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Visualizing GDP: An Inside Look at the Q1 Advance Estimate

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April 28th, 2016

The accompanying chart is a way to visualize real GDP change since 2007. It uses a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics.

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Kansas City Fed Survey: Activity Declined Modestly, but Expectations Improved

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April 28th, 2016

The latest index came in at -4.0, which indicates declining activity while the future outlook jumped to 10.0 from last month. Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.

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NYSE Margin Debt Increased in March

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April 28th, 2016

Note: The NYSE has released new data for margin debt, now available through March. We've updated the charts in this commentary to include the latest numbers.

The NYSE margin debt data is a few weeks old when it is published. The latest debt level is up 2.3% month-over-month, reversing trend of the previous three months, but it is well off its all-time high in April of last year. Here is an overlay of margin debt and the S&P 500 adjusted for inflation.

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Q1 GDP Per Capita Advance Estimate Goes Negative at -0.3%

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April 28th, 2016

The Advance Estimate for Q1 GDP, to one decimal, came in at 0.5 percent, down from the the 1.4 percent of Q4 2015. But with a per-capita adjustment, the data series is currently negative at -0.3 percent. The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

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March Real Median Household Income Inches Upward

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April 28th, 2016

The Sentier Research median household income data for March, released this morning, came in at $57,263. The nominal median declined $134 month-over-month and is up $2,950 year-over-year. That's an increase of 0.2% MoM and 5.4% YoY. Adjusted for inflation, the latest income was up $83 MoM but and $2,475 YoY. The real numbers equate to increases of 0.1% MoM and 4.5% YoY.

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RecessionAlert Weekly Leading Index: Slowly Increasing

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April 28th, 2016

RecessionAlert has launched an alternative to ECRI's Weekly Leading Index Growth indicator (WLIg). The Weekly Leading Economic Index (WLEI) uses fifty different time series from these categories: Corporate Bond Composite, Treasury Bond Composite, Stock Market Composite, Labor Market Composite, Credit Market Composite. The latest index comes in at 0.8.

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The Philly Fed ADS Business Conditions Index Update

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April 28th, 2016

The Philly Fed's Aruoba-Diebold-Scotti Business Conditions Index (hereafter the ADS index) is a fascinating but relatively little known real-time indicator of business conditions for the U.S. economy, not just the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Thus it is comparable to the better-known Chicago Fed's National Activity Index.

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New Jobless Claims: Up 9K, 60th Week Below 300K

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April 28th, 2016

Today's seasonally adjusted 257K new claims, up 9K from last week's revised 248K, was better than the Investing.com forecast of 260K. The four-week moving average is at 256,000, down from last week's 260,750.

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Q1 GDP Advance Estimate at 0.5%, Worse Than Mainstream Forecasts

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April 28th, 2016

The Advance Estimate for Q1 GDP, to one decimal, came in at 0.5 percent, down from the 1.4 percent in Q4 of 2015. Today's number was worse than most mainstream estimates, with Investing.com forecasting 0.7 percent and the Briefing.com consensus at 0.9 percent. The latest Atlanta Fed GDPNow forecast (on April 27) was 0.6 percent.

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S&P 500 Snapshot: The FOMC Mini-Drama

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April 27th, 2016

The Fed's Open Market Committee press release at 2 PM was, as expected, the fulcrum in today's market action. Asian markets were subdued in the shallow red while most major European Union indexes were a bit more upbeat. The S&P 500 gyrated at the opening bell and then sold off to its -0.45% intraday low about 70 minutes later. It then zigzagged upward to the 2 PM press release and then rallied to its modest 0.39% intraday high about 15 minutes before the close. The press release was little changed from its predecessor. The post-Fed rally shrank to a fractional 0.16% yawner of a close.

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Pending Home Sales Increased Slightly in March, Highest in Almost a Year

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April 27th, 2016

Today the National Association of Realtors released the March data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales increased slightly in March for the second consecutive month and reached their highest level in almost a year."

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The "Real" Goods on the March Durable Goods Data

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April 26th, 2016

Earlier today the Census Bureau posted the Advance Report on March Durable Goods New Orders. This series dates from 1992 and is not adjusted for either population growth or inflation. Let's now review Durable Goods data with two adjustments. In the charts the gray line shows the goods orders divided by the Census Bureau's monthly population data, giving us durable goods orders per capita. The blue line goes a step further and adjusts for inflation based on the Producer Price Index for All Commodities, chained in today's dollar value.

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Richmond Fed: Manufacturing Continued Expansion in April

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April 26th, 2016

Today the Richmond Fed Manufacturing Composite Index fell 8 points to 14 from last month's 22. Investing.com had forecast 11.0. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 10.7, indicating expansion.

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Home Prices Rose 5.3% Year-over-Year in February

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April 26th, 2016

With today's release of the February S&P/Case-Shiller Home Price we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.7% month over month. The seasonally adjusted year-over-year change has hovered between 4.8% and 5.7% for the last twelve months.

