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One more time: bifurcation in the jobs report, as Establishment Survey shows continued jobs growth, while Household Survey comes close to triggering the “Sahm Rule”

19 days ago

– by New Deal democrat

AB: July 3rd, NDd mentioned he would review the comparison between the Household and the Establishment Survey Reports today. He had initially look at the comparison July 3.

In the past few months, my focus has been on whether jobs gains are most consistent with a “soft landing,” i.e., no further deterioration, or whether deceleration is ongoing. In particular: 

Last month I wrote that “There is a common thread in the above answers: the three good results all came from the Establishment Survey, which as we’ll see below, was very strong. The one very poor result came from the Household Survey, which for the third time in four months was frankly recessionary.”

Importantly, since then I wrote at length about the issue

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ISM weighted mfg.+ non-mfg. indexes warrant hoisting a yellow caution flag for the economy

19 days ago

– by New Deal democrat

I’ll spare you the introductory graphs this month, but let me reiterate my opening comments from last month:

I never used to pay much attention to the ISM non-manufacturing report. That is partly because it only has a 20 year history, and partly because it seems to be more coincident than leading, but because manufacturing has faded so much as a share of the US economy, with at least two false recession signal in the past 10 years (2015-16 and 2022-23), there is no choice but to pay more attention.

In particular, it does seem that when we include this as part of a weighted average (75%) along with the ISM manufacturing index (25%), it has generated a much more reliable, and still timely, reading over this Millennium.

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Jobless claims appear to show both signal and post-pandemic seasonality noise

21 days ago

– by New Deal democrat

Since tomorrow is the Big Holiday, initial and continuing claims were reported today. [Also, on a programming note, later this morning I will also post about the ISM non-manufacturing survey once it is published, since it now plays an increased role in my forecasting].

Initial claims rose 4,000 last week to 238,000, while the four week average increased 3,250 to 238,500. Continuing claims, with the usual one week delay, also increased, by 26,000 to 1.858 million, the highest level since the end of November 2021:

I continue to suspect that unresolved post-pandemic seasonality is playing a role in these numbers, since we had a similar spike last year. And on that score, the YoY% changes in initial claims continued to

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Biden’s Crappy Economy . . .

21 days ago

JOLTS report shows stabilization in almost all metrics for May

 – by New Deal democrat

The JOLTS report for May showed most metrics continued to show a slight rebounding from their March lows. The overall picture for now appears to be one of stabilization, consistent with the fabled “soft landing.”

To the data: job openings (blue in the graph below), a soft statistic that is polluted by imaginary, permanent, and trolling listings, rose 221,000 from its downwardly revised post-2020 April low  to 8.140 million (vs. a pre-pandemic peak of 7.594 million). Actual hires (red) rose 141,000 from their second-lowest post-2020 level to 5.756 million (vs. a pre-pandemic peak of 6.0 million). Voluntary quits (gold) rose 7,000 from downwardly revised

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June manufacturing rebounds, May construction spending declines to (only) slightly negative

21 days ago

– by New Deal democrat

As usual, the month starts out with important data on manufacturing and construction. There was bad news and good news. The bad news is that both were negative. The relatively good news is that they were so slightly negative as to be essentially flat.

First, the ISM report on manufacturing declined very slightly – by -0.2 – further to 48.5. This is the third month in a row that this index has been under the equipoise point of 50. On the other hand, the more leading new orders subindex recovered by 3.9 from last month’s dismal 45.4 to 49.3:

While this is a mildly negative report, manufacturing has not been nearly so important in the Millennium as it was in the post-WW2 period, so negative readings, unless *very*

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Real income and spending in May a nice rebound, but watch the caution flags in manufacturing sales and goods spending

25 days ago

– by New Deal democrat

Personal income and spending, in addition to the jobs report, has become one of the most important monthly reports I follow, mainly because I am looking for signs that the contractionary effects of Fed tightening are finally taking effect. To cut to the chase, this month’s report was mainly positive, but had a few cautionary signs. 

