Sunday, January 24, 2016

Sunday Night Futures

by Bill McBride on 1/24/2016 08:51:00 PM

From James Hamilton at Econbrowser: Can lower oil prices cause a recession?. An excerpt:

There are thus some reasons why a decrease in oil prices would be a boost to the U.S. economy and other reasons why it could even be a drag. A number of studies have looked at the effects of oil price decreases and concluded that these have little or no net positive effect on U.S. real GDP growth; see for example this survey. The price of oil fell from $30/barrel in November 1985 to $12 by July of 1986. U.S. real GDP continued growing throughout, logging a 2.9% increase overall for 1986, neither significantly faster nor slower than normal.

But 1986 was a bad time for Texas and the other oil-producing states. Here’s a graph from some analysis I did with Michael Owyang of the Federal Reserve Bank of St. Louis. We estimated for each state’s employment growth a recession-dating algorithm like the one that Econbrowser updates each quarter for the overall U.S. economy (by the way, a new update will be posted this Friday). In the gif [at Econbrowser] you can watch the energy-producing states and their neighbors develop their own regional recession during the mid-1980’s even while national U.S. employment and GDP continued to grow.
[R]egardless of whether it’s oil prices that are moving stock prices or the other way around, folks in Texas and North Dakota have plenty of reason to be concerned.
Schedule for Week of January 24, 2016

• At 10:30 AM, the Dallas Fed Manufacturing Survey for January.

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are down 3 and DOW futures are down 33 (fair value).

Oil prices were up sharply over the last week with WTI futures at $32.24 per barrel and Brent at $32.33 per barrel.  A year ago, WTI was at $46, and Brent was at $47 - so prices are down about 30% year-over-year.

Here is a graph from for nationwide gasoline prices. Nationally prices are at $1.82 per gallon (down about $0.20 per gallon from a year ago).