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Strength in housing and cars, oh my!

4 days ago

Strength in housing and cars, oh my!

The two consumer goods which turn down before recessions, and up before recoveries, are houses and motor vehicles, in that order.Since January housing permits and starts came out yesterday, let’s take a look at both.

First, while housing starts retreated slightly from their December levels, the more leading and less volatile permits, and the even less volatile single family permits, both made new 14 year highs. The below graph normalizes all three series to 100 as of yesterday’s report, better to show the long term context:

Starts were not so high as in prior booms, but permits were higher than at virtually all past periods except for the early 1970s and the early 2000s bubble.

That’s really strong,

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You’re reading the right blog: 2021 economy edition

4 days ago

You’re reading the right blog: 2021 economy edition

“You’re reading the right blog” is an old chestnut (for me anyway) that I used to say from time to time to highlight a correct forecast that your (not so?) humble blogger made well in advance of more widely read sources.Well, please bear with me for one more self-pat on the back.

For at least 6 months, I have been saying that the economy was poised to pick up strongly in 2021 once the pandemic loosened its grip. Most recently I repeated that in my short term and long term forecasts for 2021 over at Seeking Alpha.

And this morning, January’s index of leading indicators came in at plus 0.3%, the 9th positive reading in a row:

If the next 3 months are simply unchanged, the YoY comparison

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Jobless claims: huge upward revisions for the second week in a row

7 days ago

Jobless claims: huge upward revisions for the second week in a row

The story this week is the repeated massive upward revisions to last week’s numbers

This week, on a unadjusted basis, new jobless claims declined by 5,702 to 862,351. Seasonally adjusted claims increased by 13,000 to 861,000 (meaning last week’s original number of 793,000 was revised higher by almost 50,000! – the 2nd week in a row for huge upward revisions). The 4 week moving average declined by 3,500 to 833,250. 

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April): 

The “relatively good” news is that, despite the upward revisions, the recent increases seem to have plateaued. At the same time,

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Blockbuster January retail sales presage gains in jobs

7 days ago

Blockbuster January retail sales presage gains in jobs

(Dan here…late posting)

[NOTE: I’ll report separately on industrial production later this morning. Real retail sales is my bellwether for the health of the consumer. And after 3 months of declines, we got a huge upturn in January. Before adjusting for inflation, retail sales jumped 5.3% – not annually, 5.3% in one month! After adjusting for inflation, sales were up 5.0%, to a new all-time high:

This is simply very good news and adds to the evidence. Once the pandemic is under control, the economy is going to accelerate.

I use retail sales as a very good short leading indicator for employment. Because the series is somewhat noisy, I use the YoY% change (which was up 6.0% in real

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Industrial production continues strong growth

8 days ago

Industrial production continues strong growth

If real retail sales (reported on in the prior post) is the best proxy for the health of the consumer, Industrial production, the King of Coincident Indicators, is the same for production. 

And the news there was also very good. Overall production rose 0.9% in December, and the manufacturing component rose 1.0%. As a result, overall production is only -1.9% below its level just before the pandemic hit last February, while manufacturing is only down -0.8% since then:

At the current pace, manufacturing should be *up* YoY in one month, and overall production in two.

Manufacturing, along with housing, has been the best sector of the economy since the bottom of the pandemic recession last April. It

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On the effects of COVID vaccination, Israel is the bellwether

10 days ago

On the effects of COVID vaccination, Israel is the bellwether

 I’m beginning to see some clickbait reports of COVID diagnoses after two doses of the vaccine, together with breathless reporting by some RW’ers and LW’ers that the vaccines are not very effective. I’m here to tell you to beware of these headlines and reports.

