– by New Deal democrat

The Bonddad Blog

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

Long Lead Indicator Remain Unchanged.

Short Lead Indicators show Improvement.

Coincidental Indicators suggest a stable consumer and taxpayer environment for 2024.

There has been a lot of churn in both the short leading and coincident indicators in the past few weeks, but the overall tone is towards a more positive economic environment.

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

– by New Deal democrat

Keep in mind NDd only talks about Real Average Wages in which he does not include supervisor wages or increases. In this regard, readers get a much better perspective of Labor wages and earnings. Since NDd was traveling, we have an additional post this week.

The Bonddad Blog

On Wednesday I was traveling so I didn’t get around to writing about the important CPI release. Let me start my delayed response by updating real wages and payrolls for non-supervisory employees.

Historically, as I have pointed out a number of times, real aggregate payrolls (red in the graph below) have a flawless record over the past 50+ years of peaking in the months ahead of a recession (Note: I show the last 30 years below. From the late

– by New Deal democrat

The Bonddad Blog

New Deal democrat has been on top of the discussions of shelter and/or gasoline prices in February and also in January. He has been on top of these discussions which appear to be making the news moreso in April than earlier in the year. I have linked to the February commentary and there you can find an earlier commentary link. Enjoy the detail of NDd’s.

~~~~~~~~

The one advantage of not reporting on the March CPI results for two days is I’ve had the opportunity to look at more data in depth and mull things over.

And I’ve decided that there really wasn’t much change from the pattern we’ve seen for about the past 9 months. Basically, the month-to-month variation in inflation is a function of the

– by New Deal democrat

The Bonddad Blog

[NOTE: After traveling all day yesterday, I decided to put off any comments on the CPI upside surprise until later today. Short version is that shelter continues its slow decent, gasoline picked up, and services are accelerating as one might expect in a strong economy with the supply chain tailwind having dissipated.]

Initial claims continued to be rangebound this week, declining -11,000 to 211,000. The four week moving average declined -250 to 214,250. With the usual one week delay, continuing claims increased 28,000 to 1.817 million:

On the YoY% basis more important for forecasting purposes, weekly claims were down -4.1%, the four week average down -4.4%, and continuing claims up from last

– by New Deal democrat

I neglected to post this over the weekend, so I will post it now….

Weekly Indicators: The Coincident Indicators Say ‘Soft Landing Is Here.’

– Long Leading Indicators Show Improvement

– Short Leading Indicators are showing mixed results.

– Coincident Indicators suggest a Soft-Landing scenario for 2024.

“My “Weekly Indicators” update is over at Seeking Alpha.

There was lots of churn under the surface last week, but it continues to point towards general improvement.

As usual, clicking over and reading will bring you up to date through last Friday, and reward me with a little lunch money as well.

Also, tomorrow morning the CPI for March will be reported. I’ll be on the road, so I won’t be able to do any in

– by New Deal democrat

The Bonddad Blog

New Deal democrat has been writing and featured at Angry Bear for years now. His economic outlooks have been accurate with few exceptions. As always the US economy is independent of us in the short term. Read on as NDd’s remarks are focusing on a sound labor market.

~~~~~~~~

As I wrote Friday, the news from the employment report was almost all good. Let’s follow up on the most important points today.

First, the thre month average of new jobs added rose to a 12 month high, meaning Q1 of this year was the best quarter since Q1 of last year (dark blue, below, vs. monthly jobs light blue):

And the unemployment rate ticked down 0.1%, meaning that the three month average is 3.8%, or 0.3% higher

In sum, this month’s report was very much consistent with a “soft landing” scenario, which must be regarded as the default outcome at this point. Read-on for the details . . .

– by New Deal democrat

The Bonddad Blog

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; and more specifically: 

Whether there is further deceleration in jobs gains compared with the last 6 month average, vs. a “soft landing” stabilization.
Whether the unemployment rate is neutral or decreasing; or whether there is further weakness. The recent excellent reports in initial claims suggested this rate would decline. After a contra-trend jump

– by New Deal democrat

The Bonddad Blog

Initial claims in the last week rose 9,000 to 221,000, while the four week moving average increased 2,750 to 214,250. With the usual one week lag, continuing claims declined 19,000 to 1.791 million:

On the more important YoY% basis for forecasting purposes, initial claims are up 2.3%, while the four week average is down -4.5%. Continuing claims are still up, by 5.1%:

The important takeaways are that the four week average is still giving a positive signal, while the YoY% change in continuing claims is the lowest increase since the beginning of March 2023. The net is a slightly positive continuing signal for economic expansion.

