February existing home sales confirm prices have declined, but bottom in sales and construction may be in

 – by New Deal democrat

There were only two noteworthy takeaways from the February existing home sales report:

(1) like mortgage applications, permits, and starts, existing home sales responded to lower mortgage rates (a decline from just over 7% to just above 6% between last October and January):

(2) As usual, price changes lag sales; for the first time since the pandemic, the median house price actually declined -0.2% YoY from $363,700 to $363,000 (remember: this data is not seasonally adjusted):

This simply confirms the data we have gotten from the more important new home construction data. I do think there is some good news

Average and aggregate nonsupervisory wages for February 2023

 – by New Deal democrat

There’s no significant economic news today, so let’s update a couple of income indicators important to average American working households. Namely, because we now have the inflation report for February as well as payrolls, we can update average and aggregate nonsupervisory wages.

Average hourly earnings for nonsupervisory employees increased 0.5% on a nominal basis in February, tied for the strongest reading since last June. But since consumer prices increased 0.4%, real average hourly wages only increased 0.1%:

The good news, as indicated above, is that this is tied for the highest reading since last April (as I’ve noted many times, a $2 decline in gas

Industrial production ‘meh’ in February, but down sharply since last summer; real manufacturing and trade sales forecast to decline in Febuary

 – by New Deal democrat

Industrial production was unchanged for the month of February, while manufacturing production rose +0.1%. But the bad news is that both were revised lower for the past 5 months, as shown on the two graphs below:

As a result, industrial production (blue below) is now -1.8% below its September peak, while manufacturing production (red) is -2.0% below its peak from last April:

With the exception of 1966, before 1990 such declines would always have been recessionary. Since then, because manufacturing has shrunk so much as a percentage of the overall economy, both in 2016 and 2019

Housing construction: good news and bad news

 – by New Deal democrat

This morning’s report on housing construction contained both good news and bad news.

First, the good news. Both permits (gold in the graph below) and starts (blue) increased, the former by 185,000 on an annualized rate, the latter by 129,000:

It is very possible that January’s rate of 1.339 million permits annualized and 1.321 starts will be the low for this cycle. That’s because mortgage interest rates (red, inverted), which along with Treasury yields frequently peak before the Fed finishes hiking interest rates, may very well have done so for this cycle at 7.08% in late October and early November. They declined to 6.09% by early February. As is usual, because permits

Jobless claims: nobody is (still!) getting laid off

 – by New Deal democrat

Initial jobless claims declined -20,000 this week, back below 200,000 to 192,000. The 4 week average declined -750 to 196,500. Continuing claims, delayed one week, declined -29,000 to 1.684 million:

For all intents and purposes, it is still the case that “nobody” is getting laid off.

As the above graph shows, we are now almost one year past the lowest level of new jobless claims in history. Needless to say, this affects the YoY comparisons, which are now higher:

On a weekly basis, new jobless claims are 8.5% higher than one year ago, and continuing claims are 5.6% higher. The much more important 4 week average of new claims is 4.1% higher.

None of this is

Forecast: real manufacturing and trade sales are likely to set a new record for January

 – by New Deal democrat

One of the four monthly series of coincident indicators most relied upon by the NBER in determining whether the economy is in expansion or recession is Real Manufacturing and Trade Sales. A significant problem with it is that reporting of the data seriously lags. For example, the result for January will only be reported more than two weeks from now on March 31, because the series relies upon the PCE deflator, which will only be reported then.

Fortunately, I have been able to decipher two methods to make earlier estimates of the series, one with less than a one month delay (which isn’t available yet for February) and I will post on

Properly measured, consumer prices have been in *deflation* since last June

 – by New Deal democrat

The majority wisdom is that the Fed is going to go ahead and raise interest rates again when it meets next week. I have been arguing for months that the data has not supported interest rate hikes. As of this morning, I am officially taking the position that, properly measured, inflation has been conquered, and the US economy has actually had price *declines* since last June.

The reason, as I have been pounding on for over a year, is that the shelter component of official inflation, which is 1/3rd of the total, and 40% of the “core” measure, badly lags the real data – as in, by a year or more. So let’s start with an updated YoY graph of the

Thoughts on Silicon Valley Bank: Why the FDIC plan isn’t (but also is) a bailout; and why systemic risk remains

 – by New Deal democrat

There’s no big economic data being released today. Which I guess is fortunate, since we had a little kerfuffle over the weekend. Which may or may not be over. Herewith hopefully some commentary to put this in terms non-finance people can understand.

