August retail sales rebound slightly, argue for continued strong jobs growth in autumn

Let’s take a look at retail sales, which are perhaps my favorite monthly economic indicator, since they tell us so much about average consumer behavior, and are also a good short leading indicator for jobs.Nominally retail sales increased 0.7% for August, after a -0.6% downward revision to -1.7% for July.  Since consumer prices rose 0.3% in August, real retail sales increased 0.4%. Although real retail sales are down -3.8% from their April peak, they are 11.5% higher than they were just before the pandemic hit:

While the recent decline from April is consistent with a slowing economy ahead, if sales stabilize here I don’t see this as a harbinger of an

Jobless claims continue in normal mid-cycle range

Last week I encouraged readers to take the very low jobless claims number with a grain of salt due to Labor Day artifacts, and see if the big reduction was maintained or reversed this week. This week did indeed reverse the pattern somewhat, but not enough to interfere with the overall declining trend.Initial claims rose 20,000 to 332,000, while the 4-week average declined 4,250 to 335,750, the latter yet another pandemic low:

Continuing claims declined 187,000 to 2,665,000, also another pandemic low (which, to reiterate, may have much to do with the expiration of emergency pandemic benefits in many States):

Here are both the 4 week average of initial claims and continuing claims from

Industrial production now exceeds pre-pandemic level

Industrial production, the King of Coincident Indicators, was reported this morning for August and was positive in a particularly significant way.

Total production increased 0.4% in August, and the manufacturing component increased 0.1%. Nothing particularly special about that; in fact the manufacturing component was a little weak compared with most recent months. Additionally, the July numbers were revised slightly (not significantly) higher and lower for each, respectively.But what is important, as shown in the graph below in which the respective values are normed to 100 as of February 2020, is that both total and manufacturing production have now exceeded their pre-pandemic levels:

A more “normal” consumer inflation reading for August belies damage to the economy going forward

Inflation, along with the expiration of the emergency pandemic payment, is one of the two big threats to this expansion. This morning August consumer inflation was the lowest in 6 months, up only 0.3% – within the range of a normal reading in normal times. Since wages increased 0.5% in August, this means that real wages increased. Let’s take a closer look.

YoY inflation is now 5.2% (blue in the graph below), but typically inflation has not been a concern unless inflation ex-gas (red) has been in excess of 3.0%. After peaking two months ago at 4.1%, it is now 3.9%:

The spike in inflation has gone on long enough at this point that I expect

Coronavirus dashboard for September 13: on the downside of the Delta wave, vaccinations make all the difference

With each passing day, it becomes increasingly likely that the peak of the Delta wave was just before Labor Day. We’ll probably get a pop in the weekly average number tomorrow, as today’s numbers replace the Labor Day holiday numbers, but unless there is a big surprise, it appears we are into the downside of the wave.

But we are still on the upside when it comes to deaths, which probably won’t peak for another week or two.Below are cases (solid line) and deaths (dotted line) for the past year:

The winter wave peaked at an average of 250,000 cases and 3,500 deaths/day. If that ratio exists for this wave, deaths will peak at

Coronavirus dashboard for September 10: was Labor Day indeed the peak of the Delta wave?

I have been saying for some time that the Delta wave would probably peak around Labor Day. It’s not certain yet, but it is looking increasingly likely to have been the case.

The Delta wave struck in both the US and Israel at almost the same time, with almost the same vaccination profiles. Here’s what cases per capita (bold lines) and deaths per capita (dotted lines) look like for each: 

Cases in both countries appear to have peaked in the last week (repeating the pattern in the Delta waves in India, the Netherlands, and the UK). Deaths have either stabilized or (more likely) are still slowly increasing.

Data in the US was affected by the Labor

July JOLTS report shows market still out of equilibrium, no additional hiring from early termination of benefits

This morning’s JOLTS report for July is particularly important, because July was the first full month after a number of GOP-controlled States terminated enhanced unemployment benefits, on the theory that they were excessive and were coddling idle workers. Thus we should be seeing a big drop in unfilled job openings, as those people were incentivized to rush out and accept new employment.

It didn’t happen.

Job openings increased roughly 750,000 to yet another new all-time record of 10.934 million (blue in the graph below). Meanwhile actual hiring *decreased* by about 250,000 (red):

Here are the month over month percentage

Jobless claims blow away the Delta wave (but beware Labor Day seasonality)

This morning’s initial jobless claims report makes it shockingly evident that the Delta wave has had no appreciable effect on at least the “firing” side of the jobs market (vs. the “hiring” side, where it might have).

