Weekly Indicators for September 18 - 22 at XE.com

 - by New Deal democrat

My Weekly Indicators post is up at XE.com.

The biggest news was in purchase mortgage applications, hurricane adjusted jobless claims, and stock prices.

On August housing permits and starts, curb your enthusiasm

 - by New Deal democrat

Hurricanes Harvey and Irma together affected over 10% of the housing market at minimum. That's one of three good reasons to take the good permits number with a grain of salt.

This is a two part post I have up at XE.com.

Part 1 is here.
Part 2 is here.

Hurricane adjusted initial jobless claims for the week of September 9: 229,000

 - by New Deal democrat

I am repeating an exercise I undertook in 2012 when Superstorm Sandy disrupted the initial claims data: estimating what the initial jobless claims would have been, but for the hurricanes.

In 2012 I created that adjustment by backing out the affected states (NY and NJ) from the non-seasonally adjusted data.  That gave me the number of initial claims filed in the other 48 states.  I compared that with the same metric one year earlier, and multiplied by the seasonal adjustment.

That gave me the number if the affected states had the same relative number of claims during the given week, as all of the unaffected states.  In 2012, it showed that Sandy was not masking any underlying weakness in the economy.

The state by state data is released with a one week delay.  So what follows is the analysis for the week of September 9, the number for which was reported one week ago and revised this week to 282,000. Last week I found the adjusted number for September 2 was 239,000.  Last week I only had to back out Texas, but this week I have also backed out Florida.

Here is the table for the Week of September 10 in 2016 vs. September 9 this year:

Metric                              2016                   2017

Seasonally adjusted:       258,000              282,000

Adjustment for total:       1.33                   1.33

Not seasonally adjusted:  193,291             212,284 

Florida claims:                 7,493                 4,773 (!!! - yes, a decline this year)
Texas claims:                   13,432               52,024                

NSA claims ex-TX+FL    202,008             155,487

TX+FL as % of total:       10.8%                   n/a

2017 w/ TX+FL adjustment:  n/a              172,280

In both 2016 and 2017 the weekly seasonal adjustment was 1.33. Multiplying the non-seasonally adjusted total of 172,280, gives us the hurricane-adjusted initial jobless claims number for the week of September 9, 2017 of 229,000.

The underlying national trend in initial jobless claims remains very positive.

The asterisk in real median household income

 - by New Deal democrat

This is a follow-up to the post I wrote last week about the latest data on real median household income.

One of the things I notes is that "households" includes the millions that are composed of retirees, a burgeoning demographic due both to healthier longevities and the demographics of the Boomer generation.

This morning Jared Bernstein helpfully includes a graph of real median household income excluding those over age 65:

Households headed by working age adults did finally surpass their 2007 income, but were still 3.4% below the all-time highs of incomes of 2000.

But mainly I wanted to follow up on that break in the graph in 2013.  It was caused by a change in methodology by the Census Bureau.

Here's the graph I ran last week of real median household incomes at various quintiles and deciles:

So I was surprised a few days later to see another, more pessimistic graph floating around, purporting to show that only the top 20% of households had higher incomes than in 2000:

Note that this graph doesn't have any break. 

I traced the information back to its source, which turned out to be the Economic Policy Institute. And at the bottom of their article, I found a footnote explaining thus:

In other words, as best I can tell the E.P.I. simply took the 3.2% difference in the two methodologies in 2013 and projected it forward.

Now, let me state right up front that I don't know whether the data as represented by E.P.I. is correct or not.

But, neither does the E.P.I.

In fact, neither does anybody else, apparently including the Census Bureau itself.

That's because the Census Bureau hasn't provided data in any year since 2013 as to what the numbers would have been under their old methodology, so that we can form a basis of comparison.

By contrast, when the methodology for "real retail sales" was updated in the 1990s, the old data series continued to run for nearly 10 years, giving us an excellent basis for comparison, and confirming that the YoY changes were virtually identical, meaning that we can stitch the two series together confidently, giving us 70 years worth of data:

The Census Bureau didn't do that with real median household income, so there will *always* be a disconnect and a lack of ability to reliably and directly compare data from before 2013 with data afterward.  We'll always be guessing. 

This is a major problem for this important data series, and the Census Bureau should take steps, to the extent possible, to correct it.

Hurricane workarounds for industrial production and housing

 - by New Deal democrat

Hurricane Harvey has already affected some of the August data releases.  Irma has already started to affect some weekly releases, and will undoubtedly affect the September monthly releases.

I have already begun to adjust for the hurricanes in the case of initial jobless claims.  But what of the monthly data?

While there is nothing so timely and precise as backing out affected states from the initial jobless claims report, there are workarounds that can at least tell us if there has been any significant change in trend for both the industrial production and housing reports.

I will put up separate posts, but to cut to the chase, we can use the Regional Fed reports (minus Dallas, and adding the Chicago PMI) to give us a reasonable estimate of industrial production in the non-hurricane affected areas. Similarly, we can make use the regional breakdowns in the housing report by subtracting the South and determining the trend in the remaining 60% of the country outside of that census region.  I have already looked at this morning's housing report, and it turns out the effect is not what you would think!  I'll have that post up by tomorrow.

Unfortunately there is no regional or state-by-state breakdown of retail sales or regional consumption expenditures on any sort of timely basis, so we're kind of stuck there.