Economic Indicators to Watch The Disturbing Economic Tea Leaves 2013 CFA Society of Houston Investor Symposium Society Houston, TX Friday, November 8, 2013 Richard Yamarone Bloomberg Economics Author of The Trader s Guide to Key Economic Indicators Twitter: @Yamarone
Jobs, Jobs, Jobs It s All About Jobs
The Type of Jobs Matter
Economy Isn t Advancing Fast Enough to Engender Job Creation Nonfarm Payrolls vs. Real GDP Payrolls ('000) GDP YOY% 1200 800 400 0-400 -800-1200 -1600 Payrolls (lhs) -2000 GDP (rhs) -2400 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 6 5 4 3 2 1 0-1 -2-3 -4-5 -6-7 Source: BEA, BLS NFP T <Index>, GDP CYOY <Index>
Economy Operating Well Below its Potential Real GDP (Blns) vs. Real Potential GDP (Blns) $14,500 $13,500 $12,500 $11,500 $10,500 Potential GDP Real GDP $9,500 $8,500 $7,500 $6,500 CBOPGDPR <Index>, GDP CHWG <Index> $5,500 1980 1985 1990 1995 2000 2005 2010 2015 Source: BEA, CBO, Bloomberg
Employment To Be a Slow Train Coming Nonfarm Payroll Creation From Onset of Recession 102 100 98 '73 - '75 96 1980 94 92 '81 - '82 '90 - '91 2001 90 '07 - current 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 Source: BLS, NBER, Bloomberg Months
Employment To Be a Slow Train Coming -- II peak-to-trough % jobs lost Recession Date (months) total jobs lost (millions) months to job restoration peak-to-trough Period 1 1948-49 11 2.34 22 5.17 1953-54 10 1.71 23 3.33 1957-58 8 2.22 20 4.17 1960-61 10 1.19 20 2.16 1969-70 11 1.04 18 1.46 1973-75 16 2.17 19 2.70 1980 6 1.16 10 1.20 1981-82 16 2.84 28 3.09 AVG: 11 1.83 20 2.91 Period 2 1990-91 8 1.62 32 1.40 2001 8 2.71 48 2.04 AVG: 8 2.16 40 1.72 Period 3 2007-09 (current) 18 8.31? 6.03
If GDP Dips to 2.0% -- It s Recession Time 14 Real GDP (Y/Y %) 12 10 8 6 4 2 0-2 -4-6 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 Source: NBER, BEA, Bloomberg GDP CYOY <Index>
Manufacturing Gains Still Not Generating Jobs Industrial Production Mfg. Manufacturing Jobs ('000) 19,000 105 18,000 100 17,000 95 16,000 90 15,000 85 14,000 80 13,000 75 12,000 70 11,000 MFG Jobs (lhs) IP (rhs) 65 10,000 1995 2000 2005 2010 Source: Federal Reserve, BLS USMMMANU <Index>, IP <Index> 60
It s 1941 For Manufacturing U.S. Manufacturing Employment (in thousands) 20,000 19,000 18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 1940 1950 1960 1970 1980 1990 2000 2010 Source: Bureau of Labor Statistics USMMMANU <Index>
Housing Starts, the Most Interest Rate Sensitive Sector of the Economy 1050 Housing Starts ('000) 950 850 750 650 550 450 Jan-10 Jan-11 Jan-12 Jan-13 Source: Dept. of Commerce NHSPSTOT <Index>
Still a Way to go for Housing Recovery Housing Starts ('000) 2,700 2,200 1,700 1,200 700 200 Jan-59 Jan-67 Jan-75 Jan-83 Jan-91 Jan-99 Jan-07 Source: Dept. of Commerce NHSPSTOT <Index>
Won t Get Any Jobs from Housing Residential Construction Spending ($ mls) Construction Employment (thousands) 700,000 8,000 600,000 Spending (lhs) Employment (rhs) 7,500 500,000 7,000 400,000 6,500 6,000 300,000 5,500 200,000 5,000 100,000 4,500 Source: U.S. Department of Commerce, Bureau of Labor Statistics, Bloomberg 0 4,000 1993 1997 2001 2005 2009 2013 USECTOT <Index>, CNSTRESI <Index>
Home Prices Have Little Improvement in Post Crisis 300 S&P-Case-Shiller Home Price Index PHXR-SA LXXR-SA SDXR-SA SFXR-SA 250 DNXR-SA WDXR-SA MIXR-SA TPXR-SA 200 ATXR-SA CHXR-SA 150 BOXR-SA DEXR-SA MNXR-SA CRXR-SA 100 LVXR-SA NYXR-SA Source: S&P/Case-Shiller 50 2000 2002 2004 2006 2008 2010 2012 CEXR-SA DAXR-SA POXR-SA SEXR-SA
Commercial Construction Slump Total U.S. Commercial Construction Spending ($ mlns) $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 1993 1996 1999 2002 2005 2008 2011 Source: U.S. Census Bureau CNSTCOMM <Index>
Retailers Headed Out of the Malls Regional & Strip Mall Vacancies 12.0% 11.0% 10.0% 9.0% Strip Mall Regional & Superregional Malls 8.0% 7.0% 6.0% 5.0% 4.0% 2000 2003 2006 2009 2012 Source: Reis Inc.
