Bank of Japan Goes Negative, "Strong Dollar" Surges

In a surprise move, the Bank of Japan announced last night that it would employ negative interest rate policy for the first time in its history.

The formula for this is rather complex. It's based on interest for bank reserves held with the central bank, and it seems that only new deposits will be charged the negative rate.
We're not talking about a straightforward single rate on overnight lending, as is the case for say, the federal funds rate in the US, or the overnight rate in Canada.

Naturally, the dollar has surged compared to the yen, and the dollar continues to look like a safe haven by comparison. But only by comparison, of course, since central banks, partly due to collaboration, and partly due to internal politics, are engaged in a race to the bottom.

Japan has long been leading the race to the bottom, however, since its overnight rate (the Mutan rate) has been under one percent since about 1996:

It's been pretty close to zero most of the time since 1999. (Since I can't find a good source for historical targets, this graph is not of target rates. Its of observed rates, which nevertheless reflect the target rates.)

The observed rate over the past five years has been around 0.06% to 0.09%.  (Not to be confused with 0.6% to 0.9%).

The target rate has been at 0.1% since 2009, and thus less than half of the US target rate (0.25) during that time. The sheer length of time that the rate has remained near zero is what's especially notable, however. (Graph from this source.)

Following the gospel that 2% price inflation will solve one's economic problems, the BOJ has been desperate to get price inflation up above zero, where it has usually been for the past decade, except for a surge in late 2014 and early 2015 as Abenomics intensified. 

The Japanese economy has continued to weaken, and apparently things have been bad enough to cause the BOJ to follow in the footsteps of the European Central Bank, and do "whatever it takes." 

Bankruptcy cases hit nine-year low in Colorado in December 2015

According to the US Bankruptcy court in Colorado, Bankruptcy filings in Colorado fell to a nine-year low in December 2015,  the lowest level recorded since January of 2007. During December 2015 there were 844 bankruptcy filings in Colorado.  During January 2007, there were 807.

Bankruptcies in Colorado have been generally declining since 2010:

The year-over-year declines have ranged from negative 10 percent to negative 20 percent in most months. Over the past year, changes have remained within this range suggesting little change to the current trend at the moment. during December 2015, bankruptcy filings were down 23.8 percent from December 2014.

It is also notable that December 2015 showed the lowest December total in ten years, coming in below December 2006's total of 874:

With such low interest rates in recent years, and thus, debt so very cheap, it has been easier for both businesses and consumers to stay ahead on their debt service and avoid bankruptcy. debt so very cheap.  We see t his reflected here, and, of course, continued improvement in the job market has helped keep bankruptcies down as well. 

How important is Cattle Ranching in the West?

As I am smart enough to not express any opinion here about the current protests being staged by cattle ranchers in Oregon, I thought it might nevertheless be helpful, or at least interesting, to look at how much of the cattle industry is located in Western states (including Colorado) and how central it is to the local economies. 

After a little examination, it seems that beef cattle are really a quite small part of the Colorado economy, and the Rocky Mountain economy overall. In Colorado, for example, agriculture overall "comprises only 1 percent of production and less than 2 percent of jobs." Of that one percent, ranching comprises around 60 percent. This means that cattle ranching is well under one percent of Colorado's economy. Ranching could completely disappear from Colorado and our economy would certainly not collapse. Among Western states, Montana, by far, has the largest agriculture sector at 5.7 percent of GDP, according to the Bureau of Economic Analysis. All other Western states come in around 2 percent or less. Contrary to the mythology, the economy of the American West is centered on the cities. 

Also notable, however, is the fact that, in spite of the stories we're told of how "the West" is the home of the cowboy, there are relatively few beef cattle West of Kansas.

If we include states like Texas, Nebraska, and Kansas in our definition of "the West," though, yes, there are a lot of beef cattle in the West. But, if we limit our view of the West to the West Coast and the Rocky Mountain region, things are rather different.

This distinction is also important due to the debate over the use of federal lands. Only the states west of Kansas have large amounts of federal land:

This map, provided by cattlerange.com, gives us a sense of the where the cows are in the United States:

This map, however, somewhat misses the mark for what we want. It includes all cattle and calves. We want to know about beef cattle, which excludes dairy cows that do not forage the way beef cows do. If we take the data from the 2012 USDA Census and look only at beef cattle, here are the states ranked by totals:

Among the top states, only Montana makes it into the top ten, and that is largely a function of Montana's immense size — it's the fourth largest state by area. 

