– by New Deal democrat

I’ve been writing for the past number of weeks that we were approaching the acid test for the hypothesis that unresolved post-pandemic seasonality explained the sharp increase in jobless claims in the summer. This week we are fully immersed in the 6+ month comparison period where initial claims in the past two years averaged between 200,000-220,000.

So, first the good news: initial claims declined -4,000 to 218,000, to the lowest level in over four months, and putting them in that range. The four-week moving average, which has a few weeks to go before its transition period is over, declined -3,500 to 224,750, also the lowest in four months. Continuing claims, with their typical one-week lag, increased 13,000 to 1.834

– by New Deal democrat

With this morning’s release of new home sales, we have all of the important housing data releases for the month. So let’s integrate that into the overall housing outlook.

Let’s begin with my usual  overview that new home sales are the single most leading metric for the entire sector, but they suffer from the fact that they are extremely volatile and also heavily revised. So it is best to look at them in comparison with single family permits, which are almost as leading and have a much better signal to noise ratio.

August data confirms that caution, as they declined -4.6% on a month over month basis, but from a nearly 2% upward revision to July. On a three month moving average basis, they are at their highest level in

– by New Deal democrat

This morning’s repeat house price indexes from the FHFA and Case Shiller continued to show deceleration in this metric which is very important to home buyers. Specifically, in the three month average through July, U.S. house prices rose 0.2% according to Case Shiller’s national index, and only 0.1% according to the slightly more leading Federal Housing Finance Agency (FHFA) purchase only index, both on a seasonally adjusted basis. For the last three months, the FHFA index has risen a *total* of 0.1% as well. The Case Shiller monthly change is also tied for the lowest in the past 18 months [Note: FRED has not updated the monthly Case Shiller numbers yet. When they do, I’ll update this graph]:

On a YoY basis, the FHFA

– by New Deal democrat

Today, New Deal democrat offers a Big Picture hypothesis.

This is Housing Week, but there is no significant data today, and I’m going to wait for new home sales to be reported on Wednesday before commenting on how existing home sales fit in. In the meantime, let me unpack a Big Picture look.

Since the Fed began actively managing interest rates over 60 years ago, expansions and recessions have followed a typical pattern. The unemployment rate decreases until ultimately inflation increases. Real wages and income ultimately fall behind inflation. At the same time, the Fed hikes interest rates to fend off the higher inflation. Consumers react by cutting back, unemployment increases, and the economy topples into recession.

– by New Deal democrat

There are some economic and financial indicators that aren’t classic leading or lagging indicators. Rather, they are “over-sensitive” in one direction or another. Two good examples are heavy truck sales and the unemployment rate: they are over-sensitive to the downside: they lead going in to recessions, but lag coming out.

The S&P 500 stock market index fits in this category as well. The classic aphorism is “the stock market has predicted 9 of the last 4 recessions.” 

But the converse is not true. With the stellar exception of 1929, when stocks themselves were in a bubble, if the market makes a new high, it’s almost a sure bet that the economy is not in a recession.

Here is the (almost) 100 year graph of the S&P 500

– by New Deal democrat

You may recall that last week I wrote that beginning this week and for the next 6+ months, initial claims would be up against some very tough comparisons from 2023 and would be the ultimate true test of whether there has been unresolved post-pandemic seasonality in the numbers.

Well, this week’s numbers suggest the unresolved seasonality hypothesis is still with us, but with considerable ambiguity.

Initial claims did decline -12,000 to 219,000, the lowest number since May 18. Similarly, the four-week moving average declined -3,500 to 227,500, the lowest since June 8. And continuing claims, with the typical one-week delay, declined -14,000 to 1.829 million, its lowest since June 15:

All well and good. But when we

– by New Deal democrat

You may recall that last week I wrote that beginning this week and for the next 6+ months, initial claims would be up against some very tough comparisons from 2023 and would be the ultimate true test of whether there has been unresolved post-pandemic seasonality in the numbers.

Well, this week’s numbers suggest the unresolved seasonality hypothesis is still with us, but with considerable ambiguity.

Initial claims did decline -12,000 to 219,000, the lowest number since May 18. Similarly, the four-week moving average declined -3,500 to 227,500, the lowest since June 8. And continuing claims, with the typical one-week delay, declined -14,000 to 1.829 million, its lowest since June 15:

All well and good. But when we

– by New Deal democrat

Residential construction permits and starts bounced back from their July Hurricane-Beryl affected decline, but housing units under construction declined below the threshold for hoisting a yellow “recession watch” flag for this sector. At the same time, I continue to suspect that we are rising from lows in the most leading metrics, and no “recession warning” is warranted.