Earnings/Analyst Conference Calls
Bloomberg Orange Book Summary of Commentary on Current Economic Conditions By Corporation ORANGE <GO> from earning statements commencing July 1, 2010
What is Being Said And so we're still seeing that midnight shopping in our stores when that EBT card, it's like a debit card, when it is ready and it is funded, there are people who are in the store at midnight because they know it turns on. And they have shopped from like 10:45 to midnight and they're waiting for that card and then our lines open up. And we've had some of our busiest ours at midnight. Rosalind Brewer, EVP, Wal-Mart April 12, 2011 I think the most telling indicator for us that economic weakness and employment is the key issue driving soft volumes, is the fact that we continue to see, as in contrast to the historical norms, we continue to see volume pick up heavily at the beginning of each month, and then steadily erode through the month, being particularly soft in the last week to 10 days of the month. That just tells us that people are running out of money. Gregg Engles, CEO Dean Foods May 10, 2011 Now clearly when it gets to the end of the month and they've run out of dollars and the first of month gets there, you'll see some pick-up in sales. I would say it's not as dramatic as it was two years ago due mostly to the fact that not 100% of those benefits are getting loaded on to people's cards.. J. Michael Schlotman, CFO, SVP Kroger May 17, 2011
What is Still Being Said know that 15% of the Americans are living on food stamps today. And we know that most of them, even after two or three weeks, are short of money... Dick Boer, CEO Koninklijke Ahold Nv November 28, 2012 the value customers are still stretched. We still are getting a lot of food stamps, a very high dollar amount and a very high percentage amount, and that is definitely problematic. David Dillion, CEO Kroger October 16, 2012 Food stamp usage continues to grow for a fragile consumer that's seeing volatility in the economy, is worried about the state of their job or finding a job, maybe using food stamps to feed their family and is trying to figure out how to put fuel in the car, it's still a very challenging and uncertain environment. Brian Cornell, CEO, Pepsi Americas September 5, 2012
Real Disposable Incomes Trending Lower Real Disposable Personal Incomes (Y/Y%) 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00-1.00-2.00-3.00-4.00 1990 1995 2000 2005 2010 Source: BEA, Bloomberg PIDSDCWT <Index>
No Typo, Over 47 Million People at or Below Poverty! 50,000,000 Supplemental Nutrition Assistance Program Number of Participants 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 2007 2008 2009 2010 2011 2012 2013 Source: U.S.D.A, Bloomberg FDSPNUM <Index>
Poverty Growing Faster than Payrolls Growth in Food Stamps vs. Nonfarm Payroll Jobs 135 130 125 120 115 110 Food Stamps Employment 105 100 95 90 6/1/2009 6/1/2010 6/1/2011 6/1/2012 6/1/2013 Source: USDA, BLS
There is No Holy Grail of Economic Indicators
Fab Five Dining Out Spending: Meals at Other Eating Places (Y/Y%) 8 6 4 2 0-2 -4-6 '00 '03 '06 '09 '12 RPCEDPMB <Index> <GO> Source: BEA, NBER
Fab Five Dining Out -- 2 Retail Sales: Food Services & Drinking Places 12 10 8 6 4 2 0-2 -4 1993 1996 1999 2002 2005 2008 2011 Source: U.S. Department of Commerce RSBAFDSV <Index>
Fab Five Casino Gambling Spending: Casino Gambling Y/Y% 24 20 16 12 8 4 0-4 -8-12 -16 '00 '03 '06 '09 '12 Source: Bureau Economic Analysis, NBER RPCEDCAS <Index> <GO>
Fab Five Jewelry & Watches Spending: Jewelry & Watches Y/Y% 16 12 8 4 0-4 -8-12 -16-20 '00 '03 '06 '09 '12 Source: Bureau Economic Analysis, NBER RPCEDJRY <Index> <GO>
Fab Five Cosmetics & Perfumes Spending: Cosmetics & Perfumes (Y/Y%) 12 9 6 3 0-3 -6-9 '00 '03 '06 '09 '12 Source: Bureau Economic Analysis, NBER RPCEDCOS <Index> <GO>
Fab Five Women s Dresses Spending: Women's & Girls' Clothing (Y/Y%) 12 10 8 6 4 2 0-2 -4-6 -8-10 '00 '03 '06 '09 '12 Source: Bureau Economic Analysis, NBER RPCEDWGC <Index> <GO>
This is an exclusive presentation from Bloomberg Brief Economics. Bloomberg BRIEF Economics is a new, groundbreaking publication written by leading economists in US, Europe and Asia, published by Bloomberg, the premier source of data and analytics in the financial world. Bloomberg BRIEF Economics is already read by thousands every morning and you ll soon see why the Economics Brief provides a clear, concise snapshot every morning of all the key information you need to know: Valuable insight and independent analysis from our renowned economists who've spent decades on Wall Street including Joseph Brusuelas Michael McDonough, Tamara Henderson, Richard Yamarone, David Powell and Niraj Shah. Proprietary data and commentary that gets beneath the numbers with eye catching charts. Guest columnists from top-tier firms. Exclusive publications such as the Orange Book, Quarterly Economic Overview, Daily Economic Outlook Videos and much more! Your time is valuable. Maximize it by switching to Bloomberg BRIEF Economics today. Take a free 30 day trial today! Or visit www.bloombergbriefs.com for more information.