The spike in inflation is not a concern – yet

By now you’ve probably already read a fair amount of commentary on yesterday’s consumer inflation report for May. I’m going to cut to the chase as to my take right off the bat:

1. The primary driver of this inflationary spike is supply bottlenecks rather than increased demand.2. The inflationary spike has wiped out any “real” wage gains during the past 10 months.3. The inflationary spike is not a concern – yet. If this continues about 3 more months, it becomes a real concern and I would expect the Fed to act at that point.To the graphs …

1. Here’s a look at retail sales (blue) and personal consumption expenditures (gold) since the beginning of 2020:

Figure 1

Just as with last year’s

Coronavirus dashboard for June 9: the high correlation between partisan lean, vaccination rates, and new cases

No big economic news today, so I wanted to follow up on Monday’s post, in which I described the correlation between the number of new COVID cases and States in which there were high vaccination rates vs. ones with low rates. The both sad and maddening point is, vaccination rates correlate strongly with partisan lean, and so do the present level of COVID cases.

First, here is a graph of vaccination rates by partisan lean (via the NYT):

This is pretty compelling: States with strong Democratic leans almost all have higher vaccination rates than almost all States with GOP leans.

Now let’s break out new infection levels.

Coronavirus dashboard for June 7: a Tale of Two Pandemics: the Vaccinated States vs. the Idiotic States

The drive towards “herd immunity” via vaccination has slowed to a crawl. The slowing is almost entirely driven by Trump-voting States in the South and West. Those Idiotic States are continuing to suffer from an ongoing pandemic, while in the Biden-voting States of the Northeast, Midwest, and California, the pandemic has all but ended.Here are the details.

Daily vaccinations have declined precipitously in the past 7 weeks, and are now only about 1 million per day:

If the US were to stay at 1 million per day, it would take the rest of the year to get everyone vaccinated. And unfortunately, there is no reason to believe that the rate

May jobs report: almost all positive, but not good enough

HEADLINES:

559,000 jobs added: 492,000 private sector plus 67,000 government. The alternate, and more volatile measure in the household report indicated a gain of 444,000 jobs, which factors into the unemployment and underemployment rates below.The total number of employed is still 7,629,000, or 5.0% below its pre-pandemic peak.  At the rate jobs have grown this year, it will take another 12 months for employment to completely recover.U3 unemployment rate declined -0.3% to 5.8%, compared with the January 2020 low of 3.5%.U6 underemployment rate declined -0.2% to 10.2%, compared with the January 2020 low of 6.9%.Those on temporary layoff declined -291,000 to 1,823,000.Permanent job

New jobless claims continue strong decline, consistent with ongoing recovery, while continuing claims continue mixed

New jobless claims continue to be the most important weekly economic datapoint, as increasing numbers of vaccinated people and outdoor activities have led to an abatement of the pandemic – deaths are at their lowest point in over a year, and new infections at their lowest points since the onset of the pandemic. 

Several weeks ago we hit my objective for claims to be under 500,000 before Memorial Day, and this week  we hit second objective, for claims to be below 400,000 by Labor Day. 

REMINDER: Because of the unprecedented number of layoffs during the April and May 2020 lockdowns, for the last year I have given heightened

May manufacturing continues white hot; April construction spending shows signs of being constrained by materials and costs

It’s the first of the month, which means we get our first look at May data in the form of the ISM manufacturing index, as well as April construction spending. The questions we are looking for information to answer from these two leading sectors of the economy, manufacturing and residential construction, are: (1) is the Boom still ongoing, and is it likely to continue in the coming few months; and (2) is there evidence that inflation is creating a bottleneck on growth?

The answers for the two sectors appear to be different.

First, the May ISM manufacturing index increased slightly from 60.7 to 61.2. The new orders

Coronavirus dashboard for June 2: most of US approaches herd immunity threshold; COVID still spreading among the remaining idiots

In the past week new COVID-19 cases declined almost 30%, by about 7,000 to 17,289/day; however, deaths actually increased by about 10% to an average of 589/day, mainly due to a data dump by California 5 and 6 days ago – thus I expect a new low in deaths within the next several days:

Figure 1

Total deaths are 595,213. Over 60% of all adults have received at least one dose, and over half are fully vaccinated. Slightly over half of the US population, including all children, has received at least one dose.

But the overall situation masks a large divergence between States where there have been the most

By New Deal democrat

Comprehensive April housing report: beware the inventory and price boomerang!

Now that we have all of the April housing data, my comprehensive look at this long leading sector is up at Seeking Alpha.