To reiterate from last month: because real personal spending on services for the past 50 years has generally risen even during recessions, the more leading components of this report have to do with spending on goods. Additionally, there are several components that form part of the NBER’s “official” toolkit for determining when and whether a recession has begun, including real spending minus

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House prices – especially for existing homes – compared with wages remain near or at all-time highs, so existing homes make up less of the market

27 days ago

– by New Deal democrat

One item I meant to address with this week’s existing and new home sales data was the relative difference in price in the two, and the effect on the relative share of the market. 

I am following up now because yesterday Kevin Drum put up a post yesterday in which he concluded that “The price of a new house is now below its pre-pandemic trendline and heading toward its 2020 level . . . When the Fed finally gets around to lowering interest rates, the real cost of buying a home will be back to normal.“

Not exactly. The graph Kevin puts up only goes back to 2013. Let’s take a longer-term look.

The first graph below divides the median price of a new home by the average weekly earnings on nonsupervisory workers (blue),

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New home sales and prices continue range-bound in May, while new homes *for sale* make a 15 year high (and that’s good!)

28 days ago

– by New Deal democrat

We finished housing data for the month with this morning’s report on new single family home sales and prices. As I usually point out, new home sales are the most leading of the housing construction metrics, but they are noisy and heavily revised. 

That was true again in May. Sales (blue in the second graph below) declined -11.3% m/m to 619,000 annualized, after April was revised sharply higher by +64,000 to 698,000. As usual: very noisy, big revision. 

Two months ago I wrote that “because mortgage rates have risen somewhat in the past few months (from 6.67% to 7.10%, I expect this range in new home sales to continue, with a slight downward bias in the immediate months ahead.” That is what happened in both April a May.

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FHFA and Case Shiller repeat sales indexes show YoY price growth has peaked; slow deceleration in shelter CPI should continue

29 days ago

– by New Deal democrat

This week’s data focuses on house prices and new home sales, and the more important personal income and spending report on Friday.

In the housing data I am looking at any movement towards rebalancing between new and existing home sales. To recapitulate, the big increase in mortgage rates has locked up the existing home market, increasing the share of new houses as to total sales.  With existing homes, we saw inventory increasing. In the repeat sales index, I am looking for signs that price increases might be abating.

This morning both the FHFA and Case Shiller repeat home sales indexes were released through April. Three months ago I wrote that “for the next seven months the comparisons will be against an average 0.7%

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Travelin’ man

June 24, 2024

New Deal democrat at The Bonddad Blog takes a vacation day.

On the road again . . .  

Fortunately, there’s no significant economic news today, so a perfect day to play hooky. See you tomorrow.

Tags: tomorrow

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Snail’s pace of housing market rebalancing, as existing sales remain range bound, and inventory has not increased enough to relieve pricing pressure

June 22, 2024

– by New Deal democrat

Existing home sales have very limited value in economic forecasting, since they are the trade of an existing product rather than indicating growth or contraction in the creation of a new product. Thus my main focus at present on this data is the extent to which it shows – or not – the rebalancing of the housing market.  That’s because, unlike existing homeowners, house builders can vary square footage, amenities, lot sizes, and offer price and/or mortgage incentives to counteract the effect of interest rate hikes.  As a result, new home sales have relatively speaking held up, while existing home sales have declined much more sharply. Conversely, the prices of new homes have moderated relative to that of existing homes, which

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Housing permits and starts the lowest since 2020, units under construction also decline further, but no yellow caution flag yet

June 21, 2024

– by New Deal democrat

I’ve written repeatedly in the past few months that I am paying especial attention to the manufacturing and construction sectors for signs of weakness now that the supply chain tailwind for the economy has ended. At the beginning of this month, one show appeared to have dropped, as the ISM report on manufacturing showed contraction for the second month in a row, declining slightly to 48.7, with the more leading new orders subindex declined sharply to 45.4, the lowest reading since last May:

This morning the construction shoe at least dangled, as housing permits and starts had their most abysmal month since 2020, and units under construction their worst in two years. In fact, housing units under construction – the real

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Jobless claims still positive for forecasting purposes; the unresolved seasonality issue should be resolved shortly

June 20, 2024

– by New Deal democrat

This morning’s jobless claims report continued the uptrend we’ve seen for the past month. But it still looks more likely than not that it is mainly unresolved post-pandemic seasonality. We’ll probably get a more definitive answer to that issue in th next several weeks.

