Blue World Economic Index® Report for July 2018

Brief Explanation

Blue World Economic Index®

Scale: -2 to +2

Release Date:  Usually the Last or First Business Day of Each Month

Release Site:

Management Value: Critical

Date: Tuesday, August 31, 2018



It’s that time of the cycle for the BWEI®. There are some major changes due to the quarterly trend analyses which always causes some turbulence, and this time was no exception and, in fact, perhaps the poster child..!  There were a couple of downgrades, but they were the overwhelming exception. We are very cautious about trend changes as they are weighted more heavily than the daily reports, so we tend to let them go a bit to make sure they have legs and that we are not hallucinating a direction.

The economy is just flat out humming, and that is reflected in the composite figures. As a matter of fact, there is only one of the eight Major Categories that remains in negative territory (Inflation), but even it made a Northerly move.

Tariffs have been a concern, but in the closing days of the month it seems they have begun to bear fruit. Please recall what Matt said on The Noon Business Hour last month when asked about the tariff issue. Tariffs can be used in two general ways. One is as actual tax policy and the other is for leverage in ongoing negotiations. In the case of this administration it is decidedly the latter, and despite all the tough rhetoric, the EU and China have taken steps in the direction of the negotiating table.

One report that needs special mention this month is GDP, which released last Friday the 27th. It came in at 4.1% which is huge anyway, but the really big news is that Inventories was a 1% drag on the total. Remember, GDP is the “stuff” that the economy “produced.” It doesn’t mean it got “sold.” We always check the Inventory component to determine the impact it had on the total. It can yield a skewed picture of the economy if GDP is big in part because inventories are up by a material amount in the face of weak sales. It means the “stuff” building up will have to be sold at discounts which hurts inflation, and retailers won’t be moving to replace the “stuff” or hiring more people to sell the “stuff.” In turn, manufacturers won’t be buying “stuff” to make “stuff” or hiring people to assemble “stuff”…so that hurts everything from employment to materials, and on and on throughout the economic web. That is decidedly not the case here. The drop in inventories is corroborated by other consumer spending and retail data from the past month, including today’s Personal Income and Outlays and Employment Cost Index reports.  Additionally, because the Inventories Report from the Census Bureau is a two-month lag, it points to a need to scramble to replenish the “stuff” because it is selling faster than it can be produced, which is a great outlook for the economy starting from employment and traveling all the way through. 

The Numbers

As mentioned above, seven of eight major categories are in the black, and that’s a first. The Composite Index shattered all prior records rising to .43 with advances in Employment, General Measures, Inflation, Manufacturing, Retail and Services. Consumer Measures and Real Estate both retreated a little bit, but the only one of any concern is Real Estate as there may actually be some trouble brewing there as six of nine reports posted negative scores. We’ll have to keep an eye on it.

Watch for the Blue World jobs report on Friday and then Matt goes on WBBM AM780 and 105.9FM at 12:05p Central in Chicago to break it all down live. If you can’t tune in you can get the Podcast here later in the day.

Have a great month and we’ll see you back here for the next BWEI® report at the end of August.



Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release sites should be cross referenced.  The index assignments represent the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on the index.

©Blue World Asset Managers, LTD Tuesday, July 31, 2018

Blue World Jobs Report Analysis July 7, 2018

Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site:

Market Impact: Usually Very High

Management Value: Critical

Date: July 6, 2018

Brain Surgery is not Rocket Science to a Brain Surgeon©



It’s another massive report that gets turbo-charged with 37k in upward revisions to the last two months! Let’s get straight to the numbers.

We see 213k on the marquee and 202k came from the Private Sector, which keeps that average at 211k with half of 2018 in the books. The Participation Rate double-ticked to 62.9, the Total Employed jumped another 100k, the Labor Force ballooned by 601k, and the Diffusion Indexes for both Manufacturing and the Private Sector astonishingly remain in the mid-60’s!

If there is any downside at all it’s that wage inflation remains elusive, but that is also a side effect of a point about workers coming back to the work force that we’ll detail below.

The labor market is three dimensional and cannot be adequately analyzed by a two-dimensional headline of two or three stats. For example, there will be those that point to the Unemployment Rate ticking up to 4% with the number of Unemployed growing by half a million. They are either disingenuous or simply misinformed.

It is a crucial yet little understood method of the unemployment report that not all of those without jobs are counted as “unemployed.” In order to be unemployed for reporting purposes one must also be a member of the Labor Force. One is only a member of the Labor Force IF they have actively looked for employment recently. In other words, we are only “unemployed” if we want work, are actively looking for work, and cannot find work. Table A-15 of the release, Alternative Measures of Labor Underutilization, tracks those who are considered Not in the Labor Force, marginally attached and discouraged from even seeking a job. When we hear talk of the “true” unemployed rate, that’s what they mean. This is why Blue World puts such heavy emphasis on the dynamic relationship of changes between the size of the Labor Force, those Not in the Labor Force, Total Employed, Total Unemployed, and the Participation Rate. Today is a fine example. As identified above, the number of “Unemployed” swelled by 500k. However, nearly that exact number came off the Not in Labor Force total. These are potential workers who have left the sidelines, looked for work and simply not found it yet! This is a VERY GOOD sign, not a negative as some have portrayed it already this morning.

Blue World Economic Index® won’t post a report this month as we are in the middle of doing quarterly trend analysis and there are a great many changes. We can tell you the index rose at the highest rate since we began publishing and smashed the previous record high water mark. We’ll post the full update at the end of July and we’ll have plenty to say about tariff and trade wars then.

We hope the 4th was safe and wonderful. Enjoy the rest of your summer!

Thanks for reading, and please stay tuned…

Release Site:

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, LTD. who does not warrant or guarantee predictions based on its analysis.


©Blue World Asset Managers, LTD Friday, July 06, 2018