To begin with, the most leading metric, housing permits (gold), rose by 69,000 to 1.475 million, the highest level since March. Single family permits (red), which are just as leading and have very little noise, rose 26,000 to 967,000, the highest since April. Housing starts (blue), which tend to lag permits by a month or two, and are much more noisy, rose

– by New Deal democrat

Residential construction permits and starts bounced back from their July Hurricane-Beryl affected decline, but housing units under construction declined below the threshold for hoisting a yellow “recession watch” flag for this sector. At the same time, I continue to suspect that we are rising from lows in the most leading metrics, and no “recession warning” is warranted.

To begin with, the most leading metric, housing permits (gold), rose by 69,000 to 1.475 million, the highest level since March. Single family permits (red), which are just as leading and have very little noise, rose 26,000 to 967,000, the highest since April. Housing starts (blue), which tend to lag permits by a month or two, and are much more noisy, rose

And now, some good news: industrial and manufacturing production rebounded strongly in August

 – 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. 

As with last month, there were significant downward revisions, but the story this month was a strong rebound.  Total production was reported higher by 0.8%, and

And now, some good news: industrial and manufacturing production rebounded strongly in August

 – 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. 

As with last month, there were significant downward revisions, but the story this month was a strong rebound.  Total production was reported higher by 0.8%, and

– by New Deal democrat

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

The imminent likelihood of a Fed rate cut has continued to drive rates down to new 12-month lows (which is good for things like mortgages in particular). Meanwhile consumer spending as measured weekly is also near 12 month highs, which is also very good.

As usual, clicking over and reading will bring you up to the virtual moment as to all the categories of economic data, and put a little lunch money in my pocket for organizing and presenting it to you.

New Deal democrats Weekly Indicators The Bonddad Blog

New Deal democrats Weekly Indicators for September 2 – 6 2024 – Angry Bear by New Deal democrat

– by New Deal democrat

I’m a little late to this, since FRED took its time updating, but the annual report of median household income for the US was released on Tuesday for 2023. 

This is an important statistic about the well-being of, well, the median American household, so one of my pet peeves is that it is only released annually, and with a 9-month delay at that. So, Tuesday’s release tells us about where an important metric was about 18 months ago. Yeah, that’s a problem in my book.

In any even, median household income rose a hair under 4.0% in 2023, to a level only exceeded – by 0.7% – in 2019:

That compares very favorably with the average annual gain in the previous 10 years which was 0.7%. On an annual basis, it was only

– by New Deal democrat

If residual post-pandemic seasonality has been affecting jobless claims statistics, the real acid test is going to begin next week, as for the next 7+ months, any number higher than 220,000 is almost always going to be higher than one year ago.

In the meantime, for this our last week of the seasonal downtrend, initial jobless claims rose 2,000 to 230,000. The four week moving average rose 750 to 230,750. Continuing claims, with the typical one week delay, rose 5,000 to 1.850 million:

Turning to the more important YoY comparisons for forecasting purposes, initial claims were unchanged, the four week moving average was down -0.8%, and continuing claims were higher by 2.2%:

This YoY comparison for continuing

– by New Deal democrat

August CPI, with the conspicuous exception of shelter, continued to come in tame. And the list of other “problem children” decreased by 1, as only food away from home (restaurants) and transportation services (motor vehicle insurance and repairs) remain.

Let’s get the headlines out of the way:

 – Headline CPI continued increased 0.2% for the month, and decelerated to 2.6% YoY, its best showing since February of 2021. 

 – energy inflation remains non-existent

– there was no inflation at all excluding shelter, as prices were unchanged, and are up 1.1% YoY, the 16th month in a row the YoY change has been below 2.5%.

 – shelter inflation was the only negative surprise, as it remained very elevated, up 0.5% for the

– by New Deal democrat

There’s no big economic news today or tomorrow, so let’s take a more detailed look at the leading indicators from Friday’s jobs report. It turns out, the news wasn’t nearly as bad as the headline employment number.

Let’s start with the negative stuff. The simple story is, manufacturing is in a funk. Employment in manufacturing declined -24,000, which is tied for a two-year low. Meanwhile, trucking employment declined -1,400 (in the graph below, both numbers are normed to 100 as of their post-pandemic peak):

The big decline in trucking last August was the Yellow Trucking bankruptcy. What is interesting is not only that other firms did not pick up any apparent slack, but that employment has declined again back to that

– by New Deal democrat

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

In the wake of yesterday’s weak jobs report, bond yields and mortgage rates declined to 12 months+ lows, commodities declined across the board, stocks sold off sharply, and the 10 years to 2-year Treasury spread un-inverted.

That’s bad news and good news. It’s bad news because it indicates a belief that the economy has weakened substantially, but good news because lower rates will enable increased activity out in the future.

As usual, clicking over and reading will bring you up to the virtual moment as to the economic data, and reward me with a little lunch money for collating and organizing the data for you.

The Bonddad Blog Weekly Indicators

New Deal

– 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