Initial claims declined 35,000 to 310,000, and the 4-week average also declined 16,750 to 339,500, both yet more pandemic lows:

By way of reference, it took almost 5 years into the last expansion – until spring 2014 – for initial claims to be this low.Continuing claims declined 22,000 to 2,783,000, also another pandemic low:

In the last expansion, this number was first seen in early 2014 as well.These are, to put it bluntly, normal

The unemployment rate is not *uniquely* overestimating the “true” employment situation

Bill McBride a/k/a Calculated Risk put up an entry over the weekend positing that the employment situation is worse than the unemployment rate indicates.

He bases this on the expectation that the overall labor force was expected to grow by 100,000 a month in 2020 and this year, whereas as of last month there were a little more than 2.9 million less people employed compared with just before the pandemic. This shortfall, he calculates, amounts to an “adjusted” unemployment rate of 7.9% vs. the official 5.2%.

This type of calculation is similar to many that were floating around for almost the entire duration of the last expansion – that the employment

August jobs report: some weak points, but the underlying very good trend continues

While the NBER has declared that the recession ended in April 2020, neither the King nor Queen of Coincident Indicators, industrial production, and jobs, have recovered to their pre-pandemic levels. The former is only off by -0.2%, but the latter – which is most important to ordinary Americans – as of this morning’s report is still -3.5% below its level in February 2020.

While this morning’s report came in well short of expectations, with the big positive revision to last month’s blockbuster report, which I’ll get into more detail about below, the 6 month average of monthly gains is still over 600,000.

Here’s my synopsis of the report:

HEADLINES:

Producer sector remains on fire, while two most important indicators of consumer sector falter

As has been the pattern for the last several months, August data started out with a strong reading on manufacturing, while July ended with weak data on housing construction. As a side note, the latest read on motor vehicle sales also slid south. 

Both the overall and new orders components of the ISM manufacturing index remained very strong, with the former increasing slightly m/m from 59.5 to 59.9 and the latter by 1.8 from 64.9 to 66.7, both far above the breakeven point of 50.0:

As I have said virtually all this year, the simplest way to read this is that the manufacturing sector remains on fire.The story remains different with this

Jobless claims show continuing improvement, now well within normal expansion range

Way back at the beginning of spring, I set a goal of initial claims being 400,000 or less by Labor Day as a marker for a good COVID recovery – which I was reminded of because the aforesaid holiday is this weekend. Well, we blew through that a while ago, and at this point, all of the jobless claims markers are well within the range of a normal expansion.

This week initial jobless claims declined 14,000 to 340,000. The 4 week average of claims declined by 11,750 to 355,000. Both set new pandemic lows:

The same is true for continuing claims, which declined 160,000 to another new pandemic low of 2,748,000:

From the long term perspective, below is

Coronavirus dashboard: the Delta wave starts to recede in the South, and migrates North

Ultimately, that I have to continue to post this material is depressing. At least 80% of all US adults and most teenagers should have been fully vaccinated by now, with the threat of mass outbreaks, even from Delta, retreating into the past.So let me begin with the best graphic representation I have seen so far of where the resistance to vaccination is coming from (via Morning Consult):

Note that for all the attention the opposition of the Trumpist GOP has received, an even *greater* share (39%) of the Young Invincibles, age 18-34, are either uncertain or unwilling, and 62% have been or have plans to get vaccinated. Additionally, right behind the GOPers,

A fundamentals-based look at the consumer indicates the expansion is in good shape for now

I was going to update the Coronavirus dashboard today, but since half of the States no longer bother to report over the weekend, Monday is basically useless. There may be a few interesting things happening … but let’s wait until tomorrow.

In the meantime, I see where Bill McBride posted a graph of spending on gas as a percent of total consumer spending, which brought to mind one of my “alternative” methods for forecasting (at least in the very near term) a recession.Start with oil shocks. As the graph below shows, all three of the non-pandemic recessions in the past 30 years were immediately preceded by a large jump in oil prices compared with income:

July personal income and spending return to normalcy. Normalcy is good

How well personal income and spending held up throughout the pandemic is one of the best things about the government response. That has continued to be the case as of this morning’s report for July.

Real personal income (blue) increased 0.7%, and is 4.2% above where it was in February 2020. Real personal spending (red) decreased -0.1%, but is still 2.7% above its immediate pre-pandemic level:

Further, the “cushion” in personal savings due to the emergency pandemic programs continues, as the savings rate remains significantly above where it was before the pandemic (the below graph subtracts 7.0%, which was the lowest level in the immediate few years before 2020,

Initial and continuing jobless claims: the good news continues

The good news for both initial and continued claims continued this week.