But, the cattle ranching heartland is most certainly not in the states with large amounts of federal land. The industry is centered around Texas, Nebraska, and Oklahoma. In fact, those three states alone contain 26 percent of all beef cows in the US. Texas alone contains 15 percent of all beef cattle. 

If we look at the number of beef cows per square mile, we see that the West is even less important. Here, I've looked at total beef cows per state compared to total land area: 

In this case, Montana comes in at 19th, well behind numerous prairie states, and even some southern states. In fact, if you want to see a cowboy rounding up cows, you'd be better off visiting Kentucky, Missouri or Iowa, than Colorado or Oregon. 

The vast majority of beef cattle production (i.e., 80 percent) in the United States occurs nowhere near federal grazing lands, and even the beef production that does occur in those states is not necessarily dependent on federal grazing. 

Now, if we think about it, this distribution should not surprise us at all. Cows are not well suited to the high-altitude and arid lands of the West, and it makes more sense to raise beef in areas where water and pasture are more readily available. 

Colorado among states with largest population growth and in-migration from other states

Last week, the Census Bureau released new numbers on state population growth. If we map the year-over-year population growth rates, it looks like this:

Here, we note that population growth is weak in the Northeast and much of the Midwest, while it is stronger in the South and the non-California West.

Driven by a flight to oil jobs in North Dakota, the growth in ND topped the list with 2.2 percent growth, or 16,800 new residents, which is a lot for a state with fewer than a million people. Colorado gained 100,900 new residents to add to its 5.3 million people in 2014. Meanwhile, New Mexico, Mississippi, Maine, Connecticut, Vermont, Illinois, and West Virginia all lost residents. New York was 16th from the bottom and added only 46,900 residents to its population of more than 19 million.

The Wall Street Journal examined these trends in light of future likely changes to the electoral college. These trends will help states like Texas, Florida, and the Western US gain in influence in national politics.

However, when it comes to looking at whether or not people are moving from other states to these places, this map can be misleading.

In-Migration from Foreign Countries 

Many states with some of the largest population gains over the past year have been gaining population from foreign areas. Among people who were already American residents last year, the first map actually overstates the extent to which people have migrated from other states. Indeed, California, New York, Texas, Massachusetts, and Florida are all being propped up in population growth via foreign in-migration.  If we check the Census Bureau's new data from September 2015 on in-migration from foreign areas, the map looks quite different:

In terms of new residents from foreign countries, Massachusetts tops the list with nearly one in one hundred Massachusetts residents having lived in a foreign country just one year ago. Washington State is close behind, and we can note that Texas, California, Florida, and Virginia growth rates are all fairly dependent on in-migration from outside the US.

Will new immigrants from foreign countries stay put in their initial state of residence? This map suggests that, at least for first generation immigrants, they will. There are many reasons for this, including the fact that the foreign born often like to stay near communities that include other foreign born residents. By the second generation, however, the incentives to stay near immigrant enclaves gives way to incentives to migrate to states with freer economies and more economic opportunities.

State-to-State Migration

If we look just at in-migration from other states (again, from September 2015), we find that California, New York, Texas, New Jersey, Pennsylvania, Illinois, and the Great Lakes area in general have attracted relatively few migrants from other states.

The most attractive areas have been the more rural areas of New England, the Carolinas, and the West, not including California or Texas. If it weren't for foreign migration, much of the North would have flat or negative growth rates:

In some areas, much of this has been driven by a boom in oil jobs, and workers have relocated to states that offer the relatively-high wages that oil-extraction jobs offer.

In North Dakota, for example, more than 5.3 percent of the population lived in a different state a year earlier. Alaska was similar with a rate of 5.2 percent coming from out of state over the past year. Idaho, Hawaii, Nevada, Wyoming, and Colorado all also showed more than 4 percent of their populations coming from other states over the past year. In California and New York, however, only 1.3 percent of residents had recently arrived from out of state. In Texas, 2.0 percent had recently arrived.

This also follows a longer trend in which Americans have been moving from the old population core of the Midwest and Northwest, and been moving South and West.

In terms of homicide, Colorado among the safest places in North America

As I explained here, I think it's useless to speak of indicators like poverty or homicide in terms of a huge place like the US or Mexico. Regional differences are so large, and so many demographic variables are different form place to place, that it's useless and even dishonest to make such comparisons.