The really important issue for most people outside of the industry is whether or not this amounts to a taxpayer-funded bailout of wealthy VC’s and their clients. Answer: it doesn’t, but it kind of does.

First, let’s talk about why this was not a bailout. In 2008, when Wall Street investment banks were in crisis, neither shareholders nor bondholders nor senior

February jobs report: the decelerating trend resumes

  – by New Deal democrat

As I’ve written several times this week, my focus on this report was on whether manufacturing and residential construction jobs turned negative or not, whether temporary jobs continued on their downward trajectory, and whether the deceleration apparent in job growth would reappear after the blockbuster January report.

Deceleration absolutely reasserted itself:

and manufacturing jobs appear to have rolled over, while construction and temporary jobs held up:

Although here too the decelerating trend is apparent. 

Here’s my in depth synopsis.

HEADLINES:

311,000 jobs added. Private sector jobs increased 265,000. Government jobs increased by 46,000. The

January JOLTS report consistent with a softening, but still very strong, labor market

 – by New Deal democrat

This morning’s JOLTS report for January, unlike the recent payrolls report, generally showed further softening in the labor market.

While hires (red in the graph below, normed to a value of 100 as of February 2020) increased 121,000, quits (gold) declined 207,000, and openings (blue) declined 410,000:

The downward trend in quits is most noticeable. Since employees voluntarily quit more, the more confident they are about new job prospects, this is a clear sign of *relative* weakening. The increase in hires is more a flattening of the trend, which had been decelerating. The trend in openings does appear to be softer, although given

Coronavirus dashboard: the first year of COVID endemicity

 – by New Deal democrat

As I indicated back in January, I don’t plan on any regular COVID dashboard updates unless something noteworthy has occurred. Since we are now 1 year into endemicity, this is a good time to look back and see what that means.

The huge initial Omicron spike started in late November 2021 and ended early in March 2022. Since March 1 of 2022, here is the range of confirmed cases daily:

Confirmed cases have varied between a low of 27,400 last April 3 to a high of 140,000 on July 17. The winter Holiday wave only reached a peak of 76,800. As of yesterday, cases were 37,000. 

But with the advent of home testing over a year ago, fewer and fewer people are having

The Fed still seems determined to bring about a recession

 – by New Deal democrat

As I wrote on Saturday, several coincident indicators have stabilized in the past several months (for example, Redbook consumer sales, which has been at roughly 5% YoY for 8 weeks; and payroll tax withholding, which was only up 1.2% YoY for the last 4 months of 2022, but is up 4.7% YoY for the first 9 weeks of this year). This has led to increased speculation that the US will avoid an economic downturn, and maybe even avoid a slowdown altogether.

But unless the Fed changes its perspective, I find it difficult to see that happening.

First of all, Fed Chairman Jerome Powell as well as other Board members have expressed concern about the continued elevated level

Real final sales and inventories as portents of recession

 – by New Deal democrat

As I have mentioned previously from time to time, I read people who have interesting things to say even if their worldview is very different from mine. One such person is Mike Shedlock, a/k/a Mish. He’s an aggressive libertarian and has a long track record as a Doomer, but he frequently parses some thought-provoking economic data. It makes me think, even if I ultimately disagree, and that’s a good thing.

As you might imagine, for the past year he’s been talking about an ongoing recession. Not so noteworthy. But about a week ago he parsed Q4 GDP and pointed out that, when you take out inventories, real final sales and in particular real final sales to domestic

Jobless claims: the situation remains, ‘all system go’

 – by New Deal democrat

Initial jobless claims declined -2,000 last week to 190,000, while the 4 week moving average increased 1,750 to 193,000. Continuing claims, with a one week delay, increased 5,000 to 1,655,000. All of these remain excellent numbers:

To repeat my meme over the past year, virtually nobody is getting laid off. It’s almost impossible to have an economic downturn with that kind of evidence.

To wit, on a YoY basis, while the past one week and continuing claims are both slightly higher, the crucially important 4 week average remains lower:

Unless and until the 4-week average goes higher YoY by at least 10%, this series is not even worthy of a yellow flag. For now,

February manufacturing and January construction continue negative, while auto sales improve

 – by New Deal democrat

We started out yet another month of data with bad news in two leading sectors.

The ISM manufacturing index has been showing contraction since November, and its more leading new orders subindex since September. And did so again in February, with the total index increasing slightly to 47.7, and the new orders index rebounding from a horrible 42.5 to 47.0. But because both of these numbers are below 50, they still show contraction:

In the past, the ISM has said that numbers below 48 have been most consistent with recession. 