Initial jobless claims rose 4,000 to 353,000 from last week’s pandemic low. The 4 week average of claims declined by 11,500 to 366,500, another new pandemic low:

Significant progress in the decline of initial claims had stalled for the last 2 months, but that has ended.The story is the same for continuing claims, which declined 3,000 to another new pandemic low of 2,862,000 (with last week’s preliminary estimate of 2820,000 being revised substantially higher):

This continues this series’ recent declining trend that began on May 29. As I have noted before, this may reflect the termination of

Coronavirus dashboard for August 25: is the Delta wave close to peaking?

I’ve been writing for about a month that, if the US outbreak followed the cycle of India and the UK, in which the Delta wave hit its peak about 6 to 8 weeks after onset, in the US the peak would be about Labor Day. As the graph below (which is in log scale better to show accelerating and decelerating trends) shows, it looks like that is about to happen:

For the US as a whole, cases over the last 7 days increased by about 10%. One week prior, on August 17, it was about 20%. On August 10 it was 30%. On August 3 it was 50%. On July 27% it was almost 70%. So if the pattern continues, it looks like the Delta wave is about 1 week from peaking – I.e., right about and maybe a

July new home sales down nearly 30% from peak, as prices perhaps start to plateau

Unlike yesterday’s existing home sales, today’s report on new home sales is much more economically significant. The reason I prefer single-family housing permits as a measure is that the sales data is extremely volatile, and heavily revised over the next several months. But with those caveats, let’s take a look.New home sales (blue in the graph below) increased 1% for the month, but are still down 28.7% since their January peak:

In the graph, I also show single-family permits (red) and deflated residential construction spending (gold). Not unusually, new home sales surged earlier than either of the other two metrics, peaking on a 3-month average basis last

A note on existing home sales

Existing home sales are the least noteworthy of the housing data, because of the very limited economic activity moving into or out of an existing home provokes compared with the construction, furnishing, and landscaping of a new home. But it’s worth a brief look, so let’s note this month’s report.

Existing home sales (blue in the graph below) are only up 1.7% compared with one year ago, as opposed to new single-family home sales (red), which are off over 30%! :

Prices for all existing homes (blue) and single-family existing homes (violet) are up almost 20% – which is still less than the 23% YoY increase recorded one month ago. Note that the median price for new single family homes (red) is also

July industrial production (good news) and retail sales (bad news still being pretty good news)

 – by New Deal democrat

This morning brought the July report for the King of Coincident Indicators, industrial production, as well as one of my favorite consumer side indicators, retail sales. Let’s take a look at each.

Industrial sales increased strongly in July, up 0.9% overall, and the manufacturing component up 1.4%. Manufacturing production is now higher than it was just before the pandemic recession, and total production is only -0.2% lower, as shown in the below graph in which each are normed to 100 as of February 2020:

The only coincident indicator still below its pre-pandemic level is jobs, which is off -3.7% compared with February

Initial claims: simply, good news

The bottom line for both initial and continued claims this week is simple: unadulterated, absolute good news.

Initial jobless claims declined 29,000 to 348,000, 20,000 below their previous pandemic low. The 4 week average of claims declined by 19,000 to 377,750, 6,750 below its previous pandemic low of 384,500:

Significant progress in the decline of initial claims had stalled for the last 2 months, but as of this week, that has ended.

The story is the same for continuing claims, which declined 79,000 to another new pandemic low of 2,820,000:

This continues this series’ recent declining trend that began on May 29. As I have noted before, this may reflect the termination of special pandemic

July housing permits and starts: yellow flag for economy in 2022

Last month I noted that, from here on, the comparisons with 2020 in housing would become much more challenging. And so they have.

While permits (gold in the graph below) did increase this month, their declining trend remains intact. Starts (blue), and more importantly, single-family permits (red, right scale) – the least volatile measure of all – both decreased again, as they have almost relentlessly since the beginning of this year:

Viewed YoY, all three are only 2.5%-6.0% above last July:

Here is a graph I have run many times, the inverted YoY change in interest rates (blue) vs. the YoY% change in single-family permits (red/10 for scale):

Note that in

Initial claims continue rangebound, while continuing claims continue slow decline, by New Deal Democrat

Initial jobless claims declined 12,000 this week to 375,000, still 7,000 above their best pandemic levels of 368,000 set on June 26 and July 10. The 4 week average of claims increased by 1,750 to 396,250, 11,750 above its pandemic low of 384,500 set on July 10:

Significant progress in the decline of initial claims remains stalled, as it has for the last 2 months.The story once again is quite different for continuing claims, which declined 114,000 to another new pandemic low of 2,866,000:

This series, which had also been near a stall, now looks to have begun a slowly declining trend on May 29. This may reflect the termination of

Coronavirus dashboard for August 16: some (relatively) “good” news, some bad news

Recently I’ve speculated in a few places that Delta may be acting as a backfire-type firebreak against Lamdba, which has been getting a lot of press as potentially evading vaccines.