With tomorrow’s jobs report, including the unemployment rate,

– by New Deal democrat

“it should be no surprise that Biden’s poll numbers have recently improved.”

No big economic news today, so let me update a correlation with information from last Friday’s personal income data. To wit, is consumer sentiment about the economy tied to any real metric? With a lot of noise, it does appear to be correlated.

The University of Michigan has been measuring consumer sentiment for over half a century. The last 45 years are available on FRED. The below graph compares this with real disposable personal income per capita. Basically, what we are looking for is, if people have more (or less) money to spend on things other than necessities, is their feeling about the economy better (or worse)?

Both data sets, but

– by New Deal democrat

The Bonddad Blog

The JOLTS report for February showed stabilization or slight improvement to all but one of its components, generally suggesting, well, stabilization in the overall jobs market.

Starting with the monthly changes, job openings (blue in the graph below), a soft statistic that is polluted by imaginary, permanent, and trolling listings, increased 8,000 from a sharply downwardly revised January number to 8.756 million, over -100,000 lower than where we thought we were in January. Actual hires (red) rose 120,000 from a slightly upwardly revised January to 5.818 million. Voluntary quits (gold) rose 38,000 to 3.484 million from a slightly downwardly revised January. In the below graph, they are all normed to a

– by New Deal democrat

The Bonddad Blog

As usual, the new month’s data starts out with information on manufacturing and construction. To repeat what I have said often recently, these are the two sectors I am paying particular attention to for forecasting purposes this year.

The ISM manufacturing index has been a good leading indicator in that sector for 75 years. The difference over time, especially the last 20 years, is that manufacturing makes up a smaller share of the total US economy. As a result, even though it had been in contraction for the last 16 months, to levels that before 2000 would always have meant recession, that didn’t happen in 2023.

Notice I said “had been.” Because in March, for the first time since late 2022 the total

– by New Deal democrat

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

Regional Manufacturing Declines Again

After several weeks of flirting with full recovery, the remaining regional Fed’s weighed in with their monthly manufacturing indexes, and they all went in the tank again. On the bright side, payroll tax withholding has had its best month in the fiscal year so far.

Also:

Long Leading Indicators Show Gradual Improvement with Bond Yields and mortgage Rates Becoming Neutral.
Short Leading Indicators are turning more positive, with stock pricing soaring with real consumer spending holding up.
Coincidental indicators remain mixed, with some positive and negative trends.
More detail revealed by clicking over and reading will bring

– by New Deal democrat

The Bonddad Blog

Personal income and spending has become one of the two most important monthly reports I follow, because it nets out the impacts of higher interest rates and abating inflation due to the unlinking of the supply chain. To repeat, 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

– by New Deal democrat

The divergence in the trends between initial and continuing claims continued this week, as the former continued their somnolent good news, while the latter had a slightly disconcerting pop.

Initial claims declined -2,000 to 210,000, and the four week average declined -750 to 211,000. On the other hand, with the usual one week delay, continuing claims rose 24,000 to 1.819 million:

The first two are in the same range they have been in for the past 4 to 6 months, while continuing claims are at their highest number but for 2 weeks in the past two years.

On the more important YoY basis for forecasting purposes, initial claims are down -9.5%, and the four week average is down -7.0%, the best YoY comparison in the past

– by New Deal democrat

As I wrote on Monday, the big question for this year is whether the recessionary effects of the Fed rate hikes have just been delayed. Or whether, because the rate hikes have stopped, so has the headwind they normally produce. Watching manufacturing and construction, especially housing construction, is what I expect to supply the answer.

On Monday I focused on housing construction and sales. Since there’s no big economic news today, let’s take a more detailed look at manufacturing.

There are three manufacturing metrics that are “official” components of the index of Leading Economic Indicators: the ISM manufacturing new orders subindex, average weekly hours of manufacturing workers, and capital goods new orders. Note

– by New Deal democrat

As I noted again yesterday, house prices lag home sales, which in turn lag mortgage rates. Yesterday we got the final February reading on sales. This morning we got the final January read on prices, for repeat sales of existing homes.

