Weekly Indicators for March 2 - 6 at Seeking Alpha

 

 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

Two important data considerations this week: (1) for the first time, some YoY comparison - e.g., restaurant reservations - are compared with data after the onset of the pandemic. The distortions will intensify next week and last at least through the end of April; and (2) long term interest rates, in particular for Treasury bonds, have considerably affected the long leading forecast.

As usual, clicking over and reading brings you up to the virtual moment, and rewards me just a little bit for the effort I put in to generating the forecasts and nowcast.

February jobs report: strong growth with a few blemishes

 

 - by New Deal democrat

HEADLINES:

• +397,000 million jobs added: 465,000 private sector minus - 86,000 government. The alternate, and more volatile measure in the household report indicated a gain of 208,000 jobs, which factors into the unemployment and underemployment rates below.
• U3 unemployment rate declined 0.1% at 6.2%, compared with the January 2020 low of 3.5%.
• U6 underemployment rate was unchanged at 11.1%, compared with the January 2020 low of 6.9%.
• Those on temporary layoff decreased 517,000 to 2,229,000.
• Permanent job losers decreased 6,000 to 3,497,000.
• December was revised downward by 79,000, while January was revised upward by 87,000, for a net gain of 38,000 jobs compared with previous reports.

Leading employment indicators of a slowdown or recession

I am still highlighting these because of their leading nature for the economy overall.  These were mixed but more positive than negative: 

• the average manufacturing workweek decreased to 40.2 hours. This is one of the 10 components of the LEI.

• Manufacturing jobs increased by 21,000. YoY manufacturing has still lost -561,000, or 4.4% of the total. About 60% of the total loss of 10.6% has been regained.
• Construction jobs decreased by 61,000 (probably reflecting poor weather, even for winter, in places like Texas in February) . YoY -175,000 construction jobs have been lost, 4.0% of the total. About 75% of the worst loss of 15.2% loss has been regained.
• Residential construction jobs, which are even more leading, *rose* by 5,300. YoY there have been actual job gains, and employment in this sector is at another new 10 year+ high.

• temporary jobs increased by 52,700. YoY, there have still been 175,100 jobs lost, or 6% of all temporary help jobs.
• the number of people unemployed for 5 weeks or less declined by -93,000 to 2.185 million, compared with last April’s total of 14.283 million.
• Professional and business employment rose by 63,000, which is still 771,000, or about 3.6% below its peak one year ago.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.04 to $25.19, which is a 5.1% YoY gain. This is at a level not seen in the past 10 years outside of the first months of this pandemic and also January. Relative gains in this measure reflect that job losses during the pandemic have occurred primarily among lower wage earners.

Aggregate hours and wages:

• the index of aggregate hours worked for non-managerial workers declined by -0.8%, with a YoY loss of -6.3%.

•  the index of aggregate payrolls for non-managerial workers declined by -0.7%, with a YoY loss of -0.8%. Still, about 90% of the loss from last February to April has been made back up.

Other significant data:

• Full time jobs gained 301,000 in the household report.
• Part time jobs declined 456,000 in the household report.
• The number of job holders who were part time for economic reasons increased by 134,000 to 6.088 million, with a YoY increase of 1,690,000, or 39.5%.

SUMMARY

This was generally a positive report, with resumed good growth in the headline employment number and another decline in the unemployment rate. Most internals were positive, including the manufacturing, residential construction, and temporary employment sectors, with a decline in both temporary and permanent layoffs, and an increase in full time jobs. 

The negatives were the surprise decline in the manufacturing workweek, and anomalous declines in both aggregate hours and payrolls. Involuntary part time employment also rose slightly. I am discounting the decline in construction jobs for weather-related reasons.

We are still about 9.5 Million jobs behind where we were one year ago just before the pandemic hit. Even if we were to continue adding jobs at this month’s rate, it would take 2 full years just to get back to that level. The good news, I think, is that with vaccinations picking up speed, the economy is set to really surge by summertime, and hopefully there will be even stronger jobs growth as that happens.

Initial jobless claims make further progress towards November lows

 

 - by New Deal democrat

Last week I “pre-debunked” the idea that a lack of reporting in Texas skewed the big decline in claims, concluding that “being very generous, the ‘real’ seasonally adjusted number of initial claims at worst probably would have been only about 30,000 higher - I.e., 760,000 - but for Texas issues.” 

That observation was validated this week, as last week’s 730,000 number was only revised higher by 6,000 to 736,000. And the *relatively* good news continued.

This week, on a unadjusted basis, new jobless claims increased by 31,519 to 748,078. Seasonally adjusted claims increased by 9,000 to 745,000. The 4 week moving average declined by 17,250 to 790,750. 

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April): 

The recent increase in claims appears to have subsided. Nevertheless both adjusted and unadjusted claims remain above their worst levels at the depths of the Great Recession.

Because of the huge swings caused by the scale of the pandemic - typically claims only vary by 20,000 or less from week to week, but since the start of the pandemic, swings of 50,000 or 100,000 per week have happened as often as not, recently I began posting the YoY% change in the numbers as well, since they will be much less affected by scale. As a result, there is less noise in the numbers, and the trend can be seen more clearly:

This confirms the observation that the recent elevation in new claims is reversing. 

Meanwhile continuing claims, which historically lag initial claims typically by a few weeks to several months, made new pandemic lows yet again this week. Seasonally adjusted continuing claims declined by 124,000 to 4,295,000, while the unadjusted number declined by 22,355 to 4,806,269:

But continued claims remain at levels last seen in autumn 2009, only a few months after the Great Recession.