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Consumer Confidence Declined Moderately in April

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April 26th, 2016

The latest Conference Board Consumer Confidence Index was released this morning based on data collected through April 14. The headline number of 94.2, was a decrease from the March final reading of 96.1, which is a downward revision from 96.2. Today's number was below the Investing.com forecast of 96.0.

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Durable Goods Orders Again Disappoint

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April 26th, 2016

The Advance Report on Manufacturers’ Shipments, Inventories and Orders released today gives us a first look at the March durable goods numbers. The latest new orders number at 0.8% month-over-month (MoM) was below to the Investing.com estimate of 1.8%. This series is down 2.5% year-over-year (YoY). If we exclude transportation, "core" durable goods came in at -0.2% MoM, which was below the Investing.com estimate of 0.5%. The core measure is down 1.4% YoY.

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Weekly Gasoline Price Update: Another Interim High

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April 25th, 2016

It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium are up two and three cents, respectively, from last week and it their highest levels since November 9th, 24 weeks ago. According to GasBuddy.com, California has the highest average price for Regular at $2.77 and San Francisco is averaging $2.90. Oklahoma has the cheapest at $1.90. The WTIC end of day spot price closed at 42.64, up 1.17 from last week.

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Vehicle Miles Traveled: Another Look at Our Evolving Behavior

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April 25th, 2016

The Department of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through February.

"Travel on all roads and streets changed by 5.6% (12.4 billion vehicle miles) for February 2016 as compared with February 2015." The less volatile 12-month moving average was up 0.39% month-over-month and 3.0% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is up 0.32% month-over-month and up 1.9% year-over-year.

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Dallas Fed Manufacturing Outlook: Factory Activity Rose

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April 25th, 2016

This morning the Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for April. Factory activity posted a modest increase. However, the latest general business activity index "held steady at -13.9, its 16th straight negative reading."

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March New Home Sales Fell 1.5% Month-over-Month

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April 25th, 2016

This morning's release of the March New Home Sales from the Census Bureau came in at 511K, down 1.5% month-over-month. Revisions were made to the previous three months reflecting a net gain of 23K. The Investing.com forecast was for 520K.

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The Four Totally Bad Bear Recoveries: Where Is Today's Market?

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April 25th, 2016

This chart series features an overlay of the Four Bad Bears in U.S. history since the equity market peak in 1929. They are:

  1. The Crash of 1929
  2. The Oil Embargo of 1973
  3. The 2000 Tech Bubble bust and,
  4. The Financial Bubble and Crisis.

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Treasury Yields: A Long-Term Perspective

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April 24th, 2016

Let's have a look at a long-term perspective on Treasury yields. The chart here shows the 10-Year Constant Maturity yield since 1962 along with the Federal Funds Rate (FFR) and inflation. The range has been astonishing. The stagflation that set in after the 1973 Oil Embargo was finally ended after Paul Volcker raised the FFR to 20.06%.

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World Markets Weekend Update: The Global Rally Continues, But at a Subued Pace

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April 23rd, 2016

The global rally in equities continued last week, but at a much subdued pace. Our benchmark gang of eight global indexes posted an average gain of 0.85%, well off the 3.86% average of the previous week. And that average encompassed a rather extreme spread from the 4.30% surge in Japan's Nikkei (which follows its 6.49% liftoff the previous week) to the dismal -3.86% of China's Shanghai, which more than erased its 3.12% gain the previous week.

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Best Stock Market Indicator Update

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April 22nd, 2016

According to this system, the market is now tradable and a signal to enter and continue long trading. The OEXA200R is at 79% and all three secondary indicators are positive.

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The Conference Board's Leading Economic Index Adjusted for Population Growth

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April 22nd, 2016

The Conference Board's Leading Economic Index (LEI), which we report on monthly, is a composite of ten indicators that stretches back to 1959. Over that multi-decade time frame, the US population has increased by about 84 percent. What would the LEI tell us about our economy if we adjusted the data for population growth?

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ECRI Weekly Leading Index: WLI Up 1.0 From Last Week

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April 22nd, 2016

Today's release of the publicly available data from ECRI (Economic Cycle Research Institute) puts its Weekly Leading Index (WLI) at 135.2, up 1.0 from the previous week. The company's Weekly Leading Index annualized growth indicator (WLIg) is at 3.5, an increase of 1.0 from the previous week, and well off its interim low of -4.7 in January of last year. Year-over-year the indicator is now at 0.75%, up from 0.53% the previous week, and in positive territory for the fourth consecutive week.

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Understanding the CFNAI Components

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April 22nd, 2016

The Chicago Fed's National Activity Index, which we reported on yesterday, is based on 85 economic indicators drawn from four broad categories of data:

  • Production and Income
  • Employment, Unemployment, and Hours
  • Personal Consumption and Housing
  • Sales, Orders, and Inventories

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Gasoline Volume Sales and our Changing Culture

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April 21st, 2016

The Department of Energy's Energy Information Administration (EIA) monthly data on volume sales is several weeks old when it released. The latest numbers, through mid-February, are now available. However, despite the lag, this report offers an interesting perspective on fascinating aspects of the US economy. Gasoline prices and increases in fuel efficiency are important factors, but there are also some significant demographic and cultural dynamics in this data series.

