Wednesday, December 17, 2014

Real retail and food service sales marches on

Period      Millions of $
2014-11: 189,545
2014-10: 187,705
2014-09: 186,768
2014-08: 187,067
2014-07: 185,578

Retail slows down a few quarters before start of recession. The numbers that we are saying clearly shows that retail is picking up & the economy is gaining momentum.


Monday, December 15, 2014

Analysis of BLS employment data for predicting market crash

I reviewed the current employment statistics data in BLS website. It lists the employment data for several industries. After analyzing how the employment picture changed for all the industries (~900), I came up with a short list of 31 industry sectors that foretell the onset of market drop & recession. These industries are the first to experience a drop in employment data a quarter or two prior to the big market drops you witness at onset of recession.

The US market peaked in Mar-00 and in Aug-07. Here is one such example :Real estate credit

Notice how Real estate credit starts to decline when FED is busy increasing the interest rate. This is one of the industries that acts as a canary in the coal mine.



Series Id:     CES5552229201 (I)
Seasonally Adjusted
Super Sector:  Financial activities
Industry:      Real estate credit
NAICS Code:    522292
Data Type:     ALL EMPLOYEES, THOUSANDS






Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
1998
208.7
214.8
220.8
223.8
226.5
230.3
234.7
238.8
241.8
247.0
250.0
252.6

1999
254.0
254.8
257.6
257.5
258.5
256.5
253.9
250.0
246.4
241.4
239.7
237.8

2000
235.4
231.7
227.4
224.4
222.3
221.2
221.2
220.5
220.0
220.3
218.3
217.5

2001
216.2
218.6
222.5
224.8
226.2
230.3
229.3
233.4
234.5
238.9
246.1
252.0

2002
259.3
260.4
262.7
265.1
264.0
270.9
274.0
278.1
286.5
295.2
300.8
305.7

2003
311.9
315.5
315.5
321.8
330.1
332.4
340.1
343.1
347.7
341.5
337.1
335.6

2004
333.7
335.9
338.2
342.5
344.7
345.3
342.7
341.5
342.9
341.1
342.4
342.7

2005
343.4
343.5
343.8
343.7
340.6
344.4
349.8
351.8
353.1
356.9
358.2
356.7

2006
354.2
356.2
356.1
354.8
349.2
347.5
345.9
349.3
352.1
350.2
347.9
344.8

2007
342.2
336.3
328.0
318.6
312.2
303.0
299.4
276.0
251.0
248.6
246.4
243.4

2008
241.7
236.5
232.9
231.2
228.0
229.7
224.2
223.0
221.6
217.5
212.9
210.5

2009
205.3
202.2
201.8
198.8
199.2
199.7
200.1
199.8
197.8
197.4
198.9
198.8

2010
200.8
202.9
202.6
203.6
200.3
202.4
205.7
208.4
210.1
212.4
212.9
215.3

2011
212.7
212.5
212.4
209.7
211.2
208.4
205.6
203.2
202.6
201.4
201.7
200.6

2012
199.7
199.4
199.8
200.4
199.6
203.7
206.5
211.1
214.1
216.1
218.6
223.1

2013
222.8
223.3
225.8
228.4
228.1
229.1
227.8
226.6
222.8
223.2
219.9
218.2

2014
216.3
213.3
208.5
210.9
210.0
211.0
212.7
213.7
214.4
216.1(P)



I : Seasonally Adjusted Independently. See http://www.bls.gov/web/empsit/cestn.htm#SA_ind for details.
P : preliminary


I constructed an index that is sum total of employment change in 31 select industries that exhibit such behavior. The graph of 6 month moving average of this index Vs broader Wilshire index is as given below. Notice how this leading index (green line) starts declining and crosses zero (industry group is shedding jobs) as market peaks. The 2007 decline was even steeper giving an investor ample time to exit the market.




I also constructed a graph that shows the select industry employment percent change Vs Wilshire. This graph is less smooth compared to 6-mo moving average, but nevertheless giving ample warnings.




An investor should view this decline only in conjunction with the FED tightening. At the moment, for November-14, we do not have all employment numbers. For Oct-14, the growth is well in positive territory.