Last week’s report on existing home sales showed a sharp increase in February, a repeat of the seasonally adjusted sharp increase last February, which was almost completely taken back over the next two months. YoY sales remained down by over 3%, but the median price of an existing home remained higher by 5.7% – very much *unlike* new homes, where sales have firmed, but price remain almost 20% down from their peak.

This morning the FHFA purchase only price index through January declined

– by New Deal democrat

Let’s begin this post by putting why I am watching new home sales in context.

The economy was kept out of recession last year, despite aggressive Fed rate hikes, in large part by commodity price deflation, much or most of which was triggered by the un-kinking of supply chains after the pandemic. That gale force economic tailwind is gone, but the Fed rate hikes remain. So, the big question for this year is whether the effects of the Fed rate hikes have just been delayed, or whether, because the rate hikes have stopped, so has the headwind they normally produce. Watching manufacturing and construction, especially housing construction, is what I expect to supply the answer.

So, to the data, starting with my usual caveat:

New Deal democrats Weekly Indicators for March 18 – 22 at Seeking Alpha

 – by New Deal democrat

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

I look at the high frequency weekly indicators because while they can be very noisy, they provide a good nowcast of the economy, and will telegraph the maintenance or change in the economy well before monthly or quarterly data is available. They are also an excellent way to “mark your beliefs to market.”

With interest rates having come down from their highs of five months ago, I anticipated that the shorter leading indicators might follow suit and improve. This week, there was some more evidence that they have.

A brief Summary as taken from NDd’s Weekly Indicators at Seeking Alpha:

Long

– by New Deal democrat

There’s no big economic news today, but yesterday existing home sales were released. While they have historically constituted up to 90% of the entire market, they have much less economic impact than new home sales, which involve all sorts of construction activity, followed by landscaping, furnishings, and other sales.

Since the Fed started raising rates two years ago, the two markets have gone in entirely different directions. Existing homeowners are largely trapped by new or refinanced mortgages in the 3% range, while builders of new homes can make all sorts of accommodations to entice buyers even with mortgage rates near 7%.

As a result, the existing home market for all intents and purposes froze. Yesterday’s report

– by New Deal democrat

Initial and continuing claims once again continued their recent good streak. 

Bonddad Blog

Initial claims declined -2,000 to 210,000, while the four-week moving average rose 2,500 to 211,250. Continuing claims, with the typical one-week delay, increased 4,000 to 1.807 million:

While these aren’t the 50+ year lows we saw 18 months ago, they’re not far off.

For forecasting purposes, the YoY% change for initial claims is -15.0%, while the four-week average is down -10.4%. Continuing claims are now only up 0.2%:

Needless to say, these strongly indicate no recession in the next few months.

Because jobless claims can be used to forecast the “Sahm rule” for recessions, let’s update that as well.

With last

Bonddad Blog

 – by New Deal democrat

No economic news today, so let me take a look at the supposed killer recent GOP meme that they claim is completely unanswerable:

“Are you better off today than you were four years ago?”

This is based primarily on consumer sentiment reading as well as polling that has consistently shown that most people think that the economy is poor, even though they rate their own situation as doing well. Dan Guild has a model comparing consumer sentiment with Presidential approval ratings. He concludes that Biden will lose re-election unless consumer sentiment as measured by the University of Michigan does not improve to the index level of 82.

As I’ve pointed out in the past, Presidential approval correlates quite

– by New Deal democrat

The Bonddad Blog

Yesterday I wrote of how Fed rate hikes had not translated into a decline in the amount of housing under construction, and without that I did not see how a recession could occur. And in reaction to January’s housing construction report I concluded, “To signify a likely recession, units under construction would have to decline at least -10%, and needless to say, we’re not there. With permits having increased off their bottom, I am not expecting such a 10% decline in construction to materialize.”

This morning’s report for February confirmed that sentiment, as single-family permits, total permits, and housing starts lol rose, with starts making up almost all of their steep, and noisy, decline in January:

– by New Deal democrat

at the Bonddad Blog

Prof. Menzie Chinn at Econbrowser makes the point that the yield curve is still inverted, and has not yet eclipsed the longest previous time between onset of such an inversion and a recession. So he believes the threat of recession is still on the table.