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Conference Board Leading Economic Index: Increase in March

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April 21st, 2016

The Latest Conference Board Leading Economic Index (LEI) for March is now available. The index increased 0.2 percent to 123.4 from February's revised 123.1 and revisions were made to four of the last six months. The latest indicator value came in below the 0.4 percent forecast by Investing.com.

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FHFA House Price Index Up 0.4% in February

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April 21st, 2016

The Federal Housing Finance Agency (FHFA) has released the U.S. House Price Index (HPI) for the most recent month. U.S. house prices rose in February, up 0.4 percent on a seasonally adjusted basis from the previous month and is at its nominal peak. Year-over-year the index is up 5.6% (nonseasonally adjusted).

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Chicago Fed: Economic Growth Below Average in March

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April 21st, 2016

"Index shows economic growth below average in March": This is the headline for today's release of the Chicago Fed's National Activity Index.

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Philly Fed Manufacturing Index: No Improvement in April

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April 21st, 2016

The latest Manufacturing Index came in at -1.6, down from last month's 12.4. The 3-month moving average came in at 2.7, up from 2.0 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was up at 42.2, versus the previous month's 28.8.

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Secular Trends in Residential Building Permits and Housing Starts

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April 20th, 2016

Over the long haul the two series offer a compelling study of trends in residential real estate. Here is an overlay of the two series since the 1959 inception of the Starts data and the Permits data, which began being tracked a year later. The monthly data points are preserved as faint dots. The trends are illustrated with 6-month moving averages of data divided by the Census Bureau's mid-month population estimates.

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Treasury Snapshot: Four Months and Counting Since the Fed's Rate Hike

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April 20th, 2016

Let's take a closer look at US Treasuries since the Fed's December rate hike decision, the first increase in a decade. The yield on the 10-year note ended the day yesterday at 1.79%, which is at the lower end of the year-to-date range of 1.68% to 2.25%. The yield on the 2-year note closed yesterday at 0.77%, below its 1.09% interim high set the last week of 2015.

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Existing-Home Sales Bounce Back in March

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April 20th, 2016

This morning's release of the March Existing-Home Sales bounced back from the previous month to a seasonally adjusted annual rate of 5.33 million units from 5.07 million in February. The Investing.com consensus was for 5.30 million. The latest number represents a 5.1% increase from the previous month and a 1.5% increase year-over-year.

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New Residential Building Permits: March Disappoints Forecast

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April 19th, 2016

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for March new residential building permits. The latest reading of 1.086M was below the Investing.com forecast of 1.200M.

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New Residential Housing Starts in March Worse Than Forecast

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April 19th, 2016

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for March new residential housing starts. The latest reading of 1.089M was below the Investing.com forecast of 1.170M.

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NAHB Housing Market Index: Third Flat Month

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April 18th, 2016

The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook.

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Michigan Consumer Sentiment: April Preliminary Continues Slow Decline

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April 15th, 2016

The University of Michigan Preliminary Consumer Sentiment for April came in at 89.7, a 1.3 point decrease from the 91.0 March Final reading. Investing.com had forecast 92.0.

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The Big Four Economic Indicators: March Industrial Production Sinks Deeper into Recession

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April 15th, 2016

Today's report on Industrial Production for March shows a month-over-month decline of 0.6 percent (-0.59 percent to two decimal places), which was significantly worse than the Investing.com consensus of a 0.1 percent decline. The previous month's -0.5 percent decline was revised downward to -0.6 percent.

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Empire State Manufacturing: Highest Level in More Than a Year

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April 15th, 2016

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 9.6 (9.56 to two decimals) shows a significant increase from last month's 0.62, and signals an increase in activity. This is the highest level for this reading for this indicator in a year. The Investing.com forecast was for a reading of 2.21.

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A Long-Term Look at Inflation

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April 14th, 2016

The Consumer Price Index for Urban Consumers (CPI-U) released today puts the year-over-year inflation rate at 0.85%. It is substantially below the 3.80% average since the end of the Second World War and its 10-year moving average, now at 1.90%.

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What Inflation Means to You: Inside the Consumer Price Index

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April 14th, 2016

Let's do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.

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Inflation: An X-Ray View of the Components

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April 14th, 2016

Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

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The Big Four Economic Indicators: March Real Retail Sales Fell 0.4%

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April 14th, 2016

Note: With the release of this morning's Consumer Price Index, we've updated this commentary to include the Real Retail Sales data for March.

Nominal March sales declined 0.3%. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, declined -0.4% month-over-month ( -0.39% to two decimal places). The chart gives us a close look at the monthly data points in this series since the end of the last recession in mid-2009. The linear regression helps us identify variance from the trend.

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March Consumer Price Index: Both Headline and Core Unadjusted Inflation Decline

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April 14th, 2016

The Bureau of Labor Statistics released the March CPI data this morning. The year-over-year nonseasonally adjusted Headline CPI came in at 0.85%, down from 1.02% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.19%, down slightly from the previous month's 2.33%.