For example, here is a report out of Oregon that 4 people were diagnosed with COVID after their second doses of vaccine. Sounds scary, right? But if you read carefully, you see that while the *diagnosis* was made more than 14 days after the 2nd dose of the vaccine. That doesn’t mean that the *infection* occurred more than 14 days after administration of the 2nd dose, which would be more significant. In other words, it is

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Signs that the worst of the pandemic related layoffs may be behind us

10 days ago

Initial and continued jobless claims: signs that the worst of the pandemic related layoffs may be behind us

Some – very relative – good news in unemployment claims this week. It looks like the recent increase in new claims has peaked, while continued claims continue to decline. With new daily infections, still horrible at 100,000/day, only 40% of their 250,000/day peak, and vaccinations slowly increasing near 1.5 million/day, we may have seen the worst.

To today’s data: on an unadjusted basis, new jobless claims declined by 36,354 to 813,145. Seasonally adjusted claims declined by 19,000 to 793,000 (meaning last week’s original number was revised higher by nearly 40,000!). The 4 week moving average also declined by 33,500 to 823,000. 

Here is

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Welcome to the Vaccination Hunger Games

11 days ago

Welcome to the vaccination Hunger Games

That, dear reader, is a slight variation on what my sibling unit said to me when I related the saga of my attempts to schedule a COVID-19 vaccination.

As I have mentioned from time to time, I am an Old Fossil. And, well, the supply shortage of the COVID vaccines has set off a fierce (if anything involving Old Fossils can qualify as “fierce”) competition for very limited appointment slots.

What your helpful neighborhood MegaPharmacy has chosen to do is to open up their website for vaccination appointments pretty much in the middle of the night. If you haven’t made your appointment for a date in the next week by the time of your first morning coffee, you are shut out.

So yesterday I intrepidly opened

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The only critical number is the doses of vaccine administered

21 days ago

January 2021 jobs report: a strong divergence between very weak job gains, but a big drop in unemployment; but the only critical number is the doses of vaccine administered

 For the past several weeks, based on the increase in initial jobless claims, I have warned that the December employment report might have a negative number, or at very least a very weak positive. Once again this was an accurate forecast.

There was a strong divergence between the household and establishment reports this month. And to cut to the chase, the only real critical number is the number of vaccinations administered.

HEADLINES:

49,000 million jobs added, only 5,000 of which were in the private sector and 43,000 in government. The alternate, and more volatile

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The only critical number is the doses of vaccine administered

21 days ago

January 2021 jobs report: a strong divergence between very weak job gains, but a big drop in unemployment; but the only critical number is the doses of vaccine administered

 For the past several weeks, based on the increase in initial jobless claims, I have warned that the December employment report might have a negative number, or at very least a very weak positive. Once again this was an accurate forecast.

There was a strong divergence between the household and establishment reports this month. And to cut to the chase, the only real critical number is the number of vaccinations administered.

HEADLINES:

49,000 million jobs added, only 5,000 of which were in the private sector and 43,000 in government. The alternate, and more volatile

Read More »

Coronavirus dashboard: Groundhog Day

21 days ago

Coronavirus dashboard: Groundhog Day

Today is Groundhog Day, America’s version of the midwinter festival, where people can at least begin to look ahead to the coming of spring in the near future. That’s a good analogy for where we are in the COVID pandemic. Let me start with the ghastly news.First, there have been over 26 MILLION confirmed cases. Since many unsymptomatic cases have gone undiagnosed, it is very likely that over 33 million, or 1 in every 10 Americans, has been infected with the disease:

 Further, in the 10 worst hit States, roughly 1 in every 500 people in the entire population has died. In the case of New Jersey, it’s 1 in 400:

As has been the case throughout the pandemic, panic has bred caution. The total number of new

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Coronavirus dashboard: Groundhog Day

21 days ago

Coronavirus dashboard: Groundhog Day

Today is Groundhog Day, America’s version of the midwinter festival, where people can at least begin to look ahead to the coming of spring in the near future. That’s a good analogy for where we are in the COVID pandemic. Let me start with the ghastly news.First, there have been over 26 MILLION confirmed cases. Since many unsymptomatic cases have gone undiagnosed, it is very likely that over 33 million, or 1 in every 10 Americans, has been infected with the disease:

 

Further, in the 10 worst hit States, roughly 1 in every 500 people in the entire population has died. In the case of New Jersey, it’s 1 in 400:

As has been the case throughout the pandemic, panic has bred caution. The total number of

Read More »

Manufacturing and construction – remain “on fire”

25 days ago

The two most leading sectors of the real economy – manufacturing and construction – remain “on fire”

Data for January 2021 started out this morning with the ISM manufacturing index, while the December laggard of construction spending was also reported. 