So, I prefer to look at things at the state level, or preferably at the metropolitan-area level, if the data is available.

People often speak of the US homicide rate as being unusually high, but that really relies on a couple of mistakes in examining the data. First, those who say such things usually make the arbitrary choice of excluding any country in the analysis except the so-called "developed countries" by which they really mean Western Europe. To do this, of course, excludes a huge portion of humanity, and there's no reason why a country not currently at war, like Brazil or Russia, for example, should be excluded from the analysis. (Both have much higher homicide rates than "the US," by the way) The other mistake is to compare a country the size of Finland (with 5 millions people in essentially one metropolitan area) to the United States with 320 millions people and dozens of large metro areas.

So, if we drill down a bit more, we see quickly that high homicide rates are really a regional issue in the United States, and not a nationwide issue. Let's look at both the US and Canada together:

We quickly find that the Northern US is quite comparable to Canada, which has a reputation for being remarkably safe. . And we also see that Colorado is in the second-to-lowest —low being good— category for homicide rates.

According to 2014 FBI homicide data, Colorado has a rate of 2.8 per 100,000. That puts it about equal with Alberta at 2.52 per 100,000 and Wyoming at 2.7 per 100,000. The lowest homicide rates in the nation was in New Hampshire with a rate of 0.9, and the highest was in Louisiana at 10.3. In Canada, there was a much smaller spread with the lowest rate found in Quebec at 0.86, and the highest was in the far north where homicide rates among the small populations there exceeded 10 per 100,000 in Nunavut and 8 per 100,000 in the Yukon.

The chart shows a more exact comparison among the states and provinces (Canadian provinces in red):

Moreover, we might note that Colorado is also among the safest places in the Western Hemisphere since homicide rates in the Caribbean and South America tend to be much higher than even the American South.

Personal Recollections of the Underground Railroad by Mark Campbell McMaken

I found this written account by Mark Campbell McMaken. Mark McMaken was the younger brother of my great-great-great grandfather Joseph Hamilton McMaken (born 1787). This branch of the McMaken family lived primarily in Southern Ohio and Eastern Indiana. Some of them were active in the anti-slavery movement, including Mark McMaken. I found the following document on the web site of the Ohio Historical Society. The documents have since been taken down, but I preserved screen shots. In this document, written by Mark McMaken himself, recounts some episodes in which he and other members of the community worked to free slaves who had crossed the river from Kentucky. (Warning: the "n word" is used in this 1895 document. In spite of his egalitarian sentiments, McMaken was not PC by modern standards.)

Note: The place names appear to all still be current except "Port Union" which is now better known as West Chester Township.  The area used to be known as Union Township, but before that, was known as "McMaken's Bridge." 

Fed Slightly Raises Target Fed Funds Rate After Seven Years

The Fed today announced that it will increase the target Federal Funds rate from 0.00-0.25 percent up to 0.25-0.5 percent.

The last time the target rate exceeded 0.25 percent was in November of 2008 when the higher bound of the target rate was 1 percent. In December of 2008, the Fed lowered the target rate to 0.00-0.25 and it has stayed there ever since. 

Back in September, when we thought that the Fed might raise rates, The Economist noted that "The last time the Federal Reserve raised its benchmark interest rate, there was no one to tweet about it," because Twitter did not yet exist. Moreover, Zero Hedge ran a somewhat amusing article reminding us of what the world was like the last time the target rate was above 0.25. Remember Nelly Furtado? George W. Bush was still president back then, too. 

The sheer length of the Fed's flatlining has made it seem that a move to a 0.5 target rate is an immense change. Here's what the huge change looks like: 

The fact that this is being labeled such a large change underscores just how fragile the current economic "recovery" is. Ever since 2009, the Fed has been telling us that its monetary easing will help the economy regain its footing, and then momentum will take over from there. We're still waiting.

Median incomes are falling, workforce participation is down, and housing is becoming more unaffordable. But, the fed may have figured out that if the economy's going to be lackluster anyway, the Fed might as well try to regain some of its credibility by letting rates inch up ever so slightly.

It could be worse, though.  We could be living under the European Central Bank which is doubling down on negative interest rates.  Nevertheless, Europe's future may soon be our future, since, as many Fed critics are predicting, the increased in the Fed Funds rate is really just a temporary measure. We may see the economy stall even more in the face of higher rates, at which point the Fed will quickly use the opportunity to return rates to zero or even negative.