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Producer Price Index: A 0.1% MoM Fall in March

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April 13th, 2016

Today's release of the March Producer Price Index (PPI) for Final Demand came in at -0.1% month-over-month seasonally adjusted, up from -0.2% in February. It is at -0.1% year-over-year, down from 0.0% in February. Core Final Demand (less food and energy) came in at -0.1% MoM, down from 0.0% the previous month and is up 1.0% YoY. The Investing.com forecasts were for 0.2% headline and 0.1% core.

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March Retail Sales Were a Major Disappointment

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April 13th, 2016

The Census Bureau's Advance Retail Sales Report released this morning shows that seasonally adjusted sales in March unexpectedly contracted. Headline sales came in at -0.3% month-over-month, which was substantially below the 0.1% increase forecast by Investing.com. Headline sales are up only 1.7% year-over-year. Core Retail Sales (ex Autos) were up 0.2% MoM, but that was below the Investing.com forecast of a 0.4% increase.

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NFIB: Small Business Survey at Two Year Low

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April 12th, 2016

The latest issue of the NFIB Small Business Economic Trends is out today. The headline number for March came in at 92.6, down 0.3 from the previous month's 92.9. The index is at the 16th percentile in this series. Today's number came in below the Investing.com forecast of a rise to 93.9.

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Equity Valuations, Recessions and Stock Market Declines

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April 12th, 2016

Note: In response to an email, I've updated the data in this article through the March month-end numbers and at the launch of the Q1 2016 earnings season.

Last year I had a fascinating conversation with Neile Wolfe, of Wells Fargo Advisors, LLC. Based on the underlying data in the adjacent chart, Neile made some cogent observations about the historical relationships between equity valuations, recessions and market prices:

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Market Remains Overvalued, Up from Last Month

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April 6th, 2016

Here is a summary of the four market valuation indicators we update on a monthly basis.

  • The Crestmont Research P/E Ratio
  • The cyclical P/E ratio using the trailing 10-year earnings as the divisor
  • The Q Ratio, which is the total price of the market divided by its replacement cost
  • The relationship of the S&P Composite price to a regression trendline

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Market Valuation, Inflation and Treasury Yields: Clues from the Past

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April 6th, 2016

Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations on investment returns. In a "normal" market environment -- one with conventional business cycles, Federal Reserve policy, interest rates and inflation -- current valuation levels would be a serious concern.

But these are different times.

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What Would It Take for the Prime U.S. Workforce to Fully Recover?

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April 6th, 2016

We've updated our workforce analysis to include last week's Employment Report for March. The unemployment remained at 5.0% and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) was at to 215K with February's number revised upward by 3K.

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The Q Ratio and Market Valuation: March Update

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April 6th, 2016

Note: We've posted an update to incorporate data through the end of March.

The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies.

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Demographic Trends for the 50-and-Older Work Force

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April 6th, 2016

Note: This commentary has been updated with the latest numbers from last week's Employment Report.

This is not the scenario that would have been envisioned a generation ago for the "Golden Years" of retirement. Consider: Today nearly one in three of the 65-69 cohort and about one in five of the 70-74 cohort are in the labor force.

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The Latest Look at Long-Term Trends in Employment by Age Group

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April 5th, 2016

The Labor Force Participation Rate (LFPR) is a simple computation: You take the Civilian Labor Force (people age 16 and over employed or seeking employment) and divide it by the Civilian Noninstitutional Population (those 16 and over not in the military and or committed to an institution). The result is the participation rate expressed as a percent.

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Job Openings & Labor Turnover: Clues to the Business Cycle

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April 5th, 2016

The latest JOLTS report (Job Openings and Labor Turnover Summary), data through February, is now available. The time frame is quite limited compared to the main BLS data series in the monthly employment report, many of which go back to 1948, and the enormously popular Nonfarm Employment (PAYEMS) series goes back to 1939, while the BLS began tracking JOLTS in December 2000. Nevertheless, there are some clear JOLTS correlations with the most recent business cycle trends.

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ISM Non-Manufacturing: PMI Growth Continues at Faster Rate

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April 5th, 2016

Today the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 54.5 percent, up 1.1 percent from last month's seasonally adjusted 53.4 percent. Today's number came in above the Investing.com forecast of 54.0 percent.

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February Trade Deficit Increased from Revised January

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April 5th, 2016

The U.S. International Trade in Goods and Services, also known as the FT-900, is published monthly by the Bureau of Economic Analysis with data going back to 1992. The monthly reports include revisions that go back several months. This report details U.S. exports and imports of goods and services.

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Is the Stock Market Cheap?

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April 4th, 2016

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly average of daily closes for the past month. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

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Multiple Jobholders: Two Decades of Trends as of March

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April 4th, 2016

What are the long-term trends for multiple jobholders in the US? The Bureau of Labor Statistics has two decades of historical data to enlighten us on that topic, courtesy of Table A-16 in the monthly Current Population Survey.

At present, multiple jobholders account for five percent of civilian employment. The survey captures data for four subcategories of the multi-job workforce, the current relative sizes of which we've illustrated in a pie chart.

