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World Markets Weekend Update: The Global Rally Accelerates

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May 28th, 2016

Seven of the eight indexes on our world watch list posted gains over the past week, up from five the week before, and the average of the eight was an impressive 2.60%. India's SENSEX was the outstanding out performer with a 5.34% surge, and three indexes, France's CAC 40, the Hong Kong's Hang Seng and Germany's DAXK closed the week with gains in the mid-three percents. China's Shanghai was the sole loser with its fractional 0.16% decline. Japan's Nikkei had the second worse performance with a modest gain of 0.59%.

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Moving Averages: Month-End Preview

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May 27th, 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" — unchanged from last month's triple "invested" signal. All five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI),Vanguard FTSE All-World (VEU), iShares' Barclays 7-10 Year Treasury (IEF), PowerShares DB (DBC) and Vanguard REIT Index ETF (VNQ), — are signaling "invested", unchanged from last month's triple invested signal.

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Best Stock Market Indicator Update

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May 27th, 2016

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

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S&P 500 Snapshot: Third Largest Weekly Gain of 2016

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May 27th, 2016

The S&P 500 opened at its intraday low and closed with a modest 0.43% gain at its intraday high. However, the week-over-week gain of 2.28% is the third largest weekly gain of the year so far, bested only by the 2.84% jump the week ending on February 19th and the 2.67% advance the week ending March 4th. This morning's 0.8% Second Estimate of Q1 GDP was a yawner, but the 5.7 point surge in the May final Michigan Consumer Sentiment was the largest increase since December 2013. The market showed no anxiety from Fed Chair Yellen's remark that a near-term rate hike would probably be appropriate.

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Visualizing GDP: An Inside Look at the Q1 Second Estimate

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May 27th, 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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Q1 GDP Per Capita Second Estimate Back in Positive Territory

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May 27th, 2016

The Second Estimate for Q1 GDP, to one decimal, came in at 0.8 percent, up from the the 0.5 percent of Advance Estimate. With a per-capita adjustment, the data series is currently back in positive territory at 0.16 percent. The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

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ECRI Weekly Leading Index: WLI Up 1.0, YoY at 1.29%

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May 27th, 2016

Today's release of the publicly available data from ECRI (Economic Cycle Research Institute) puts its Weekly Leading Index (WLI) at 136.1, up 1.0 from the previous week. Year-over-year the indicator is now at 1.29%, up from a revised 1.14% the previous week and the ninth week in positive territory. The company's Weekly Leading Index annualized growth indicator (WLIg) is at 6.1, a slight increase from the previous week.

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Michigan Consumer Sentiment: May Final Substantially Higher Than April

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May 27th, 2016

The University of Michigan Final Consumer Sentiment for May came in at 94.7, a 5.7 point increase from the 89.0 April Final reading and it's highest reading in nearly a year. Investing.com had forecast 95.4.

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Q1 GDP Second Estimate a Slight Disappointment at 0.8 Percent

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May 27th, 2016

The Second Estimate for Q1 GDP, to one decimal, came in at 0.8 percent, up from 0.5 percent in last month's Advance Estimate. Today's number was a bit below most mainstream estimates, with Investing.com forecasting 0.9 percent and the Briefing.com consensus also at 0.9 percent.

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RecessionAlert Weekly Leading Index Update

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May 26th, 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 2.0, down from last week's revised 2.7.

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The "Real" Goods on the April Durable Goods Data

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May 26th, 2016

Earlier today the Census Bureau posted the Advance Report on April 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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Kansas City Fed Survey: May Activity Continued to Decline Modestly

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May 26th, 2016

The latest index came in at -5.0, which indicates declining activity and the future outlook fell to 4.0 from 10.0 last month. Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.

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Pending Home Sales "Lift Off" in April, Highest in Over a Decade

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May 26th, 2016

Today the National Association of Realtors released the April data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales rose for the third consecutive month in April and reached their highest level in over a decade. All major regions saw gains in contract activity last month except for the Midwest, which saw a meager decline."

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Real Median Household Income Growth Stalls in April

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May 26th, 2016

The Sentier Research median household income data for April, released this morning, came in at $57,243. The nominal median declined $20 month-over-month but is up $2,409 year-over-year. In percentages, the April number is essentially flat MoM but up 4.4% YoY. Adjusted for inflation, the latest income was down $253 MoM but up $1,783 YoY. The real numbers equate to a -0.4% MoM contraction but a 3.2% YoY increase.

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New Jobless Claims: Down 10K, Better Than Forecast

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May 26th, 2016

Today's seasonally adjusted 268K new claims, down 10K from last week's 278K, was below the Investing.com forecast of 275K. This is the 64th consecutive week under 300K, the longest streak since 1973.