While the ISM manufacturing reading declined from 60.7 to 58.7, since 50 is the break-even point, this is still a very strong positive. The even more leading new orders subindex also declined from 67.9 to 61.1, also still a very positive reading:

The manufacturing sector remains very healthy.

Turning to construction, one of my consistent themes in the past few months has been how the housing market is priming the economy for strong growth in 2021 as soon as the pandemic is brought under

Read More »

Manufacturing and construction – remain “on fire”

25 days ago

The two most leading sectors of the real economy – manufacturing and construction – remain “on fire”

Data for January 2021 started out this morning with the ISM manufacturing index, while the December laggard of construction spending was also reported. 

While the ISM manufacturing reading declined from 60.7 to 58.7, since 50 is the break-even point, this is still a very strong positive. The even more leading new orders subindex also declined from 67.9 to 61.1, also still a very positive reading:

The manufacturing sector remains very healthy.

Turning to construction, one of my consistent themes in the past few months has been how the housing market is priming the economy for strong growth in 2021 as soon as the pandemic is brought

Read More »

Not quite enough to start a “double-dip” recession

28 days ago

Real personal spending declines in December, while income rises; not quite enough to start a “double-dip” recession

This morning’s report on personal income and spending for December reversed the pattern we have seen all during the second half of 2020. After rebounding strongly for 6 months, real personal spending (blue in the graph below) declined for the month by -0.2%, and is 3.6% below its February peak. Meanwhile real personal income (red), which has generally declined since April, rose 0.6%, and remains 1.3% higher than it was in February just before the pandemic hit:

The continued strength in income compared with prior to the pandemic has everything to do with the emergency stimulus Congress put in place early on after the pandemic hit.

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Not quite enough to start a “double-dip” recession

28 days ago

Real personal spending declines in December, while income rises; not quite enough to start a “double-dip” recession

This morning’s report on personal income and spending for December reversed the pattern we have seen all during the second half of 2020. After rebounding strongly for 6 months, real personal spending (blue in the graph below) declined for the month by -0.2%, and is 3.6% below its February peak. Meanwhile real personal income (red), which has generally declined since April, rose 0.6%, and remains 1.3% higher than it was in February just before the pandemic hit:

The continued strength in income compared with prior to the pandemic has everything to do with the emergency stimulus Congress put in place early on after the pandemic hit.

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Upward trend confirmed in new jobless claims

January 28, 2021

Upward trend confirmed in new jobless claims

On a unadjusted basis, new jobless claims declined by 101,498 to 873,966. Seasonally adjusted claims also declined by 67,000 to 847,000. The 4 week moving average, however, rose by 16,250 to 868,000. Since the 4 week average has risen above 850,000, and weekly claims were above 900,000 for several weeks in a row, jobless claims have finally met my criteria confirming a change to an upward trend.

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April): 

Because of the huge swings caused by the scale of the pandemic – typically

claims only vary by 20,000 or less from week to week, but since the start of the pandemic,

Read More »

Upward trend confirmed in new jobless claims

January 28, 2021

Upward trend confirmed in new jobless claims

On a unadjusted basis, new jobless claims declined by 101,498 to 873,966. Seasonally adjusted claims also declined by 67,000 to 847,000. The 4 week moving average, however, rose by 16,250 to 868,000. Since the 4 week average has risen above 850,000, and weekly claims were above 900,000 for several weeks in a row, jobless claims have finally met my criteria confirming a change to an upward trend.