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Regression to Trend: A New Look at Long-Term Market Performance

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April 4th, 2016


Quick take: At the end of March the inflation-adjusted S&P 500 index price was 80% above its long-term trend, an increase from 70% the previous month.
About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis to the question.

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The Labor Market Conditions Index for March

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April 4th, 2016

The Labor Market Conditions Index (LMCI) is a relatively recent indicator developed by Federal Reserve economists to assess changes in the labor market conditions. It is a dynamic factor model of labor market indicators, essentially a diffusion index subject to extensive revisions based on nineteen underlying indicators in nine broad categories (see the table at the bottom for details). Today's release of the March data came in at -2.1, up from a revised -2.5 in February. Extensive revisions were made to the entire series, including 6 out of the last 12 months.

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Industrial Production: Those Ugly Annual Benchmark Revisions and the Heightened Risk of Recession

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April 4th, 2016

The big economic news on Friday was the Department of Labor's Employment Report for March. The mainstream press focused on two numbers: the 215K new jobs and the 5% unemployment rate. Over the next few days we'll dig in a bit deeper to look at some of the underlying employment demographics, which in many ways give a greater understanding of employment conditions. But the much more significant economic news on Friday was the Federal Reserve's noon release of the disturbingly negative annual benchmark revisions to Industrial Production.

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Ratio of Part-Time Employed Remains Higher Than the Pre-Recession Levels

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April 4th, 2016

Let's take a close look at Friday's employment report numbers on Full and Part-Time Employment. Buried near the bottom of Table A-9 of the government's Employment Situation Summary are the numbers for Full- and Part-Time Workers, with 35-or-more hours as the arbitrary divide between the two categories. The source is the monthly Current Population Survey (CPS) of households. The focus is on total hours worked regardless of whether the hours are from a single or multiple jobs.

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Light Vehicle Sales Per Capita: Our Latest Look at the Long-Term Trend

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April 1st, 2016

For the past few years we've been following a couple of transportation metrics: Vehicle Miles Traveled and Gasoline Volume Sales. For both series we focus on the population adjusted data. Let's now do something similar with the Light Vehicle Sales report from the Bureau of Economic Analysis. This data series stretches back to January 1976. Since that first data point, the Civilian Noninstitutional Population Age 16 and Over (i.e., driving age not in the military or an inmate) has risen 63%.

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Crestmont Market Valuation Update

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April 1st, 2016

Quick take: Based on the March S&P 500 average of daily closes, the Crestmont P/E is 86% above its arithmetic mean and at the 97th percentile of this fourteen-plus-decade monthly metric.

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A Perspective on Secular Bull and Bear Markets

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April 1st, 2016

Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? At this point, almost seven years later, the S&P 500 has set an inflation-adjusted record high.

Let's examine the past to broaden our understanding of the range of historical trends in market performance. An obvious feature of this inflation-adjusted series is the pattern of long-term alternations between up-and down-trends.

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The Civilian Labor Force, Unemployment Claims and the Business Cycle

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April 1st, 2016

What does the ratio of unemployment claims tell us about where we are in the business cycle and our current recession risk? At present, the ratio for Continued Claims has been trending down. Excluding the 1981 recession, the Initial Claims trough lead time for a recession has ranged from 7 to 22 months with an average of 12 months if we include the 1981 recession and 14 months if we exclude it. Admittedly, the last recession is an extreme example, but the Initial Claims trough preceded its December 2007 onset by a whopping 22 months.

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The Big Four Economic Indicators: March Nonfarm Employment

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April 1st, 2016

Note: This commentary has been updated to include this morning's release of Nonfarm Employment for March. As the adjacent thumbnail of the past year illustrates, Nonfarm Employment remains in its upward trend. The March report of 215K new jobs was above expectations (Investing.com was looking for 205K), and the February number was revised upward by 3K.

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ISM Manufacturing Index: Expansion in March, First in Seven Months

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April 1st, 2016

Today the Institute for Supply Management published its monthly Manufacturing Report for March. The latest headline PMI was 51.8 percent, an increase of 2.3 percent from the previous month and above the Investing.com forecast of 50.7.

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March New Jobs Better Than Forecast at 215K

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April 1st, 2016

Today's report of 215K new nonfarm jobs in March was higher than the Investing.com forecast of 205K. February's nonfarm payrolls was revised upward by a 3K. The unemployment rate was little changed, up 0.1% to 5.0%.

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The S&P 500, Dow and Nasdaq Since Their 2000 Highs

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April 1st, 2016

This update is a response to a standing request from a couple of sources that we also share with regular visitors to my Advisor Perspectives pages. The request is for real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite. Here two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the Consumer Price Index for Urban Consumers (which is usually just refer to as the CPI).

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Moving Averages: March Month-End Update

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March 31st, 2016

Valid until the market close on April 29, 2016

The S&P 500 closed March with a monthly gain of 6.60% after three months of losses. All three S&P 500 MAs are signaling "invested" and three of the five Ivy Portfolio ETF MAs are signaling "Invested". In the table, monthly closes that are within 2% of a signal are highlighted in yellow.

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Chicago PMI Increased in March

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March 31st, 2016

The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, increased in March to a value of 53.6 from last month's 47.6. Values lower than 50.0 indicate contracting manufacturing activity.

