Saturday, April 17, 2021

Weekly Indicators for April 12 - 16 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

The big call I made last year is that conditions were setting up for a Boom this year, once the pandemic started to be overcome. Well, almost half of all Americans have received at least one dose of vaccine, and all the signs are that the Boom is well and truly upon us.

So the nowcast and short term forecast is all about chronicling the Boom, while the long term forecast is about what happens as the Boom begins to fade.

As usual, clicking over and reading will bring you up to the virtual moment about the economy, while rewarding me just a little bit for my efforts.

Friday, April 16, 2021

Why March’s big jump in real retail sales augurs well for big employment gains through summer


 - by New Deal democrat

Yesterday I wrote that the steep decline in new jobless claims in the past 4 weeks likely presages another big monthly employment gain, on the order of 1 million or more jobs.

Another very big positive for the next few months in employment is the massive, stimulus-fueled jump in retail sales.

As I have pointed out many times, real retail sales (blue in the graph below, /2 for scale) tend to lead employment (red) by about 3-4 months. Here’s the long term YoY look from 1993 on, averaged quarterly to cut down on noise:

I’ve also included aggregate hours (gold) in the above. Hours tend to be cut more than jobs in recessions, and increase faster in recoveries. The pandemic has been somewhat unique in that, for obvious public health reasons, jobs were cut entirely rather than just hours. Note also the “China shock” in the first few years after 1999, when both jobs and hours continued to be cut, even after sales had rebounded.

But saying that there is likely to be a big YoY jump in jobs in the next several months is hardly surprising, given the 22 million loss in jobs last April. So the below graph compares the absolute data, sales on the left scale, and employment on the right:

Again, the brief lag with which employment follows sales is obvious. The most important takeaway is that, if the big March gain in sales isn’t taken back in the next month or two, then there’s likely to be a similarly large jump in employment by the end of summer. A gain of another 4 to 6 million jobs, to close to the pre-pandemic peak, is quite possible.

March housing permits and starts - don’t get too excited


 - by New Deal democrat

Don’t get too excited about this morning’s big jump in housing starts for March. In the first place, it wasn’t confirmed in either total or single family permits, which both remain down from December and January, and the latter of which is the least of all housing numbers:

Also, the big jump in starts is mainly a rebound from February’s Big Texas Freeze. February and March starts together average 1599 annualized, which is significantly below the December and January pace.

And no, I’m not cherry picking. I checked, and here is how I led my report on housing permits and starts one month ago:

The headline numbers for both permits and starts for February, released this morning, were both poor, off -10.8% and -10.3%, respectively. The temptation is to say, “higher interest rates, We’re DOOOMED!!!” Not so fast. In context, the declines were well within normal month to month variation, and at least some of the declines looks like more fallout from the Big Texas Freeze that we saw yesterday in industrial production and retail sales.
Higher mortgage interest rates and surging prices are having an effect. To the extent there is a surprise, it’s that there hasn’t been a bigger effect so far.

Finally, here is something that concerns me. One twitter account I usually peak in on, more for political tweets than anything else, had this to say:

Here’s the problem. Here’s the time stamp of the above tweet:

How did this person know about a big jump in housing starts 24 hours before the Census Bureau published the information?

Thursday, April 15, 2021

Industrial production for March disappoints - but only on the surface


 - by New Deal democrat

As an initial note, retail sales for March blew out to the upside, but as expected due to cosnumers’ spending their latest pandemic stimulus checks. This does have implications for future jobs reports, but I will report on that tomorrow. But to the main point . . . 

Industrial production rose in March, but disappointingly - on the surface at least - did not recover to its level in January, as shown below in the graph of total production (blue) and the manufacturing. component (red):

But on closer examination, the reasons for the shortfall put an entirely different gloss on the numbers.

First of all, one of the three components of production, besides manufacturing and mining, is utilities, as to which the Fed appended this note:

The drop of 11.4 percent for utilities in March was the largest in the history of this index (since 1972).”

This was probably due to much fairer weather than expected during the month.

Further, as to manufacturing, the Fed noted:

The output of motor vehicles and parts rose 2.8 percent in March after falling 10 percent in February. Shortages of semiconductors held down vehicle production in both months, while cold weather also curbed production in February.”