Confirmation that this may in fact be the case comes from Dr. Eric Topol who writes:

The Lambda variant is going out like a lamb. (from the hard to find pandemic good news list) https://outbreak.info/situation-reports?pango=C.37… It can’t compete with Delta.

and here is the graph (C.37 is Lambda):

Delta appears to be so infectious that it is preventing Lambda from getting a foothold anywhere beyond the west coast of South America.

Elsewhere in the (relatively) “good”

Here is my inflation worry by New Deal democrat

I want to follow up on a comment I made yesterday in connection with Wednesday’s consumer price report.

It is certainly true that *inflation* is likely to be transitory. The 5.3% YoY inflation we’ve seen in June and July may certainly pass in the next few months and reduce to a more somnolent number under 3%.

Hoorah! Inflation was transitory!

But what if the price increases “stick?” In other words, what if the absolute price increases in houses, cars and trucks, and gas don’t recede? Then I think we have a problem.

To show you what I mean in one easy (I hope) graph, below are wages and personal income (red shades), house and construction materials prices (blue shades), and new and used

July consumer inflation: the spike subsides somewhat, but we are close to the limit of “transitory”

For the last two months, my theme has been that if the spike in inflation only lasted two or three months, it was not a big deal, but if the trend were to continue longer, it would begin to impact consumer spending, and it will get the Fed’s attention.

In that regard, the “good” news is that in July consumer inflation was “only” 0.5%. The bad news is that for the last 5 months alone, consumer prices have risen 3.5%. Further, while inflation was only confined to a few sectors, those sectors were houses and cars – the two most important purchases made by most consumers – and the gas with which to power those cars, the most visible of all

Coronavirus dashboard for August 11: evidence that the Delta wave may be peaking in the earliest hit States

My framework of analyzing the economy via leading, coincident, and lagging indicators continues to come in handy at looking at the course of the pandemic.

At the beginning of June, I flagged that the number of cases had stopped declining among 5 of the least vaccinated States. By the middle of June, I wrote that Delta was going to be a real challenge for those States. More pointedly, on June 23, I wrote that the Delta wave was beginning in those States, including Missouri, Arkansas, Nevada, Oklahoma, and Utah. Sure enough, as the days went by, more and more States showed increasing cases as Delta took hold. By the end of June, I was

Scenes from the July jobs report

[Note: I haven’t put up a Coronavirus dashboard in almost a week. I’ll try to get around to that later today or tomorrow. It isn’t *all* bad news.]

Last Friday’s jobs report for July was probably the most uniformly positive report I have seen since I started writing about them going on 15 years ago. Let’s take a look at a few of the most salient items.First of all, unemployment (blue in the graph below) at 5.4% and underemployment (red) at 9.2% are about where they were in the middle of each of the last 3 expansions:

Not a boom, but not bad at all either. This is real progress, and a real positive (note graph is normed at the 0 level equal to the current month in both numbers).

On the other hand, when

June JOLTS report: at last, new hires (slightly) outpace record job openings

This morning’s (Aug. 9) JOLTS report for May was the best we have seen since the immediate rebound from the pandemic lockdowns.  There was yet another record level continued all of the unfilled job openings, yet another new record low in layoffs and discharges, an enhanced number of people quitting their jobs, and finally – for the first time this year – a huge number of new hires, setting a new m/m record high outside of the immediate lockdown rebound last year.

Here are the month over month percentage changes for each of those metrics:

As noted above, headline job openings (blue), which have been making new all-time records for the month, were finally

Initial jobless claims continue in range, while continuing claims sharply decline

Initial jobless claims declined another 14,000 this week to 385,000, still 17,000 above their best pandemic levels of 368,000 set on June 26 and July 10. The 4 week average of claims declined by 250 to 394,000, also 9,500 above its pandemic low set on July 11:

Significant progress in the decline of initial claims remains stalled, as it has for the last 2 months.The story is quite different for continuing claims, which declined 366,000 to a new pandemic low of 2,930,000:

This series, which had also been near a stall, now looks to have begun a new slow declining trend on May 29, and to have accelerated this week. This may reflect the termination of