- by New Deal democrat
First, the Really Bad News: the NAR reported that new home sales cratered, falling from 450K to 300K on an annualized basis. Meanwhile, existing home sales fell slightly from 5.79M to 5.66M on an annualized basis. They will crater in turn next month.
This bad news is only augmented by the MBA mortgage indexes for the week ending June 18. The Market Composite Index declined 5.9%, the Refinance Index declined 7.3% and the seasonally adjusted Purchase Index declined 1.2%, all compared with the previous week. by 1.0 percent. This index is back to its housing crash lows of 2 weeks ago. (Side note: a commenter asked me what I thought of ECRI's long leading index going negative. Since we know that the MBA index is part of ECRI's separate index - and apparently a fairly big part - this tells us that if mortgage applications don't improve, we will have a double-dip, at least for one quarter. It all depends on whether the new home market bounces back from this low, or flatlines.)
Since housing is a pre-eminent leading indicator, the ongoing steep decline mortgage applications is not good at all. For the icing on the cake, Congress told the states and the jobless to go somewhere and die -- the last of 5 indicators of a possible double-dip coming in negative. I agree with Bonddad that this is one of the stupidest things the Congress has ever done.
In other news, the final estimate of 1st quarter GDP was revised lower, from 3.0% to 2.7%. Durable goods orders also fell -1.1% (well within the range of noise in this series), while core capital goods rose by 2.1%, showing that manufacturing is still the engine of the growth we do have. Consumers reported more confidence than at any point since January 2008 in the University of Michigan survey.
Edmund's prelimary estimate of June 2010 new vehicle sales is for a 16.6% increase from lasst year but a 9.5% decrease from May, at 11.2 million vs. 11.6 last month. Jessica Caldwell, the spokesperson for Edmunds.com blamed the decline on March's incentives! I'm a little skeptical of that, given the good performance of May in particular.
Turning to the other weekly indicators:
The ICSC reported same store sales for the week ending June 19 were up 2.5% YoY but down -0.5% WoW as the summer doldrums set in. This series has been up between 2.5% to 3.0% YoY for the last month. Meanwhile, Shoppertrak reported YoY sales increased 4.6% and also up 11.0% WoW. Whether these generally good numbers get translated into an improved Census Bureau Retail Sales reading for the month of June remains to be seen.
Gas increased for the fist time since the end of April, up $.04 to $2.74. The 4 week average of usage is very slightly ahead of last year.The price of a barrel of Oil remained at about $76/barrel as of Friday morning, up less than 10% from a year ago. It remains disconcerting that, despite the Euro remaining near its multiyear lows, Oil has nevertheless made up about 50% of its decline from nearly $90/barrel.
The BLS reported 457,000 new jobless claims this week. I continue to suspect that the continuing elevated level of layoffs consists of construction jobs post expiration of the housing credit, and state and municipal workers. Laid off Census workers may also now be contributing to this total.
Railfax showed an improvement in cyclical and intermodal loads this week, mainainting the advance compared with last year.
Weekly M1 and M2 were both down to 4 week lows. M1 is still up about 3% YoY in real terms, and "real" M2 most likely remains ever so slightly positive.
Finally, let's turn to the good news. First, the American Staffing Association reported that for the week of June 7–13, 2010, temporary and contract employment increased 1.96%, pushing the index up one point to a value of 90. This leading employment index continues to point to good news on that front.
Secondly, the Daily Treasury Statement continues to show strong gains vs. last year, 17 days into June. For the month, this year we have $115.2B paid in withholding taxes compared with $106.3B last year, a gain of $8.9B, or 8.5%. For the last 20 reporting days, withholding taxes for 2010 are $125.4B vs. $118.2B a year ago, a gain of 6.5%. Since this very strong showing in payment of withholding taxes coincides with over 200,000 layoffs of census workers (only about 2/10 of 1% of the workforce), it will be very interesting to say the least how June nonfarm payrolls plays out. A strong upside surprise certainly looks possible.
In summary, we have very bad news in a big leading indicator, but good news in the most important coincident indicator of jobs.
Have a nice weekend!
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8 comments:
Regarding the extended benefits David Resler pointed out something I thought was interesting "Resler estimated that the unemployment rate, 9.7 percent in May, may decline by as much as one percentage point as some workers drop out of the labor force and others accept jobs they might have rejected earlier." This will mean more bad wage growth after 10 years of already bad wage growth.
With residential investment only 2.4% of nominal GDP aren't we giving housing construction too much emphasis on a double dip scenario? Now if we get zero jobs
growth ,a drop in productivity,or
an inflationary spike then we have
ingredients for a double dip.
From the Treasury Statement, total witholding tax revenue was up 3.0% year over year last week. A little of that gain will be from census workers. A little will be from increased wages and salaries. A little will be from job growth. But even about job growth, there are seasonal factors involved heavily with the data. Note that in a normal June there are 400-650k new net jobs created without seasonal adjustments. Improving withholding tax revenues from a year ago may just indicate that more net jobs were added in a month than in the same year before, or from the month before, but after seasonal adjustments the net jobs numbers could still be negative. Right now the continuing claims, expanded claims, emergency claims, and initial claims numbers together are consistent with rather substantial contractions in employment. May numbers were consistent with 200k of job losses, and that was consistent with the payroll data minus census workers and fake birth/death adjustment jobs.
@anon 4:20
All I needed to hear was "fake birth/death adjustment"...you could have made a better point without resorting to internet conspiracies.
Also, many of the things you mentioned that are consistent with substantial contraction were the same in March and April which saw decent private payroll gains. Does that mean this years gains have all been "fake"? What about the unadjusted household survey numbers?
Doesn't it make sense that housing, having just been in a massive speculative bubble, would temporarily lose its status as a leading indicator? House prices need to stay low (and go lower still) until such time as more people are working, and wages increase, so people can afford to buy homes. That's people buying homes, not investors flipping houses. Unemployment needs to go down, and wages need to go up, before house prices can start to go up again.
Is Census still doing significant hiring? I dont know. My guess is if they are, there probably isnt much net gain there, since some of the Census hires in April and May are losing those jobs. So I dont know how much of an impact that is having on withholding taxes.
Consumer Confidence: this is interesting. Not sure how much weight to put on this piece of data, but it may be significant that it is at its highest level in over 2 years despite all the recent problems with housing, European debt, and the oil spill. It may be related to jobs, and that the this month's number, as you say, may surprise in a good way.
Census has begun letting go and will be a drag on Junes number not a contributor.
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