It’s pretty clear that sales and new construction have peaked in the short term. So, what happens when all of those people who would have put their houses on the market in 2020, but didn’t because of the coronavirus, decide to put them on the market later in 2021 or in spring 2022?

As usual, clicking over and reading puts a penny or two in my pocket to reward me for my efforts.

Tags: housing inventories and pricing

Real personal income has completely made up its recession losses, now exceeds pre-recession peak

The last of the 4 monthly coincident markers for whether the economy is in recession vs. expansion was reported this morning for April. Let’s take a look.

In nominal terms, personal income declined -13.1%, taking back most, not by no means all, of March’s big 20.7% gain. After taking inflation into account, in real terms, it declined -13.7%. Meanwhile, nominal personal spending increased 0.5%, but in real terms declined -0.1%, barely touching March’s 4.0% gain:

An issue came up at Seeking Alpha about why I believe that demand-driven inflation will be transitory. The above graph shows why. After 2020’s big stimulus package, real personal

New home sales decline in April, revised sharply lower for March; prices continue to skyrocket, while inventory increases

This morning both new home sales and two price indexes for houses were released for April, completing our view of that important long leading sector.

As anticipated, not only did new home sales decline for the month, but March was also hugely revised to the downside ( over 10%!):

Figure 1

With these revisions, the peak for new home sales becomes the December-January period, exactly as is the case for housing permits, starts, and existing home sales.

But if sales are down, prices are continuing to skyrocket:

As measured by the FHFA, prices increased 1.4% seasonally adjusted just in the past month! YoY

New jobless claims continue to decline at rate of 100,000 per month, while continued claims stall at elevated level

New jobless claims continue to be the most important weekly economic datapoint, as increasing numbers of vaccinated people and outdoor activities have led to an abatement of the pandemic – both new infections and deaths are near their lowest points in a year. 

We have hit my objective for new claims to be under 500,000 by Memorial Day. Even better, we are already approaching my second objective, which is for them to be below 400,000 by Labor Day. 

REMINDER: Because of the unprecedented number of layoffs during the early lockdowns, for the last year I have given heightened importance to the non-seasonally adjusted numbers.

Coronavirus dashboard for May 24: 3 weeks to 0 new cases?

No, that won’t happen. But, even so, that is the current trajectory. Let’s start with the overview:Total *confirmed* cases: 33,117,737Total deaths: 589,893

Note that there are many more cases that we don’t know about because the people were never tested. Since about half of cases appear to be only mildly or non-symptomatic, an additional 10% of the population having been infected seems like a reasonable guess. And excess deaths for 2020 ran closer to 900,000, so we may also be missing many deaths.

Before I go further, let me address an article that appeared over the weekend in the Wall Street Journal suggesting that an “intelligence source” had confirmed that it was likely that the

Existing vs. new home sales: sales have peaked, expect prices to soon peak

I normally don’t pay much attention to existing home sales. Even though they constitute about 90% of the housing market, they have much less impact on the economy overall than new home sales (because all of the economic activity involved in building the house, and then landscaping the outside and furnishing the inside).

But they can be a comparison with new home sales, particularly as they are a competing product. And the procession of data is the same: interest rates lead sales, which in turn lead prices, which in turn lead inventory.

Existing home sales for April confirmed what we have already seen with new home sales: the market peaked at the turn of the year.

Big decline in new jobless claims continues, while decline in continuing claims has stalled

New jobless claims continue to be the most important weekly economic datapoint, as increasing numbers of vaccinated people and outdoor activities have led to an abatement of the pandemic – both new infections and deaths are near their lowest points in a year. 

We have hit my objective for new claims to be under 500,000 by Memorial Day. My second objective is for them to be below 400,000 by Labor Day. 

NOTE: Given the unprecedented scope of layoffs during the earliest phase of the pandemic, I have given heightened importance to the non-seasonally adjusted numbers. Once May is over, their importance recedes and I expect to discontinue tracking them.

Further considerations on the disappointing April jobs report. Consider the averages!

I’ve been threatening for a couple of weeks to run some extended comments on the big miss in the April jobs report. As there’s no economic news of note today, here goes . . . .

1. It’s possible March was the outlier rather than April.

The original report for March was that 916,000 jobs were added. In this month’s report it was revised down to 770,000. Below is a graph of “civilian employment” from the household report (blue), “employment” from the establishment report (which is the commonly reported number (red), and the monthly change in initial jobless claims (green, inverted so that a decline shows as a positive, /100 for scale):

Note that in

April housing permits and starts: a pullback from peak, but no recessionary signal UPDATED

The monthly statistics on housing permits and starts, reported this morning, were mixed, as permits increased slightly and starts declined:

The less volatile single-family permits also declined slightly.