In other words, had it not been for a bottleneck in supply, industrial production would have rebounded much more sharply in March.

This is very bullish for production in the immediate future. I think we may see production all the way back at pre-pandemic levels by the end of summer.

Jobless claims break on through - 1M+ jobs report for April looks likely


 - by New Deal democrat

As I have said for the past few weeks, new jobless claims are likely to the most important weekly economic data for the next 3 to 6 months. With the number of those vaccinated continuing to increase, I have been expecting a big increase in renewed consumer and social activities, with a concomitant gain in monthly employment gains - as we saw in the March jobs report.

Four weeks ago I set a few objective targets: new claims to be under 500,000 by Memorial Day, and below 400,000 by Labor Day. 

This week was a major advance towards those targets.

On a unadjusted basis, new jobless claims declined by 152,833 to 612,919. Seasonally adjusted claims declined by 193,000 to 576,000 (with last week’s number being adjusted upward by 25,000). The 4 week average of claims also declined by 42,250 to 683,000. 

Here is the close up since last August (recall that these numbers were in the range of 5 to 7 million at their worst in April of last year): 

Note that I have discontinued the YoY comparisons, since we would be comparing agains the very worst weeks of the initial lockdowns last year.

Continuing claims, which historically lag initial claims by a few weeks to several months, and which are reported with a one week lag, in something of an unusual occurrence, failed to make another new pandemic low this week. While the unadjusted number did decline 87,991 to 3,936,696, which was a new low, the seasonally adjusted number of continuing claims rose by 4,000 to 3,731,000:

Seasonally adjusted continued claims are at levels last seen in the summer of 2011, when weekly jobless claims were just over 400,000 and the unemployment rate was 8.2%.

In the last 4 weeks, since the March reference week for the jobs report, initial claims have declined on average by 68,750 m/m. This kind of decline has happened less than a dozen times since data started to be collected almost 60 years ago, and even in normal times has typically been associated with strong monthly employment gains on the order of +350,000. When we had a similar decline last August, the monthly gain in jobs was about 1,600,000. 

In other words, barring big revisions or a reversal next week, April’s jobs report could easily show well over 1,000,000 new jobs added. 

Let me close, however, with the caveat I added last week: I am growing more concerned at the big spike in new coronavirus cases from the now-dominant UK variant in Michigan and the Northeast. the recent decline in deaths has plateaued and may have begun to increase slightly. It is at least reasonably possible that this will counterbalance progress on the vaccine front for the next 2 to 3 months.

Wednesday, April 14, 2021

Wealth distribution in the US continues to be a first order economic issue


 - by New Deal democrat

Tomorrow is one of those days when just about Every Economic Statistic in the World will be released. In the meantime, no new data today.

So, while we wait, let me send you over to this article by Wolf Richter analyzing the distribution of wealth and assets in the US updated by the Fed through the end of last year.

Unsurprisingly, the rich have gotten richer, and their preferred asset classes are the most protected by the tax code.

Just one of many first-order economic problems in the US. Wealth, once entrenched - most particularly when it is unearned and inherited - will never be voluntarily disgorged. The beneficiaries would rather give up democracy, give up the Rule of Law, rather than see their privileged status compromised.

Tuesday, April 13, 2021

Monthly consumer inflation rate increases by most in 10 years; real wages decline, but real aggregate wages increase


 - by New Deal democrat

Seasonally adjusted consumer prices rose 0.6% in March. This was the biggest single month gain since June 2009, coming out of the Great Recession:

Leaving aside the pandemic, since the 1980s recessions have only happened when CPI less energy costs (red) had risen to close to or over 3%/year, usually driven by increases in the price of oil by more than 40% YoY. Even with this month’s spike, YoY inflation ex-energy is only up 1.9%:

Because in the first few months of the pandemic during the lockdowns there was a spurt of deflation as shown above in the first graph, in the below graph I’ve normed the values to 100 as of May of last year. In the 9 months since, total inflation has been up 3.5% (for a 4.7% annual rate), while inflation ex-energy has risen 2.0%, (for a 2.7% annual rate):

This is still not enough to be of concern on a transient basis.

Now let’s take a look at how inflation has affected real wages. 