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Moving Averages: Month-End Preview

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March 30th, 2016

Here is an advance preview of the monthly moving averages we track after the close of the last business day of the month. At this point, before the close on the last day of the month, all three S&P 500 strategies are signaling "invested" — changed from last month's triple "cash" signal. Three of the five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), iShares' Barclays 7-10 Year Treasury (IEF) and Vanguard REIT Index ETF (VNQ)— are signaling "invested", a change from last month's double invested signal.

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Weekly Heating Oil Price Update: US Average Unchanged, Last Update of Season

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March 30th, 2016

The latest price for home heating oil nationwide is $2.13 per gallon, unchanged from last week. This season, heating oil prices on average have dropped 29 cents per gallon in the US. With winter at a close, we are at the end of the heating oil season. This year's winter was warmer than average and saw a continued drop in heating oil prices, but with a slight uptick toward the season close. The end-of-season jump in prices reflects the crude oil uptick we've seen recently.

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Anticipating March Employment: ADP Report at 200K

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March 30th, 2016

The economic mover and shaker this week is Friday's employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, the most publicized being the month-over-month change in Total Nonfarm Employment (the PAYEMS series in the FRED repository). Today we have the March estimate of 200K new nonfarm private employment jobs from ADP, a decrease from February's 205K, revised downward from 214K.

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Regional Fed Manufacturing Overview: March Sees Increase, but Still Negative

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March 29th, 2016

The Federal Reserve System consists of twelve Federal Reserve Banks, twenty five branches, and the Board of Governors in Washington, D.C. Each bank serves a larger regional district. Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. Here is an overview of all five with an overlay and average of historical data.

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Two Measures of Inflation and Fed Policy

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March 29th, 2016

The BEA's Personal Consumption Expenditures Chain-type Price Index for February, released yesterday, shows core inflation below the Federal Reserve's 2% long-term target at 1.68% and definitely on the rise, up 0.37% over the past four months. The latest Core Consumer Price Index release, also data through February, is higher at 2.33%. The Fed is on record as using Core PCE data for its primary inflation gauge.

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February Disposable Income Per Capita Rose 0.1%, 0.2% When Adjusted for Inflation

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March 28th, 2016

With the release of today's report on February Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita.

At two decimal places, the nominal 0.12% month-over-month increase in disposable income comes in at 0.23% when we adjust for inflation. The year-over-year metrics are 2.94% nominal and 1.96% real.

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The Big Four Economic Indicators: Real Personal Income for February

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March 28th, 2016

Personal Income (excluding Transfer Receipts) in February rose 0.7% and is up 3.9% year-over-year. When we adjust for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) rose 0.18%. The real number is up 2.9% year-over-year. Real PI less TR is one of those indicators that warrants adjustment for population growth to understand the long-term trends.

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The Core PCE Price Index at Its Highest Since February 2013

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March 28th, 2016

The Personal Income and Outlays report for February was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.96%, down from the previous month's downwardly revised 1.24%. The latest YoY Core PCE index (less Food and Energy) came in at 1.68%, up from the previous month's downwardly revised 1.66%. Core YoY is the highest since February 2013.

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Brace Yourself: Our Latest Look at Student Debt

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March 18th, 2016

College Tuition and Fees constitute one of the biggest threats to our economic outlook. Here is a chart of data from the relevant Consumer Price Index sub-component reaching back to 1978, the earliest year Uncle Sam provides a breakout for College Tuition and Fees. As an interesting sidebar, we've thrown in the increase in the cost of purchasing a new car as well as the more substantial increase for the broader category of medical care, both of which pale in comparison.

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Five Decades of Middle Class Wages: March 2016 Update

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March 17th, 2016

We've updated this series to include the yesterday's release of the Consumer Price Index as the deflator and the final March monthly update. The initial update was based on a linear extrapolation of the CPI. The latest hypothetical annual earnings are at $35,924, down 13.2% from 44 years ago.

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The Fed's Financial Accounts: What Is Uncle Sam's Largest Asset?

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March 11th, 2016

Pop Quiz! Without recourse to your text, your notes or a Google search, what line item is the largest asset in Uncle Sam's financial accounts?

  • A) U.S. Official Reserve Assets
  • B) Total Mortgages
  • C) Taxes Receivable
  • D) Student Loans

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Household Net Worth: The "Real" Story

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March 10th, 2016

Let's take a long-term view of household net worth from the latest Z.1 release. A quick glance at the complete data series shows a distinct bubble in net worth that peaked in Q4 2007 with a trough in Q1 2009, the same quarter the stock market bottomed. The latest Fed balance sheet shows a total net worth at an all-time high -- 58.9% above the 2009 trough and 28.3% above the 2007 peak. The nominal Q3 net worth is up 1.9% from the previous quarter and 3.1% year-over-year.

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Secular Trends in Employment: Goods Producing Versus Services Providing

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March 10th, 2016

The Department of Labor's Bureau of Labor Statistics has monthly data on employment by industry categories reaching back to 1939. At the highest level, all jobs are divided into two categories: Service-Providing Industries and Goods Producing Industries. The adjacent chart illustrates the ratio of the two categories since 1939.

