Jobless claims continue recent strong streak

Programming note: I’ll put up separate posts on durable goods orders, real manufacturing and trade sales, and the Q4 GDP reports later.

Initial jobless claims have been the best performing – and perhaps only positive – element of the short leading indicators in the past few months. And that continued in this morning’s report.

Initial claims declined -6,000 to 186,000, the lowest number since last April. The 4 week average declined -9,250 to 197,500, the lowest since last May. Continuing claims with a one week delay increased 20,000 to 1.675 million, still -43,000 below their recent high in December:

Only continuing claims were higher YoY. Initial claims, and more importantly, their 4 week

Three most quickly reported measures of coincident indicators – all of which are close to turning negative

 – by New Deal democrat

While we await tomorrow morning’s deluge of Almost Every Economic Series Imaginable, I have posted over at Seeking Alpha a detailed look at one measure of consumer spending and two of employment which will give us extremely timely warnings as to whether a recession has started. I explain their trajectory in the past year in detail, and how close they are to actually turning negative.

I definitely expect them to turn negative before any monthly data confirms if and when a recession has begun.

As usual, clicking over and reading will help you understand the economic situation, and bring me a little change in my

Index of leading indicators says recession almost certain; so what of the coincident indicators?

– by New Deal democrat

This week is one of those where almost all of the important data is crammed into one day – in this case, Thursday, when Q4 GDP, initial claims, real manufacturng and trade sales, durable goods orders, and new home sales will be reported all at once.

In the meantime, you may have heard that yesterday the Index of Leading Indicators declined again, by -1.0%. This marks the 9th straight decline in the index, which is now -5% below its recent peak (via Advisor Perspectives):

(Don’t know why the December level is labeled 97.9%. I have verified that the Index has indeed declined -5% to 95% since its recent peak, as shown).

How “FHFA-CPI” using house prices rather than OER shows a sharp deceleration in inflation

 – by New Deal democrat

Paul Krugman made another foray into the “inflation is mostly gone” genre over the weekend with a thread on Mastodon that largely relied on the following graph:

concluding that

“[A]t this point the burden of proof lies on anyone claiming that we had more than a, well, transitory inflation spike that’s mostly behind us.”

I’m very disappointed with Krugman’s argument, mainly because his “supercore” measure of inflation boils down to “if we exclude all the items that CPI says are really going up in price, plus gas, then things aren’t really going up in price.”

Well, duh.

Since the inflection point of all this

Weekly Indicators for January 16 – 20 at Seeking Alpha

 – by New Deal democrat

I forgot to post this yesterday, so here you go today . . . 

My “Weekly Indicators” post is up at Seeking Alpha.

Every now and then you get a contratrend week, when a bunch of metrics move in the opposite direction as the overall recent trend. This past week was just such a week, primarily among financial indicators.

As usual, clicking over and reading will bring you up to date on what the contratrend move is, and will bring me a little change in my pocket.

Weekly Indicators for December 26 – 30, Angry Bear, angry bear blog

Tags: 2023, weekly indicators January 16 -20

Existing home sales and prices decline; plus, a closer look at multi-unit housing construction

 – by New Deal democrat

I will keep my comments on December existing home sales and prices brief. That’s because, even though they make up about 90% of the total market, they have much less economic impact than new home construction. They are best used to confirm trends; in this case, that housing sales have continued to decline, and prices (which follow sales with a lag) have also rolled over.

And confirm both trends they did. December sales declined another -1.5% to 4.02 million annualized, a -34% YoY decline. Via Mortgage News Daily, here’s what they looked like for the last 3 years through November:

The median price of an existing home,

The actual Big News in this morning’s housing report was – positive

 – by New Deal democrat

For the second month in a row, the biggest news in the housing report was not in the headlines. 

Most of what you are going to read is about how bad housing permits and starts were, and that they are recessionary.

And it’s true. In particular, the most leading and least noisy housing metric of all is single family permits, and they declined another 6%+ to 830,000 annualized, their lowest reading in over 5 years excepting the pandemic lockdown month of April 2020:

They are also down 39% from their peak in early 2022. This is recessionary, plain and simple.

The recessionary or near-recessionary figures also include total permits (gold in the

Jobless claims continue their string of good news

 – by New Deal democrat

If yesterday’s economic data was bad, this morning’s was considerably better (I’ll post on housing construction later).

Initial jobless claims declined 15,000 to 195,000, tied for their best number in almost 8 months. The 4 week moving average declined 6,500 to 206,000, the best number in over 6 months. Continuing claims, one week earlier, did increase by 17,000 to 1.647 million, still lower than their December readings:

These continue to be just excellent numbers.