Because wages are “stickier” than prices, typically as recessions beat down prices (or at least price increases), in real terms wages rise, either during or just after a recession. That was the case for the coronavirus recession as well. As prices increase with renewed demand, and employers are able to add workers from the larger pool of the unemployed and underemployed, real wages decelerate and even decline.

That was the case for March. Real wages declined -0.5%, and are -3.1% off their all-time high set last April:

They are still 0.9% above their previous 1973 peak.

As more low-wage employees in service industries like dining and entertainment are called back to work, the YoY% change in real wages has decreased from over 7% last April to 1.9% in March:

A further decline in real wages is quite likely. As a result, YoY real wage increases have declined from over 5% last I suspect we will see an actual YoY decline in real wages by the end of this year.

A bright spot is that real *aggregate* payrolls for nonsupervisory workers did increase:

These are now only -2.1% below their pre-pandemic peak, and equivalent to where they were in July 2019. If vaccinations succeed in controlling the pandemic, it is quite likely that these make a new all-time high by the end of the year as well.

Monday, April 12, 2021

Coronavirus dashboard for April 12: more good news, more bad news


 - by New Deal democrat

The good news is, vaccinations work.

Vaccine effect in the UK:

By age group:

Vaccine effect in France (in the face of an increasing case count):

Vaccine effect even in Chile:

While confirmed cases have gone up by 100% in Chile, deaths have “only” gone up by 50%. Even employing a 4 week lag, 4 weeks ago cases had gone up 50%, while deaths are up 33% from 4 weeks ago:

Vaccine effect in the US:

Now, the bad news.

A 4th wave has clearly begun in the US, as confirmed cases are up over 30%, from 53,300 3 weeks ago to just over 70,000. Deaths have plateaued:

One week ago I said that Michigan would be the acid test for what happened with deaths in the face of a 4th wave of infections even with a substantial portion of the population having been vaccinated. And the news is not good:

Deaths have followed new infections higher with a 3.5 week lag. And worse, so far deaths have increased at the same rate as new infections since the bottom.

One final note: I have seen several stories recently about “breakthrough” infections, I.e., infections which are claimed to have begun *after* a person was fully vaccinated, and even a few hospitalizations and deaths. There are two important caveats to those stories: 

(1) the studies are based on *diagnoses* more than 14 days after the 2nd vaccination. They are not based on *when the person was infected.* In other words, a person who first felt symptoms and got tested 14 days or more after their 2nd vaccination may well have been infected shortly after, or even *before* their 2nd shot. These studies would have a lot more credibility if the test were first performed more than 28 days after the 2nd shot, so that the infection would have almost certainly begun more than 14 days later. Until we see such studies, take the “breakthrough” claims with many grains of salt. 

(2) the vaccines have never been claimed to be 100% effective. At roughly 95% effective, that means a certain small number of infections are still likely to take place. As yet, however, I do not know of even a *single* death that we are sure resulted from an infection that began more than 14 days after a person’s 2nd shot.

Saturday, April 10, 2021

Weekly Indicators for April 5 - 9 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

The big news continues to be bifurcation between the currently unfolding Boom, fueled by the fire hose of monetary and fiscal stimulus, and the fallout in the long leading forecast based on the increase in interest rates as a result.

As usual, clicking over an reading will bring you up to the virtual moment on the economic data, and reward me with a penny or two for my efforts.

Friday, April 9, 2021

With a Booming economy comes at least transitory inflation: March producer prices


 - by New Deal democrat

One of the economic subjects you are going to hear a lot about this year is inflation. We are recovering from a sharp if brief recession, and with the dual firehoses of fiscal and monetary stimulus, entering a Boom such as we have probably not seen in over 50 years.

Unsurprisingly supplies of commodities and goods that had been cut back during the recession are going to be stretched thin and much competed for now, generating at least a brief burst of inflation.

With that background noted, this morning producer prices for March were reported up 1.3% for that month alone. YoY producer prices are up 6.0% (blue in the graphs below):

Much of the increase has been due to gasoline. Take out energy costs and producer prices were up a more modest 3.3% (red in the graph above).