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April Durable Goods Orders: Strong Headline New Orders, Core Capital Goods Shrink

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May 26th, 2016

The Advance Report on Manufacturers’ Shipments, Inventories and Orders released today gives us a first look at the April durable goods numbers. The latest new orders number at 3.4% month-over-month (MoM) was well above the Investing.com estimate of 0.5%. This series is up 1.9% year-over-year (YoY). If we exclude transportation, "core" durable goods came in at 0.4% MoM, which was slightly above the Investing.com estimate of 0.3%. The core measure is down 1.4% YoY.

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Vehicle Miles Traveled: Another Look at Our Evolving Behavior

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May 25th, 2016

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

"Travel on all roads and streets changed by 5.0% (13.0 billion vehicle miles) for March 2016 as compared with March 2015." The less volatile 12-month moving average was up 0.41% month-over-month and 3.2% 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 0.33% month-over-month and up 2.1% year-over-year.

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49 Years of Income and Home Values

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May 25th, 2016

Often conversations about home buying end up in discussions on the high cost of homes today and their affordability – or lack thereof. We decided to take a look at the long-term trends in home prices in comparison to income and found that incomes have been stagnant since the early 1970s, while home prices have risen dramatically in comparison.

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FHFA House Price Index Up 0.7% in March

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May 25th, 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 March, up 0.7 percent on a seasonally adjusted basis from the previous month and is at its nominal peak. Year-over-year the index is up 6.0% (nonseasonally adjusted).

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Richmond Fed: Manufacturing Slows in May

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May 24th, 2016

Today the Richmond Fed Manufacturing Composite Index fell 15 points to -1 from last month's 14. Investing.com had forecast 9.0. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 11.7, indicating expansion.

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April New Home Sales Jumped 16.6% Month-over-Month, Surprises Forecast

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May 24th, 2016

This morning's release of the April New Home Sales from the Census Bureau came in at 619K, up 16.6% month-over-month. Seasonally adjusted estimates for January 2014 through March 2016 were revised. The Investing.com forecast was for 523K.

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Weekly Gasoline Price Update: Regular and Premium Up Again

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May 23rd, 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 six cents each from last week. According to GasBuddy.com, California has the highest average price for Regular at $2.80 and San Francisco is averaging $2.97. Mississippi has the cheapest at $2.04. The WTIC end of day spot price closed at 48.11, a decline of 0.71 from last week.

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Gasoline Volume Sales and our Changing Culture

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May 23rd, 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-March, 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 April

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May 20th, 2016

The Latest Conference Board Leading Economic Index (LEI) for April was released yesterday, but we failed to post our usual update. Here it is ... a day late. The index increased 0.6 percent to 123.9 from March's downwardly revised 123.1 (previously 123.4) and small downward revisions were made to January 123.2 to 123.0) and December (123.4 to 123.3). The latest indicator value came in above the 0.4 percent forecast by Investing.com.

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Existing-Home Sales in April Signal Slowly Building Momentum

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May 20th, 2016

This morning's release of the April Existing-Home Sales increased from the previous month to a seasonally adjusted annual rate of 5.45 million units from an upwardly revised 5.36 million in March. The Investing.com consensus was for 5.40 million. The latest number represents a 1.7% increase from the previous month and a 6.0% increase year-over-year.

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The Philly Fed ADS Business Conditions Index Update

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May 20th, 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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Five Decades of Middle Class Wages: April 2016 Update

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May 19th, 2016

We've updated this series to include this week's release of the Consumer Price Index as the deflator and the April monthly update. The latest hypothetical annual earnings are at $36,143, down 13.1% from 44 years ago.

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Understanding the CFNAI Components

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May 19th, 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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Philly Fed Manufacturing Index: Weak Growth in May

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May 19th, 2016

The latest Manufacturing Index came in at -1.8, down from last month's -1.6. The 3-month moving average came in at 3.0, up from 2.7 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was down at 36.1, versus the previous month's 42.2.

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Chicago Fed: Economic Growth Picked Up in April

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May 19th, 2016

"Index shows economic growth picked up in April": This is the headline for today's release of the Chicago Fed's National Activity Index. Here is the opening summary: "Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.10 in April from –0.55 in March. All four of the broad categories of indicators that make up the index increased from March, but three of the four categories made nonpositive contributions to the index in April."

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A Long-Term Look at Inflation

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May 18th, 2016

The Consumer Price Index for Urban Consumers (CPI-U) released yesterday puts the year-over-year inflation rate at 1.13%. It is substantially below the 3.80% average since the end of the Second World War and its 10-year moving average, now at 1.88%.