Further, both initial claims and their 4 week average improved, and are lower YoY, although continuing claims are just slightly higher:

Unless and until the 4 week average of initial claims is higher

And the King of Coincident Indicators rolls over

 – by New Deal democrat

This morning’s second big – and big negative – report was for industrial production, the King of Coincident Indicators (I call it so because historically, it more often than not marks the exact month +/-1 that a recession begins or ends).

In December industrial production declined -0.7%, and manufacturing production declined -1.3%. Even worse, both were revised down by -0.4% and -0.5% for November. Total production was lower than at any time since last February; manufacturing production was lower than at any time since October 2021:

If production did truly peak in October, we are much closer to recession than we previously thought.

With that in mind, let’s look at

December real retail sales: the worst in almost two years

 – by New Deal democrat

Real retail sales, one of my favorite indicators, was updated this morning for December, and it was significant.

It’s not just that retail sales declined -1.1% for the month both in nominal and real terms; it’s that both October and November were revised downward by -0.2% and -0.4% respectively, so the ultimate number is considerably worse than would otherwise have been expected.

How so? First, here are real retail sales in absolute terms for the past 25+ years:

Note that in the year before both the 2001 and 2008 recessions, real retail sales went flat. As shown in the below close-up of the past two years, last month was the worst showing since February

Why the Fed’s present rate hike campaign is almost unprecedented

– by New Deal democrat

Just how unprecedented is the Fed’s current rate hike policy? Since the Fed started actively managing the Fed Funds rate in the late 1950s, only two other occasions are similar.

The reason the Fed is hiking rates is to combat inflation. But, as I have pointed out in the past, the post-pandemic Boom is very similar to the immediate post-WW2 Boom. In 1947 in the face of 20% YoY inflation, the Fed did – basically nothing. It raised the discount rate from 1% to 1.5%:

Prices stabilized on their own once they reached the limit of ordinary consumers to bear. There was a brief inventory-led recession in 1948, and the economy proceeded to motor right forward.

The important trend in retail sales that Redbook’s weekly report is telling us about

 – by New Deal democrat

This is the first of hopefully two posts I will put up today.

Tomorrow retail sales for December will be reported. In advance of that, I wanted to discuss their comparison with the weekly high-frequency data of Redbook consumer sales, which I have been paying heightened attention to in the past several months.

Here is what Redbook YoY sales look like since the beginning of 2020:

After the initial pandemic lockdowns, they returned to positivity by summertime. Then they really took off with the receipt of the 2021 stimulus $$$ in March, peaking at about 18% YoY (on a 4 week average) at the end of the year. During 2022 they

COVID endemicity: 100,000+ (mainly needless) excess deaths per year

– by New Deal democrat

I suspect these updates are going to be much less frequent from now on; for example, if a significant new wave is evident. 

That’s because, as we start our fourth year of the pandemic, the good news is that it is far less lethal than it was during its first two years. From March 2020 through March 2021, 500,000 Americans died of Covid. Another 500,000 died in the next 12 months. But since last March, only 100,000 have died so far (an average of roughly 400 per day, mainly seniors, and mainly unvaccinated):

The bad news is that any hope that vaccinations would put an effective end to the pandemic – in terms of infections – is long gone. The virus has

Real average wages and real aggregate payrolls for December 2022

 – by New Deal democrat

Now that we know December consumer inflation, we can see how the American working/middle class is “really” doing.

Nominally, average wages for nonsupervisory workers increased 0.2%, while prices deflated by -0.1%, meaning that “real” average wages increased 0.3% for the month:

While this only returns them to April’s level, and -2.2% below their December 2020 interim peak, they are also 1.5% higher than their pre-pandemic levels, and more importantly 1.3% above their recent June 2022 lows. Essentially all of the volatility in 2022 can be laid at the feet of the huge increase, then huge decrease, in gas prices.

Aggregate real payrolls tell us how

Jobless claims start out 2023 where they left off in 2022 – as positive

 – by New Deal democrat

It took a little while for FRED to post this data today, but with that reason for a delay . . . 

Initial jobless claims started off 2023 where they left off in 2022, with another good print. Initial claims declined -1,000 to 205,000, while the more important 4 week average declined -1,750 to 212,500. Continuing claims also declined, down -63,000 to 1.634 million:

Let me just add a small caution that we are in the time when Holiday season adds the most distortions even to seasonally adjusted data.