On the one hand, a high level of construction activity is continuing. But the three-month moving average of both single-family and total permits, as well as starts, all declined from their highs in the December-January period. To be recessionary, I would need to see at least a 10% decline in total permits; the actual decline from the peak is about 6%, so well within the range of a little pullback during an expansion.

I’ll have more to say

Coronavirus dashboard: entering the home stretch?

G*d willing, I will only feel the need to update this information for another month or two. The US is simply making great progress on all fronts, and there are no new outbreaks in any of the States.

Close to 40% of the entire US population is totally vaccinated, and almost 50% has received at least one dose:

As a result, both cases and deaths are lower than their troughs last summer, and are at 10 to 11 month lows. Deaths are down about 85% from peak, and cases down 88%:

At their current trajectory, there will be fewer cases than at any time since March 2020 in about 2 weeks. Deaths, which are declining at a much slower trajectory, may be there in 4 to 6 weeks.

And there

New jobless claims continue to improve, while continuing claims concerningly stall

New jobless claims continue to be the most important weekly economic datapoint, as increasing numbers of vaccinated people and outdoor activities have led to an abatement of the pandemic – both new infections and deaths are near their lowest points in a year. 

We have hit my objective for new claims to be under 500,000 by Memorial Day. My second objective is for them to be below 400,000 by Labor Day. 

New jobless claims declined 34,000 to 473,000. On a unadjusted basis, new jobless claims declined 26,286 to 487,436. The 4 week average of claims also declined by 28,250 to 534,000. All of these were new pandemic lows.Here is the trend since last August:

April retail sales “disappoint,” but maintain almost all of March’s surge

[Note: I’ll comment on industrial production in a separate post later]At first glance, April’s retail sales report looks like another Big Miss. Nominally (blue) sales increased less than 0.1% (rounded to unchanged). Adjusted for inflation (red), they declined -0.7%:

But the important point is that the big jump in March didn’t get taken back.  As I wrote last month: “if the big March gain in sales isn’t taken back in the next month or two, then there’s likely to be a similarly large jump in employment by the end of summer.” Further, as I wrote a couple days ago in response to the inflation report, I fully expected the big jump in sales and income fueled by stimulus

April Industrial Production slightly disappoints – but only due to supply chain bottlenecks

Industrial production is the King of Coincident Indicators, and is the one whose peaks and troughs most frequently mark the beginning and end of recessions. It had been bouncing back strongly, but in the last several months, has hit something of a snag.

In April, total production increased 0.7%, while manufacturing production increased 0.4%:

Both of these, however, remain slightly below January’s levels, and -2.7% and -1.4% respectively below their February 2020 peak just before the pandemic hit.

The good news in April was that the declines from February’s Big Texas Freeze have been largely resolved. The bad news is that shortages in

March JOLTS report confirms that month’s strong jobs report

This morning’s JOLTS report for March confirmed that month’s stellar jobs report. Job openings made a new series high, while layoffs and discharges made a new series low. Hires, quits, and total separations all also moved in the right direction.This report has only a 20 year history, and so includes only two prior recoveries. In those recoveries: 

first, layoffs declinedsecond, hiring rosethird, job openings rose and voluntary quits increased, close to simultaneouslyThe recovery from the worst of the pandemic almost one year ago at first followed this script, but the winter surge, which led to a few month of flat, or worse, jobs reports, disrupted that trend. We now appear to have

We all expected inflation to arrive: now it’s here

This morning’s report on April inflation confirmed what we already knew: inflation, both from the demand and the supply side, was coming. Now it’s here.

First of all, take the YoY numbers with a grain of salt. Last April saw actual price declines in the teeth of the worst of the pandemic deaths and lockdowns. Here’s the monthly %change since the beginning of 2020 in total inflation (blue), core, i.e., less food and energy (red), and less energy only (gold):

So let’s delete last April, and look at the price increases in the 11 months since last May:

Total prices are up 4.3% since then, but only 3.0% in the “core” groups, and 2.8% less energy. That’s not enough to excite the Fed into

Coronavirus dashboard for May 10: stay the course!

The story in the US continues to be that vaccinations work!As of today, the 7 day moving average of new cases is down to a new 8 month low of 40,873 per day. The 7 day moving average of deaths is down to a new 11 month low of 667:

Cases are down 5/6’s from their wintertime peak. Deaths are down over 80%.

