Driven by frozen inventory, repeat home prices continue to increase, but downward pressure on shelter inflation remains

 – by New Deal democrat

Our last piece of important housing information for the month was released this morning; namely repeat home sale prices as measured by the FHFA and Case Shiller. The former increased by 0.6%, and the latter by 0.3%, continuing their increases since the beginning of this year:

On a YoY basis, the FHFA Index is up 6.1%, while the Case Shiller Index is up 3.9%:

As repeat sales, by definition these are existing home sales, and the increases in these indexes are similar (on a non-seasonally adjusted basis) to the last year’s record in the NAR data:

The story continues to be that many

Two year low in new home prices and turndown in sales show renewed pressure caused by increased mortgage rates

 – by New Deal democrat

Once again, this morning’s report on new single family home sales shows that the compete bifurcation of the new vs. existing home markets continues. Unlike existing homeowners, many of whom are shackled in place by 3% mortgages, new home builders can offer price incentives and downsize floor plans to increase sales. This morning’s report also shows once again that this data is very volatile and heavily revised.

September new home sales (blue in the graph below, left scale), which had been reported at a 12 month high of 759,000 annualized, were revised downward by -40,000 to 719,000. And October sales were

Why the Index of Leading Indicators failed

 – by New Deal democrat

I have a post by the above title up at Seeking Alpha.

The Index of Leading Indicators has persistently declined for 22 months, and is off by a level that in the past has been consistent with already ongoing, deep recessions. And yet the economy has continued to improve.

Clearly there has been a misfire. The above article explains in more detail why I believe this has happened, for one long-term reason, and one unique to the post-pandemic environment.

As usual, clicking over and reading should be rewarding for you and a little bit for me.

New Deal Democrats Weekly Indicators for November 13 – 17, Angry Bear, New Deal democrat

Initial jobless claims confirm benign employment conditions

 – by New Deal democrat

Initial claims declined -14,000 to 209,000 last week, and the four week moving average declined -750 to 220,000. With the usual one week lag, continuing claims declined -22,000 to 1.840 million:

On a YoY basis, both weekly claims and their four week average were up only 4.6%. Continuing claims, which have been much more elevated YoY, were up 24.0%:

This is well below the 10% cautionary level.

There has been some commentary that continuing claims mean a recession is imminent or may even be underway. I am discounting that because initial claims have always signaled first, and also because continuing claims have been in the range of 25%-30% higher YoY

Existing homeowners with 3% mortgages remain frozen in place, as sales fall to a new 28 year low

 – by New Deal democrat

October marked yet another month in the fully bifurcated housing market, in which most existing homeowners are frozen in place by their 3% mortgages, and buyers have turned to new homes (and in particular condos and apartments) instead.

Existing home sales fell yet again, by 16,000 annualized, to 3.79 million, 45% down from their 2021 peak, and the lowest level since 1995:

This is of a piece with the collapse in purchase mortgage applications, which have also declined to 1995 levels, per Edward Yardeni:

With inventory so restricted, prices have held firm, and have even increased. In October, the median price

On Thanksgiving, enjoying the bounty of foods native to the New World

 – by New Deal democrat

Happy Thanksgiving to all readers of this old-fashioned blog.

One little fact I did not know until this year is that, with just a couple of exceptions, all of the foods that we traditionally put on the table for Thanksgiving dinner all are native to the New World:, including:

Turkey

Cranberries

Squash

Cornbread

Potatoes

Green beans

Pecans

Pumpkins

So, part of the theme of Thanksgiving is enjoying the cornucopia of plenty that the New World provided to us.

Only bread stuffing and pie shells made from wheat are not native.

Some people might also make use of cashews, peanuts, tomatoes, peppers, and/or chili peppers, all

Why has residential building construction remained so strong, despite the recessionary-level decline in permits and starts?

 – by New Deal democrat

As an initial note, there is no economic news today. For obvious reasons there won’t be on Thursday or Friday either. So, don’t be surprised if I take a couple of days off as well.

In the meantime, I’ve been continuing to ponder why housing under construction remains close to its all-time, 50+ year record set one year ago, even though for the past year permits have been down 25% or more from their high set nearly two years ago, and so is the three-month average of actual housing starts:

I did some rooting around over the weekend to see if I could find the reason for this seeming levitation,

Weekly Indicators for November 13 – 17 at Seeking Alpha

 – by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

After a brief pause, the coincident indicators have continued to improve. There are now very few that are not positive.

