– by New Deal democrat

My focus continues to be on whether jobs gains are most consistent with a “soft landing,” i.e., no further deterioration, or whether there is further decline towards a recession. 

For a change, this month the Establishment report was the weakest in several years, if still positive. Meanwhile the Household report rebounded for the month, but now shows an absolute decline in job holders YoY.

Below is my in-depth synopsis.

HEADLINES:

142,000 jobs added. Private sector jobs increased 118,000. Government jobs increased by 24,000. 

There were big downward revisions to the last two months. June was revised downward by -61,000, and July was revised downward by -25,000, for a net decline of -86,000. This continues the

– by New Deal democrat

Recently I have paid much more attention to the ISM services index. That’s because, since the turn of the Millennium, manufacturing’s share of the economy has contracted to the point where even a significant decline in that index has not translated into an economy-wide recession, as for example in 2015-16. 

When we use an economically weighted average of the non-manufacturing index (75%) with the manufacturing index (25%), it has been a much more reliable signal, particularly when we use the 3-month average, requiring it to be below 50. 

Once again this month the contraction shown in the manufacturing index has been more than counterbalanced by continued expansion in the services index, which was reported at 51.5. The

– by New Deal democrat

The weekly news from jobless claims continues to be good. The hypotheses that the summer increase was unresolved post-pandemic seasonality, plus the several week spike post-Beryl was all about Texas, both have held up very well. And that has continued to be the case against more challenging YoY comparisons as the data heads into September.

Initial claims declined -5,000 last week to 227,000. The four week moving average declined -1,750 to 230,000. Continuing claims, with the usual one week delay, declined -13,000 to 1.838 million:

The two year chart really pays off in showing the unresolved summer seasonality post-pandemic both in 2023 and this year.

On the more important YoY basis for forecasting purposes,

– by New Deal democrat

The JOLTS survey parses the jobs market on a monthly basis more thoroughly than the headline employment numbers in the jobs report. In July, it painted a picture of what looks like pretty relentless deterioration.

The theme for three of the four data series I track was the same: job openings, hires, and quits, all had their lowest or second lowest readings since the start of 2021. In the case of the “second worst” hires and quits numbers, it was only because last month’s numbers were even lower.

Specifically, job openings (blue in the graph below), a soft statistic that is polluted by imaginary, permanent, and trolling listings, declined 227,000 to 7.623 million. Actual hires (red) rose 273,000 to 5.521 million (vs. a

– by New Deal democrat

As usual we start the month with two important reports on the leading sectors of  manufacturing and construction.

First, the ISM manufacturing index showed contraction yet again, with the headline number “less negative” by way of increasing from 46.8 to 47.2, and the more leading new orders subindex declining sharply by -2.8 from 47.4 to 44.6:

Including August, here are the last sis months of both the headline (left column) and new orders (right) numbers:

MAR 50.3. 51.4

APR 49.2   49.1

MAY 48.9. 45.4

JUN 48.5. 49.3

JUL. 46.8. 47.4

AUG 47.2. 44.6

Because manufacturing is of diminishing importance to the economy, and was in deep contraction both in 2015-16 and again in 2022 without any recession

– by New Deal democrat

On this Labor Day, it is fitting to update the economic state of ordinary workers. There is a variety of economic data series to track both average and median wages:

The most commonly known measure average hourly pay for nonsupervisory workers, which is part of the monthly jobs report.

The Bureau of Labor Statistics, which conducts the household employment survey, also reports “usual weekly earnings” for full-time workers each quarter.

The BLS also measures the Employment Cost Index quarterly.

The BLS also measures “business sector compensation per hour” quarterly.
Without further ado, here is the update for all four. Average hourly wages are updated through July; the other three are updated through the end of

– by New Deal democrat

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

There were two noteworthy events this past week. First, the 10-year minus 2-year Treasury spread briefly normalized during the week, on Wednesday, and ended the week only inverted by 1 basis point (.01%). Second, almost *all* of the coincident indicators are now positive.

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

The Bonddad Blog Weekly Indicators

New Deal democrats Weekly Indicators August 19-23 . . . Progress? – Angry Bear by New Deal democrat

– by New Deal democrat

The monthly personal income and spending report is now the most important report of all, except for jobs. That’s becuase it tells us so much about the state of the consumer economy. It is the raw material for several important coincident indicators that the NBER looks at, as well as several leading indicators on the spending side.