And cases are declining, sometimes strongly so, in almost all the 10 worst States, including Michigan, where they are down over 60% (and look how well one of the best States, California, is doing!):

I found only 4 States where the overall trend in the past months could colorably be called increasing vs. sideways or declining – Maine, Oregon, Washington, and Colorado:

Within

April jobs report: well, that was a big miss …. but look at the composition

HEADLINES:

+266,000 million jobs added: 218,000 private sector plus 48,000 government. The alternate, and more volatile measure in the household report indicated a gain of 328,000 jobs, which factors into the unemployment and underemployment rates below.U3 unemployment rate rose 0.1% to 6.1%, compared with the January 2020 low of 3.5%.U6 underemployment rate declined 0.3% to 10.4%, compared with the January 2020 low of 6.9%.Those on temporary layoff increased 88,000 to 2,114,000.Permanent job losers increased 97,000 to 3,529,000.February was revised upward by 68,000, while March was revised downward by 146,000, for a net loss of 78,000 jobs compared with previous

Jobless claims: pandemic progress continues

[Note: I’ll comment on the Q1 GDP report later today or tomorrow.]

New jobless claims will almost certainly continue to be the most important weekly economic data for the next 3 or 4 months, as increasing numbers of vaccinated people and outdoor activities lead to an abatement of the pandemic. Seven weeks ago I set a few objective targets for new claims: to be under 500,000 by Memorial Day, and below 400,000 by Labor Day. This week showed that the first target is clearly in reach.

On an unadjusted basis, new jobless claims declined from 9,486 to 575,350. Seasonally adjusted claims declined by 13,000 to 553,000. The 4 week average of claims also declined by 44,000 to 611,750. All of these were new

More signs of an economic Boom

I have a new article discussing Monday’s durable goods new orders report up at Seeking Alpha, explaining how this data fits into the overall picture of a production-side Boom continuing in the months ahead. 

As usual, clicking over and reading will increase your knowledge of what to expect in the months ahead for the economy, and reward me with a few $$$ for the effort I put in.

While I am at it, the consumer side is Booming as well. Not only is personal spending at record levels (blue in the graph below), but personal saving is also much higher than it was before the pandemic (red), thanks to the stimulus payments:

And consumer confidence as at Boom levels as well:

The leading indicator among this

While house price gains continue to go nuts, housing remains much more affordable than at the peak of the bubble

The boom – and maybe insanity – in house price gains continued in February, as both the Case Shiller and FHFA house price indexes increased roughly 1% just since January! The YoY increase for both was almost exactly 12%, as shown in the graph below:

While the YoY increase in house prices matches those of the bubble peak, and are, to say the least, not sustainable, they aren’t quite the crisis that they appear at first glance. 

That’s because mortgage rates over the 12 month period declined, which makes the affordability of monthly mortgage payments considerably less intense. And in real terms compared with income mortgage

Coronavirus dashboard for April 26: reasons for optimism all around

Let’s start with an overview of total cases and deaths in the US:

1.7 in every 1,000 Americans has died of COVID-19. 9.7% of the entire population has had a *confirmed* infection. Probably another 5% to 10% have been infected, but were never tested.

With large-scale vaccinations, plus the onset of warmer weather (so fewer indoor gatherings), the incipient “4th wave” appears to have reversed:In the past 7 days, an average of 58,164 cases per day was confirmed, vs. the recent low of 53,663, and down from 71,234 12 days ago. Deaths in the past 7 days averaged 706 per day, just above the recent low average of 697 4 days ago. Note of course that this is still above last

More new pandemic lows in jobless claims: April jobs report likely to show over 1,000,000 new jobs added

Repeating my recent top-line mantra, new jobless claims are likely to the most important weekly economic data for the next 3 to 6 months. With the number of those vaccinated continuing to increase, I expect an ongoing big increase in renewed consumer and social activities, with a concomitant gain in monthly employment gains like we saw in the March jobs report.Five weeks ago I set a few objective targets: new claims to be under 500,000 by Memorial Day, and below 400,000 by Labor Day. 

This week we continued our major advance towards those targets.On an unadjusted basis, new jobless claims declined by 56,554 to 566,479. Seasonally adjusted

New and existing home sales vs. inventory

I have a full plate in, you know, actual life today, so let me just drop this note here while we’re waiting for new home sales to be reported. I’ll update later when I have a chance.

The evidence is crystal clear that, as to new homes (which are by far more important than existing home sales in terms of the economy), sales lead prices, which in turn lead inventory.

Here are sales (red) vs. inventory (blue):

And here are prices (green) vs. inventory:

When it comes to existing homes, the NAR is very squirrelly about use of their data, but here is a long term look at sales vs. inventory:

Again, it’s crystal clear that sales led inventory through the housing boom, bubble, and