For purposes of recession watching, we want to know if claims are higher YoY, the first sign of weakness. And the answer is, they are not:

Consumer inflation remains dominated by gas prices (good) and shelter (bad)

 – by New Deal democrat

Declining gas prices continue to do wondrous things for the economy. In December they declined from roughly $3.50 to $3.10/gallon. Meanwhile the phantom menace of Owners’ Equivalent Rent continues to drag “core” inflation higher. Details below.

Total inflation: -0.1%m/m , +6.4% YoY (12 month+ low), +0.9% since June, 1.8% annual rate

Core +0.3%, +5.7% (12 month low), +2.2% since June, 4.4% annual rate 

Energy -4.5%, +7.0%, -15.1% since June (right scale on graph below)

All items less energy: +0.3%, +6.4%, +2.5% since June, +5.1% annual rate

Note importantly that for all of the ballyhoo about how inflation has plunged since June,

An in-depth look at production and sales: evidence of peaking in both

 – by New Deal democrat

Yesterday I took an in-depth look at employment. Today let’s take a look at two other important coincident indicators that are looked at by the NBER for guidance as to whether or not the economy is expanding or in recession: production and sales.

As I’ve mentioned several times in the past month, as of the latest readings it looks like industrial production (blue), and its manufacturing component (red) as well, are either on the verge of turning down, or may have already peaked:

Yesterday I noted that several leading indicators for this, the ISM manufacturing index and its new orders component, and also the manufacturing work week, had already

Scenes from the December jobs report: more deceleration

 – by New Deal democrat

The only significant economic data this week will be released on Thursday, with both CPI and jobless claims. In the meantime, let’s take a closer look at the jobs data we got last Friday. As indicated in the title of this post, the theme was “deceleration.”

First, here is the long term YoY look at total employment (blue), employment in goods-producing industries (red), and service providing (gold):

Notice that goods-producing jobs are much more volatile; they decline first, while until the Great Recession, service providing jobs barely declined at all YoY even during recessions.

Here is the close-up of the same since mid-2021:

Service jobs came roaring

In which I quibble with Prof. Alan Blinder about the main reason for the decline in inflation since June

 – by New Deal democrat

Alan S. Blinder is getting traction for an opinion piece published in the WSJ concerning the big decline in inflation since June. He acknowledges that“ energy inflation played a meaningful role” but that “the rest of the stunning drop in inflation in 2022 [is] due …  What did change dramatically was the supply bottlenecks. Major contributors to inflation in 2021 and the first half of 2022, they are now mostly behind us.”While I agree that supply bottlenecks are “mostly behind us,” the phrase “the rest of” in his analysis appears to be doing some heavy lifting.

Here is a graph of total CPI (blue), CPI less food and

December jobs report: good headlines, but deceleration continues

 

 – by New Deal democrat

If the long leading indicators all last year, and the majority of the short leading indicators from the past few months are to be believed, a recession is near. And if that is the case, we ought to see the leading elements of the jobs report begin to roll over. One of them, the average manufacturing workweek, clearly has. Arguably so has temporary employment. Residential construction employment may have peaked. But total construction and manufacturing employment continued to increase through November’s report.

So my focus as of this report is on those remaining leading components, as well as whether the deceleration in the 3-month moving average of

December manufacturing, new orders both decline further, to readings even more on the cusp of recession

 – by New Deal democrat

I described last month’s ISM manufacturing reading as being one “on the cusp of recession.” Well, this month’s reading was even cusp-ier.

To recapitulate, this index has a very long and reliable history. Going back almost 75 years, the new orders index has always fallen below 50 within 6 months before a recession. Recessions have typically started once the overall index falls below 50, and usually below 48.

This is the second straight month that the index was below 50, declining another -0.6 to 48.4. As noted above, per the ISM itself, typically recessions have not begun until this index falls below 48, and as you

New jobless claims end 2022 on a positive note; preview of tomorrow’s jobs report

 – by New Deal democrat

Initial claims started off the year – or ended last year if you are technical about it – on a positive note, declining 19,000 to a 3-month low of 204,000. The more important 4 week moving average declined 6,750 to 213,750, a two-month low. Continuing claims for the prior week also declined by 24,000 to 1,694,000 (due to either a software or human entry glitch, FRED recorded the entries as December 31, 2023! Which leaves a one-year gap, so I have omitted this week’s data on the graph below):

All three numbers also remained lower YoY. The most important leading indicator, the YoY% change in the 4-week moving average of new claims, is 3.2%

November JOLTS report consistent with a continued “hot” labor market

 – by New Deal democrat 

The JOLTS report for November showed both continuing decelerating trends in some series, but overall a picture of a labor market that continued “hot.”