Initial Jobless claims declined 5,000 for the week to 238,000. The 4 week moving average rose 5,500 to a new 9 month high of 232,750. With the typical one week delay, continuing claims rose 15,000 to 1.828 million, a 5 month high:

Note that last year followed a very similar trajectory from lows of just over 200,000 in January, rising through early spring before more sharply increasing in late May and June. But as the below graph shows, on a YoY% basis

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The economy during Biden’s tenure has not been kind to young person’s looking to buy or rent property

June 19, 2024

– by New Deal democrat

I saw a graph within the past few days (which unfortunately I did not make a copy of) indicating Biden’s polling problems are not against Trump per se so much as they are the failure of Biden to consolidate support among young voters, especially voters of color, vs. Trump’s having already consolidated his base support.

One reason, is the huge generational divide in how the Israel/Palestine issue is viewed. But the other is that, for all the ballyhoo about jobs created and the low unemployment rate, in the sector of the most important purchase most people will ever make – housing – the news has been awful, and still is.

Let’s take an example out of thin air with nice round numbers. Let’s say a young couple want to

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Good news on production is overshadowed by the yellow caution flag of flagging real retail sales

June 18, 2024

– by New Deal democrat

There was good news and not so good news in this morning’s two important data releases. 

I’ll start with the good news. Both total industrial production and its manufacturing component increased a sharp 0.9% in May. Even after downward revisions of -0.4% in March and -0.3% in April, both were still up 0.5% compared with where we thought we were one month ago:

The only fly in the ointment is that both are still down, by -0.2% and -0.8% from their respective 2022 peaks.

Total production and manufacturing production are both also up slightly YoY, after being negative YoY for most of 2023:

In the 20th century, negative YoY readings such as were had in 2023 would almost always have meant recession. Since the

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Immigration and the housing market freeze are making the “last mile” of disinflation harder, not the Phillips Curve

June 18, 2024

If you look at Part 1 and Part 2 of The Demographic Outlook: 2024 to 2054 CBO projections. The estimation of Net Immigration varies anywhere from 2.7 to 3.3 million to the US in 2024. In Part 1, of CBO’s current estimates, net immigration is larger than the agency estimated last year, by 0.7 million people in 2021, 1.4 million people in 2022, 1.9 million people in 2023, 2.1 million people in 2024, 1.5 million people in 2025, and 0.7 million people in 2026. There is much going in population growth through immigration.

