Market Indicators

The labor force participation rate (LFPR) is a simple computation: You take the civilian labor force (people aged 16 and over employed or seeking employment) and divide it by the civilian non-institutional population (those 16 and over not in the military and or committed to an institution). As of April, the labor force participation rate is at 62.6%, up from 62.5% the previous month.

Today, one in three of the 65-69 cohort, one in five of the 70-74 cohort, and one in ten of the 75+ cohort are in the labor force.

Our monthly workforce recovery analysis has been updated to include the latest employment report for April. The unemployment rate remained at 4.2%. Additionally, the number of new non-farm jobs (a relatively volatile number subject to extensive revisions) came in at 177,000.

In the week ending May 3rd, initial jobless claims were at a seasonally adjusted level of 228,000. This represents a decrease of 13,000 from the previous week's figure. The latest reading was lower than the forecast of 231,000.

The Federal Reserve concluded its third meeting of the year by keeping the federal funds rate (FFR) at 4.25-4.50%, as expected.

Multiple jobholders accounted for 5.4% of civilian employment in April.

April's employment report showed that 82.6% of total employed workers were full-time (35+ hours) and 17.4% of total employed workers were part-time (<35 hours).

Gas prices were essentially flat this week, remaining near their lowest levels in six weeks. As of May 5th, the price of regular was up 1 cent while premium gas was unchanged from the previous week.

Travel on all roads and streets increased in March. The 12-month moving average was up 0.10% month-over-month but was up 0.99% year-over-year. However, if we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was up 0.03% MoM and down 0.91% YoY.

The U.S. trade deficit widened to a record high as imports rose more than exports. In March, the trade deficit rose 14.0% to -$140.5B, the fourth monthly increase in the past five months.

What does the ratio of unemployment claims to the civilian labor force tell us about where we are in the business cycle and recession risk?

Here is a look at real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq composite since their 2000 highs. We've updated this through the April 2025 close.

The S&P 500 real monthly averages of daily closes reached a new all-time high in December 2024 but has retreated from it over the past few months. Let's examine the past to broaden our understanding of the range of historical bull and bear market trends in market performance.

With the Q1 GDP advance estimate and the April close data, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 207.8%, down slightly from the previous quarter.

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 $21,618 for an annualized real return of 15.52%.

The Institute for Supply Management (ISM) released its March Services Purchasing Managers' Index (PMI), with the headline composite index at 51.6—above the forecast of 50.2. This marks the tenth consecutive month of expansion for the index.

The April U.S. Services Purchasing Managers' Index (PMI) from S&P Global came in at 50.8, below the 51.4 forecast. The reading marks the 27th consecutive month of expansion and the slowest growth since November 2023.

The weekly leading economic index (WLEI) is a composite for the U.S economy that draws from over 20 time-series and groups them into the following six broad categories which are then used to construct an equally weighted average. As of April 25th, the index was at 6.038, down 1.531 from the previous week, with 4 of the 6 components in expansion territory.

There is a general belief that there are four big indicators that the NBER Business Cycle Dating Committee weighs heavily in their cycle identification process. This commentary focuses on one of these indicators: nonfarm employment. In April, total nonfarm payrolls increased by 177,000 while the unemployment rate remained at 4.2%.

Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations for investment returns. This analysis focuses on the P/E10 ratio, key indicator of market valuation, and its correlation with inflation and the 10-year Treasury yield.

The moving average for the per-capita light vehicle sales series peaked in August 1978. Almost 50 years later, it is down 35.2% from that peak.

The latest employment report showed that 177,000 jobs were added in April, down from 185,000 in March but higher than the expected 138,000 addition. Meanwhile, the unemployment rate remained at 4.2%, as expected.

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

The Q Ratio is the total price of the market divided by the replacement cost of all its companies. The latest Q-ratio is at 1.74, down from 1.85 in March. This is the lowest level in fifteen months.

Based on the April S&P 500 average of daily closes, the Crestmont P/E of 36.0 is 137% above its arithmetic mean, 159% above its geometric mean, and is in the 98th percentile of this 14-plus-decade series.

Here is the latest update of a popular market valuation method, Price-to-Earnings (P/E) ratio, 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. The latest trailing twelve months (TTM) P/E ratio is 24.5 and the latest P/E10 ratio is 32.6.

At the end of April, the inflation-adjusted S&P Composite Index was 145% above its long-term trend, down from 160% in March. This is the lowest variance in twelve months.

The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) came in at 48.7 in April, indicating contraction in U.S. manufacturing for a second straight month. The latest reading was above the forecast of 48.0.

U.S. manufacturing growth remained subdued in April as confidence in the outlook hit a ten-month low and prices continued to quickly rise. With that said, the S&P Global U.S. Manufacturing PMI remained in expansion territory for a fourth straight month in April at 50.2 signaling a marginal expansion. The latest reading was lower than the 50.7 forecast.

The 10-year Treasury yield has experienced dramatic fluctuations, ranging from a peak of 15.68% in October 1981, during the height of the Volcker era, to a historic low of 0.55% in August 2020, amidst the economic uncertainty of the pandemic. As of April 30, 2025, the weekly average stood at 4.37%.

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process.

With the release of March's report on personal incomes and outlays, we can now take a closer look at "real" disposable personal income per capita. At two decimal places, the nominal 0.42% month-over-month change in disposable income comes to 0.46% when we adjust for inflation, the largest monthly gain since January 2024. The year-over-year metrics are 3.33% nominal and 1.01% real.

Personal income (excluding transfer receipts) rose 0.6% in March and is up 3.7% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, real personal income (excluding transfer receipts) was up 0.7% month-over-month and up 1.4% year-over-year.

The BEA's core Personal Consumption Expenditures (PCE) Price Index for March showed that core inflation continues to be above the Federal Reserve's 2% long-term target at 2.6%. The March core Consumer Price Index (CPI) release was higher, at 2.8%. The Fed is on record as using core PCE data as its primary inflation gauge.