Here’s the graph I ran one month ago of job openings, hires, quits, and total separations:

Now here is an update for the past 2 years of all four series:

Three of the four series – openings, hires, and total separations – show a pattern of continued deceleration since the beginning of this past spring, although only hires made a new 12+ month low is this report. Only quits appear consistent with a stabilizing market – although they too could be read as decelerating.

At the same time, both

2023 data begins with another lesson: the remedy for high prices is – high prices

 – by New Deal democrat

And so, another year begins. And kicks off with a look at the leading housing sector. And furthermore, there is even some good news.

Total construction spending in November rose 0.2% for the month, while the more leading residential construction spending declined -0.5%. While total construction spending is only down 0.6% from its recent high in July, residential construction spending is down -8.1% from its recent peak last May:

This is in line with the steady drumbeat of negative news in the housing sector for the past year.

Generally speaking, residential construction spending comports with the number of housing units under

– by New Deal democrat

My Weekly Indicators post is also up at Seeking Alpha.

The volatile coincident consumer numbers bounced higher this week, while another recession indicating system flashed red, suggesting a recession is most likely to start during the 2nd Quarter of 2023.

As usual, clicking over and reading my commentary at Seeking Alpha will not only bring you up to the virtual moment as to the economy, but it will bring me a little pocket change for my efforts.

Best wishes for a happy, healthy, and prosperous new year to all readers!

New Deal democrat’s weekly indicators for December 19 – 23, Angry Bear, angry bear blog

Tags: weekly indicators

Initial claims close out the year still positive

 – by New Deal democrat

This morning we got the final economic news of the year, as initial claims for the week rose 9,000 to 225,000. The 4-week moving average declined 250 to 221,000. Continuing claims rose 41,000 to 1,710,000, a 10-month high:

The weekly number was actually 14,000 higher than one year ago, but that is not significant. The 4-week average and the continuing claims numbers both remained below their levels from the end of last year:

So, this series closes out the year still positive.

At the same time, beginning next week the YoY comparisons get more challenging. To reiterate, I’ll raise a “yellow flag” caution if the 4-week moving average turns higher YoY. I won’t raise a

Coronavirus dashboard for year end 2022: becoming endemic, and still an important threat to seniors

 – by New Deal democrat

As we close out 2022, let’s look back at the overall picture for COVID.

The best historical measure of actual infections is Biobot, which samples wastewater. This is because the advent of easy home testing one year ago meant that far fewer people have had “confirmed” cases this year in comparison to “actual” infections. The solid line in the graph below is the level of particles (left scale) from which actual case levels can be inferred (right scale):

Current levels are now higher than any other wave peak except for last winter’s Omicron.

Regionally the Northeast is faring the worst, although its current outbreak

Three graphs which defined the economy in 2022; a look back at my forecasts

In the summer of 2021, looking at the long leading indicators, I wrote:

“while the long leading indicators confirm a firm, even strong expansion through the remainder of 2021, by spring of 2022 they are neutral, suggesting a much softer economy, although not a recession before the midyear limit of this forecast.”

By the beginning of this year, the long-term outlook transformed into the short-term outlook, which was:

“The short leading indicators now confirm the positive trend through the first half of this year, with very little evidence of softening at this point.“

Meanwhile I took my first look at the longer leading outlook for the 2nd half of this year;

House price indexes decline, unchanged in October; further evidence of real declines since summer

The Case Shiller national house price index declined another -0.3% in November, and is now up 9.2% YoY, compared with a peak of +20.8% YoY in March (note that is in line with my rule of thumb that a decline of 1/2 or more in YoY growth over the past 12 months indicates a series has peaked and rolled over).

The FHFA purchase only house price index was unchanged for the month, and is up 9.7% YoY (vs. its peak of +19.7% in February, so also is in decline per my rule of thumb):

Here’s an update of the FHFA house price index YoY (/2 for scale) vs. Owners’ Equivalent Rent in the CPI:

Because OER follows house prices with roughly a 12 month lag, I

Weekly Indicators for December 19 – 23 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

Coincident indicators continue to ever so microscopically worsen – but not yet in recession territory; while there is an increasing suggestion from the long leading indicators that a recession could be relatively short. Provided, of course, that the Fed takes the hint.

As usual, clicking over and reading will bring you up to the virtual moment as to the economic situation, and reward me slightly for my efforts.

Also, this programming note: Merry Christmas to all who celebrate! There will be a few economic releases in the next week, but don’t be surprised if I take a few days off.

“New Deal democrat’s Weekly Indicators for