Archive for September, 2015

About The Report


Managed by Philippa Dunne and Doug Henwood, TLR on the Economy is an independent research outfit located in New York.

Our proprietary surveys of state-level withholding and sales tax receipts are the backbone of our work. We have long-standing relationships with senior revenue estimators in tax departments around the country, whose insights give us a unique take on the state of the US economy. Instead of looking at total personal income receipts, which include non-wage income, we track withheld taxes since they are levied on wages and bonuses, not capital gains and the like.

We do our own macro-economic research, and, unlike many other research-providers, do not manage money: we are beholden to no one but our subscribers and ourselves.

Philippa Dunne and Douglas Henwood were John Liscio’s closest associates and, since John’s untimely death in 2000, are honored to be carrying on the research techniques he pioneered when he established The Liscio Report on the international scene in 1992.

We are known for our meticulous dissection of federal data, for pointing out technical anomalies glossed over in the mainstream press (and related debunking of market rumors), and for ferreting out market-moving shifts in the economic landscape as they develop, getting the news out to our readers before the mainstream media catches on. We also grill the highly informed senior tax officials who participate in our surveys on their favored indicators, like diesel-fuel consumption, and collect their thoughts on emerging economic trends for our subscribers. They are watching the cash flow into the state coffers so they know what they are talking about.

Look for us in Barron’s, the FT, Reuters, and the Wall Street Journal; on Bloomberg, Reuters, and CNBC; and around the web.

Philippa Dunne
Philippa Dunne was hired by John Liscio in 1996 to work on special projects, and in 1997 began full-time work as the “research department,” specifically to develop her own set of states for our monthly surveys of state tax collections and to handle the burgeoning demands of TLR on the Economy.

She graduated from University of California and has a Master’s Degree from Wesleyan University. A musician by training, in previous lives she has performed widely and taught at a number of colleges and private institutions, done research and writing for the Office of Ray and Charles Eames in California and for the American Museum of Natural History in New York, and, true to her name, worked in stables exercising steeplechasers. She lives in New York with her husband.

Douglas Henwood
While working toward his PhD in English at the University of Virginia, Doug returned to his earlier interest, the dismal science, and by the mid-1980s was regularly writing about the world economy with special attention to finance and the labor markets.

He caught the attention of John Liscio and as the “resident wise man” he crunched stats and analyzed them for John from the report’s very first days. A widely recognized economic analyst, Doug has given talks at venues all over the U.S. and abroad as well. He’s also frequently quoted or cited in the media, including newspapers ranging from The Asia Times to the New York Times to the Times of London.


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Our Track Record

We’re the ones who track monthly withholding and sales tax receipts in the 25 largest states, and are known for our spot-on interpretation of what changes in revenue flows mean for our overall economy, and by traders around the world for the accurate forecasts of the BLS’s Employment Report, and the Census’s Advance Retail Sales print, both built on the results of our surveys. During  months when calendar effects influence revenue flows, like bonus season, we fine-tune our analysis to take such effects into account. But, as you can see below, even before we do that, state Withheld tax Diffusion Index has a .82 correlation with non-farm payrolls (both in year-over-year quarterly averages to smooth out noise). When our surveys start to change course, we are able to warn our readers that a change is coming before it surfaces in the official data:


Our Sales Tax Diffusion Index (SDI) a .80 correlation with the Advance Retail Sales print:

The markets work on shocks to expectations: when our tax contacts are shocked, that’s something you need to know. And please note that both our WDI and our SDI picked up the current weakening trend early in the year.

Please read through our Sample Reports directly below to see our work, as it was published, for yourself. We’ve been warning our readers for decades about crucial trends before they were visible: the 2001 profit squeeze, hidden weakness in the labor market that led to several big downward benchmark revisions, research in 2006 showing that the then-current housing boom was an anomaly in US history, so preparing our readers for what was to come. We also flagged a sudden reversal in remittances to Mexico that signaled the housing collapse, and both recent collapses in oil prices. We pushed back on the idea that we were heading back into recession in 2012/13 because state-level withheld and sales receipts, while not great, were holding up. And, although it has been pretty monotonous, we began warning in 2009 that we were in for a decade-long slog through a swamp with chronic slow growth and inflation too low for the FOMC. For the last few years the FOMC, unfortunately, has been the only game in town, and we’ve providing steady, insightful analysis of what we knew they would do: work to overcome the stagnation that follows a financial crisis until there are real signs that wages are picking up, as they may, finally, be doing these days.

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Sample Reports

Our work speaks for itself, and here we’ve selected reports that cover a broad range of what we do. If you’d like to see how we did during stretches not included here, please contact us.

Fact Checking with Demographics

A sober look at job projections darkens STEM’s outlook.

Five uneasy pieces: history may not tell us what it once did

Challenges include interpreting familiar data in an undoubtedly new context.

