public. And so, that’s going to support economic activity. So, I think there’s a good chance that those factors will help support positive growth this year. And that’s my base case is that there will be positive growth this year. 

also:

NANCY MARSHALL-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. I wanted to go back to another thing that Fed Vice Chair Lael Brainard said recently. She said she doesn’t see signs of a wage price spiral, and I’m wondering if you agree with that. 

CHAIR POWELL. I do. Yeah, I do. You don’t see that yet. But the whole point is, you know, if you — once you see it, you have a serious problem. That means that effectively, in people’s decision-making, inflation has become a really salient issue. And once that happens, that’s what we can’t allow to happen. And, you know, so that’s why we worry that the longer we’re at this and the longer people are talking about inflation all day long, every day, you know, the more risk of something like that. But no, there’s not much — It’s more of a risk. It always has been more of a risk than anything else. By the way, I think it’s becoming less salient. And people are — You know, we pick that up in conversations. And I’ve seen some data, too, that show people are, you know, gradually — they’re glad that inflation is coming down. People really don’t like inflation. And as we see it coming down, that could also add a boost to economic activity. You look at the sentiment surveys now, and they’re very, very low with three and a half percent unemployment and, you know, high wage increases nominally by historical standards. Why can that be? It has to be inflation, right? So, I think once inflation is seen to be coming down in coming months even you will also see a boost to sentiment, I hope. 

NANCY MARSHALL-GENZER. So that’s what you’re looking at most closely is consumer expectations? 

CHAIR POWELL. That’s at the very heart, is consumers and businesses that, you know, are the — essentially, we believe that expectations of future inflation are very important part of the process of creating inflation. That’s a sort of bedrock belief, in one way or another it has to be. We think it’s important. And in this case, I would say the risk eight months ago or so, longerterm inflation expectations had moved up. We moved quite vigorously last year. Expectations are seemed to be well-anchored, including at the shorter end now, not just the longer end. So, it’s, you know — and that’s — I think that’s very reassuring. I think, you know, the markets have decided, and the public has decided that inflation is going to come back down to 2 percent and it’s just a matter of us following through that’s immeasurably helpful to the process of getting inflation down. The fact that people now do generally believe that it will come down, that’ll be part of the process of getting it down. And it’s a very positive thing. 

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4193.07 as this post is written

The St. Louis Fed’s Financial Stress Index (STLFSI4) is one index that is supposed to measure stress in the financial system. Its reading as of the February 2, 2023 update (reflecting data through January 27, 2023) is -.4892:

source: Federal Reserve Bank of St. Louis, St. Louis Fed Financial Stress Index [STLFSI4], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed February 2, 2023: https://fred.stlouisfed.org/series/STLFSI4

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 February 1, 2023 incorporating data from January 8, 1971 through January 27, 2023 on a weekly basis.  The January 27 value is -.35201:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 2, 2023:  
http://research.stlouisfed.org/fred2/series/NFCI

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The ANFCI chart below was last updated on February 1, 2023 incorporating data from January 8, 1971 through January 27, 2023, on a weekly basis.  The January 27, 2023 value is -.40891:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 2, 2023:  
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 4178.76 as this post is written

For reference purposes, below are two charts of the VIX from year 2000 through the February 1, 2023 close, which had a closing value of 17.87.

Here is the VIX Weekly chart, depicted on a LOG scale, with the 13- and 34-week moving averages, seen in the cyan and red lines, respectively:

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

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Here is the VIX Monthly chart, depicted on a LOG scale, with the 13- and 34-month moving average, seen in the cyan and red lines, respectively:

(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 4119.21 as this post is written

In the March 9, 2012 post (“Charts of Equities’ Performance Since March 9, 2009 And January 1, 1980“) I highlighted two charts for reference purposes. 

Below are those two charts, updated through the latest daily closing price.