To the numbers: in July nominal personal income rose 0.3%, and spending rose 0.5%. Since PCE inflation rose 0.2%, real income rounded to an increase of 0.2% and real spending to 0.4%:

Since spending on services tends to rise even during recessions, the more important component to focus on is real spending on goods. This rose 0.7% to a new all-time high. Real spending on services also

– by New Deal democrat

The news about initial and continuing jobless claims was almost all good this week.

Initial claims declined -2,000 to 231,000, and the four-week moving average declined -4,750 to 231,500, the lowest since early June. Continuing claims increased by 13,000 to 1.868 million:

As usual, more important for forecasting purposes are the YoY% changes. In that regard, initial claims were down -1.3%, and the four-week moving average down -5.6%. While continuing claims remained higher by 2.7%, this is the lowest YoY% increase in 18 months:

All of these forecasts continued economic growth. Additionally, the hypothesis that the increase in late spring and early summer was due to unresolved post-pandemic seasonality appears

– by New Deal democrat

Over the past year, I have downgraded the importance of manufacturing indicators as a forecasting tool for the economy as a whole. This post explores why and suggests a revised tool that may be a helpful short leading indicator.

On Monday, durable goods orders rebounded sharply in July from their abrupt June decline. Still, as shown in the graph below, growth in both new factory orders and core capital goods orders has stalled in the past year:

In the past 30 years, such as stall has not been unusual, as shown by the YoY% changes in each:

New factory orders and core capital goods orders similarly stalled – or even declined YoY – in 1998, and most of the entire period from 2013-19, including what I called the

Repeat home sale indexes show continued deceleration in house price inflation, more comfort room for Fed to cut rates

 – by New Deal democrat

This morning, we got the repeat home sales price data from the FHFA and Case Shiller. And the news was good, especially in the slightly leading FHFA Index.

This is of heightened importance compared with normal historical times. That’s because to reiterate, my focus is looking for any movement towards rebalancing between new and existing home sales. As to existing home sales, this means increasing inventories and more stable or even slightly declining prices, and we did see another increase in inventory earlier this week. In the repeat sales index, I am looking for signs that price increases might be

Weekly Indicators for August 19 – 23 at Seeking Alpha

 – by New Deal democrat

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

This week, for the first time in several years, the number of long leading indicators improved just enough for me to move the rating from “negative” to “neutral.” And the short leading indicators are lopsidedly very positive.

As usual, clicking over and reading will bring you up to the virtual moment on the economic data, and reward me a little bit for categorizing and organizing it for you.

New Deal democrats Weekly Indicators August 12-16 2024, Angry Bear

– by New Deal democrat

I figured this month I would report on new and existing home sales at the same time, since they have been reported only one day apart. I have been looking for a rebalancing of the market between the two, which means *relatively* more existing vs. new home sales, firming in new home vs. existing home prices, and more inventory growth in existing homes vs. new homes. 

To cut to the chase, it looks like that rebalancing is beginning to happen. With that in mind, let’s check the data.

Let me start by reiterating the big picture: mortgage rates lead sales, which in turn lead prices. Further, new home sales are the most leading of all housing metrics, but they are noisy and heavily revised. The much less noisy single family

– by New Deal democrat

For the last several months, jobless claims have been buffeted first by unresolved post-pandemic seasonality, and then also by the effect of Hurricane Debby on claims in Texas. The first is now abating, and the second has ended, as this week claims in Texas declined to their typical level last year at this time.

To the numbers: initial claims rose 4,000 to 232,000, while the four-week moving average declined -750 to 235,000. With the typical one week delay, continuing claims rose 4,000 to 1.863 million:

The YoY% change removes the effects of unresolved seasonality and is the best metric to use for forecasting. Measured this way, initial claims were down -3.7%, and the four-week average down -4.4%. Continuing claims

– by New Deal democrat

Every month I write about the Jobs Report. But while it is timely, it is only an estimate. There is an actual census of over 95% of all employers that also gets reported, called the QCEW, and it is the “gold standard” of actual jobs growth (or loss). Its two drawbacks are that it is not seasonally adjusted, and it is reported almost 6 months after the end of the quarter it updates.

Which is a lengthy introduction to saying that it was just reported through March of this year this morning. More importantly, the BLS preliminarily re-benchmarked all of its data beginning in March of last year.

And which is a further introduction to saying that, as expected, job growth was a lot less late last year and earlier this year

How restrictive are “real” interest rates?