Indeed, New Deal democrats analysis is supported by the CBO’s calculations which AB presented earlier in June. If I get some time, I will compose a Part III.

~~~~~~~

Immigration and the housing market freeze are making the “last

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Post-pandemic Latin American immigration and the unemployment rate

June 15, 2024

Post-pandemic Latin American immigration and the unemployment rate (and it’s implications for the economy)

 – by New Deal democrat

One week ago, in analyzing the jobs report, I noted the continuing severe disconnect between the Establishment Survey, which continues to show strong growth, and the Household Survey, which has been downright recessionary.

I expanded on that analysis Monday and Tuesday, noting that “At the end of Q4 2022, the Establishment Survey showed gains of 3.0% YoY. By the end of 2023, that had declined to 2.0%. Meanwhile, over the same period the YoY gains in the Household Survey had declined from 2.0% to 1.2%.” Meanwhile, the comprehensive QCEW, showed a YoY deceleration from 2.8% in Q4 2022 to 1.5% at the end of Q4 2023.

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Initial jobless claims now in a clear uptrend – but is it unresolved post-pandemic seasonality?

June 13, 2024

– by New Deal democrat

Initial jobless claims rose significantly last week, up 13,000 to 242,000, the highest level since last August. The four-week moving average rose 4,750 to 227,000, the highest level since last September. And with the usual one-week delay, continuing claims rose 30,000 to 1.820 million, the highest since this January:

There is no doubt at this point that jobless claims are in a significant uptrend. But note from the graph that there was a very similar increase last spring and summer, which is why as I have been reporting on these numbers for the past month that I have cautioned that there may be some unresolved post-pandemic seasonality in play.

This shows up even more clearly when we look at the YoY% changes, those

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May CPI continued to be all about shelter

June 12, 2024

May CPI continued to be all about shelter

 – by New Deal democrat

Consumer prices in May showed no inflation at all, as a decline in gas prices helped the headline number come in unchanged. YoY inflation decelerated -0.1% to 3.3% – continuing in the narrow 3.0%-3.4% range it has been in for the last year.

The bottom line remains that almost the entire inflation “problem” is with shelter, which increased 0.4% again, while the YoY rate continued its snail pace of deceleration, down -0.1% to 5.4% – still the lowest increase in 2 years. 

For the record, here is the month over month change in headline inflation (blue) vs. “core” inflation less food and energy:

More importantly, all items except shelter were unchanged for the month, and

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What would adjusting the Household jobs Survey for immigration driven population growth do?

June 11, 2024

– by New Deal democrat

This is a continuation of my post from yesterday discussing the large divergences between the Household and Establishment jobs surveys.

A big current issue with the Household Survey is whether, by relying on Census estimates, it has substantially underestimated population growth, and in particular immigration-driven growth, in the past two years. Here’s a graph from Wolf Street, the source material of which I have verified, that sums it up:

In the past two years through May, according to the Census Bureau, the US population has grown by a little over 1%. But according to the Congressional Budget Office, it has grown slightly over 2%. That’s over a 3,000,000 difference!

If the Household Survey data were normed to

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The recessionary Household Jobs Survey is not confirmed by other comprehensive hard data

June 11, 2024

– by New Deal democrat

As per usual, the Monday after jobs report Friday does not update any significant data.

So let me return to the deep divergence between the Household and Establishment Surveys in the jobs report. With Friday’s data for May, the two have now diverged 1.9% over the past year, adjusted for the size of the prime working age population:

This big a divergence has only happened previously twice in the 1960s, and one month each during the pandemic and the 1980s. There is clearly a big issue going on. Either the data in one or both series is simply wrong, or the implications of the data in one or both series is incorrect. I spent a fair amount of time during the weekend poking around all sorts of data, and I think I can shed

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New Deal democrats Weekly Indicators for June 3 – 7 2024

June 8, 2024

– by New Deal democrat

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

The stock market was conflicted by yesterday’s jobs report, but the bond market’s verdict was unequivocal: ignore the unemployment rate; it was a strong report which will stay the Fed’s hand from raising rates. 

Meanwhile, coincident economic data in particular continues to look very expansionary. And the long leading indicator of corporate profits turned positive, as Q2 earnings are expected to be sharply higher.

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 it and presenting it to you.

Bonddad Blog

New Deal democrats Weekly Indicators for May 27 – 31

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We have a serious problem: the two job surveys show two completely opposed economies

June 7, 2024

If you have been reading New Deal democrat’s over the weeks, you would already know the economy we have today is not for sure. The FED is holding the keys to a transition to a good economy favoring people or one that will punish people through no fault of their own.

Houston, we have a serious problem: the two job surveys show two completely opposed economies

 – by New Deal democrat

In the past few months, my focus has been on whether jobs gains are most consistent with a “soft landing,” i.e., no further deterioration, or whether deceleration is ongoing. In particular: 

Yesterday I wrote that “I will be most interested to see if declines in manufacturing and housing under construction translate into a stall or even downturn in