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Inflation: An X-Ray View of the Components

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May 18th, 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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Secular Trends in Residential Building Permits and Housing Starts

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May 18th, 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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What Inflation Means to You: Inside the Consumer Price Index

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May 17th, 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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The Big Four Economic Indicators: April Real Retail Sales Up 0.8%

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May 17th, 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 April.

Nominal April sales rose 1.3%. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, rose 0.8% month-over-month. 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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The Big Four Economic Indicators: April Industrial Production

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May 17th, 2016

Today's report on Industrial Production for April shows a month-over-month increase of 0.7 percent (0.66 percent to two decimal places), which was better than the Investing.com consensus of a 0.3 percent increase. The previous month's -0.59 percent decline was revised downward to -0.87 percent.

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New Residential Building Permits: April Disappoints Forecast

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May 17th, 2016

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for April new residential building permits. The latest reading of 1.116M was below the Investing.com forecast of 1.130M.

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March Consumer Price Index: Headline CPI Up Slightly, Core CPI Essentially Unchanged

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May 17th, 2016

The Bureau of Labor Statistics released the April CPI data this morning. The year-over-year nonseasonally adjusted Headline CPI came in at 1.13%, up from 0.85% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.15%, little changed from the previous month's 2.19%.

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New Residential Housing Starts in April Better Than Forecast

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May 17th, 2016

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for Paril new residential housing starts. The latest reading of 1.172M was above the Investing.com forecast of 1.127M.

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NAHB Housing Market Index: Fourth Flat Month

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May 16th, 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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Empire State Manufacturing: 19 Point Drop in May, Disappoints Forecast

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May 16th, 2016

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -9.0 (-9.02 to two decimals) shows a significant drop from last month's 9.56, and signals a decline in activity. The Investing.com forecast was for a reading of 6.50.

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Treasury Yields: A Long-Term Perspective

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May 14th, 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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Treasury Snapshot: Approaching Five Months Since the Fed's December Rate Hike

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May 13th, 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 today at 1.71%, which is at the low end of the year-to-date range of 1.63% to 2.25%. The yield on the 2-year note closed today at 0.76%, well below its 1.09% interim high set the last week of 2015.

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April Retail Sales Rebound

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May 13th, 2016

The Census Bureau's Advance Retail Sales Report released this morning shows that the seasonally adjusted sales series rebounded in April from its recent weakness. Headline sales came in at 1.3% month-over-month, which was above the 0.8% increase forecast by Investing.com. It is the strongest MoM since the 1.6% gain in March of last year. Headline sales are up 3.0% year-over-year. Core Retail Sales (ex Autos) were also strong at 0.8% MoM, also above the Investing.com forecast of a 0.5% increase.

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Producer Price Index: Up 0.2% MoM in April

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May 13th, 2016

Today's release of the April Producer Price Index (PPI) for Final Demand came in at 0.2% month-over-month seasonally adjusted, unchanged from a revised from 0.2% in March. It is at -1.9% year-over-year, up from -2.0% in March. Core Final Demand (less food and energy) came in at 0.2% MoM, up from 0.1% the previous month and is up 1.6% YoY. The Investing.com forecasts were for 0.3% headline and 0.1% core.

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

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May 11th, 2016

We've updated our workforce analysis to include last week's Employment Report for April. The unemployment remained at 5.0% and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) was at 160K with March's number revised downward by 7K.

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Demographic Trends for the 50-and-Older Work Force

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May 11th, 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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May 10th, 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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Multiple Jobholders: Two Decades of Trends as of April

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May 10th, 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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Job Openings & Labor Turnover: Clues to the Business Cycle

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May 10th, 2016

The latest JOLTS report (Job Openings and Labor Turnover Summary), data through March, 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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NFIB: Small Business Survey: Slight Improvement

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May 10th, 2016

The latest issue of the NFIB Small Business Economic Trends is out today. The headline number for April came in at 93.6, up 1.0 from the previous month's 92.6. The index is at the 20th percentile in this series. Today's number came in above the Investing.com forecast of a rise to 93.2.

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The Labor Market Conditions Index for April Remains Negative

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May 9th, 2016

With the surge in last week's new unemployment claims, the largest in 65 weeks, and the fourth smallest number of monthly new nonfarm jobs since January 2014, today's updated of the Labor Market Conditions Index takes on special significance. The LMCI is a relatively recent indicator developed by Federal Reserve economists to assess changes in the labor market conditions. Today's release of the April data came in at -0.9, up from -2.1 in March.

