Markets appear to be proceeding just as EJ suggested

[vt]

http://scottgrannis.blogspot.com/

Note Chart #2 on the output gap.

[dcarrigg]

Re: Markets appear to be proceeding just as EJ suggested

Data's looking a little better than it did a couple weeks ago. Existing home sales still down despite interest rates dropping below 4% for some folks the first time in a while. Energy prices up quite a bit. Average workweek's down a bit in Feb, up a bit in Mar, stuck around 34 and a half. Real average wages slightly up, but median are down. Rent's up, real rent costs are now over 25% more than during the Great Recession. Price-to-rent ratios Healthcare costs are way up. Healthcare-related bankruptcies are up sharply, especially in rural areas. Grassroots squeeze might not be a big deal for a while unless the squeeze gets tighter. Credit card delinquencies are up to a level we haven't seen since 2013. Still nowhere near as high as the run-up to the last recession. But climbing. Auto loan delinquencies are at a record high nominally, and up to rates we haven't seen since 2012. Student loan delinquencies are at a record high nominally and rates are climbing. Mortgages and home equity lines look fine right now, rates are going down.

Yield curve straightened itself out some, but has been bending a bit again since Wednesday. Consumer sentiment has dropped a little. Overall spending is still high. Construction and manufacturing are bleeding jobs. Manufacturing production was down in January and February after rising for a while. Will be interesting to see March numbers. The local construction slowdown at least is noticeable here compared to last fall. Housing starts have been trending down. LEI is down around 2010 levels, but had a slight bump. I'll be curious to see the retail numbers, February was the biggest monthly drop in retail sales since 2009. So whether and to what extent there's a rebound should be illuminating. CEO confidence is slightly up, but very slightly. NY Fed puts recession probability over the next 12 months at 27%, about where it was in Spring 2007 for reference.

So there's the round-up anyways. Certainly not looking as grim as February data. But a seasonal bounce out of winter is standard too. Still think it's early. Really it seems like there's a sharp bifurcation between asset holders and non-asset holders this time around. That comes part and parcel with bubbles, but it seems more pronounced in some ways this time. Asset-holders seem to be weathering the storm much better. Those who don't own homes or substantial portfolios appear to be faring much worse.

Especially young people. Kids under 30 are doing poorly. The 35-45 set seem to be doing a bit better, and 45+ folk seem to be doing pretty well, which is probably the only saving grace of this economy. The median 29 year earns less (only about $37,000) than the median 79 year old (about $37,500) for the first time in American history. Kind of common sense if you exist in the real world. But true all the same. There's a population glut who are 25 to 29 right now (echo boom, whatever you want to call it). They're faring particularly poorly. I imagine if they go another 5 or 10 years without somebody throwing them a bone, they're going to lose their minds as they realize there's no more time left for children or houses and they missed out on the American Dream, at least at the median. Fewer than 1/3 of them own homes. 15 years ago almost half of 25 year olds did. More than half of people just 5 years older today do. Timing is everything. And that glut of kids has real bad luck with timing.