And he’s correct about the yield curve, although it is getting very long in the tooth. In the past half century, the shortest time between a 10 minus 2 year inversion (blue in the graph below) to recession has been 10 months (1980) and the longest 22 months (2007). For the 10 year minus 3 month inversion (red), the shortest time has been 8 months (1980 and 2001) and the longest has been 17 months (2007):

At present the former yield curve has

Originally Published at The Bonddad Blog

by New Deal democrat
Industrial production is an indicator that has faded somewhat in importance in the modern era since China’s accession to normal trading status in 2000. Before that, a downturn in production was an excellent coincident indicator for a general downturn in the economy. Since then there have been several downturns, most importantly during 2015-16, when the broader economy, most notably housing and the consumer, did not follow. That was again the case of the downturn in 2023 – which has not resolved yet.

This morning’s report was another case of good news and bad news. The good news is that industrial production rose 0.1% for the month, and manufacturing production rose 0.8% from

Bonddad Blog

– by New Deal democrat

This morning brought us both good and bad economic news.

The good news was that initial jobless claims continue very low, at 209,000, down -1,000 from last week, while the four week average declined -500 to 208,000. Even better, after major downward revisions, continuing claims rose 17,000 to 1.811 million:

Recall that continuing claims had been reported over 1.900 million, so as I said above, this was major!

On the more important YoY basis for forecasting, initial claims are down -14.3%, the four week average down -7.2%, and continuing claims, which before revisions had been running at about 10% higher YoY, are now only up 2.2%:

This is all very positive for continued good employment

The Bonddad Blog

 – by New Deal democrat

On Monday I examined some series from last Friday’s Household survey in the jobs report, highlighting that they more frequently than not indicated a recession was near or underway. But I concluded by noting that this survey has historically been noisy, and I thought it would be resolved away this time. Specifically, there was strong contrary data from the Establishment survey, backed up by yesterday’s inflation report, to the contrary. Today I’ll examine that, looking at two other series.

Historically, as economic expansions progress and the unemployment rate goes down, average hourly wages for nonsupervisory workers improve at an increasing rate (blue in the graph below). But eventually, inflation

February consumer inflation: the tug of war between gasoline and shelter continues

The Bonddad Blog

 – by New Deal democrat

Last month I described the trend in consumer inflation as an ongoing “tug of war” between energy and housing. Energy (mainly gasoline) peaked in June 2022 and made its low in June 2023, while housing, which peaked in early 2023, has been gradually disinflating since.

That tug of war continued in February. Energy prices firmed, up 2.3% for the month, while shelter, which still increased 0.4% for the month, had its lowest YoY reading since June of 2022. As you may already know, both headline and core inflation rose 0.4% in February. The YoY increases were 3.2% and 3.8% respectively. The former YoY reading is in the

Scenes from the February jobs report: yes, the Household Survey really was recessionary

 – by New Deal democrat

Later this week we get a lot of interesting reports, including CPI tomorrow, retail sales on Thursday, and industrial production on Friday. In the meantime, let’s take a further look at some of the more noteworthy data from Friday’s employment report. In particular, as I wrote then, the Household Survey portion of that report was downright recessionary. Let me show you why.

Let’s start with YoY civilian employment. This is only up 0.4%. (Note: in this graph, as in all of the below graphs except for the last one, I subtract the current value so that it shows exactly at the zero line for easy comparison with previous occasions where

Weekly Indicators for March 4 – 8 at Seeking Alpha

 – by New Deal democrat

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

Generally speaking, there is a demarcation between consumer-oriented data, which is in the main positive, and manufacturing-oriented data, which is mainly weak or negative.

As usual, clicking over and reading will bring you up to the virtual moment on the economy, and reward me with a little lunch money.

New Deal democrats Weekly Indicators for February 12-16 2024 – Angry Bear by New Deal democrat

Tags: 2024, weekly indicators March 3-8

February jobs report: the Household Survey is downright recessionary, while the Establishment Survey is decidedly mixed

 – 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; and more specifically: 

Whether there is further deceleration in jobs gains compared with the last 6 month average, or weather gains have held steady. In February, they held steady.
Whether the unemployment rate is neutral or decreasing; or whether there is further weakness. The recent excellent reports in initial claims suggested this rate would decline. To the contrary, it increased to a new 2 year high; and

Based on the