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Initial jobless claims now in a confirmed seasonal uptrend, but still positive for the economy

June 6, 2024

– by New Deal democrat

My “quick and dirty” economic status indicator is the stock market (still making new all-time highs) and initial jobless claims, which are also still positive for the economy despite being in an apparent uptrend.

Last week initial claims rose 8,000 to 229,000, their second highest level in the past 9 months. The four-week moving average declined -750 to 222,250, just below its own 9 month high of the week prior. With the usual one week delay, continuing claims rose 2,000 to 1.792 million, right about in the middle of their 10 month range:

Some of this, as I have speculated in the past month, may be some residual post pandemic seasonality that has not been worked out, given last year’s similar increase.

As per

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ISM weighted manufacturing + services indexes signal continued expansion

June 6, 2024

– by New Deal democrat

I never used to pay much attention to the ISM non-manufacturing report. That is partly because it only has a 20 year history, and partly because it seems to be more coincident than leading:

But because manufacturing has faded so much as a share of the US economy, with at least two false recession signal in the past 10 years (2015-16 and 2022-23):

there is no choice but to pay more attention.

In particular, it does seem that when we include this as part of a weighted average (75%) along with the ISM manufacturing index (25%), it has generated a much more reliable, and still timely, reading over this Millennium (note: graph ends last summer):

On Monday, the ISM manufacturing index, and its more leading new

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About the April JOLTS report: hiring and quitting remain very, very good

June 5, 2024

– by New Deal democrat

I’ll write about today’s ISM non-manufacturing report later, but first I wanted to follow up with several more graphs based on yesterday’s JOLTS labor report for April. Basically, I didn’t want to leave the impression that the labor market was in any way sub-par based on those numbers.

With that in mind, below are two graphs. Both show the entire history of hires (red) and quits (gold) normed to 100 as of the yesterday’s report. Both show that, in raw numbers, only 2018-19 were stronger than even yesterday, let alone earlier in the post-pandemic recovery.

In this first graph I also show the civilian labor force (number of people employed + unemployed) (blue), also normed to 100 as of yesterday. Where the blue line is

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April JOLTS report: firming in hires, quits, and a (good) decline in layoffs, while “fictitious” job openings continue their slide

June 4, 2024

– by New Deal democrat

The JOLTS report for April showed most metrics rebounding slightly from March lows, with the exception of the “soft data” job openings. The overall picture is that hiring is weak relative to the past five years, but so are layoffs, and voluntary quits are equally relatively strong, balancing them out.

To wit: job openings (blue in the graph below), a soft statistic that is polluted by imaginary, permanent, and trolling listings, declined -another 296,000, form a downwardly revised March, to yet another three year low of 8.059 million (vs. a pre-pandemic peak of 7.594 million). Actual hires (red) rose 23,000 from an upwardly revised March to 5.640 million (vs. a pre-pandemic peak of 6.0 million). Voluntary quits (gold)

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May new manufacturing orders slide, truck sales rise, construction spending close to unchanged

June 3, 2024

– by New Deal democrat

As usual, the month starts out with important data on manufacturing and construction. The news was mixed this month and weighted more to the downside in my opinion.

First, the ISM report on manufacturing declined again slightly to 48.7. This is the second month in a row that this index has been under the equipoise point of 50. More importantly, the more leading new orders subindex declined sharply to 45.4, the lowest reading since last May:

The silver lining here is that manufacturing is not nearly so important to the overall economy as it was in the 50 years after World War 2, so a negative reading like this – similar to what we had in 2022-23 – does not necessarily mean recession. But it does mean that the ISM

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New Deal democrat Weekly Indicators May 27 – 31 2024

June 1, 2024

Weekly Indicators for May 27 – 31 at Seeking Alpha

 – by New Deal democrat

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

None of the high frequency indicators made any meaningful change this week. The short term outlook continues to be positive. As I wrote yesterday in my summation of the personal income and spending report, the leading goods-producing sectors of manufacturing and construction are most important to my analysis of where the economy goes from here.

As usual, clicking over and reading will bring you up to the virtual moment in re the state of the economy, and bring me a little pocket change in reward for my efforts organizing the material for you.

“New Deal democrat Weekly Indicators May 20-24, 2024,” Angry Bear by

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April personal income and spending: a flat report consistent with either a temporary pause or weakness ahead

May 31, 2024

– by New Deal democrat

Personal income and spending have become one of the two most important monthly reports I follow. This is in large part because the big question this year is whether the contractionary effects of Fed tightening have just been delayed until this year, or whether the fact that there have been no rate hikes since last summer mean that the expansion will strengthen.

Because real personal spending on services for the past 50 years has generally risen even during recessions, the more leading components of this report have to do with spending on goods. Additionally, there are several components that form part of the NBER’s “official” toolkit for determining when and whether a recession has begun, including real spending minus

Read More »