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A Closer Look at the Latest ADP Employment Report

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March 3rd, 2016

In yesterday's ADP employment report we got a February estimate of 214K new nonfarm private employment jobs, an increase from January's 193K, revised downward from 205K. The popular spin on this indicator is as a preview to the monthly jobs report from the Bureau of Labor Statistics. But the ADP report includes a wealth of information that's worth exploring in more detail.

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A Bear Market for Most Global Indexes

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February 14th, 2016

The traditional definitions of a "market correction" and a "bear market" are 10% and 20% declines, respectively. All eight indexes on our global watch list have been in correction territory, and as of the end of last week, seven of the eight had dropped into bear territory. The S&P 500 is the one outlier. It has been hovering in the correction zone since January 13th. The UK's FTSE 100 is a near outlier. It dropped below 20% on February 9th, but after three days of bear stigma, it rallied to a 19.7% decline on Friday.

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APViewpoint Events presents: Taking the Fiduciary High Ground

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February 12th, 2016

Presenter: Blaine Aikin
Monday, February 22, 4:00 pm ET

Regulation seeks to protect the public; professional advisors seek to serve the public. In this session, Blaine will help advisors understand how the "big picture" can make a big difference when it comes to successfully managing their regulatory and professional obligations. Blaine will answer attendees' questions during the webinar and will also be available to continue the discussion on APViewpoint.

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Putting the Recent Market Volatility in Context

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February 4th, 2016

The increase in market volatility has been a major focus of the popular financial press during the opening weeks of 2016. Let's examine the historical context for market volatility over the past nine-plus years, specifically since January 2007. Our preferred measure of volatility is the daily price range in the S&P 500: The percent change from the intraday low to the intraday high. To illustrate this bit of market behavior, we've charted the intraday range, the red dots in the accompanying chart, along with a 20-day moving average of this measure.

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Home Ownership Remains Near Its Interim Low

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January 28th, 2016

Over the last decade the general trend has been consistent: The rate of home ownership continues to decline. The Census Bureau has now released its latest quarterly report with data through Q4 2015. The seasonally adjusted rate for Q4 is 63.7 percent, up slightly from 63.6 in Q3. The nonseasonally adjusted Q4 number is 63.8 percent, slightly above the Q3 number and up from the 63.4 percent interim low in Q2.

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Second Set of Updates at Crestmont Research

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January 26th, 2016

Note from dshort: My friend Ed Easterling, whose Crestmont Research P/E valuation is a regular feature on this website, has published a collection of periodic updates to his ongoing analysis. The commentary below is based on his latest distribution email to subscribers.

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Another Look at the Total Return Roller Coaster

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January 11th, 2016

Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $17,357 for an annualized real return of 11.08%.

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New Updates at Crestmont Research

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January 7th, 2016

Note from dshort: My friend Ed Easterling, whose Crestmont Research P/E valuation is a regular feature on this website, has published collection of periodic updates to his ongoing analysis. The commentary below is based on his latest distribution email to subscribers.

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Forecasting Q3 GDP 2nd Estimate: Gazing Into the Crystal Ball

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November 23rd, 2015

The big economic number tomorrow will be the Q3 Second Estimate for GDP. The volatile first two quarters are behind us with their real annualized rates of 0.6% in Q1 and 3.9% in Q2, and the Advance Estimate for Q3 came in at 1.5%. What do economists see in their collective crystal ball for Q3 Second Estimate? Let's take a look at the latest GDP forecasts from the latest Wall Street Journal survey of economists conducted earlier this month.

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Access the latest research from mutual fund thought leaders

November 10th, 2015

Access research from the fund industry as soon as it is available. We curate the most relevant research reports from top analysts and firms, and we write a one-paragraph abstract with a link to read the full report. This is a free service from Advisor Perspectives, the parent company of dshort.

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Intuit Small Business Index: Up Fractionally

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November 10th, 2015

The latest Intuit Small Business Employment Index (SBI) came out this morning, which measures employment in firms with fewer than 20 employees with data going back to 2007. The real-time data comes directly from Intuit software, not from surveys, and is the only source of monthly data on small business revenues, expenses, and payroll data. It allows for a much earlier read on the health of small businesses.

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Student Loan Debt: A Closer Look

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October 28th, 2015

Many reports on student loan debt over the last decade have focused on the rapid growth of educational debt per student. Here we examine loan debt through current costs of undergraduate education and enrollment, and student aid over time.

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Forecasting Q3 GDP: Gazing Into the Crystal Ball

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October 21st, 2015

The big economic number next week will be the Q3 Advance Estimate for GDP on Thursday the 29th at 8:30 AM ET. With the volatile first two quarters behind us with their real annualized rates of 0.6% in Q1 and 3.9% in Q2, what do economists see in their collective crystal ball for Q3 of 2015? Let's take a look at the latest GDP forecasts from the latest Wall Street Journal survey of economists conducted earlier this month.