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April): 

Because of the huge swings caused by the scale of the pandemic – typically

claims only vary by 20,000 or less from week to week, but since the start of the pandemic,

Read More »

Coronavirus dashboard for January 25: a vaccination race against time vs. the new mutations

January 27, 2021

Coronavirus dashboard for January 25: a vaccination race against time vs. the new mutations

 All of the significant economic data is backloaded this week, onto Thursday and Friday. So don’t be surprised if I take a day off between now and then.In the meantime, here is a Coronavirus update.

First things first: the most ominous thing I’ve read about the new coronavirus mutations comes from Dr. Eric Fiegl-Ding, who says, quite bluntly, “We need to switch to KN95, KF94, or European FFP2 masks ASAP. The new B117 COVID 19 is just too contagious. Cloth isn’t enough anymore folks.”

Everyone needs to take heed of that advice. There’s also evidence that the B117 variant infects people with much higher viral loads (I.e., copies of the virus at the

Read More »

Coronavirus dashboard for January 25: a vaccination race against time vs. the new mutations

January 27, 2021

Coronavirus dashboard for January 25: a vaccination race against time vs. the new mutations

 All of the significant economic data is backloaded this week, onto Thursday and Friday. So don’t be surprised if I take a day off between now and then.In the meantime, here is a Coronavirus update.

First things first: the most ominous thing I’ve read about the new coronavirus mutations comes from Dr. Eric Fiegl-Ding, who says, quite bluntly, “We need to switch to KN95, KF94, or European FFP2 masks ASAP. The new B117 COVID 19 is just too contagious. Cloth isn’t enough anymore folks.”

Everyone needs to take heed of that advice. There’s also evidence that the B117 variant infects people with much higher viral loads (I.e., copies of the virus at the

Read More »

A detailed, updated look at the housing market

January 25, 2021

A detailed, updated look at the housing market

Existing home sales for December were reported this morning at 6.76 million annualized, just below the October 10 Year+ high of 6.86 million.

Although existing home sales are about 90% of the entire housing market, they are less important economically than new housing construction, which has multiplier effects which last 12-24 months.

But right now both existing home sales and new home construction are telling the same story: a market that is turning in its best performance since before the Great Recession. I have updated my detailed look at this very important long leading sector in an article over at Seeking Alpha.

Clicking over and reading will bring you thoroughly up to date about this

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Initial jobless claims: still elevated compared with several months ago, another negative jobs report for January a possibility

January 23, 2021

Initial jobless claims: still elevated compared with several months ago, another negative jobs report for January a possibility

Initial jobless claims this week came within a hair of meeting my criteria for a change to an upward trend. 

On a unadjusted basis, new jobless claims declined by 151,303 to 960,668. Seasonally adjusted claims also declined by 26,000 to 900,000 (last week’s numbers were also adjusted downward from 965,000 to 926,000). The 4 week moving average, however, rose by 23,500 to 848,000.

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April): 

There is now a 2 1/2 month trend of YoY% increases in initial claims. Further, by rising to  900,000 or

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NFIB small business optimism vs. reality

January 23, 2021

(Better late than never…Dan) This is a really slow news week – on the economy!  My retrospective on the Trump Presidency is nearly complete and will be published tomorrow morning.In the meantime, here is a brief note on the Small Business Optimism index which was updated for December last week, showing a steep decline across the board. Here it is:

What happened? Was there some earthshaking economic news? A hidden cataclysm of supply or demand?

Hardly.

What happened is that it became apparent to the small businessmen who primarily make up the National Federation of Independent Business that Biden had been elected to the Presidency.

As has been noted from time to time, Trump’s core constituency is not the white working class, but rather

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Good news (industrial production) and bad news (retail sales)

January 19, 2021

Good news (industrial production) and bad news (retail sales)

This morning’s two reports on industrial production and retail sales for December were a case of good news and bad news.

Let’s do the good news first. Industrial production, the King of Coincident Indicators, rose 1.6% in December. The manufacturing component rose by 1.0%. Needless to say, these are strong positive numbers. As a result, overall production is only -3.3% below its February level, while manufacturing is only down -2.4% since February:

Manufacturing has consistently been one of the biggest bright spots in the economy ever since April. 