The spotlight therefore remains on the short leading indicators, as to which manufacturing has not declined enough to tip the economy into recession, and construction has not declined meaningfully yet at all (something I anticipate addressing further on Monday).

As usual, clicking over and reading will bring you up to the virtual moment as to the economy, and reward me a little bit for my efforts.

New Deal democrats Weekly Indicators for November 6 – 10, Angry Bear, New Deal democrat

Housing construction continues to support subdued expansion

 – by New Deal democrat

Yesterday I wrote of how manufacturing has faded somewhat as a leading indicator, at least in the sense that it takes a steeper downturn than it used to in order to forecast a wider downturn in the economy.

Which makes the other big goods-producing sector, construction, even more important. And residential housing is the single most component of that. 

And even further, because of supply-chain issues during the pandemic, housing units under construction has been the most important metric of all, because they represent the actual economic activity of construction. As I wrote two months ago:

“total housing units under construction, although the most

October industrial and manufacturing production tank – but it’s all about the UAW strike

 – by New Deal democrat

Industrial production historically has been the King of Coincident Indicators, turning up and down coincident with the onset and end of recessions in the past. But there are signs that has changed in the past 20+ years since China was admitted to normal trade relationships with the US. Because manufacturing is a much smaller share of domestic economic activity, and employment, downturns which before 2000 would always have meant recession probably do not do so now.

Which is a particularly apt introduction this month, because in October industrial production declined -0.6%, and there was a -0.2% revision to September. Manufacturing

Initial claims rise, but remain below the caution threshold

 – by New Deal democrat

Initial jobless claims rose 13,000 to 231,000 in the past week. The 4 week moving average increased 7,750 to 220,250. With a one week lag, continued claims rose 32,000 to 1.865 million:

I had speculated that the big decline in claims through September may have been affected by some unresolved post-pandemic seasonality, and the last several weeks have indicated that speculation may indeed have had merit. Which makes the YoY comparisons more important.

On the more important YoY basis for forecasting, initial claims were up 9.5%, the four week average up 7.0%, and continued claims up 28.3%:

Initial claims remain below the 10% increase YoY level that

If you have been following NDd, you will note one of the biggest issues with the economy is supply chain. Most notably shortages of raw material, components, and finished products. Similar occurred in 2008 and my own belief is this is a recurrence of similar. I believe much of this could have been prevented. Beyongd that remark, I will let NDd tell you how falling costs impacts the economy.

Real retail sales consistent with continued slow growth, aided by a continuing decline in commodity prices

 – by New Deal democrat

Before I discuss today’s main course of real retail sales, let’s briefly ingest the ours d’oauvres of PPI and a brief update on chained CPI.

The economy has greatly benefitted from the un-kinking of the pandemic supply

It appears inflation is coming down this year and probably into next year also. Maybe Biden will not have to twist the Fed’s arm to get them to lower the Fed rate.

Except for fictitious shelter and motor vehicle insurance and repairs, consumer inflation is thoroughly contained

 – by New Deal democrat

The October CPI report confirmed yet again what I have been saying for months: except for fictitious shelter, both headline and core inflation are well within what should be the Fed’s comfort zone.

Headline inflation (blue in the first two graphs below) was unchanged in October (thank you, renewed decline in gas prices!) and was up 3.2% YoY. Core inflation less food and energy (red) increased 0.2%, and was up 4.0% YoY.

Shelter, which is

Why Biden is in trouble about the economy

 – by New Deal democrat 

A big focus of political discourse in the past two weeks has been about why Biden seems to be polling so poorly against Trump, and in particular has not consolidated support among younger voters.

Since the economy is always a very important component of voter intentions, unless there is a major superseding event like 9/11, economic performance has historically been a good predictor of Presidential election outcomes.

So let’s take a detailed look.

First of all, remember that the election is between two people, Biden and Trump. And the economy was actually doing pretty good during Trump’s mal-administration before COVID. Here’s what real hourly wages and the unemployment

I have been sharing New Deal democrats Weekly Indicators with an Edward Jones consultant who handles our funds. He was pretty impressed with the detail New Deal democrat gives here and at Seeking Alpha. He has his own account so he can go every week (I am limited). If have some time, you should explore NDd’s stats.

Weekly Indicators for November 6 – 10 at Seeking Alpha

 – by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

How long can the short-term outlook stay positive in the face of some of the worst financial background conditions in the past 40 years? Apparently, as long as commodity prices keep declining.