Jobs look solid: spiders spin an uneven tale

Arachnophobes beware.
Download TLR 01 08 15

Wages strive to close the gaps

A look at real wages around the country since the trough. It helps, a lot, if you are sitting on valuable mineral resources. Maps included.
Download TLR 12 10 14

Fiscal drag; oil boost

Our oil call, and what it likely means.
Download TLR 09 14 14

Work martyrs who can’t buy a house

Surprise: Housing boom/bust mostly about price. Afraid to take a vacation?
Download TLR 09 14 14

Big freeze in sales tax receipts

“Really, when you look at this graph, you have to wonder how retail sales recovered from their recessionary depths.”< Download TLR 03 12 14

Sustainable improvement?

State revenue officials are encouraged by recent receipts. Is confusion giving way to, maybe, some confidence?
Download TLR 12 11 13

Waiting for the Jackson Hole research deluge

In 2012 the Jackson Hole meetings produced a slew of critical papers (see below). This year, researchers at the SF Fed cite weakness in wages of recent college grads, the “marginal workers” of the highly skilled, as evidence of continuing weakness in the job market.
Download TLR 07 31 13

Incomes (& Fed policies?) take a beating

Research from former Fed officials and related academics sounds the alarm: QE can’t make a dent in the unemployment rate, and the FOMC has fewer options than members suggest.
Download TLR 09 13 12

The debtless recovery

Deleveraging continues, household balance sheets remain ragged, and corporate America: flush, tightfisted, eyes overseas.
Download TLR 09 20 11

Crawling back to 2006, or 2004?

Animal dis-spirits: there isn’t a lot of new business formation out there. And please ignore those rumors about a big upward benchmark revision to payrolls. (Rumor? +500K; Reality? -378K.)
Download TLR 04 12 11

Sales tax receipts miss lowered forecasts, again

Things do not look good in revenue world. MEW goes negative, and Prof. Curtin, who heads up the UMich Consumer Confidence series, outlines the 5 degrees of discontent. Can’t we just keep it at 4?
Download TLR 01 13 09

The news will keep getting worse

Carmen Reinhart and Kenneth Rogoff’s now classic, then new, study of international financial crises was not yet on the national radar screen, but it was on ours. We lay out their findings, and what we believed lay ahead for us, unfortunately we were right on the money.
Download TLR010809

Tough love, Swedish style

News that the Fed is studying how Nordic countries handled their early-1990s banking crises cheered the markets, but the enthusiastic bidders must not have been paying attention to the details. Sweden took a successful and painful stand, which included raising overnight rates 500% to defend the krona. Can you imagine the Feds raising rates a relatively modest 10% in the current environment?
Download TLR 04 03 08

Can you say, “Housing, gas, and food prices?”

Or, stagflation hits the hotdog.
Download TLR 03 12 08

Dimmed lights and a giant Grinch

A holiday season only Dr. Seuss’s infamous character could love: electricity prices keeping Christmas lights in storage, mall vacancies at 11-year highs, phones disconnected over unpaid bills, our recession index moving into full alarm mode, and a giant inflatable Grinch replacing the usual riot of Christmas lights in rural New York.
Download TLR 01 14 08

Can exports save us from a recession?

We’ve been hearing a lot of talk about how we can export our way out of this mess, but a look at historical trends doesn’t support that view. State revenue estimators “take the ax” to their forecasts. Oh, and, December saw a nasty spike in our recession index.
Download TLR 04 03 08

The Italians are coming…to buy Prada!

This is one mighty unusual weak-dollar environment. It’s all about tourists coming here to flex their currencies, which means our manufacturers aren’t getting much of a boost, and, perhaps oddest of all, challenged Upstate New York is once again BJ’s strongest sales region. But all that shopping isn’t enough to offset domestic weakness; use this link to read what out tax contacts are saying about sagging sales tax receipts.
Download TLR 12 12 07

Could it be a recession?

Famous last words! With sales tax receipts plunging, we outline evidence that we are at the edge of a recession.< Download TLR 10 11 07

Sittin’ on the dock:

We wrote this report cataloguing the burgeoning costs of our fraying infrastructure, including both the crumbling rocks and gravel and the rusting research edge, on the Fourth of July as a patriotic lea. Click here to find out why research in “emergent phenomena” is crucial to our maintaining a leading role in the world scientific community.
Download TLR 07 05 07

Edgy debtors and a history book

Although Yale Economist Robert Schiller didn’t utter the words “irrational exuberance,” they did summarize his message to the then Fed chair on the day before the latter coined the phrase. We wrote this report to make sure our readers knew what Dr. Schiller had dug up recently on real estate prices: There’s no real uptrend in housing prices over the last century, and the then-current boom was a real anomaly.
Download TLR 05 10 06

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SAMPLE RESEARCH: Bulletins, Domestic Regions, and Special Reports

We offer two subscriptions: Sightlines Bulletin itself, which is released monthly and includes information gleaned from our ongoing discussions with revenue officials around the country, analysis of macro-economic data, indexes of special fuel usage and what the trend portends for future growth, and a round-up of financial and real indicators. The subscription includes our Special Reports, released whenever we come across information between reports that we believe you need to know immediately. Additionally, we are developing forward looking regional and state indexes, available as a separate subscription. You can read through some samples of the three categories, Bulletins, Domestic Regions, and Special Reports using the links below.