At this point anything could happen. We live in such an abnormal economic world right now, it's hard to guess much of anything.  After all, it wasn't all that long ago that the Federal Funds Rate was between four and six percent.

On the other hand, I'm an old man of 38 years, so I can remember the ancient world of the 1990s, albeit I was a teenager at the time.  Some people working at the Fed, though, don't know, in practice, what it even means to raise rates.

Homicide Rates in Mexico, by Region

As I noted here, and here, I'm not a big fan of speaking about demographics or trends at the national level when we're talking about a large country with large regional differences. It's nonsensical to  speak about "the United States" as if the 318 million people in the US lived under similar conditions and were affected by identical demographic trends.

The same is true of Mexico, which has nearly 120 million people and displays very large regional differences, especially from north to south. The south is densely populated and tends to be poorer. The north is more sparsely populated and tends to be richer. Culturally, there are big differences. Chiapas, for example is mostly populated by people descended from Indians, while Chihuahua has a slight majority of  "whites" descended largely from migrants of German, Spanish, and French origins (among others).

So, given that Mexico has a reputation for a remarkably high murder rate right now, I thought we might look more closely at this indicator. I mentioned this metric a bit in this post, but thanks to this data from the OECD, we can list by region the homicide rate in each Mexican state (from 2013 data).

Mapped by state, this is what it looks like:

Here's a map to help you identify the name of each state:

The biggest factor in the homicide rate in Mexico right now is the War on Drugs. It's a huge factor, so it's not a coincidence that the states that border the USA are some of the worst, in terms of homicide. Other high-murder states, such as Guerrero and Sinaloa are also notable for being connected to the drug trade. Gone for now are the days of seemingly endless crowds of happy tourists in Acapulco in Guerrero state.

Most Mexicans, however, live in states where the homicide rate is relatively low. Moreover, places where you're likely to vacation, such as Baja California Sur (i.e., Cabo), Vercruz, Jalisco (i.e., Guadalajara), and the Yucatan region are relatively low-crime areas.  Indeed, most of southern Mexico has a homicide rate of around 10 or less per 100,000. If that seems like a lot, remember that the US homicide rate in the 70s and 80s was around 9.5 per 100,000, and it was over 10 in many US states at the time. Even as late as 1995, the US overall homicide rate was over 8 per 100,000. Somehow, we lived through it. This isn't to say that homicide is not a serious problem in Mexico. It's just important to have perspective.

Where people live in Mexico:

And just as a final note, it's interesting to see that drug murders often come along with higher GDP per capita. Are the two related? In some ways yes, because the same factors behind the international trade that makes northern Mexico wealthier are also important factors to international drug runners: 

Unemployment Rates in Colorado Metro Areas Keep Falling

Through October, the overall trend in unemployment rates for Colorado metros remain downward.

For October 2015, the unemployment rate for each metro area in Colorado (according to the Colorado Department of Labor and Employment) was:

Boulder: 2.7%
Colorado Spr:3.9%
Denver: 3.1%
Fort Collins: 2.8%
Grand Junction:
Greeley: 3.2%
Pueblo:4.6%

This numbers are remarkable low, and I discourage comparisons with unemployment rates in the current cycle to unemployment rates of past cycles. Declines in work force participation are a significant factor in determining the unemployment rate. Nevertheless, these rates are quite helpful; in comparing geographical areas.

Historically, the best job markets have been in Boulder, Ft. Collins and Denver. Greeley has recently joined that group thanks to oil jobs:

Unemployment, as expected, is a bit higher in the lower part of the state. Pueblo rather consistently has the highest unemployment rate among Colorado metros, but all areas have seen big drops since 2010.

Compared nationally, Colorado enjoys a very low unemployment rate, as can be seen in this data from the US Bureau of Labor Statistics:

Nationwide for October 2015, the unemployment rate was 4.8 percent, compared to 3.3 percent for Colorado. Colorado's unemployment rate situation has increasingly improved relative to the nation overall over the past year. In other words, the job market in Colorado is getting better faster than in the US overall. This likely has implications for the overall demand for real estate here.

All data used in this article is not seasonally adjusted.