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Household Incomes: The Value of Higher Education

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October 19th, 2015

What is the value of education for household income? The Census Bureau's annual survey data for 2014 published last month gives us some interesting insights into this question. The median income for all households with a householder age 25 and older was $55,283. The chart below shows the median annual household income for nine cohorts by educational attainment. We've rounded the data points to the nearest $100, e.g. $55.3K for all households.

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Household Incomes: The Decline of the "Middle Class"

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October 13th, 2015

The median household is the statistical center of the Middle Class. In terms of income, this class has not fared well in recent decades. Let's take a closer look at a troubling aspect of the Census Bureau's latest annual household income data, issued last month. In this update we'll focus on the growing gap between the median (middle) and mean (average) household incomes across the complete time frame of the Census Bureau's annual reporting, which began in 1967, to the release last month of the annual data for 2014.

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Household Incomes Across Time: The Divergence at the Top

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October 7th, 2015

Among the most interesting of the long-term economic indicators we track is the Census Bureau's annual data on the mean (average) household income received by each fifth (quintile) and top 5 percent. See our latest update here. A conspicuous pattern in the series is the widening of the spread in income growth that started during the 1980s.

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Baby Boomer Employment Across Time

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October 5th, 2015

The 20th century Baby Boom was one of the most powerful demographic events in the history of the United States. We've created a series of charts to show seven age cohorts of the employed population from 1948 to the present. What we see is essentially the "Boomer Bulge" in employment across time. Those born between 1946 and 1964 continue to grow the employment of the two oldest cohorts. It will be interesting to see how long those two trends continue.

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Median Household Income Growth: Deflating the American Dream

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September 23rd, 2015

What is the single best indicator of the American Dream? Many would point to household income growth. The Census Bureau has now published some selected annual household income data in a new report: "Income and Poverty in the United States: 2014". Last year the median (middle) household income was $53,657 — a 0.13% year-over-year increase that shrinks to -1.48% when adjusted for inflation. Let's put the new release into a larger historical context.

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Median Home Price and Salary Required in 27 Major Cities

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September 23rd, 2015

Tim Manni, the Managing Editor at HSH.com, features a periodic update entitled "The Salary You Must Earn to Buy a Home in 27 Metros". The key question is:

"How much salary do you need to earn in order to afford the principal and interest payments on a median-priced home in your metro area?"

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Median Household Purchasing Power for the 50 States and DC

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September 22nd, 2015

Last week we posted an update on the median household income by the 50 states and DC based on the Current Population Survey, a joint undertaking of the Census Bureau and Bureau of Labor Statistics, which includes annual data from 1984 to 2014. Let's now look at the actual purchasing power of those median incomes. For this adjustment we're using the "C2ER Cost of Living Index" produced by C2ER, the Council for Community and Economic Research.

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Median Household Income by State: A New Look at the Data

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September 18th, 2015

The Census Bureau's annual household income reports for 2014 is now available. We've now compiled a few tables for the 50 states and DC based on the Current Population Survey, a joint undertaking of the Census Bureau and Bureau of Labor Statistics, which includes annual data from 1984 to 2014. The details are fascinating.

First, some context. The median US income in 2014 was $53,657, up from $22,415 in 1984 -- a 139.4% rise over the 30-year time frame.

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Median Household Incomes by Age Bracket: 1967-2014

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September 17th, 2015

Earlier today we updated our commentary on household income distribution to include the Census Bureau's release of the 2014 annual data. Our focus was on arithmetic mean (average) household incomes by quintile (and the top 5%) over the 46-year history of this data series. The analysis offered some fascinating insights into U.S. household incomes. But the classification misses the implications of age for income. Households are by no means locked into the same quintile over time.

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U.S. Household Incomes: A 47-Year Perspective

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September 17th, 2015

The Census Bureau has now released its annual report household income data for 2014. This update features an analysis of the quintile breakdown of data from 1967 through 2014 along with the statistics for the top 5%.

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Debt, Taxes and Politics: A Perspective on Federal Tax History

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September 14th, 2015

With the focus on the Federal Reserve and conflicting expectations of a September rate hike, let's take a long look back at federal debt and taxes.

The first chart is a snapshot of federal debt with government forecasts through 2018.

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How Business Friendly Is Your State?

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August 18th, 2015

Thumbtack.com has now published its fourth annual Small Business Friendliness Survey, with responses from nearly 18,000 businesses in the United States. The objective is to rate their state and city governments across a broad range of policy factors.

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Trends in the Teenage Workforce

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August 10th, 2015

Last month CNN Money featured an article with the optimistic and intriguing title "More American teens are getting jobs. That's good for everyone." After reading the article, we revised one of our monthly charts on Labor Force Participation to include the age 16-19 cohort -- one we elsewhere combine with the 20-24 year-olds. The first chart below features the three-month moving averages of the non-seasonally adjusted participation rates to better highlight the trends.

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Millennials and the Labor Force: A Look at the Trends

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July 29th, 2015

We have added Millennials to our series of employment demographics. The general consensus is that the Millennial cohort consists of people born between the early 1980s to the early 2000s. In this study we will focus on the Bureau of Labor Statistics data for the those born between 1981 and 2000.

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