Clicking over and reading will bring you up to the virtual moment as to the condition of the economy and

Consumption leads (longer term) unemployment, too

 – by New Deal democrat

Once again there is no new economic data, so let me follow up some more on the issue of longer term unemployment.

Earlier this week I pointed out that just as initial claims lead continuing claims, so does short term unemployment (under 5 weeks) lead long term unemployment (15 weeks and over). Think of unemployment as a pipeline, and the intake flows before the main body of the pipeline.

Yesterday I followed up by noting that just as initial claims lead the unemployment rate, so continuing claims lead long term unemployment.

Because one of my persistent themes over the years has been that consumption leads employment, let me take a little time and briefly examine

Scenes from the October jobs report: soft landing vs. continued slow deceleration

 – by New Deal democrat



First, an editorial note: economic news is light this week, so don’t be surprised if I play hooky for a day or two.

That being said, let’s take a look at the most important trends, as I see them, from Friday’s employment report. The Big Question is, are we having a proverbial “soft landing?” Or is that just an illusory phase on the path of deceleration to something worse? Let’s take a look.

Jobs Growth

The 2023 record on job creation is susceptible to both interpretations. Since, alas, one shortcoming of FRED is that it does not have a setting for 3 month moving averages, I am outsourcing this graph to Harvard economist

Weekly Indicators for October 30 – November 3 at Seeking Alpha

 – by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

One way I keep track of the producer side of the economy is via the long leading indicator of corporate profits and the short leading indicator of the stock market. As is implied, the former has a long history of leading the latter. Except that the stock market turned down in 2022 before profits did and rose at the end of 2022 before profits did.

Now the stock market has been in a 3+ month downtrend after failing to make a new high, while corporate profits have risen sharply in Q3 to new all-time highs.

Meanwhile the last real estate indicator has rolled over.

But consumer spending has been

New Deal democrat’s October Jobs report is again featured at Angry Bear. You can also pick-up the September 2023 Jobs Report from the link at the end of this report. This is the most complete monthly review on Unemployment Rate, average hourly earnings (minus management), which way job growth or decline is going, and a summary. NDd also writes at Seeking Alpha and does a Weekly Indicator Report there also. He has been writing at Angry Bear for a few years and has also dabbled in other topics posts such as the history behind the Fifteenth Amendment.

Hope you find this monthly report interesting. Comments are welcome.

October jobs report: more deceleration, in the weakest report (except for June’s) since March 2021

 – by New Deal democrat

Initial claims: were the recent lows just unresolved seasonality after all?

 – by New Deal democrat

Initial jobless claims rose 5,000 to a 7 week high of 217,000 this week. The 4 week moving average rose 2,000 to 210,000 from its 9 month low of 208,000 last week. With the usual one week delay, continuing claims continued their recent sharp ascent, up 35,000 to 1.818 million. Aside from 2 weeks in April, this is the highest level of continuing claims since December 2021:

The YoY% changes, which are more important for forecasting, were higher by 6.4% for weekly claims, and 3.8% for the most important 4 week average. Continuing claims were higher by 27.0%:

Since initial claims are not higher by over 10% YoY, they indicate continued

September JOLTS report shows continued deceleration in all trends – except layoffs

 – by New Deal democrat

All of the major metrics in last month’s JOLTS report for August improved, most slightly, but the decelerating trend continued. In this morning’s report for September, that trend continued, as most of the metrics improved or declined very slightly, but the trends remained intact.

Here are openings (blue), hires (red), and voluntary quits (gold), all normed to 100 just before the pandemic:

As can be easily seen, for all intents and purposes both hiring and quitting are back to where they were in normal times before the pandemic, while openings – which are always suspect because many companies keep fictitious openings posted as a matter

The new month of data begins: residential construction positive, job openings negative, and manufacturing mixed

 – by New Deal democrat

As usual, the monthly data started out with reports on the two most important production sectors of the economy, namely manufacturing (for October) and construction (for September). Additionally, the JOLTS jobs survey for September was released.

I am going to do more detailed reports on both JOLTS and construction later today or tomorrow. For now, let me just make a couple of drive-by comments.

The most important segment of the JOLTS report right now are job openings, because they will tell us how much upward pressure remains in the jobs market due to employers being unable to fill vacant positions. And

House resale price indexes confirm upturn in prices for existing homes, but do not negate combined price declines

 – by New Deal democrat

We got more price information about the very important housing market this morning.