The first is a daily chart of the S&P500 (shown in green), as well as five prominent (AAPL, IBM, AMZN, SBUX, CAT) individual stocks, since 2005.  There is a blue vertical line that is very close to the March 6, 2009 low.  As one can see, both the S&P500 performance, as well as many stocks including the five shown, have performed strongly since the March 6, 2009 low:

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

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This next chart shows, on a monthly LOG basis, the S&P500 since 1980.  I find this chart notable as it provides an interesting long-term perspective on the S&P500′s performance.  The 20, 50, and 200-month moving averages are shown in blue, red, and green lines, respectively:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4119.21 as this post is written

StockCharts.com maintains long-term historical charts of various major stock market indices, interest rates, currencies, commodities, and economic indicators.

As a long-term reference, below are charts depicting various stock market indices for the dates shown.  All charts are depicted on a monthly basis using a LOG scale.

(click on charts to enlarge images)(charts courtesy of StockCharts.com)

The Dow Jones Industrial Average, from 1900 – January 27, 2023:

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The Dow Jones Transportation Average, from 1900 – January 27, 2023:

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The S&P500, from 1925 – January 27, 2023:

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The Nasdaq Composite, from 1978 – January 27, 2023:

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4065.18 as this post is written

U.S. Dollar weakness is a foremost concern of mine.  As such, I have extensively written about it, including commentary on the “A Substantial U.S. Dollar Decline And Consequences” page.  I am very concerned that the actions being taken to “improve” our economic situation will dramatically weaken the Dollar.  Should the Dollar substantially decline from here, as I expect, the negative consequences will far outweigh any benefits.  The negative impact of a substantial Dollar decline can’t, in my opinion, be overstated.

The following three charts illustrate various technical analysis aspects of the U.S. Dollar, as depicted by the U.S. Dollar Index.

First, a look at the monthly U.S. Dollar from 1983.  This clearly shows a long-term weakness, with the blue line showing technical support until 2007, and the red line representing a (past) trendline:

(charts courtesy of StockCharts.com; annotations by the author)

(click on charts to enlarge images)

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Next, another chart, this one focused on the daily U.S. Dollar since 2000 on a LOG scale.  The red line represents a (past) trendline.  The gray dotted line is the 200-day M.A. (moving average):

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Lastly, a chart of the Dollar on a weekly LOG scale.  There are two clearly marked past channels, with possible technical support depicted by the dashed light blue line:

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I will continue providing updates on this U.S. Dollar situation regularly as it deserves very close monitoring…

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4076.60 as this post is written

Various surveys, economic growth projections, and market risk indicators portrayed a short period (through mid-2020) of substantial U.S. economic decline, and now indicate sustained economic growth and financial stability for the foreseeable future.

However, there are various indications – many of which have been discussed on this site – that this very widely-held consensus is in many ways incorrect.  There are many exceedingly problematical financial conditions that have existed prior to 2020, and continue to exist.  As well, numerous economic dynamics continue to be exceedingly worrisome and many economic indicators have portrayed facets of weak growth or outright decline currently as well as prior to 2020.

Of paramount importance is the resulting level of risk and the future economic implications.

From an “all things considered” standpoint, I continue to believe the overall level of risk remains at a fantastic level – one that is far greater than that experienced at any time in the history of the United States.

Cumulatively, these highly problematical conditions will lead to future upheaval.  The extent of the resolution of these problematical conditions will determine the ongoing viability of the financial system and economy as well as the resultant quality of living.

As I have previously written in “The U.S. Economic Situation” updates:

My analyses continues to indicate that the growing level of financial danger will lead to the next stock market crash that will also involve (as seen in 2008) various other markets as well.  Key attributes of this next crash is its outsized magnitude (when viewed from an ultra-long term historical perspective) and the resulting economic impact.  This next financial crash is of tremendous concern, as my analyses indicate it will lead to a Super Depression – i.e. an economy characterized by deeply embedded, highly complex, and difficult-to-solve problems.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4076.60 as this post is written

Advisor Perspectives had a post of January 31, 2023 (“Consumer Confidence Declines in January“) that displays the latest Conference Board Consumer Confidence and University of Michigan Consumer Sentiment Index charts.  They are presented below:

(click on charts to enlarge images)

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While I don’t believe that confidence surveys should be overemphasized, I find these readings and trends to be notable, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4044.69 as this post is written

While the concept of Americans’ incomes can be defined in a number of ways, many prominent measures continue to show disconcerting trends.

