DAILY UPDATE (May 12th to May 13th – Updated Schedule) April 2019 Real Average Hourly Earnings Declined for the Second Straight Month / April CPI-U Gained 0.32% in the Month, a 5-Month High 2.00% Year-to-Year, Along With Rising Gasoline Prices / April Annual PPI Construction Inflation Hit a 10-Year High of 5.40% / March 2019 Trade Deficit Widened Minimally / Narrowing First-Quarter Real Merchandise Trade Deficit Held in Place, Reflecting Declining U.S. Imports of Goods / GDP Issues Continue with Missing Full Consumer Goods Accounting / 49-Year Low in U.3 Unemployment Rate of 3.58% / Yet the Labor Force (Employed and Unemployed) Shrank for the Third Month, With Employment Stress at 7-Month Highs / Strong Payroll Gain on Top of Minimal Upside Revisions Still Reflected Low Annual Growth

• Next Posting of SHADOWSTATS CONCURRENT ANALYSES OF NEW ECONOMIC DATA: April 2019 Retail Sales (Census Bureau) and April Industrial Production (Federal Reserve), both on Wednesday, May 15th released at 8:30 and 9:15 am ET. ShadowStats analyses should post by 12:30 pm ET, usually within two-to-three hours of the headline release.

• Next SHADOWSTATS COMMENTARY and BULLET EDITION (Updated): Bullet Edition No. 9 should post May 13th, reviewing April inflation. The INFORMAL SURVEY OF U.S. ECONOMIC CONDITIONS, likely will post midweek; we still are receiving survey responses. Regular Commentary No. 984 is planned for May 25th; updated Consumer-Liquidity and Hyperinflation Watches follow. Targeted posting dates remain subject to change; actual postings are advised to Subscribers by coincident e-mail.

• LATEST ECONOMIC RELEASES. April 2019 Consumer Price Index (CPI): Annual Inflation Rebound Continued, Driven by a Continued Upswing in Gasoline Prices, Not by a Strong Economy. Real Hourly Earnings Declined for a Second Month (Bureau of Labor Statistics – BLS, May 10th). Moving in tandem with a continuing upswing in dominant gasoline prices, April 2019 unadjusted annual CPI-U inflation rose to 2.00%, from 1.86% in March 2019 and against a 28-month low of 1.52% in February 2019. [Year-to-year change in gasoline prices swung to the upside, with an annual gain of 3.13%, versus annual declines of 0.70% (-0.70%) in March 2019, 9.09% (-9.09%) in February 2019 and a 10.10% (-10.10%) trough in January 2019.] The seasonally adjusted April 2019 CPI rose by 0.32% in the month, versus gains of in 0.41% March and 0.17% in February, the first three monthly gains since October 2018. The monthly CPI-U had held “unchanged” at 0.0% November 2018 through January 2019, down by 0.01% (-0.01%) in November and December 2018 and by 0.02% (-0.02%) in January 2019.

By major CPI-U Sector, monthly Food inflation declined by 0.10% (-0.10%) in April, versus gains of 0.28% in March and 0.41% in February; Energy rose by 2.94% in the month, versus 3.47% in March and 0.44% in February; Core (net of food and energy) rose by 0.14% in April, versus 0.15% in March and 0.11% in February.

The April 2019 ShadowStats Alternate CPI (1980 Base) notched higher to 9.7% year-to-year, from 9.6% in March and 9.2% in February. The detail has been graphed on the Alternate Data tab (also accessible by clicking on the mini-graph below), with the latest numbers and an inflation calculator also available there to subscribers.

Based on the April 2019 CPI-U and last week’s payroll reporting, Real Average Hourly Earnings for all employees on private nonfarm payrolls declined for the second straight month, down by 0.1% (-0.1%) in April, having dropped by 0.3% (-0.3%) in March. Reflecting both hourly earnings and hours worked, Real Average Weekly Earnings declined by 0.4% (-0.4%) in April, having been unchanged at 0.0% in March. Such broadly remained suggestive of weakening economic activity.

(May 9) April 2019 Producer Price Index Gained 0.2% in the Month, 2.2% For the Year, Still Driven by Gasoline Prices (BLS). Aggregate Final Demand PPI (FD-PPI) rose by 0.17% in April, versus 0.60% in March, with unadjusted annual inflation effectively holding at a four-month high of 2.16%, versus 2.17% in March. The FD-PPI is dominated by “Services,” which guestimates profit margins, not prices. Accordingly, rising energy inflation (gasoline prices) tended to prop “Goods” inflation but muted “Services” inflation.