After a shaky start, 2015 ended on a positive note, with payrolls up, unemployment down, and the long-term unemployed coming back into the labor force. Our updated spider, or radar, graphs spin an uneven, but encouraging tale; and the OECD recently ranked the U.S. pretty low on the financial vulnerability scale. Even so, we continue to face risks, both at homr and from abroad.

To read full report, click here: SL 1-15


While the job market looked strong in May, consumption seems to be slowing. Worrywarts to the contrary, the labor market is far from tight, but some other indicators are looking a bit late cycle-ish. The Federal Open Market Committee lowered their projections for 2014 in their June meeting, a smart move given the most recent downward revision to Q1 GDP. Diesel fuel sales rose 5.1% over the year for the November-January period, an encouraging signal for future job growth.

read more


Diesel Fuel Update
The three BEA regions showing the strongest growth in diesel fuel usage, the Northeast, the Midwest, and the Southwest, were the same as in September. Weakness in the Great Lakes might be thought to reflect a slowdown in auto production, but on closer look, much of the sag comes from Wisconsin. The Plains are the laggard, but they did go positive.

read more


How Much Has the Job Market Recovered?
We just updated our Jobs Spider, a graph taken from the work of James Bullard, President of the St. Louis Fed, who collected about a dozen takes on the health of the job market. The leading indicators are still a bit ahead of reality, but the distance has narrowed in recent months.

read more

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Consumer Purchasing Power Rising Faster than Wages

By Anthony Mirhaydari

The big question from last week’s pre-holiday jobs report, given the drop in the unemployment rate and a further drop in the labor participation rate, is why a tightening workforce isn’t resulting in long-delayed wage gains.

Thursday’s numbers were largely as expected: Nonfarm payrolls expanded by 223,000 (vs. 230,000 expected) as the unemployment rate dropped to 5.3 percent (down from 5.5 percent) to the lowest level in seven years. The numbers from the last two months were downwardly revised by 60,000.

[Co-]editor Philippa Dunne of research publication The Liscio Report notes that while the result may seem disappointing at first blush, it’s in line with the average of the past three months. And it still represented a bounceback from a weak first quarter, although we haven’t returned to the strength seen at the end of 2014.

Yet average hourly earnings were unchanged in June from May, a slowdown from the 0.2 percent growth seen in the April and May and the 0.3 percent jump in March.

Aneta Markowska, chief U.S. economist at Societe Generale, notes that the lack of wage growth is at odds with the healthy pickup in the Employment Cost Index (ECI) in the first quarter, shown below, which indicates businesses are paying more for their workers. She wonders if this raises questions about the veracity of the ECI’s numbers given that it hasn’t yet been confirmed by other data sources.


The lack of wage inflation has led many to assume the Federal Reserve could possibly wait until December or even early 2016 before starting its rate hike campaign. As a reminder, the Fed hasn’t raised rates since 2006 and has maintained a 0 percent interest rate policy since 2008.

But this could be a mistake. At the current trajectory, the unemployment rate is on track to hit 5 percent in December. Fed Chair Janet Yellen has also said that wage growth is not a prerequisite for a lift-off in rates.

Also, while headline wages may have stalled, so-called “real wages” that take into account inflation are actually rising at a very impressive clip, according to Ed Yardeni of Yardeni Research. This supports the strong rebound in retail sales we’ve seen lately, which rose 1.2 percent in May. Personal consumption expenditures jumped 0.9 percent that month; real PCE rose at a 2.1 percent seasonally adjusted annual rate.

Want more? Consider that total real personal consumption expenditures per household rose to a record $96,550 in March on a seasonally adjusted annual basis — up 1.6 percent over last year and up 6.5 percent from the previous cyclical peak hit in August 2007.


What’s fueling this? Certainly, asset price gains from the rise in stock prices and the bounce back in home values are playing a big role. Yet so are wages: Real disposable personal income rose 3.5 percent in May with real wages and salaries up 4.8 percent. Real average hourly earnings for all workers in the private sector rose 2.1 percent year-over-year to a record-high $22.89 last month.

Given that the job market accelerated into the second quarter, these aternative measures of take home pay should continue their surge to the upside in the months to come.

As long as inflation remains tepid, real wages can keep growing even if nominal wages — the number on your paycheck — doesn’t move very much. The personal consumption price deflator (PCED) rose at just a 0.2 percent year-over-year rate in May. The core rate, which excludes food and energy, rose 1.2 percent.

Factors that are driving the slowdown in inflation include a drop in durable goods prices, with prices of used cars, furniture and bedding leading the way.

The takeaway is that while the headlines are saying wage growth remains stagnant, this dismisses the “real” gains to purchasing power consumers are enjoying thanks, in part, to cheaper second-hand goods.

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