Typically producer and consumer prices move in sync, with no more than one month’s variation in YoY peaks and troughs. But consumer prices are much less volatile (gold in the graph below):

Because producer prices frequently actually decline during a recession, as they did in March and April of last year, it is not a surprise that some of their biggest YoY increases occur right thereafter, as recessionary price declines are replaced by strong gains due to increased demand:

And that’s what is happening now. 

I am expecting inflation to abate next year after a great deal of caterwauling from Doomers this year. One negative this year, however, will likely be that average wages will not keep up, resulting in an actual decline in purchasing power for many ordinary workers.

Thursday, April 8, 2021

Jobless claims: progress pauses, as a new surge in COVID in Michigan and the Northeast causes concern


 - by New Deal democrat

New jobless claims are likely to the most important weekly economic data for the next 3 to 6 months. As the number of those vaccinated continues to increase, I expect a big increase in renewed consumer and social activities, with a concomitant gain in monthly employment gains - as we saw in the March jobs report last week.

Three weeks ago I set a few objective targets: I am looking for new claims to be under 500,000 by Memorial Day, and below 400,000 by Labor Day. This week didn’t help us, although it is more of a pause than a significant increase.

On a unadjusted basis, new jobless claims rose by 18,172 to 740,787. Seasonally adjusted claims rose by 16,000 to 744,000. The 4 week average of claims also rose by 2,000 from last week’s pandemic low of 721,250 to 723,250. 

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

Focusing just on the less volatile 4 week average since September shows that the last several weeks have been more of a pause at the recent low rather than a notable reversal:

Note that I have discontinued the YoY comparisons, since we would be comparing agains the very worst weeks of the initial lockdowns last year.

Continuing claims, which historically lag initial claims by a few weeks to several months, continued to make new pandemic lows yet again this week. Seasonally adjusted continuing claims declined by 16,000 to 3,734,000, while the unadjusted number declined by 67,666 to 4,031,531:

Seasonally adjusted continued claims have now slowly declined to levels last seen in the summer of 2011, when weekly jobless claims were just over 400,000 and the unemployment rate was 8.2%.

I remain bullish that the ever-increasing pool of fully vaccinated adults - 64,300,000 as of yesterday, or almost 25% of the entire adult population - together with the ongoing seasonal shift from indoor to outdoor activities, is going to continue to result in a dramatic fall in jobless claims over the next few months.

I have to acknowledge, however, that I am growing more concerned at the big spike in new coronavirus cases from the now-dominant UK variant in Michigan and the Northeast, which is now showing up in increased deaths as well. It is at least reasonably possible that this will entirely counterbalance progress on the vaccine front for the next 2 to 3 months.

Wednesday, April 7, 2021

February JOLTS report showed a pandemic still in control


 - by New Deal democrat

Yesterday morning’s JOLTS report for February showed that the pandemic was still in control of the numbers.

This report has only a 20 year history, and so includes only two prior recoveries. In those recoveries: 
  • first, layoffs declined
  • second, hiring rose
  • third, job openings rose and voluntary quits increased, close to simultaneously
The recovery from the worst of the pandemic almost one year ago at first followed this script, but the winter surge, which led to a few month of flat, or worse, jobs reports, disrupted that trend.

Layoffs have followed the above script, reverting to normal levels back in last May, and continuing at those levels since:

But the situation is different with hirings, openings, and quits. Here is the long-term record of the entire series:

But now, let’s zoom in on the past several years:

This shows up in the YoY view as well, where only openings are positive compared with February 2020 (in contrast with the past two recoveries, where hires turned positive first):

While hires did bounce back most strongly at first, as in the past two recoveries, they have faded relatively speaking since.

Further, job openings have continued to increase strongly, and are back to close to their all time peaks in late 2018 and early 2019. Meanwhile, quits, like hires, are slightly subdued.

Because the YoY comparisons will be with the worst of the pandemic in the next several months, those comparisons will generally be useless. We will see if hires reassert themselves, as in the past two recoveries, or whether openings without actual hiring continue to soar as they did starting in 2015.

Tuesday, April 6, 2021

American plutocracy in two simple graphs; plus, when will wage growth bottom?


 - by New Deal democrat

The JOLTS report for February comes out later this morning; I may post on it later or tomorrow.

In the meantime, here are updates on several graphs I used to run during the last expansion in order to examine how shared out (or not) economic growth was.