 – by New Deal democrat

This post is inspired by a Xtweet from Paul Krugman this morning, in which he pointed out that if we measured inflation the same way it is done in Europe, the Yoy% change would be only 1.7%. That got me wondering, since the primary difference is how shelter inflation is measured, just how restrictive is current Fed policy across a number of the most important inflation measures?

Let’s begin by reviewing what the current YoY% changes in consumer prices are using the harmonized index (red), CPI les shelter (gold), headline CPI (dark blue) and core CPI (light blue):

As I pointed out when the CPI was reported last week, ex-shelter consumer prices are only up 1.8% YoY, while

– by New Deal democrat

It’s a slow economic news week, so don’t be surprised if I play hookie tomorrow or Wednesday.

In the meantime, now that we have July’s inflation data, we can update some “real” consumer well-being indicators.

First, real average hourly wages for nonsupervisory workers rose 0.1% in July to a new all-time high excluding April through June 2020:

It has risen 3.8% since its pre-pandemic all-time high, and 3.0% from its June 2022 post-pandemic low (when gas prices were $5/gallon).

Meanwhile, Motio Research has updated their monthly calculation of real median household income through June. It is also at an all-time high excluding the months of  March through August 2020:

Note this includes pandemic stimulus

– by New Deal democrat

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

With the bond market anticipating Fed rate cuts ahead, it has already lowered mortgage rates somewhat on its own. That has led to a jump in new applications, and to an even bigger spike in refinancing.

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

New Deal democrats Weekly Indicators August 5-9 2024, Angry Bear by New Deal democrat

– by New Deal democrat

The effects of Hurricane Beryl had just enough of an effect on home building in July to cause me not to hoist a yellow recession caution flag in this important leading sector. While the hurricane had no significant effect on permits, it likely did have an effect on starts and on units under construction, as I’ll go into further below.

Let’s start with the overall view. Starts (blue in the graph below), which are noisier and slightly lag permits, declined -6.8% in July, while total permits (gold) declined -4.0%. by contrast, the least noisy, most leading single family permits (red, right scale) declined a mere -0.1%:

Comparing single family with multi family permits, the former as above declined -1,000, while the

– by New Deal democrat

In the past, industrial production has been the King of Coincident Indicators, since its peaks and troughs tended to coincide almost exactly with the onset and endings of recessions. That weighting has faded somewhat since the accession of China to the world trading system in 1999 an the wholesale flight of US manufacturing to Asia, generating several false recession signals, most notably in 2015-16. But it is still an  important coincident measure in the economy. 

This month was one of those times where revisions made all the difference. Last month I headlined my note by pointing out that both manufacturing and total industrial production were reported near 10 year highs. But this morning both of those numbers were

– by New Deal democrat

The second point of economic data released this morning, retail sales, were also positive.

On a nominal basis, retail sales in July rose 1.0%. After adjusting for inflation, they rose 0.8% to the highest level so far this year. The below graph norms both real retail sales (dark blue) and the similar measure of real personal consumption of goods (light blue) to 100 as of just before the pandemic:

Since the end of the pandemic stimulus in spring 2022, real retail sales have been trending generally flat to slightly declining, while real personal consumption expenditures on goods have continued to increase.

On a YoY basis, however, real retail sales are still negative at -0.3%, which while also the second best

– by New Deal democrat

Last week I pointed out that the YoY increases in initial and continuing jobless claims appeared to be all about Texas in the wake of Beryl. This week there was good news even with some continued hurricane Beryl effects in Texas.

Initial claims declined -7,000 to 227,000 for the week, while the 4-week average declined -4,500 to 236,500. Continuing claims with the typical one-week delay declined -7,000 to 1.864 million:

There was even better news on the more important YoY comparisons. There, initial claims were down -8.5%, and the four-week average down -3.2%. Continuing claims were up 3.4% YoY, but this is the best YoY comparison except for one week in the past 1 1/2 years:

The news is all the better because

– by New Deal democrat

The CPI for July continued all of the trends I have been writing about for the past year or more:

 – Headline and core CPI continue to slowly decelerate. 

 – energy inflation is non-existent

 – shelter inflation remains very elevated but continues to declerate, following house prices.

 – all prices except for shelter coming in near or below the Fed’s 2% target

 – there are a few other problem children that don’t amount to too much

So let’s take these in order.