Through September, the median price of home resales as measured by Case Shiller increased 0.9% monthly. For the FHFA Index they rose 0.6%. Both measures are up about 46% since just before the pandemic hit (note: FRED hasn’t updated the FHFA index yet):

On a YoY basis, prices have rebounded in both indexes, 5.6% for the FHFA and 2.6% in the Case Shiller National index. Since historically the FHFA has tended to slightly lead the Case Shiller index, unsurprisingly the upturn in the former index is now showing up in the

Coronavirus update through October 30, 2023

 – by New Deal democrat

No important economic news today, but it’s been a while since I took a look at the COVID-19 data, and there is an interesting trend, so let’s have at it!

But first, some bad news. The most reliable data for infections for the past year has been from Biobot, which tracked wastewater nationwide. Well, they lost their contract, which was won by a Google subsidiary called Verily. And Verily has all but rendered the data useless. In particular, they do not track any aggregate levels of COVID particles in wastewater regionally or nationwide. The sole option they provide is to show individual plants’ data. So there is no way to know what any regional or national trend is.

In

Weekly Indicators for October 23 – 27 at Seeking Alpha

 – by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

With half of reports in, Q3 profits for corporations have made a new all-time high. Meanwhile the stock market has made repeated new 3 month lows. The former is a long leading indicator, the latter a short leading indicator, so we shall see which one proves more accurate.

And in case you haven’t noticed at the pump, gas prices have declined to new 6 month lows as well, so maybe that consumer spending spree can continue for awhile.

As usual, clicking over and reading will bring you up to the virtual moment as to the economy, and reward me a tiny little bit for my efforts.

New Deal democrats Weekly Indicators

Spending soars, income stagnates, savings sink like the Titanic

 – by New Deal democrat

Real life intruded yesterday, so I didn’t put up any information about the Q3 GDP report. I’ll write in detail next week, but in the meantime there were 4 basic highlights:

1. Obviously it was an excellent report overall.

2. The long leading metric of real residential fixed spending also rose slightly, although as a share of real GDP it fell, so technically it was a slight negative.

3. Proprietors’ income also rose, both nominally and after adjusted for inflation, so it was positive.

4. The only other fly in the ointment was the real personal income declined for the Quarter, as to which we got more information in this morning’s report on personal

Jobless claims continue near expansion lows

 – by New Deal democrat

Jobless claims continued very low last week, justifying taking down the “yellow caution flag” that had been in place for a number of months.

Specifically, weekly new claims rose 10,000 to 210,000 – still a very low historical number. The more important four week moving average increased 1,250 to 207,500. Contrarily with a one-week lag, continuing claims rose sharply, up 63,000 to 1.790 million, their highest level since spring, and before that, the highest level in 18 months:

On the YoY basis, which is more important for forecasting, initial claims were up 4.5%, the four-week average up 3.4%, and very much conversely, continuing claims up 28.7%:

Basically, there are

The bifurcation in the new vs. existing home market continues

 – by New Deal democrat

Last week we saw that sales of existing homes plummeted to a 28 year low, save for one month in 2010; but prices for the very limited number of such homes on the market rose 2.8% YoY.

This morning we saw the exact converse happen with new home sales, which rose to a 12 month high of 759,000 annualized, up 83,000 from one month ago; while prices declined $14,300 month over month to $413,800, very close to a 2 year low:

In short, the compete bifurcation of the new vs. existing home markets continues. Unlike existing homeowners, many of whom are shackled in place by 3% mortgages, new home builders can offer price incentives and downsize floor plans to

Stock prices and bond yields during disinflationary, deflationary, and reflationary periods

 – by New Deal democrat

This is an update of a post I wrote almost exactly 10 years ago. I’m doing this because of an important secular change I noticed that appears to have happened in the financial markets.

Back when I first started delving into financial markets and economy 30 years ago, I noticed that, dating all the way back to the Great Depression, the stock market appeared to perform best during periods of very low inflation, or very slight deflation, that persisted. The more inflation beyond about 3%, the worse the market performed. And in the rate case where deflation was more than -1%, the stock market performed horribly (because deflation

This is an excellent review of what has helped the economy stay stable during the pandemic and some of the issues mostly centered around demand and supply chain. Spend a few minutes here and read NDd’s reasoning.

A further examination of the state of the economic tailwind

 – by New Deal democrat

With no big economic news today, I thought I would pick up where I left off Friday, when I identified three major reasons for the economic tailwind that prevented a recession from happening in the past 12 months.

1. Commodity prices generally and gas prices specifically

I am beginning to think that all economic forecasts should come with an open caveat on the order of “subject to the trend in gas prices, which are set by a few geopolitical