Apartment Vacancy Rate Rises to Five Percent in Metro Denver

According to the Multifamily Vacancy survey from the AAMD, the vacancy rate for the third quarter in metro Denver was 5 percent. That's up from 3.9 percent during the third quarter of 2014. And it's also up from 4.5 percent during the second quarter of this year.

It's unlikely that this is a seasonal softening, as the third quarter tends to be one of the tightest quarters of the year in terms of rental housing. We can expect further softening during the fourth and first quarters coming up.

Five percent is what the report's original author, Gordon Von Stroh, used to call "the equilibirum rate," since it's the rate at which you wouldn't say that the market is either tight or soft. This is a change from most quarters in the last two years, though. One would certainly say that a vacancy rate of 3.5 percent is indeed a tight market, as was clearly the case last year. There does appear to be real softening in the market right now, though:

Note that the third quarter's rate of 5 percent was the highest rate recorded in six quarters. 

I like to compare the vacancy rate to the unemployment rate as well, since there has historically been a connection between the two. Naturally, a hot job market tends to lead to a tight rental market since more people can afford to go out and found a new rental household without the need for roommates. Thus, more households are created and more units demanded. We can see the two curves move together in most cases. 

 Thanks to sustained population increases in the metro Denver area over the past decade, the rental market tightened after 2010 even in the face of a very lackluster job market. As the unemployment rate declined, the vacancy rate moved quickly toward some of the lowest rates ever recorded.

The metro Denver vacancy rate rarely falls below 4 percent. Whether or not the current tight market can be sustained remains to be seen, however. As we'll see in other data, median household income growth in Denver has not been robust in recent years, and this will tend to put a damper on multifamily demand as people take on roommates or share quarters with other families. 

Metro Denver's Inflation-Adjusted Rents Hit An All-time high This Year

New third-quarter average rent data came out for metro Denver last month. The average rent hit a new all-time high during the third quarter of 2015. During the third quarter, the average rent in metro Denver, according to the Apartment Association of Metro Denver's vacancy survey, was $1,291. That's up from the third-quarter 2014 average rent of $1,145:

Year-over-year, the third quarter saw one of the largest growth rates ever recorded. During the third Q of 2015, the YOY change was 12.7 percent. That's down slightly from the second quarter's all-time highest growth rate of 13.2 percent:

Although this graph only goes back to 1988, we'd still find that recent YOY growth is the highest ever, even if we go back to the earliest data recorded by this survey (which was in 1982). We can safely say that we're now experiencing the highest levels of rent growth seen in thirty years. 

But what if we adjust for inflation? Is the rent really at an all time high? The answer is yes.  In this graph, I've adjusted the average rent data so that everything is in constant 2015 dollars: 

When we adjust for inflation, we find that real rents were fairly high even by today's standard during 2000 and 2001. Back in the 4th quarter of 2000, real rents had peaked at $1,085. They would not reach that level again until the 4th Q of 2013. Since then, rents have been regularly reaching new all-time highs. 

Also note that rents were going down in real terms between 2001 and 2009. Those were the days when, in real terms, your rent actually went down when you renewed your lease. For now, renters are facing some of the biggest rent growth ever, both in nominal terms and in real terms. 

This data is for multifamily rentals only. "Multifamily" means structures with more than four units. 

It's Not Only a Supply Issue: Oil Price Falls to 35 Dollars per Barrel

According to the LA Times, the US crude slumped to $35 per barrel this week, "the lowest price since early 2009."

Up through last week, the West Texas Intermediate Crude price had fallen to 40 dollars per barrel, putting it close to the sorts of prices we saw during the dark days of the last recession. If this week's trends keep up, we'll be headed back to ten-year lows in oil prices:

Source: US Energy Information Administration

A year ago, the oil price was more than 30 dollars per barrel higher, and came in around 70 dollars, although by that point, the price had already tumbled from a price of 105 dollars that had been reached during mid-2014.

The 2014 prices were not as high as they seemed, given the effects of price inflation. If we make a  mild adjustment based on the official CPI data, we find that 2014's peak levels had really only been matching the prices we saw during the early 80s. Those prices are indeed near historical highs, but the decline since then has not taken us down to historically cheap gas in real terms (in 2015 dollars):

Source: US energy Information Administration and Bureau of Labor Statistics
Even with today's relatively cheap gas, we're still looking at real prices that are above the good ol' days of the 1990s.