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

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May 9th, 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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The Civilian Labor Force, Unemployment Claims and the Business Cycle

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May 6th, 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: April Nonfarm Employment

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May 6th, 2016

This commentary has been updated to include this morning's release of Nonfarm Employment for April. As the adjacent thumbnail of the past year illustrates, Nonfarm Employment remains in its upward trend. However, the April report of 160K new jobs was substantially below expectations (Investing.com was looking for 202K). Furthermore, the February and March numbers were revised downward by 19K (12K and 7K, respectively).

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April New Jobs Worse Than Forecast at 160K

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May 6th, 2016

Today's report of 160K new nonfarm jobs in April was lower than the Investing.com forecast of 202K. March's nonfarm payrolls was revised downward by 7K. The unemployment rate was unchanged, remaining at 5.0%.

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A Closer Look at the Yesterday's ADP Employment Report

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May 5th, 2016

In yesterday's ADP employment report we got a March estimate of 156K new nonfarm private employment jobs, April estimate of 156K new nonfarm private employment jobs from ADP, a decrease from March's 194K, which was a downward revision from 200K. 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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ISM Non-Manufacturing: PMI Growth Continues at Slightly Faster Rate

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May 4th, 2016

Today the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 55.7 percent, up 1.2 percent from last month's seasonally adjusted 54.5 percent. Today's number came in above the Investing.com forecast of 54.7 percent.

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March Trade Deficit Down 6.5B from Revised February

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May 4th, 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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Anticipating April Employment: ADP Disappoints at 156K

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May 4th, 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 April estimate of 156K new nonfarm private employment jobs from ADP, a decrease from March's 194K, which was a downward revision from 200K.

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

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May 3rd, 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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Market Cap to GDP: An Updated Look at the Buffett Valuation Indicator

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May 3rd, 2016

With last week's release of the Advance Estimate of Q1 GDP, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The indicator remains under 2 standard deviations from its mean. The current reading is 113.0%, down from 119.4% for Q4 of last year. It is off its 130.9% interim high in Q1 of 2105 year and below the +2SD.

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Market Remains Overvalued, Up from Last Month

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May 3rd, 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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May 3rd, 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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The Q Ratio and Market Valuation: April Update

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May 2nd, 2016

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

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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Is the Stock Market Cheap?

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May 2nd, 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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ISM Manufacturing Index: Continued Expansion in April

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May 2nd, 2016

Today the Institute for Supply Management published its monthly Manufacturing Report for April. The latest headline PMI was 50.8 percent, a decrease of 1.0 percent from the previous month and below the Investing.com forecast of 51.4.

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

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May 2nd, 2016

Quick take: At the end of April the inflation-adjusted S&P 500 index price was 83% above its long-term trend, an increase from 79% 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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Crestmont Market Valuation Update

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May 2nd, 2016

Quick take: Based on the April S&P 500 average of daily closes, the Crestmont P/E is 90% 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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May 2nd, 2016

Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? At this point, 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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Moving Averages: April Month-End Update

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April 29th, 2016

Valid until the market close on May 31, 2016

The S&P 500 closed April with a monthly gain of 0.27% after a gain of 6.6% last month. All three S&P 500 MAs are signaling "invested" and all 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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Regional Fed Manufacturing Overview: April Still Negative, but Continuing to Climb

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April 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. The average of the five for April is -3.2, up from last month's -7.8.

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March Real Disposable Income Per Capita Rises Again

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April 29th, 2016

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

At two decimal places, the nominal 0.31% month-over-month increase in disposable income comes in at 0.26% when we adjust for inflation. The year-over-year metrics are 3.20% nominal and 2.35% real.

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Two Measures of Inflation and Fed Policy

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April 29th, 2016

The BEA's Personal Consumption Expenditures Chain-type Price Index for March, released yesterday, shows core inflation below the Federal Reserve's 2% long-term target at 1.56%, down from its February reading of 1.72%, which was the highest since late 2012. The most recent Core Consumer Price Index release, also data through March, is higher at 2.19%. The Fed is on record as using Core PCE data for its primary inflation gauge.

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Chicago PMI Down in April

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April 29th, 2016

The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, decreased in April to a value of 50.4 from last month's 53.6. Values lower than 50.0 indicate contracting manufacturing activity.

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The Core PCE Price Index Drops in March

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April 29th, 2016

The Personal Income and Outlays report for March was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.82%, down from the previous month's upwardly revised 0.96%. The latest YoY Core PCE index (less Food and Energy) came in at 1.56%, down from the previous month's upwardly revised 1.72%.

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The Big Four Economic Indicators: Real Personal Income for March

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April 29th, 2016

Personal Income (excluding Transfer Receipts) in March rose 0.38% and is up 4.3% year-over-year. When we adjust for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) rose 0.33%. The real number is up 3.5% 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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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