Tag Archives: Statistics

Back Below “Stall Speed”: 2016 Economy Matches Worst Year since Great Recession, by Wolf Richter

The economy is loaded with too much debt to achieve much in the way of growth. Is it even really growth when the overall debt load is growing faster than the economy? From Wolf Richter at wolfstreet.com:

Gutted Hopes for a Strong Finish.

The consensus forecast by economists predicted that the US economy would grow at an rate of 2.2% in the fourth quarter, as measured by inflation-adjusted GDP. The forecasts ranged from 1.5% to 2.8%. The New York Fed’s “Nowcast” pegged it at 2.1%, and the Atlanta Fed’s “GDPNow” at 2.9%. And today, the Bureau of Economic Analysis reported that growth in the fourth quarter was a measly 1.9%.

That was down from 3.5% in the third quarter, a spurt that had once again given rise to the now gutted hopes that the US economy would finally emerge from its stall speed. But instead it has slowed down.

For the year 2016, the growth rate dropped to 1.6%. It was worse even than 2013, when GDP growth tottered along at 1.7%. And it matched the growth rate in 2011. Both 2016 and 2011 were the worst since 2009 when the US was in the middle of the Great Recession:

In fact, over the past 50 years, anytime the economy grew less than 2% in a year, it was either already in a recession for part of the year, or there’d be a recession the following year. Hence “stall speed” – a speed that is too slow to keep the economy from stalling altogether.

To continue reading: Back Below “Stall Speed”: 2016 Economy Matches Worst Year since Great Recession

State Tax Revenues Plunge In Q2, by Tyler Durden

Tax revenues generally don’t plunge year-over-year when the economy is doing well. From Tyler Durden at zerohedge.com:

The latest confirmation that the US economy continues to deteriorate comes not from the Federal Government but from state-level data, where year-over-year growth in state tax revenues slowed in the first quarter to its lowest rate since the second quarter of 2014, according to the latest data published yesterday by the Rockefeller Institute of Government. Worse, preliminary data for the second quarter show an outright decline in state tax collections relative to the second quarter of last year.

As SMRA notes, state tax collections were up 1.6%, year-over-year, in the first quarter, the smallest increase since the second quarter of 2014. After adjustment for inflation, revenues were up 0.4%. Personal income tax collections, which account for roughly 36% of total state revenue, increased 1.8% in the first quarter, down from 5.1% in the fourth quarter. Sales tax collections – the second largest source of state revenue – increased 2.4% in the first quarter, up from 2.0% in the first quarter.

Corporate tax receipts, which account for less than 5% of state revenues, were down sharply for the second consecutive quarter, while motor fuel taxes, which also account for just under 5% of revenues, were up 2.0%, down from 3.5% increase in the fourth quarter.

According to preliminary estimates from Rockefeller, tax collections will be down 2.1% in the second quarter relative to last year, reflecting a decline of 3.3% in personal income taxes and a 9.2% plunge in corporate tax collections.

Sales tax revenue is estimated to have increased.

Rockefeller attributes the recent softness in personal income tax collections to a variety of factors, including weakness in the stock market, in both 2015 and the earlier part of this year, which has depressed tax collections related to investment income. Tax collections have been particularly weak in states with economies that are heavily reliant on oil or other natural resources. In the second quarter, growth in individual income taxes from withholding has slowed considerably.

The suddenly plunge in state income tax should not come as a surprise: the trend in individual income taxes at the state level in recent quarters tracks the sharp decline we have reported previously at the federal level.

For most states, the second quarter marks the end of the fiscal year and the current fiscal year began on July 1. According to Rockefeller, most states forecast weak income and sales tax growth for fiscal 2017. Also, in many states 2017 budget projections were prepared before the second quarter and don’t yet reflect the downside surprise in April tax receipts. In the words of the analysts at the Rockefeller Institute the outlook for state budgets in the 2016-2017 fiscal year “remains gloomy.”