Nevertheless, prices are no longer what they need to be to sustain much of the shale oil industry. As Retuers reported yesterday:

Drained by a 17-month crude rout, some U.S. shale oil companies are merely hanging on for life as oil prices lurch further away from levels that allow them to profitably drill new wells and bring in enough cash to keep them in business. 

The slump has created dozens of oil and gas "zombies," a term lawyers and restructuring advisers use to describe companies that have just enough money to pay interest on mountains of debt, but not enough to drill enough new wells to replace older ones that are drying out.

Meanwhile, CNBC reports that the energy sector became the biggest "job cutter of 2015." It was only 18 months ago that we were still hearing about how oil jobs — and especially shale oil jobs — were going to save us from any serious downturn in jobs.

Moreover, much of the nation's economic growth was coming from a handful of oil-rich states, including Texas, Oklahoma, and Colorado, among other places. It's not a coincidence that the BEA reports the highest GDP growth in 2014 in California, Texas, Oklahoma, North Dakota, and a few other Western States.

Those areas may now be in trouble, and national GDP will suffer the more oil rigs go dark. Texas has been the salvation of the nation's overall jobs-gains totals in recent years, as Texas's size and oil-based wealth has made the national numbers look much better than they would have without Texas. But the statisticians at the BEA and BLS may not be able to rely on Texas much longer. The Arkansas Democrat-Gazette reports:

Unemployment in Texas may surpass the national rate in the next year for the first time since 2006, according to Prestige Economics, JPMorgan Chase and ING Bank. Texas is already experiencing a "rapid deceleration" in job growth to just a third of what it was last year following a slump in oil prices, said the Wood Mackenzie consultancy group.

Perhaps in an attempt to put a silver lining on the matter, many continue to cling to the belief that the collapse in oil prices is driven almost entirely by excess supply. In other words, we're being told that there's still plenty of good hearty demand out there, it's just that we extracted too much oil.

If it's just a problem of too much oil supply, the thinking goes, then there's not all that much to worry about because people will take all the money they saved on gasoline or fuel and spend it somewhere else right away.

However, The Wall Street Journal admitted yesterday that this doesn't seem to be happening. The subtitle reads: "Experts expected the drop in gasoline and oil prices would jolt spending by U.S. consumers and businesses. It hasn’t turned out that way."
It hasn't worked out that way because demand is much weaker than the "experts" are willing to admit. As I noted here earlier today, median income and wages are lackluster at best, and there's little reason to believe that consumers are just itching at the chance to spend away any money they might save at the gas pump.

Like the owners of oil rigs, consumers have plenty of debt to deal with. Or they may be realizing that their incomes aren't going to go up as much as they hoped. Or they may just be uncomfortable enough about the future that they're saving a little more than usual.

In other words, some individual households may be doing the right thing. By saving and cutting back on spending, they're imposing a temporary "recession" and temporary drop in their standard of living on themselves at the household level to make up for some past malinvestments. This would especially be true of people employed in energy-related fields or other bubble industries. They made a mistake by investing their time, labor, and energy into an industry that was really based on malinvestments stemming from what David Stockman calls the Fed-money-fueled Wall Street Casino. When enough households do this, the overall economy will go into recession which — if left alone — would repair the economy.  The Fed, however, will do everything in its power to keep that from happening. If the energy sector will no longer do the trick, the Fed will find some other sector to flood with money, just as the housing bubble replaced the dot-com bubble beginning in 2002.

Yes, all things being equal, falling oil prices would free up funds for other types of spending. But when there are larger economic headwinds at work, a little freed-up cash in one place may not be enough to overcome the global malaise. The WSJ article gives a perfect example of the complexity of markets right now:

Beef ‘O’ Brady’s, a restaurant chain based in Tampa, Fla., saw sales rise late last year thanks to cheaper gas, said Chief Executive Chris Elliott. But the momentum waned, especially in the factory-heavy Midwest. “The restaurant industry seems to be slowing,” he said, though lower prices for beef and other ingredients have “helped firm up” profit margins.

It may be too little too late.

As Mark Thornton noted a year ago, large drops in the oil price tend to accompany economic downturns. They don't cause the downturns of course, but there's good reason to be extra cautious before declaring that a dropping oil price is going to be followed by a boon to new consumer spending. It rarely happens that way. In fact, a big drop in the oil price is often followed by some very bad economic news. 

Image source.