Both headline and core inflation rose 0.2% for the month. On a YoY basis the former is up 2.9% YoY (blue) and the latter is up 3.2% YoY (red):

Both of these are at their lowest YoY levels since 2021.

Now let’s add in CPI less shelter

– by New Deal democrat

In the paradigm popularized by Prof. Edward Leamer 20 years ago, motor vehicle sales are the 2nd domino to fall, after housing, in the procession of sectors that turn down prior to recessions.

I haven’t updated this in a while, so let’s take a look.

As an initial matter, the cycle in this sector was particularly hard hit by supply chain kinks during the pandemic, as electronic parts in particular were not produced at nearly a fast enough rate to allow full-scale production. This was a major reason why the prices of motor vehicles rose 20% since just before the pandemic by 2023:

Turning to history, I’ve noted many times before that sales of heavy trucks (red, left scale) tend to turn down first, and much less

Producer prices remain tame

 – by New Deal democrat

Producer prices for final demand (blue) rose 0.1% in July, while upstream raw commodity prices (red) rose 0.7%, close to their highest monthly increases in the past two years:

In the larger pre-pandemic scheme of things, the one month rise in commodity prices is not a matter of concern at this point.

On a YoY basis, final demand producer prices are up 2.2%, while raw commodity prices are up 1.5%:

Like all other prices except for imputed shelter costs, this is well within the Fed’s target range. We’ll see how this pans out for consumer prices tomorrow.

The Bonddad Blog

“April producer prices reflect some building pressure from a strong economy with full employment,” Angry

Weekly Indicators for August 5 – 9 at Seeking Alpha

 – by New Deal democrat

My “Weekly Indicators” post is up, a day later than usual, at Seeking Alpha.

While there was some excitement at the racetrack Monday as stocks just missed making a new 3 month low by a hair, the more exciting news by the end of Friday was . . . mortgage rates made a new 12 month low, and mortgage refinancing is showing signs of life again.

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me a little bit for the effort I put into the work.

New Deal democrat’s Weekly Indicators July 15 – 19 2024, Angry Bear by New Deal democrat

Residential building construction and spending sound a warning for goods-producing employment

– by New Deal democrat

The final data point from last week that I wanted to catch up on was construction spending, and especially residential construction and spending.

As reported last week, in June total nominal spending declined -0.3% in June, but is higher 6.2% YoY. The more leading residential sector also showed a -0.4% decline, and is higher by 7.3% YoY:

Since producer prices for construction materials declined another -0.1% in May and are down -2.5% YoY, “real” total construction declined -0.2%, while residential construction spending declined -0.3%:

Finally, the Inflation Reduction Act, which conferred favorable tax benefits for

– by New Deal democrat

Officially reported initial jobless claims declined -17,000 to 233,000 last week. The four-week moving average rose 750 to 240,750. With the typical one-week delay, continuing claims rose 6,000 to 1.875 million, the highest number since November 17, 2021:

On the more important YoY basis, initial claims were down -9.7%, while the 4-week average was nigher by 0.3%. Continuing claims were higher by 5.8%, up by more than their recent range but still well below their YoY readings from several months ago and last year:

Because this is the first week of August, I’ll dispense with my usual note about the unemployment rate and the “Sahm rule.”

Instead, there’s a more important point to discuss: the impact of Hurricane

– by New Deal democrat

Continuing my catching up this week, let’s take a look in some further detail about why I didn’t think Friday’s jobs report portended recession – at least, not yet.

As I always point out, the jobs report does contain some leading numbers. These are generally employment in more cyclical industries that, when they turn down, start the cascade into the broader economy. Generally speaking, these are all goods-producing industries, and specifically manufacturing and construction. Usually I also include temporary help, but that has clearly been undergoing some structural changes, so I am temporarily discounting that.

Anyway, here is a closer look.

First, here are goods producing jobs (gold) vs. manufacturing jobs (blue)

Credit conditions in Q2 improved, and are typical of an economy having come *out* of a recession, not going in to one

 – by New Deal democrat

The Senior Loan Officer Survey, the premier quarterly measure of the loose- or tight-ness of bank lending, was published yesterday for Q2. And since lending conditions are a long leading indicator for the economy, and several of the metrics contained in this release have a good and lengthy track record, let’s take a look.

And to cut to the chase, the news is positive.

The first measure that has a lengthy and accurate historical record is the percentage of banks tightening or loosening criteria for making commercial and industrial loans. This is one of those data series where a positive number is