Why MainStreet Isn’t Buying Obama’s Economic Recovery Fantasy, by Lance Roberts

You don’t need a Harvard economics PhD to know the state of the economy, and in fact, if you are so credentialed, you probably don’t know the state of the economy. From Lance Roberts at davidstockmanscontracorner.com:

Last night, President Obama took the stage at the Democratic National Convention to throw his support to Hillary Clinton in her bid for the Presidency. He also took the opportunity to take a victory lap for his economic achievements while in office.

With the 2016 Presidential Election fast approaching, this was one of the final chances the President will have to try and divert attention away from Hillary’s “trustworthiness” problem following continued revelations surrounding Benghazi, email scandals and the Clinton Foundation which is now under investigation by the IRS.

The problem for the Democrats currently, following a rather severe beating at the polls during the 2012 mid-terms, is the broad loss of faith in “hope and change.” With Donald Trump and Hillary Clinton virtually tied in the majority of polls (within a margin of error), it is imperative to regain those voters. Not surprisingly, since voters tend to “vote their pocketbook,” it wasn’t surprising to hear the President spin a decisively positive economic picture during his speech. He hopes that by pointing to falling unemployment rates, economic growth and higher confidence levels; it will give voters a sense of confidence in the President’s accomplishments and be convinced the expect the same for Hillary.

The question is whether the majority of the voting public will agree with the President’s message? Let’s take a look at some charts.

Government Debt

Since 2009, Government debt has surged by $7.8 Trillion and by the end of the next budget cycle will likely surpass $20 Trillion in total. The problem is that during the current Presidential term, real economic growth has risen by just $2.09 Trillion. However, even this number is inaccurate as the current government debt levels do not include other liabilities of the government such as social security and other social welfare programs.

The following chart quantifies it a bit better when you look at cumulative increases in debt and real, inflation adjusted, GDP.

Yes, the economy is growing, however, that growth has come at a huge cost of a debt burden that will be amplified if borrowing costs rise with anticipated increases in real interest rates. Of course, this is entirely ironic considering it was President Obama himself who admonished the previous administration’s increase in debt which he conveniently forgot to mention during his self-congratulatory speech.

The problem is this. There is a direct correlation between the expansion of debt and economic growth. Debt detracts revenue from productive investments that lead to economic growth and diverts it into non-productive interest payments. This is why the explosion in the amount of debt required to generate economic growth (currently $3.72) is unsustainable longer term.

To continue reading: Why MainStreet Isn’t Buying Obama’s Economic Recovery Fantasy


How the Fed Stopped the “Corporate Profit Recession” (and the Media Fell for it), by Wolf Richter

The corporate profits recession that afflicted the US economy is over because…because…because the 12 regional Federal Reserve Banks made more money! There’s no keeping a great economy down! From Wolf Richter at wolfstreet.com:

This about sums up the US economy in more than one way.

The end of the corporate “profit recession” has been declared last week. It was based on data by the Bureau of Economic Analysis, released on May 27. Corporate profits, after declining with some zigs and zags since their peak in the third quarter 2014, suddenly ticked up in the first quarter 2016. And everyone was ecstatic.

Corporate profits are in the eye of the beholder. For example, “adjusted earnings” – the ex-bad items earnings proffered by companies and analysts – of the S&P 500 companies have dropped four quarters in a row, since their peak in Q2 2015, on a year-over-year basis.

But by BEA’s estimates, one of the broadest measures out there, corporate profits peaked in Q3 2014. The BEA tracks “profits from current production” based on all US corporate entities. It makes a number of adjustments, including the Inventory Valuation Adjustment and the Capital Consumption Adjustment. It thus produces a seasonally adjusted annual rate for each quarter that then can be compared to prior quarters. This annualized rate shows what profits would be like at this rate for the entire year.

By this measure, corporate profits peaked at $1.643 trillion annualized rate in Q3 2014. By Q4 2015, profits had plunged 16% to $1.380 trillion. That’s the “corporate profit recession.” But then there was a tiny uptick of $8.1 billion in Q1 this year, which has been heralded as the long-awaited end of the profit recession.