Meanwhile, construction spending for January also declined by -0.1%, and the more leading private

Housing prices continue to come down – like a feather

 – by New Deal democrat

As I’ve repeated many times in the past 10 years, in housing prices follow sales with a lag. Housing permits and starts both peaked early in 2022, and house prices followed during the summer.

This morning the FHFA and Case Shiller house price indexes for December showed continued declines both on a monthly and YoY basis, continuing to presage a similar decline in CPI for shelter by the end of this year.

Here is what both look like normed to 100 as of their June peaks:

The FHFA index is down -0.9% since then, and the Case Shiller national index down -2.7%.

Notice that between June 2020 and June 2022, both indexed increased by an average of over 1% a month,

Durable goods orders: more deceleration, still no recession

 – by New Deal democrat

I normally don’t pay too much attention to durable goods orders. That’s because they are very noisy. They don’t always turn down in advance of a recession (see 2007-08), although they may at least stall, and there are a number of false positives as well (see 2016) as shown in the graph below showing up until the pandemic:

But in 2022 they were one of the last short leading indicators to be positive. As late as November of last year I still rated them as a “positive.”

That has changed somewhat in the past several months. With the exception of December, durable goods orders have made no progress at all since last June, and while “core” durable goods orders

Weekly Indicators for February 20 – 24 at Seeking Alpha

 – by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

While several of the important coincident indicators continue to hover just above neutrality, importantly neither long term Treasury yields nor corporate bond yields nor mortgage rates have made a new high in the past 4 months, and historically that has been significant.

As usual, clicking over and reading will bring you up to the virtual moment as to the nowcast and the forecast for the economy, but reward me a little bit for putting it all together for you.

New Deal democrat’s Weekly Indicators February 13 – 17, Angry Bear, New Deal democrat

New home sales: a bright spot in the housing indicators

 – by New Deal democrat

New home sales are very noisy, and are heavily revised, which is why I pay more attention to single family housing permits. But they do have one important value: they are frequently the first housing indicator to turn at both tops and bottoms.

And it increasingly looks like new home sales have already made their bottom for this cycle. In January they rose a 45,000 annualized rate to 670,000. This is their second strong monthly advance in a row, and 127,000 above their low in July (blue in the graph below). This is largely a function of the lower mortgage rates we have seen in the past several months, shown in red, inverted, below:

Since mortgage rates have

Strong upward revisions push real personal income to new highs, put 2 important coincident indicators firmly in expansion territory

 – by New Deal democrat

Almost all of the news in this morning’s release for personal income and spending for January was positive.

Nominally, personal income rose +0.6% and personal spending rose 1.8%. The deflator also rose +0.6%, making real personal income close to unchanged, and real spending (after rounding) up 1.1%. 

But that wasn’t the biggest news. There were major upward revisions to real personal income in the past 6 months. The below graphs show the former values (blue) vs. the current revisions (red):

What had looked like moderate growth in real personal income suddenly looks very strong (once

The “gold standard” of jobs data shows a strong rebound in Q3 2022

 – by New Deal democrat

The preliminary estimate for the Q3 2022 QCEW was released yesterday. Although the monthly nonfarm payrolls report gets all the glory, it is only a survey. The QCEW is an actual census of the roughly 95% of all businesses paying unemployment insurance. It is reported with about a 6 month delay, and is not seasonally adjusted.

The bottom line is while Q2 was very weak, it was followed by a strong Q3. My take is essentially that shown on the dot plot below for the Philadelphia Fed, via Prof. Menzie Chinn at Econbrowser:

Just “how” weak and strong they are depends entirely on how one seasonally adjusts. Generally speaking, June was extremely weak, only

Initial claims continue recent excellent streak

 – by New Deal democrat

Initial jobless claims continued their recent excellent reports, as there were only 192,000 new claims, down -3,000 from the week before, and close to their 50+ year lows of last March and April. The 4 week average increased 1,500 to 191,250, still an excellent number. Continuing claims, with a one week delay, declined -37,000 to 1,654,000, still in their slightly elevated range that started in November:

On a YoY basis, contnuing claims were slightly higher, while initial claims were slightly lower:

Remember, I do not believe there is any recession signal until initial claims on a 4 week moving average basis are at least 10% higher YoY.

