Friday, January 7, 2011

Weekly Indicators: The Disappointment Syndrome edition

- by New Deal democrat

The big news this week, as usual for the first week of the month, was the 103,000 initial estimate of jobs added in December, and the decline of the unemployment rate to 9.4%. Had there not been people leaving the workforce, the unemployment rate still would have declined back down to 9.6%. Interestingly, almost every commentary on this morning's report headlined it as "disappointing" -- even though, only a week ago, expectations were for about 125,000 new jobs to be added. Likely the blowout ADP report so boosted expactations that a 6-digit initial BLS estimate perversely was a letdown.

Meanwhile, under the radar, October was revised up - again - to 210,000 jobs added (initially it was 151,000). Had that been the initial report there would have nearly been dancing in the streets. And remember last month's gut-punch of 39,000? As I predicted, that too was revised up - 31,000 - to 70,000. The odds are very good it will be revised upward again next month, and it is further likely that this month's number will wind up somewhere around 150,000 - which would of course have been in line with estimates and not a "disappointment" at all! But because it will be two months later, it will be all but ignored in the sturm und drang about the first estimate for February jobs, which will be the then-currently "disappointing" number.

In other news, it is worth noting that income and spending were once again up, that residential investment was up, and that the slide in nonresidential investment is slowing considerably.

Now here are this week's other high frequency data:

Gas at the pump went up 2 more cents to $3.07 a gallon last week, and Oil declined back below the $90 a barrel mark to ~$87.60. Gasoline usage was slightly above (1%) last year's levels. This will become a number to watch more closely.

The Mortgage Bankers' Association did reported for the last two weeks of 2010, a net decrease of 1.6% in seasonally adjusted mortgage applications. This number has been generally stable for several months now. Refinancing decreased about 3.3% further for the combined two weeks. Increased mortgage rates are killing refinancing. This is likely to impact consumer spending down the road.

The ICSC reported that same store sales for the week ending new Year's Day increased 3.6% YoY, and increased 0.4% week over week - not too shabby for a week that included a big snowstorm in the northeast. Shoppertrak was stronger, reporting that sales rose 6.1% YoY.

Railfax declined in all areas last week again, for seasonal reasons. It nevertheless remained steady in its comparative improvement over last year. Shipments of waste and scrap metal and auto shipments are no better than last year's levels.

The American Staffing Association Index fell 7.8% to 92 for the week ending December 26, entirely for seasonal reasons. This index will probably decline further for one more week, before it again gives reliable information.

The BLS reported initial jobless claims of 408,000, the third lowest initial estimate since the onset of the recession. The 4 week moving average fell to 411,000. (I will update the scatter graph of initial claims vs. payrolls on Monday).

M1 was up 2% for the week, down -0.4% month over month, and up 7%+ yoY, meaning "Real M1" was up 6%. M2 was up +0.16% for the week, +0.24% month over month, and +3.2% YoY, meaning "Real M2" was up ~2.2%. These numbers have told the same story for months on end. Real M1 is up sharply, Real M2 can't seem to improve above the red zone of +2.5%.

Weekly BAA commercial bond rates fell slightly to 6.07% last week from 6.10%. This compares with a .01% increase in the yields of 10 year treasuries. There is no sign of deflationary fear amound B grade corporate bonds.

The Daily Treasury Statement showed receipts in the first 3 reporting days of January of $39.2 B vs. $40.0 B a year ago, for a loss of $0.1 B. Over the last 20 reporting days, this year shows $164.4 B collected vs. $158.3 B one year ago. With the "temporary" reduction in Social Security payroll taxes of 2% capitulated to - I mean, negotiated - by President Obama in 2011, this metric will have to be approached very carefully to try to at least get a comparative handle on the data.

In summary, with the very real problem of gas prices, the economy continues to pick up steam, but this will be a very long and painful slog.

Have a nice weekend!