First, here is a graph comparing corporate profits adjusted for inflation, and total nonsupervisory wages, also adjusted for inflation. Both are also adjusted for population growth, so that we can see how much each has grown (or not) per person:

During the era of strong unions, ordinary workers got an increasing share of the pie. That reversed after the 1970s, took off in the 1990s, and really exploded after 2000. By 2020, real corporate profits per capita had grown by 75% more than total wages per capita:

All of which supports President Biden’s plan to raise corporate taxes to pay for infrastructure, as well as Treasury Secretary Yellen’s proposal for a global minimum corporate tax rate.

Next, let’s turn to underemployment and wage growth. One graph I used to regularly update was the U6 underemployment rate vs. YoY wage growth, which is a “long lagging” metric. In other words, typically an expansion has to be well underway before wage growth starts to accelerate. Based on the history of the broad measure of U6, which only goes back to 1994, it appears that it takes an underemployment rate of less than 10% for wage growth to finally tick up.

In the below graph, I subtract the U6 rate from 10 (blue), so that, e.g., an underemployment rate of 8% shows as +2%. In other words, the more the underemployment rate is under 10%, the more positive it shows. Meanwhile to account for the long term average inflation rate, I subtract 2% from YoY wage growth (red), and multiple *2 for scale:

The U6 rate as of March was 10.7%, and has declined by about 1% in the past 6 months. There are still about 8.4 million fewer workers, mainly from low-paying service jobs, than there were in February 2020. It will probably require the majority of them to be rehired before wage growth bottoms out.

Monday, April 5, 2021

Coronavirus dashboard for April 5: the problematic cases of Chile . . . and Michigan


 - by New Deal democrat

As you probably already know, the news on the vaccination front continues to be good, as the US is now administering on average over 3 million doses a day - and still climbing. At this rate of improvement, every adult in the US could be vaccinated by Memorial Day at the end of next month.

One bit of not so good news is that the percentage of seniors who have received at least one dose has almost stalled out at roughly 75%. For example, yesterday that percentage improved by exactly 0.1%. If 1/4 of even the most vulnerable population simply refuses to be vaccinated, we are not going to achieve herd immunity.

Further, while in the past few weeks I have been highlighting the success stories in vaccination, particularly in Israel and the UK, there are a number of counter-examples that I want to examine today.

First of all, Chile. Chile has administered even more doses per capita than the US, equivalent to about 55% of its population vs. 50% for the US. And yet both cases, and with about a 4 week delay, deaths, have both risen about 50% from the date that vaccinations started to be administered:

It’s possible that Chile’s trend is being affected by the fact that it is in the Southern Hemisphere and has entered autumn.

But there are several other countries, in the Northern Hemisphere, that are among the top 10 per capita for administering vaccines among more populous countries, who are undergoing similar surges - Turkey, France, Belgium, and Poland:

Cases are up 50% to 100%, in the case of Turkey, since the vaccination programs began.

The situation, alas, is similar in some US States, particularly Michigan, NJ and NY, where despite doses equivalent to about 1/2 of their populations having been administered, cases have risen by about 10% in NY, 20% in NJ, and 500% (not a typo!) in Michigan:

Deaths in NY and NJ have not risen, at least not yet, but they have plateaued:

And in the case of Michigan, deaths have followed cases by 28 days both on the way down, and now on the way back up:

This week is going to be the acid test for Michigan, because it was 4 weeks ago that cases started to really increase exponentially. If deaths follow this week, then by the end of this month Michigan could be back to its worst levels of the entire pandemic.

What this means, I think, is that relaxing too early - even with a large percentage of the population having received at least one dose of the vaccine - can lead to renewed severe outbreaks. We really, really, really need to get close to herd immunity levels in the next month or two.

Sunday, April 4, 2021

I bookmarked a prediction about the coronavirus by supply-sider Scott Grannis one year ago ...

 - by New Deal democrat

 As I mention from time to time, I read a number of economic observers with whose opinions I usually strongly disagree, partly because it is good to consider other points of view, and partly because some compile excellent and interesting data, even if I disagree with their conclusions about what the data means.

The “Calafia Beach Pundit,” Scott Grannis, is one of those writers. His chart work is frequently compelling and often challenging. But, when it comes to the ideologically-inspired response to COVID-19, he has been out of his mind.

