- by New Deal democrat
The week's headline numbers were the 216,000 jobs added in March and the continued decline in the unemployment rate to 8.8%. As usual, I'll have more to say in the coming week, including at least one finding that contradicts the conventional wisdom. For now, we can just note that it was a good number - just not good enough for all the ground we have to make up. Other monthly numbers continued to show an economy that is slowing due to the choke collar of high Oil prices. The manufacturing workweek declined (-.1), as did new factory orders. There are two more of the 10 leading indicators that have turned down. Residential and non-residential spending also declined. New cars sold in March also declined slightly from February, although at 13.1 million vehicles, this is still the second best showing in over two years. On the plus side, manufacturing as measured by the Chicago PMI and the ISM continued on a tear. BUT the leading components of that index - new orders and vendor deliveries - declined. Vendor deliveries declined sharply - the third of the 10 leading indicators to show a decline this week.
Did I mention that Oil was like a choke collar constricting economic growth?
Turning now to the high-frequency weekly indicators:
The BLS reported that Initial jobless claims last week were 388,000. The 4 week average is 394,250. This is the sixth week in a row that this number has been initially reported below 400,000. On the other hand, this series has not made a new low in the last month. Will the downward momentum continue or has it stalled?
On the other hand, Oil was trading at about $107.94 a barrel Friday, the fourth full week it has been above $100. It remains at a level above 4% of GDP. I believe we have started to see the economic damage from that shock. Gas at the pump increased to $3.60 a gallon. Gasoline usage at 8866 M gallons was 2% lower than last year. As I expected, this YoY comparison is deteriorating and has now turned negative.
Railfax was up 3.5% YoY. Baseline traffic for the second week is no higher than last year's levels, and both cyclical and intermodal traffic are only slightly higher. Waste materials continued below last year's levels (this may be fallout from municipal funding cuts for recycling). Shipments of motor vehicles remained the bright spot, continuing to improve YoY. With the exception of motor vehicles, rail freight is now also signalling a significant slowdown (but not an outright reversal).
The Mortgage Bankers' Association reported a decrease of 1.7% in seasonally adjusted mortgage applications last week. This series has meandered generally in a flat range since last June. Refinancing decreased 10.1%, and remains near its lows since last July. The silver lining is that neither series has hit a new low in almost 9 months.
The American Staffing Association Index remained at 91 for yet another week. This series has stalled at the 90-91 level for 7 weeks. It is signalling stagnation, not growth, and is stalled relative to its pre-recession peak.
The ICSC reported that same store sales for the week of March 26 rose 2.6% YoY, and increased 0.2% week over week. Shoppertrak reported a 4.3% YoY gain for the week ending March 19, and a WoW gain of 0.5%. Unlike almost every other series, these two series' YoY comparisons have been remaining steady or improving over the last month.
Weekly BAA commercial bond rates increased.02% to 6.00%. This compares with a 09% increase in the yields of 10 year treasuries to 3.38%. Both series are down from recent highs.
Adjusting +1.07% due to the recent tax compromise, the Daily Treasury Statement showed that for all of March 2011, $163.8 B was collected vs. $164.9 B a year ago, for a loss of -1.1 B YoY. This is the first month with an outright YoY decline compared with last year. For the last 20 days, $136.6 B was collected vs. $128,4 B a year ago, for a gain of $8.2B, or +6.4%. I suggest using this series with extra caution, because the adjustment for the withholding tax compromise is only a best guess, and may be significantly incorrect.
M1 was up 1.3% w/w, down -0.4% M/M, and up a strong 9.9% YoY, so Real M1 is up 7.7%. M2 was unchanged w/w, up 0.2% M/M and up 4.3% YoY, so Real M2 is up 2.1%. Although Real M1 is still strongly in the "green zone" where it has been since before the end of the "great recession," Real M2 has been fading back into the "yellow zone" below 2.5%. Additionally, the weak +0.2% M/M reading means that, depending on inflation, it could become yet another of the 10 components of the LEI to go negative in March.
Last week I noted that the LEI may have a negative month in March. Consumer confidence, durable goods, and (Feb.) housing permits were all down strongly. This week ISM vendor supplies, the manufacturing workweek, and new factory orders also turned down. As noted just above, M2 could also be a negative. Only the bond spread yield, the stock market, and initial unemployment claims look like positives. In sum, that's 6 components down, 1 neutral (possibly negative), and only 3 positive. (OTOH, ECRI's growth indicator continues to be positive).
Did I mention that OIl was like a choke collar constricting economic growth?