One prominent measure is the Employment Cost Index (ECI).

Here is a description from the BLS document titled “The Employment Cost Index:  what is it?“:

The Employment Cost Index (ECI) is a quarterly measure of the change in the price of labor, defined as compensation per employee hour worked. Closely watched by many economists, the ECI is an indicator of cost pressures within companies that could lead to price inflation for finished goods and services. The index measures changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. As a fixed-weight, or Laspeyres, index, the ECI controls for changes occurring over time in the industrial-occupational composition of employment.

On January 31, 2023, the latest ECI report was released.  Here are two excerpts from the BLS release titled “Employment Cost Index – December 2022“:

Compensation costs for civilian workers increased 1.0 percent, seasonally adjusted, for the 3-month period ending in December 2022, the U.S. Bureau of Labor Statistics reported today. Wages and salaries increased 1.0 percent and benefit costs increased 0.8 percent from September 2022. (See tables A, 1, 2, and 3.)

also:

Compensation costs for civilian workers increased 5.1 percent for the 12-month period ending in December 2022 and increased 4.0 percent in December 2021. Wages and salaries increased 5.1 percent for the 12-month period ending in December 2022 and increased 4.5 percent for the 12-month period ending in December 2021. Benefit costs increased 4.9 percent over the year and increased 2.8 percent for the 12-month period ending in December 2021. (See tables A, 4, 8, and 12.)

Below are three charts, updated on January 31, 2023 that depict various aspects of the ECI, which is seasonally adjusted (SA):

The first depicts the ECI, with a value of 155.5:

source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian [ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed January 31, 2023: 
https://research.stlouisfed.org/fred2/series/ECIALLCIV/

The second chart depicts the ECI on a “Percent Change from Year Ago” basis, with a value of 5.1%:

The third chart depicts the ECI on a “Percent Change” (from last quarter) basis, with a value of 1.0%:

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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 4017.77 as this post is written

For reference, below is a chart of the St. Louis Fed Price Pressures Measures – Deflation Probability [FRED STLPPMDEF] through January 2023.

While I do not necessarily agree with the current readings of the measure, I view this as a proxy of U.S. deflation probability.

A description of this measure, as seen in FRED:

This series measures the probability that the personal consumption expenditures price index (PCEPI) inflation rate (12-month changes) over the next 12 months will fall below zero.

The chart, on a monthly basis from January 1990 – January 2023, with a last reading of .00001, last updated on January 27, 2023:

Here is this same U.S. deflation probability measure since 2008:

source:  Federal Reserve Bank of St. Louis, Deflation Probability [STLPPMDEF], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed January 27, 2023: https://fred.stlouisfed.org/series/STLPPMDEF

_________

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 4070.56 as this post is written

Each month I have been highlighting various estimates of U.S. recession probabilities.  The latest update was that of January 12, 2023, titled “Recession Probability Models – January 2023.”

While I don’t agree with the methodologies employed or the probabilities of impending economic weakness as depicted by these and other estimates, I do believe that the results of these models and estimates should be monitored.

Another probability of recession is provided by James Hamilton, and it is titled “GDP-Based Recession Indicator Index.”  A description of this index, as seen in FRED:

This index measures the probability that the U.S. economy was in a recession during the indicated quarter. It is based on a mathematical description of the way that recessions differ from expansions. The index corresponds to the probability (measured in percent) that the underlying true economic regime is one of recession based on the available data. Whereas the NBER business cycle dates are based on a subjective assessment of a variety of indicators that may not be released until several years after the event , this index is entirely mechanical, is based solely on currently available GDP data and is reported every quarter. Due to the possibility of data revisions and the challenges in accurately identifying the business cycle phase, the index is calculated for the quarter just preceding the most recently available GDP numbers. Once the index is calculated for that quarter, it is never subsequently revised. The value at every date was inferred using only data that were available one quarter after that date and as those data were reported at the time.