As spring begins in the warmer parts of the country, we can expect increased outdoor activity and a relative recovery in employment servicing those activities. Together with an ever-increasing pool of vaccinated people, this should put the worst of the job losses behind us. If further COVID relief is passed by Congress in the next week, which seems likely, the added income should carry us through the summer, with continuing strength in consumer spending, which in turn will drive increasing employment.

Coronavirus dashboard for March 3: as good news on vaccinations accumulates, the Dakotas already appear to be shambling towards herd immunity

 

 - by New Deal democrat

There is more and more good news on the vaccination front. In addition to the fact that the single-dose Johnson and Johnson vaccine has been approved, President Biden has made use of the Defense Production Act to enlist competitor Merck in additional production of the J&J vaccine. Biden also announced that there would be enough vaccine produced to supply doses for every American adult by the end of May.

Further, the pace of vaccination has picked up to new highs since the setbacks due to recent weather, with the 7 day average just short of 2 million per pay at 1.946 million as of yesterday:

And just shy of 80 million doses have been administered - 78.6 million as of yesterday:

By about Memorial Day weekend, the principal obstacle to herd immunity is going to be anti-vaxxers and other vaccine-hesitant people, primarily stupid GOPers. I wonder if by that time employers will make being vaccinated a condition of returning to work facilities.

In the meantime, one other recent development has jumped out from the graphs: it looks increasingly like both North and South Dakota have shambled towards herd immunity already. That’s because both States’ levels of total infections look close to perfect representations of an “S”-shaped type of exponential curve called a logistical curve. This occurs when a population approaches a saturation point.

Here’s the graphic evidence in a nutshell:

Both North and South Dakota have the highest rate of *confirmed* infections at roughly 13% of their entire populations.

Further, South Dakota is close to, and North Dakota is already among, the lowest 10 States for the level of new confirmed infections:

Since neither one of these two jurisdictions is exactly known for their aggressive anti-COVID restrictions, we are either seeing a recent onset of panic among the populace after their late autumn outbreaks, or else we are seeing a virus that is facing an ever-thinning number of susceptible individuals.

Most notably, during the autumn outbreaks At least South Dakota had close to a 60% positivity rate among people who were tested, that went on for several weeks - where 3% is the rate at which it is thought that testing is probably picking up close to all actual infections:

In other words, during the weeks that roughly 10% of their entire populations are *confirmed* to have contracted the disease, it’s entirely likely that some multiple of that percentage were in fact infected, but either weren’t able, or just didn’t bother, to get tested. If during those weeks for every one confirmed positive there were 4 actual but unconfirmed infections, then by Christmas an outright majority of the population of both North and South Dakota had actually contracted the disease.

I want to emphasize that I’m not claiming that either State has actually arrived at herd immunity yet. For that to be the case I would expect the rate of current infections to be closer to 1 in 100,000 daily than 10 in 100,000 - and I would expect to see continuing declines, which really hasn’t been the case in the past several weeks. And I am *certainly* not claiming that the result is the case of good government! Far from it, both North and South Dakota have among the highest confirmed death rates from COVID at roughly 1 death for every 500 persons, putting them in the top 10 States:

I would love to see what a comparative graph of excess deaths above normal looks like for those 10 States, because I suspect that a significant part of the Dakotas’ death toll was never reported.

Here’s hoping that the vaccines get us to herd immunity before the reckless actions of Trumpist GOP governors like Abbott of Texas manage to hatch a resistant strain of the disease.

Household debt and the pandemic

 - by New Deal democrat 

This is something I used to pay a lot more attention to back around the time of the Great Recession. How stretched were American households in paying their monthly bills? The Federal Reserve publishes a quarterly update tracking this issue.

Two of the metrics in that quarterly update are debt service payments and financial obligations, respectively, as percents of household disposable income. The last update was in December, for Q3 2020. The Q4 figure should be released later this month.

And the story is how strong of an impact the pandemic stimulus has made on household balance sheets. Here’s the graph, that pretty much speaks for itself:

Both measures were by far at all-time lows in Q2, and increased slightly in Q3.

One important criticism is that these aren’t median measures. They tell us how the average, not median, household is doing, so they are subject to being skewed by high upper incomes. But the stimulus payments were not matched to income - e..g, every household got a $1200 check back in April, regardless of underlying income. And pandemic unemployment assistance also tended to be skewed towards moderate and lower incomes (i.e., there was a ceiling in the amount of relief).

This is another important data point on how successful (obviously not universal!) the Congressional stimulus has been in alleviating the potentially devastating impact of the pandemic on households and the economy.

Two leading sectors of the economy - manufacturing and housing - turn even hotter

 

 - by New Deal democrat

Last month I wrote that both the manufacturing and housing sectors were “on fire.” If anything, this month they turned white hot, with both construction spending and ISM manufacturing data at levels not seen in years.

The overall ISM manufacturing reading rose from 58.7 to 60.8, tying the highest reading since the Great Recession, and indeed since 2004. The even more leading new orders subindex also rose from 61.1 to 64.8, not quite as high as readings earlier in autumn 2020:

Turning to construction, in January spending for residential construction surged even further, up 2.5% for the month. This was the highest nominal reading ever:

Taking into account inflation - deflating by the PPI for construction materials, which rose 2.7% for the month, in the graph below - residential construction spending (blue) declined -0.2%. Because permits have to be taken out before construction can begin, typically these lead construction spending (although in fairness that really hasn’t been true in the past 2 years). Below I show the less volatile single family permits (right scale):

This year, 2021, is likely going to be absolutely gangbusters for residential construction spending, which means lots more money flowing through the economy as a whole.

Simply put, this morning’s two reports together show that manufacturing and housing, the two most important leading sectors of the real economy, are if anything even hotter than before, and are likely to power very strong GDP gains as vaccinations (hopefully) case the pandemic strictures to give way.