The almost complete lack of

Consumption leads jobs: a comprehensive update

 – by New Deal democrat

Yesterday I encountered a post on Seeking Alpha from the chief economist for a major trading platform, who probably makes in a week the amount I pocket in an entire year from my writing, who wrote:

“if one loses one’s job, one likely spends less. If one witnesses colleagues lose their jobs, one may cut back on spending. If extended family members lose their jobs, spending may be reduced.”

Here’s their accompanying graph:

Note the heading: “consumption is still growing because jobs are expanding” This is an argument I encountered many times during the Great Recession: as more an more jobs were lost, it was a sure thing that people would spend less and less.

The long leading forecast through year end 2023 at Seeking Alpha

 – by New Deal democrat

Normally in late January I update my top-line long leading forecast for the entire year. A little late this year, it is now up at Seeking Alpha.

If you follow my updates on the leading indicators, the result isn’t very surprising. The twist is that recessions are almost always much shorter than expansions, so the long leading indicators turn up on a shorter time span than they turn down in advance of recessions.

Anyway, clicking over and reading will tell you how I expect the trend for the remainder of this year to unfold, and bring me a little reward for my efforts.

My long leading forecast through the end of 2022, Angry Bear, New Deal democrat.

Existing home sales and prices decline further, BUT . . .

 – by New Deal democrat

Even though existing home sales 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 January they continued to confirm that sales have continued to decline, and prices, which follow sales with a lag, have joined in.

January sales declined another -0.7% to 4.2 million annualized, a -37% YoY decline from a peak of 6.34M one year ago:

The median price of an existing home, which isn’t seasonally adjusted, also declined further to $359,000, up only 1.3% YoY from 2022’s $354,300. Since my rule of thumb for non-seasonally adjusted data is that the trend has turned when the YoY

Weekly Indicators for February 13 – 17 at Seeking Alpha

 – by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

There are two trends percolating under the surface. One trend is the continued slow decaying of growth in the coincident indicators. The other is the slow move towards turning neutral or positive among some of the long and even short leading indicators.

No forecast at this point, but I am beginning to suspect that, while there will be a recession, it will be relatively short and relatively mild.

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

New Deal democrat’s weekly indicators February 6 – 10, Angry Bear, New Deal democrat

Real average wages and real aggregate payrolls for nonsupervisory workers through January

 – by New Deal democrat

With no new data today, to close out the week let’s update real average wages and aggregate payrolls for nonsupervisory workers. This is the best way, based on monthly data, to see how average Americans are doing financially.

While average nonsupervisory wages increased 0.2% in January, consumer inflation increased more, at 0.5%, meaning that real average hourly wages decreased -0.3%. They are down -2.1% since December 2020:

Much of the decline in real wages has had to do with the big increase in gas prices during the first half of 2022.

If real hourly wages have declined, that has been made up by the powerful increase in

Slight decline in housing construction: the negative actual economic impact has not yet begun

 – by New Deal democrat

Housing permits (gold) increased slightly in January from their December lows, while the more volatile housing starts (blue) declined again. The much less volatile single family permits (red, right scale) also declined again to a new post-pandemic low:

This is a very important long leading indicator, and shows that coming misery in the economy due to housing sector is nowhere near bottoming out.

But, as I wrote on Monday, the most important metric in the entire economy right now is probably housing units under construction, which is the “real” economic impact of the industry. Here there was a very slight (less than 1%)

Initial claims: nobody is getting laid off, but slight weakness in continuing claims compared with 2022

 – by New Deal democrat

Initial claims remained below 200,000 at 195,000, while the 4 week average increased very slightly to 189,500. Continuing claims increased to 1,696,000, the third highest number in over a year:

Holiday seasonality has ended. It continues to be the case that almost nobody is getting laid off. Very slightly on the other hand, the relatively elevated number of continuing claims suggests a little weakness compared with 2022.

Tags: 2023, Claims, layoffs

Despite sharp rebounds in retail sales and manufacturing production, both metrics are on the cusp of being recessionary

 – by New Deal democrat

Retail sales for January rose strongly in January,up 30% in nominal terms and up 2.4% after accounting for inflation. While that looks great, it only reverses the two downward readings of November and December, and is similar to the reversal last January. This makes me think that there is unresolved Holiday seasonality at work. In any event, real retail sales remain -0.8% below their April 2022 peak:

Further, as I’ve noted many times, real retail sales going negative YoY, at least for more than one or two months, has been an excellent harbinger of incoming recession. In fact, the relationship goes