Note the circled uptick in profits that was used by the media to proclaim the end of the profit recession, and how the overall profit picture since Q1 2012 smacks of stagnation, or worse:

But there’s a detail – a huge detail – that the media conveniently forgot to point out: whose profits are included in “corporate profits.” The BEA tells us (emphasis added):

These organizations consist of all entities required to file federal corporate tax returns, including mutual financial institutions and cooperatives subject to federal income tax; nonprofit organizations that primarily serve business; Federal Reserve banks; and federally sponsored credit agencies.

Ah yes, the Federal Reserve Banks (FRB), which include the 12 regional Federal Reserve Banks, such as the New York Fed. They’re private banks, owned by the largest financial institutions in their respective districts. And as private banks, their consolidated profits are added to US financial sector profits, and thus overall corporate profits, along with those from Goldman Sachs, JP Morgan, and your local bank down the street.

It works like this: the Fed creates money out of thin air, buys securities with that money, adds the interest payments from those securities to “Net Income,” then pays most of it back to the Treasury, whose interest payments became part of this income in the first place. If this seems a bit absurd and circular, so be it. We’re interested in another absurdity here.

To continue reading: How the Fed Stopped the “Corporate Profit Recession” (and the Media Fell for it)

He Said That? 5/30/16

How government statistics work. From Winston Churchill (1874-1965) British politician and statesman, as cited in The Life of Politics. Henry Fairlie (1968):

I gather, young man, that you wish to be a Member of Parliament. The first lesson that you must learn is that, when I call for statistics about the rate of infant mortality, what I want is proof that fewer babies died when I was Prime Minister than when anyone else was Prime Minister. That is a political statistic.

Americans haven’t gotten a raise in 16 years, by John Crudele

If rosy statistics don’t line up with a manifestly sour public mood, maybe the statistics are wrong. That’s the kind of assertion that will get you kicked off Wall Street or the Obama administrations team of “economists,” but it’s just common sense. From John Crudele on a guest post at theburningplatform.com:

Mark Twain is credited with saying “figures don’t lie, but liars figure.” If he were around today Twain’s quote might go something like this: “Figures do lie, and liars figure out how to make people believe them.”

Granted, not as catchy.

But my quote goes a long way toward explaining something that is bothering many political pundits today. President Obama whined last week that he’s not getting enough credit for the economy.

Democrats are besides themselves wondering why Americans are so angry that they might be willing to elect Donald Trump president when the official unemployment rate is only 5%, oil prices are near their lowest level in a decade and the economy has been expanding for seven straight years.

Why aren’t Americans happier?

One of those pundits made me chuckle Tuesday night when he was talking about Trump’s primaries victories in another five states. He suggested that Americans were somehow being brainwashed by the media into thinking the economy was really bad when in fact it was good.

Then, on Thursday, the Commerce Department showed just how good the economy wasn’t. It announced that the Gross Domestic Product grew by an annual rate of just 0.5% in the first three months of 2016.

But that didn’t stop the media from trying to explain away the disappointment.

The New York Times, for example, suggested softly that “the recovery has two sides.” Toward the bottom of the piece, it included the startling facts that “factories shed nearly 50,000 jobs in February and March, wiping out all of the gains recorded last year. The proportion of Americans in the active labor force remains depressed by historical standards, and more than 6 million workers say they are in part-time positions because they cannot find full-time work.”

But hey, the paper continued, we found some anecdotes of companies that are hiring!

It’s not just political spin, however, that explains the rose-colored coverage. Another explanation is that the media is plain stupid — quick to accept guidance from economists on Wall Street, for example, who have a vested interest in making everything wonderful.

Economists understand what “statistical noise” is. If you don’t, here’s a definition from a website called WiseGeek: “Strictly defined, statistical noise is a term that refers to the unexplained variation or randomness that is found within a given data sample or formula. There are two primary forms of it: errors and residuals.”

In other words, economic statistics may not make sense in the short term because something is innocently interfering with the accuracy of the data or someone is intentionally fooling with the numbers.