Now on to the bad news.

Nominal retail sales declined -1.0% in December. Excluding the food services sector which has been

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“insurrections, treason, and the pardon power”

January 18, 2021

The Federalist Papers #74 on insurrections, treason, and the pardon power: an argument that such pardons would be invalid as “arising in a case of impeachment”

The Insurrectionists from January 6 are already asking Trump for pardons. Probably the only thing that would hold him back from doing so is his innate selfishness: what would be the benefit to *him*?

The thought that Trump could issue Got Out of Jail Free cards to the very people he incited to riot is mind boggling.

But it’s at least possible that he might not have the right to do so. 

Article III, Section 2 of the Constitution provides that “The President … shall have the power to grant] reprieves and pardons for offenses against the United States, EXCEPT IN CASES OF

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Jobless claims highest in three months – but seasonality still playing a huge role

January 15, 2021

Jobless claims highest in three months – but seasonality still playing a huge role

On a unadjusted basis, new jobless claims rose by 231,335 to 1,151,015. Seasonally adjusted claims also rose by 181,000 to 965,000. The 4 week moving average rose by 18,250 to 834,250.

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April): 

There is now a 2+ month trend of YoY% increases in initial claims. Further, by rising to over 900,000, seasonally adjusted claims hit one of my two markers for a fundamental change of trend. But the 4 week average, which is still under 850,000, did not.

For the last couple of months, I have been cautioning that the holiday season plays havoc

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Scenes from the December jobs report

January 15, 2021

Scenes from the December jobs report

Friday’s December jobs report saw the first decline in employment since the lockdowns of March and April. Let’s take a closer look.As I pointed out Friday, the losses were concentrated in the food and dining (restaurant) and amusement and recreation sectors, both of which are shown below normalized to 100 as of February:

The two sectors are down 20% and 30% from their February peaks.By contrast, the leading job sectors of manufacturing, residential and overall construction, and temporary help positions all continued with gains, and are close to if not completely recovered from their pandemic losses. Below I show these YoY in two time periods for easier comparison (note two of the series did not begin until

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Programming note

January 14, 2021

By New Deal democrat

Programming note

 

Four year ago I wrote a valedictory piece about the Obama Administration, and separately wrote of my fears of what the Trump Administration would wreak.

Needless to say, especially in light of events of the past week, I intend to do the same retrospective as to Trump and the current state of the GOP and the Republic. Much of what I have to say is in agreement with disparate threads I have read on Twitter, but I want to weave those strands together into one cohesive piece. Hint: I keep thinking about old episodes of Supernanny, where a toddler’s behavior was allowed to get worse and worse without consequence. The longer it went on, the more forceful and resolute the parents’ response ultimately had

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November JOLTS report shows the renewed impact of the pandemic, partial lockdowns

January 13, 2021

November JOLTS report shows the renewed impact of the pandemic, partial lockdowns

This morning’s JOLTS report for November (remember – a month in which there were total job gains) showed a jobs market recovery that at least paused due to the increasing effects of the out of control pandemic. Hires were up (good), while quits were unchanged, openings declined (bad) and layoffs and discharges rose (bad).

While the JOLTS data is a deep dive into the dynamics of the labor market, since it only dates from 2001, there are only 2 previous recoveries with which to compare the present. Nevertheless it is worthwhile to make the comparison.

In the two past recoveries:

first, layoffs declinedsecond, hiring rosethird, job openings rose and voluntary

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November construction spending confirms building surge

January 9, 2021

November construction spending confirms building surge

One of my consistent themes in the past few months has been how the housing market is priming the economy for strong growth in 2021 as soon as the pandemic is brought under control. In that vein, November construction spending surged, confirming what we have already been seeing in housing permits and starts.

First of all, here are both total and residential construction spending for the past 15+ years:

Note that in raw, non-inflation-adjusted terms, both are close to their all-time highs, and definitely at 10+ year highs.

Of the two, residential construction is more important because it is a more leading, indicator. Commercial and government construction, which is included in

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