So almost exactly one year ago, on March 27, 2020, I bookmarked one of his observations and forecasts, because I expected that the truth would be very different than he thought: 
Since the normal flu season began last October, the CDC estimates that as many as 45 million Americans have come down with one form or another of the flu, and roughly 45,000 have died from complications of the flu. That works out to about 250 deaths per day. In all of the US, and for the year to date, covid-19 has been tied to only 1700 deaths. Simply put, this is not a pandemic, and is very likely not going to become one, especially given the draconian measures that have been imposed across the country to date. 
.... What we really need right now is to recognize that this virus is not a pandemic or a mass killer. It’s probably more like an unusually nasty flu. We need to lift the economic shutdown as aoon as possible and get back to work. Trump is right.

Now that we’re one year later, let’s see how it panned out.

There have been over 30 million *confirmed* cases of the coronavirus. The 550,000 who have died is over 10x the number who typically “have died from complications of the flu,” and over 300x the “only 1700 deaths” from coronavirus he touted.

But not only has Grannis never acknowleged his gargantuan error, the one thing he has remained constant about is that there should be no restrictions on economic behavior which might curb the spread or the deadly toll of the virus. There is literally no set of facts which would cause him to change his mind. Just like his supply-side mania. There is simply no set of facts which would ever cause him to deviate from his mantra that tax cuts for the wealthy and for corporations are the cure for everything.

Saturday, April 3, 2021

Weekly Indicators for March 29 - April 2 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

One fairly unique service I think I provide is not just forecasting the next few months, but into the next year as well. So in the second half of last year I was writing about how all of the indicators were lining up for strong growth in 2021 if the pandemic could be brought under control.

Now I am beginning to look at 2022, and what I see are increasing signs of jumps in the prices of important middle class commodities and assets, mainly houses and gasoline. Which means, we could see the old-fashioned type of end of an economic boom.

As usual, clicking over and reading will not just bring you right up to the moment in the nowcast and the forecasts, but also reward me a little for bringing that information to you.

Friday, April 2, 2021

Blockbuster March jobs report, but still a long way to go


 - by New Deal democrat

  • +916,000 million jobs added. The alternate, and more volatile measure in the household report indicated a gain of 609,000 jobs, which factors into the unemployment and underemployment rates below.
  • U3 unemployment rate declined 0.2% to 6.0%, compared with the January 2020 low of 3.5%, and the April 2020 high of 14.8%.
  • U6 underemployment rate declined 0.4 to 10.7%, compared with the January 2020 low of 6.9%, and the April 2020 high of 22.9%
  • Those on temporary layoff decreased -203,000 to 2,026,000.
  • Permanent job losers decreased -65,000 to 3,432,000.
  • January was revised upward by 67,000, and February was also revised upward by 89,000, for a net gain of 156,000 jobs compared with previous reports.
Leading employment indicators of a slowdown or recession

I have been highlighting these throughout the pandemic because of their leading nature for the economy overall.  These were positive: 
  • the average manufacturing workweek increased 0.2 hours to 40.5 hours. This is one of the 10 components of the LEI.
  • Manufacturing jobs increased by 53,000. Since February 2020 manufacturing has still lost -515,000, or 4% of the total. Over 60% of the total loss of 10.6% has been regained.
  • Construction jobs increased by 110,000 This was a big rebound from February’s Big Texas Freeze. Since February 2020 -182,000 construction jobs have been lost, 2.4% of the total. Over 80% of the worst loss of 12.5% has been regained.
  • Residential construction jobs, which are even more leading, rose by 10,200. YoY there have been actual job gains, and employment in this sector is at another new 10 year+ high.
  • temporary jobs *decreased* by -800. Since February 2020, 175,000 jobs have been lost, or 6% of all temporary help jobs.
  • the number of people unemployed for 5 weeks or less decreased by -8,000 to 2.177 million, compared with last April’s total of 14.283 million.
  • Professional and business employment rose by 66,000, which is still -685,000, or about 3.2% below its peak in February 2020.

Wages of non-managerial workers
  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.2 to $25.21, which is a 4.4% YoY gain - less than the 5%+ YoY gains we saw in the last few months, which reflected that job losses during the pandemic  occurred primarily among lower wage earners.