I don’t think anyone today is intentionally fooling with the nation’s economic data, although I’ve proven that there were questionable data collections leading up to the presidential election in 2012. These days, I think the data is simply misleading.

To continue reading: Americans haven’t gotten a raise in 16 years

This is Where Industrial Production Normally Meets a Recession, by Wolf Richter

From Wolf Richter at wolfstreet.com:

The only exceptions were in the early 1950s

Painful – that’s how you can describe the slew of recent US economic data. And today’s data dump was even worse.

On a regional level, there was the Empire State Manufacturing Survey. The Current Activity Index plunged to the lowest level since March 2009. The last time it had squeaked into positive territory was in July 2015. The Expectations Index plummeted by an unprecedented 29 points, also to the worst level since March 2009.

Thank God it’s only regional. But wait…. California’s Inland Empire Purchasing Managers Index, which tracks manufacturing in the Inland Empire, started losing its grip in August and in December plunged to the lowest level since the dark days of February 2009.

The report pointed to the link between the index and the overall economy in the region: Historically, when the PMI drops below a certain level, as it did in December, and stays there for three months, it coincides with a recession in the region’s overall economy [“The Sky is Falling” on California Manufacturing, Worst since February 2009, Might Kick Regional Economy into Recession].

Then retail sales for December dropped. Turns out, holiday sales brought no respite to the beleaguered brick-and-mortar retailers [read… Wal-Mart Rubs Salt on Deepening Retail Wounds].

And the final shoe to drop today, in a gratuitous sort of way, was the Federal Reserve’s index for industrial production. It fell 0.4% in December, after having already fallen 0.9% in November and 0.2% in September, while August had been flat. Year-over-year, December was down 1.8%.

A year-over-year drop of this magnitude (-1% or more) has been linked to a recession every time it occurred over the past six decades. You have to dig into the early 1950s before you find the last two occurrences where this kind of drop in industrial production was not associated with a recession.

To continue reading: This is Where Industrial Production Normally Meets a Recession

Another Atrocious Week Going Out With A Bang, by John Rubino

From John Rubino on a guest post at theburningplatform.com:

On days when lots of financial numbers are released, the normal pattern is for some to point one way and some another, giving everyone a little of what they want and overall presenting a reassuringly muddled picture of the economy.

Not today. A wave of economic stats flowed out of Washington, almost all of them terrible, while corporate news was, in some high-profile cases, shocking. Let’s go to the highlight reel:

Retail sales fell again in December, bringing the 2015 increase to just 2.1% versus an average of 5.1% from 2010 through 2014. This kind of deceleration is out of character for year six of a gathering recovery, but completely consistent with a descent into recession.

The New York Fed’s Empire State Manufacturing Survey index plunged to -19.37 in January from -6.21 in December. This is a recession — deep recession — level contraction. Not a single bright spot in the entire report.

U.S. industrial production fell for the third straight month in December, and the previous month was revised down sharply. Factories are already in a recession that appears to be deepening.

On the company-specific front:

UK resource giant BHP Billiton wrote down the value of its US shale assets by $7.2 billion — two-thirds of its total investment — in response to plunging oil prices. Now everyone is wondering who’s next, and the list of likely candidates spans the entire commodities complex.

Chip maker Intel reported okay earnings but really disappointing margins and outlook. Its stock is down 9% as this is written mid-morning.

Walmart is closing nearly 300 stores and laying off most of the related 16,000 workers. It also cut its forward guidance aggressively.

There’s more, much of it related to plunging oil prices and their impact on developing world economies. For countries that grew temporarily rich on China’s infrastructure build-out, the end of that ill-fated program has produced something more like a depression than a garden-variety slowdown.

To continue reading: Another Atrocious Week going Out With A Bang

Guns Don’t Cause Suicide, by Ryan McMaken

From Ryan McMaken at mises.org:

Homicide rates in the United States have been declining for 20 years as the number of privately-held guns in the US has increased substantially.