If the value of the index rises above 67% that is a historically reliable indicator that the economy has entered a recession. Once this threshold has been passed, if it falls below 33% that is a reliable indicator that the recession is over.

Additional reference sources for this index and its construction can be seen in the Econbrowser post of February 14, 2016 titled “Recession probabilities” as well as on the “The Econbrowser Recession Indicator Index” page.

Below is a chart depicting the most recent value of 8.30000% for the third quarter of 2022, last updated on January 27, 2023 (after the January 26, 2023 Gross Domestic Product, Fourth Quarter 2022 (Advance Estimate):

source:  Hamilton, James, GDP-Based Recession Indicator Index [JHGDPBRINDX], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed January 27, 2023: 
https://research.stlouisfed.org/fred2/series/JHGDPBRINDX

_________

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 4086.32 as this post is written

Here are two charts from the St. Louis Fed depicting the velocity of money in terms of the M1 and M2 money supply measures.

All charts reflect quarterly data through the 4th quarter of 2022, and were last updated as of January 26, 2023.

Velocity of M1 Money Stock, current value = 1.313:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 26, 2023:
http://research.stlouisfed.org/fred2/series/M1V

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Velocity of M2 Money Stock, current value = 1.225:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 26, 2023: 
http://research.stlouisfed.org/fred2/series/M2V

_________

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 4036.81 as this post is written

For reference purposes, below is a chart from the Advisor Perspectives’ post of January 26, 2023 titled “Q4 GDP Advance Estimate: Real GDP at 2.9%, Better Than Forecast” reflecting Real GDP, with a trendline, as depicted.  This chart incorporates the Gross Domestic Product, Fourth Quarter 2022 (Advance Estimate) of January 26, 2023:

_________

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 4035.83 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 January 2023 Chicago Fed National Activity Index (CFNAI) updated as of January 26, 2023:

The CFNAI, with a current reading of -0.49:

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed January 26, 2023: 
https://fred.stlouisfed.org/series/CFNAI

The CFNAI-MA3, with a current reading of -.33:

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; accessed January 26, 2023: 
https://fred.stlouisfed.org/series/CFNAIMA3

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

The ADS Index as of January 19, 2023, reflecting data from March 1, 1960 through January 14, 2023, with last value -.342372:

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

As per the January 23, 2023 Conference Board press release the LEI was 110.5 in December, the CEI was 109.6 in December, and the LAG was 117.6 in December.

An excerpt from the release:

“The US LEI fell sharply again in December—continuing to signal recession for the US economy in the near term,” said Ataman Ozyildirim, Senior Director, Economics, at The Conference Board. “There was widespread weakness among leading indicators in December, indicating deteriorating conditions for labor markets, manufacturing, housing construction, and financial markets in the months ahead. Meanwhile, the coincident economic index (CEI) has not weakened in the same fashion as the LEI because labor market related indicators (employment and personal income) remain robust. Nonetheless, industrial production— also a component of the CEI—fell for the third straight month. Overall economic activity is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023.”

Here is a chart of the LEI from the Advisor Perspectives’ Conference Board Leading Economic Index (LEI) update of January 23, 2023:

_________

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 4029.38 as this post is written

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, below are two charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through December 2022, updated on January 26, 2023. This value is $286,885 ($ Millions):

(click on charts to enlarge images)

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Second, here is the chart depicting this measure on a “Percent Change from a Year Ago” basis, with a last value of 11.9%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Manufacturers’ New Orders:  Durable Goods [DGORDER]; U.S. Department of Commerce: Census Bureau; accessed January 26, 2023; 
http://research.stlouisfed.org/fred2/series/DGORDER

_________

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 4016.22 as this post is written