Aggregate hours and wages:
  • the index of aggregate hours worked for non-managerial workers increased by 1.6%, still a loss since February 2020 of about 5%.
  •  the index of aggregate payrolls for non-managerial workers increased by 1.6%,  still a loss of -2.1% from February 2020. On the other hand, over 90% of the loss from last February to April has been made back up.

Other significant data:
  • Full time jobs increased 935,000 in the household report.
  • Part time jobs decreased -31,000 in the household report.
  • The number of job holders who were part time for economic reasons decreased by 262,000 to 5.826 million, which is still an increase from February 2020 of 1,428,000.
  • The Labor Force Participation Rate increased 0.1% to 61.5%, which is nevertheless down 1.8% from February 2020.
  • The Employment to Population Ratio increased 0.2% to 57.8%, which is down 3.3% from February 2020.
  • Leisure and hospitality employment increased 280,000.
  • Employment in food and drinking jobs increased 176,000. 


This was a blockbuster report, but one that was anticipated by the big declines in the weekly new jobless reports during the reference weeks for March. 

There were only two negative items: the number of temporary jobs actually declined slightly in March, and average hourly wages for non-supervisory personnel increased an anemic $0.02. There are silver linings in each. Former temporary jobs may be getting converted to permanent jobs; and lower wage service workers have been called back to work in large numbers.

Everything else was up sharply, reflecting an economy that is making substantial strides towards returning to pre-pandemic levels. This is partly because of great vaccination progress (for example, over half of all seniors in the US have been fully vaccinated), and partly a result of spring weather opening up great numbers of outdoor venues. I am particularly impressed that full-time employment was up sharply, while part time employment declined; and that temporary layoffs declined sharply, and permanent job losses declined as well. These were powerful moves in the right direction. Still, even at this rate, it will take the rest of the year to get back to February 2020 levels.

Thursday, April 1, 2021

ISM manufacturing at multi-decade highs in March, while construction chilled in the February Big Texas Freeze


 - by New Deal democrat

Two months ago I wrote that both the manufacturing and housing sectors were “on fire.” Then last month I wrote that they had “turned white hot,” with both construction spending and ISM manufacturing data at levels not seen in years.

While construction backed off, manufacturing is even ... well, hotter than white hot?

The overall ISM manufacturing reading rose from 60.8 to 64.7, the highest reading since 1984! The even more leading new orders subindex also rose from 64.8 to 68.0, the highest reading since 2004:

Turning to construction, the Big Texas Freeze showed up in February spending for residential construction, which declined -0.2% for the month, while total construction spending declined -0.8%:

Taking into account inflation - deflating by the PPI for construction materials -  neither residential construction spending nor overall construction spending is anywhere near their housing bubble levels of 2005:

While I am concerned about 2022, as I described yesterday, this year is likely going to be absolutely gangbusters for residential construction spending, which means lots more money flowing through the economy as a whole.

In short, this morning’s two reports together show that manufacturing and housing, the two most important leading sectors of the real economy, remain likely to power very strong GDP gains this year.

New jobless claims rise slightly, expect a big payrolls gain tomorrow


 - by New Deal democrat

New jobless claims are likely to the most important weekly economic data for the next 3 to 6 months. They are going to tell us whether, as the number of those vaccinated continues to increase, there will be a veritable surge in renewed commercial and social activities and attendant consumer spending, leading in turn to a strong rebound in monthly employment gains.

Three weeks ago I set a few objective targets: I am looking for new claims to be under 500,000 by Memorial Day, and below 400,000 by Labor Day. 

This week initial jobless claims increased from last week’s pandemic lows. On a unadjusted basis, new jobless claims rose by 63,282 to 714,433. Seasonally adjusted claims rose by 61,000 from last week’s downwardly revised 658,000 to 719,000. The 4 week average of claims declined by 10,500 to 719,000, a new pandemic low. 

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

Because YoY comparisons would be with the worst of the pandemic, including widespread lockdowns, I have discontinued that graph as temporarily unreliable.

Continuing claims, which historically lag initial claims typically by a few weeks to several months, also made new pandemic lows yet again this week. Seasonally adjusted continuing claims declined by 46,000 to 3,794,000, while the unadjusted number declined by 90,696 to 4,142,940:

Nevertheless seasonally adjusted continued claims remain at levels last seen in March 2011.