By Major Category: PPI-Goods inflation rose by 0.26% in April, versus 1.05% in March, with annual Goods inflation at 1.49% versus 1.32% in March. The month-to-month gain was dominated by a 1.77% increase in energy prices, not by surging economic activity. PPI-Services inflation rose in the month by 0.08%, muted by surging gasoline prices, down from 0.34% in March, with annual April inflation at 2.41%, versus 2.50% in March. PPI-Construction April year-to-year inflation rose to a record high (for this series as started in November 2009) of 5.40%, from 4.87% in March. The month-to-month Construction numbers never are comparable.

(May 9) March 2019 Trade Deficit Widened Minimally (Census Bureau, Bureau of Economic Analysis - BEA). Reflecting minimal revisions, the March Goods and Services Trade Deficit widened to $50.0 billion from $49.3 billion and against $51.1 billion in January. A pattern of similar minimal revisions in the Real Merchandise Trade Deficit left intact the recessionary pattern in Imports, as seen in 2008, during the Great Recession, where declining domestic consumer demand was reflected in declining real imports of goods. The Net Export account in the first-quarter GDP should see only a minimal first revision (May 30th) as a result, although the GDP still remains shy of fully accounting for the decline in consumer activity.

(May 3) April 2019 Labor Numbers: Unemployment Dropped to a 49-year low of 3.58%, Amidst Mounting Labor-Market Stress Now at a Seven-Month High; Payrolls Rose by a Strong 263,000, With Continued Soft Annual Growth, Amidst Unusually Minimal Revisions (BLS, May 3rd, see discussion and graphs in Bullet Edition No. 8). April 2019 headline U.3 Unemployment dropped to a 49-year low of 3.58% from 3.81% in March, but that continued in the context of a shrinking labor force, discussed shortly. Broader U.6 Unemployment eased to 7.26% in April from 7.34% (it includes those marginally attached to the labor force and those working part-time for economic reasons). On top of U.6, the ShadowStats Alternate Unemployment Estimate, including long-term displaced/discouraged workers not counted by the BLS, held at 21.2% for the third month. An updated graph of the unemployment measures has been posted on the Alternate Data Tab (or mini-graph below), with hard numbers also available there for subscribers.

Labor-Market Stress Increased for Third Month. Although the headline U.3 rate dropped to a new low of 3.58%, the labor force declined at the same time by 490,000 (-490,000), with declines in both the employed and unemployed counts. Accordingly, both the Participation Rate and Employment-Population Ratio dropped to seven-month lows, indicating rapidly mounting labor-market stress. The counts of distressed workers and those working part-time because they could not find full-time employment rose by 215,000 in the month. At the same time, the count of full-time employed fell by 191,000 (-191,000) in April, following a drop of 190,000 (-190,000) in March.

Monthly Payroll Jobs Jumped, While Annual Growth in Payroll Jobs Remained Soft. Monthly payroll jobs growth gained 263,000 in April (counts the number of jobs, including multiple jobs/part-time jobs for the same person), against minimal net revisions to February and March, which left March payrolls 16,000 above the prior estimate. Nonetheless, year-to-year jobs growth held at 1.76%, above the 1.69% of February and March, but otherwise the weakest since November 2018. Near-term labor market trends and conditions were reviewed in Bullet Edition No. 8.

Markets: Weaker Economic Data Should Intensify Market Expectations for Renewed FOMC Easing, Hitting the U.S. Dollar and Boosting Precious Metals Prices. The U.S. Stock Market and the U.S. Dollar face intensified/renewed heavy selling, likely in the very near future, reflective of the weakening economy that already had triggered Fed officials and the FOMC to shelve further rate hikes, at least temporarily. Beyond the initial GDP reporting and strong April Payrolls, the headline economy continues to slow. Look for the FOMC to resume some form of renewed easing, possibly Quantitative Easing, by September 2019, despite Fed protestations to the contrary. As headline economic activity weakens sharply, meaningful downtrends in the stock market and the U.S. dollar should become dominant, along with rallying precious metals prices, as flight capital (domestic and foreign) seeks higher rates and safety outside the dollar and U.S. assets.

The broad economic and financial-market outlook of Special Commentary No. 983-B remains in play, in the context of updated material in Bullet Edition No. 7 (subscription only, at present). No. 982 and earlier missives provide broad background information and are open to the public; click on the links to those missives at the bottom of the left-hand column for access (and on “Archives” for earlier missives back to 2004).

• ALTERNATE DATA TAB provides the latest ShadowStats Alternate Estimates of Inflation, GDP and the Unemployment Rate, as well as exclusive estimates of Money Supply M3 and the Financial-Weighted U.S. Dollar.