In some states, such as New Hampshire and Oregon, which have very weak gun laws, homicide rates are remarkably low, and these states are among the safest places on earth.

As homicide rates have declined, however, and gun-related homicides with them, gun-control advocates have attempted to create a new category of “gun violence” by blaming suicides on access to guns.

Most “Gun Violence” Is Suicide

Note this recent article from The Washington Post which casts suicide as indistinguishable from homicide, and goes on to point out that there were as many firearm related deaths in 2014 as there were deaths that resulted from automobile accidents.

The article rightly notes that thanks to medical science and safety features on automobiles, deaths from car accidents have gone into steep decline in recent years. The article then notes that suicides have been increasing over the same period, but then attempts to connect this rise with access to firearms.

The article never explicitly says that suicides are indistinguishable from homicides, of course — since any rational person can see a large and obvious distinction — but it does imply the two are more or less the same by classifying both firearm-related suicides and firearm-related homicides as “gun violence.”

Employing the usual lazy methods of mainstream journalists, The Post fails to provide hard numbers or to direct links to sources, so I’ll do it for you:

To come up with this new category of “gun violence” The Post combines the CDC’s statistics of firearm suicides (a total of 21,175 in 2013) to the total of gun homicides (a total of 11,201 in 2013). Then it compares this total to the number of accidental automobile deaths, which was 33,804 in 2014. (The article claims there is new 2014 data from the CDC showing more gun deaths than automobile deaths, but the CDC web site has not been updated to reflect this.)

So, overall, as of 2013, there were 32,376 gun deaths and 33,804 automobile deaths. (During that same period, about one-third of automobile deaths were alcohol-related.)

So, yes, according to the CDC, the number of gun-related deaths and the number of automobile deaths are similar — but only if suicides are included.

Contained in all of this, however, is the implied conclusion that were it not for such easy access to guns, the suicide rate in the US would be lower. This is of course pure speculation, and rather baseless speculation at that.

To continue reading: Guns Don’t Cause Suicide

Another Phony Payroll Jobs Number , by Paul Craig Roberts

Month after month the Bureau of Labor Statistics announces the employment statistics, and month after month various alternative internet sites thoroughly dismantle them, casting all sorts of reasonable doubt on their veracity. Month after month the mainstream media takes the numbers at face value, even though they will be “officially” revised several time before they’re put to bed. The points and criticisms of the alternative sites are never acknowledged or addressed. From Paul Craig Roberts at paulcraigroberts.org:

The Bureau of Labor Statistics announced today that the US economy created 271,000 jobs in October, a number substantially in excess of the expected 175,000 to 190,000 jobs. The unexpected job gain has dropped the unemployment rate to 5 percent. These two numbers will be the focus of the financial media presstitutes.

What is wrong with these numbers? Just about everything. First of all, 145,000 of the jobs, or 54%, are jobs arbitrarily added to the number by the birth-death model. The birth-death model provides an estimate of the net amount of unreported jobs lost to business closings and the unreported jobs created by new business openings. The model is based on a normally functioning economy unlike the one of the past seven years and thus overestimates the number of jobs from new business and underestimates the losses from closures. If we eliminate the birth-death model’s contribution, new jobs were 126,000.

Next, consider who got the 271,000 reported jobs. According to the Bureau of Labor Statistics, all of the new jobs plus some—378,000—went to those 55 years of age and older. However, males in the prime working age, 25 to 54 years of age, lost 119,000 jobs. What seems to have happened is that full time jobs were replaced with part time jobs for retirees. Multiple job holders increased by 109,000 in October, an indication that people who lost full time jobs had to take two or more part time jobs in order to make ends meet.

Now assume the 271,000 reported jobs in October is the real number, and not 126,000 or less, where are those jobs? According to the BLS not a single one is in manufacturing. The jobs are in personal services, mainly lowly paid jobs such as retail clerks, ambulatory health care service jobs, temporary help, and waitresses and bartenders.

To continue reading: Another Phony Payroll Jobs Number