I remain bullish that the ever-increasing pool of fully vaccinated adults - 54,500,000 as of yesterday, or 21% of the adult population - together with a seasonal shift from indoor to outdoor activities, is going to continue to result in a dramatic fall in jobless claims over the next few months.

Finally, based on the revisions of last week’s number, which results in a month over month decline in initial claims of roughly 40,000, a decline last seen in August and October of last year - both of which produced job gains over 600,000, I also expect that the March jobs report will show a gain at very least on the order of last month’s 264,000 gain, and quite possibly much better - 600,000 to 1,000,000.

Wednesday, March 31, 2021

Housing and the economy, now and in 2022 - recession caution?


 - by New Deal democrat

My long-form review and forecast of the housing market and its potential effect on the 2022 economy is up at Seeking Alpha.

If the market stays like 2014 when interest rates went up, no biggie. But if it’s more like the 1950s, we have a problem.

As usual, clicking over and reading should be informative for you, and it rewards me a little bit for my efforts.

Tuesday, March 30, 2021

This may be the most important housing chart of springtime 2021


 - by New Deal democrat

My longform housing market analysis is almost complete, and will probably get posted later today or tomorrow at Seeking Alpha. I’ll post a link here once that is done.

In the meantime, consider the following. The Case Shiller national house price index had another sharp increase in February, and is now up 11.2% YoY, the highest rate since the days of the housing bubble in 2002 (green in the graph below):

Meanwhile look at inventory (gold). In absolute terms, the seasonally adjusted inventory of new homes for sale bottomed last August and October. Last August inventory was down -12.3% YoY. As of last month, it was only down -4.6% YoY. At this rate of change, it will be *up* YoY by about May.

Multiple offers over asking prices within days if not hours are now becoming common. We are experiencing the hottest “seller’s market” in housing since the bubble. 

A sharp break in house prices and inventory levels is likely to be the biggest “surprise” in the housing market between now and Labor Day.

Monday, March 29, 2021

Coronavirus dashboard for March 28: good news ... < sigh > ... and bad news


 - by New Deal democrat

According to the CDC, there have been 30.3 Million *confirmed* cases of COVID-19 in the US, and 550,000 deaths.The true number of actual infections is probably much higher.

On the good news front, the CDC says that 36.2% of the entire US adult population has received at least one shot; a full 20%, or 1 in every 5 adults, has been fully vaccinated. Among those 65 years of age or higher, the news is even better: just shy of 3/4’s (72.4%) have received at least one dose, and just shy of 50% (48.4%) are fully vaccinated.

As a result, as of one week ago, both cases and deaths among senior citizens have declined by nearly 90% since their December peak. Here are cases: 

And deaths among senior citizens have all but disappeared:

The situation among nursing home and other long term residential care facilities is even better. Cases have declined by 97% from nearly 35,000 to 828 weekly!:

Deaths, which lag by a couple of weeks, are down 89%, from 7,000 to 825:

These can be expected to declined even further.

This is just an excellent, excellent result of the US’s vaccination program.

And now, <sigh> the bad news.

Let me start with this graphic, showing that the unvaccinated (I.e., a *much* younger demographic) are less hesitant to engage in indoor group activities, including those without masks, than those who have already been partially or completely vaccinated (skewing heavily towards seniors):

This, of course, was exemplified by the pictures we all saw of spring breakers in Florida.

And here is the result, as we see the havoc that has been wrought by the “UK variant” taking hold in Michigan, and the start of a resurgence in Florida:

Michigan is on track to completely undo all of its progress in cases since December over the next 7 to 10 days. Deaths are about 3 weeks behind. Florida, the #1 export of which to other States is new COVID cases, is running about 4 weeks behind Michigan.

Here are cases and deaths for the US as a whole:

Cases have already turned back up. Deaths have just started to turn back up.

Where Michigan is now is about where I expect the US as a whole to be in 4 to 6 weeks. The only consolation is that another 25% of the US population should be partially or fully vaccinated by that time, meaning that it will be a younger demographic getting sick, and deaths will probably not approach their December peak of 3,000 a day.