Saturday, January 9, 2021

Weekly Indicators for January 4 - 8 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

Although yesterday’s employment report was negative, there is still no sign of any broad-based downturn in the broader economy. Rather, losses appear contained to the dining and entertainment sectors.

As usual, clicking over and reading should bring you up to the moment, and brings me a tiny jingle in my pocket.

Also ... in the conclusion, I make reference to the improvement in the daily average of people being vaccinated against COVID-19. Here is the graph with the information I am referring to:

Friday, January 8, 2021

December jobs report: I told you so - jobs actually declined in December; BUT employment primed for takeoff once pandemic abates


 - by New Deal democrat

Important: There was a huge amount of seasonality in this report. This is common for December, but the issue was greatly exacerbated because of the outsized impact of the pandemic. Take the large changes in some of the data with many grains of salt.

I have been warning for almost 4 weeks that the December employment report might have a negative number. It did. At the same time, the internals are not nearly so bad as the headline.

  • -140,000 million jobs lost, 95,000 of which were in the private sector and 55,000 were in government. Comparatively, there were 22.1 million job losses in March and April. The alternate, and more volatile measure in the household report indicated a gain of 21,000 jobs, which factors into the unemployment and underemployment rates below.
  • U3 unemployment rate was unchanged at 6.7%, compared with the January low of 3.5%.
  • U6 underemployment rate fell -0.3% from 12.0% to 11.7%, compared with the January low of 6.9%.
  • Those on temporary layoff increased 277,000 to 3,039,000.
  • Permanent job losers decreased by -348,000 to 3,370,000.
  • October was revised upward by 44,000. November was also revised upward by 95,000 respectively, for a net gain of 135,000 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 generally positive: 
  • the average manufacturing workweek was unchanged at 40.2 hours. This is one of the 10 components of the LEI.
  • Manufacturing jobs increased by 38,000. Manufacturing has still lost -543,000  jobs in the past 10 months, or -4.2% of the total. About 60% of the total loss of 10.6% has been regained.
  • Construction jobs increased by 51,000. Even so, in the past 10 months -226,000 construction jobs have been lost, -30% of the total. About 80% of the worst loss of 15.2% loss has been regained.
  • Residential construction jobs, which are even more leading, rose by 8,900. Since February there have now been actual job *gains,* to the tune of 6,400 jobs, to a new 10 year+ high.
  • temporary jobs rose by 67,600. Since February, there have still been -213,500 jobs lost, or -7.3% of all temporary help jobs.
  • the number of people unemployed for 5 weeks or less rose by 849,000 to  million, compared with April’s total of 14.283 million.
  • Professional and business employment rose by 161,000, which is still -858,000, or about 4% below its February peak.

Wages of non-managerial workers
  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.20 from $24.89 to $25.09, which is a gain of 5.2%(!) in the 10 months since the pandemic began. As with last March and April, these gains reflect that job losses occurred primarily among lower wage earners, who since May had been disproportionately recalled to work.

Aggregate hours and wages:
  • the index of aggregate hours worked for non-managerial workers declined by -0.1%. In the past 10 months combined this has nevertheless fallen by about  -6%.
  •  the index of aggregate payrolls for non-managerial workers rose by 0.7%. In the past 10 months combined this has nevertheless fallen by about -1.6%. Still, about 90% of the loss from February to April has been made back up.

Other significant data:
  • Full time jobs gained 397,000 in the household report.
  • Part time jobs declined -471,000 in the household report.
  • The number of job holders who were part time for economic reasons decreased by -332,000 to 4.891 million. This is still an increase since February of 1,772,000.


While the headline was a negative number, this was almost entirely due to huge declines of -372,000 in food and beverage establishments, and another -92,000 in amusement and recreation. Private education lost -63,000, and there were also sizable losses in local and state government.

In contrast, all of the leading job groups showed equally sizable gains, and residential construction employment made a new decade-plus high. Among leading employment indicators, only the increase in short term unemployment was a negative.

Full time jobs also showed gains, while part time jobs showed losses. Aggregate and average payrolls also rose sharply. While the average hourly wage increase can be put down to the heavily skewed nature of the new job losses, the aggregate increase which includes the total from all jobs, is a big positive, probably reflecting some annual raises.

This is an absolutely poor report as to current conditions, particularly 10 months into the pandemic. On the other hand, the leading sectors once again show that the economy - including employment - is primed for takeoff once the pandemic is brought under control.

Thursday, January 7, 2021

Jobless claims start 2021 continuing flat to increasing trend; negative December jobs number increasingly likely


 - by New Deal democrat

On a unadjusted basis, new jobless claims rose by 77,400 to 922,072. Seasonally adjusted claims declined by 3,000 to 787,000. The 4 week moving average declined by 18,750 to 818,750. All of these are above their recent lows. 

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): 

At the same time, neither of these has hit my established markers of renewed upward trend of seasonally adjusted new claims rising to over 900,000 and the 4 week average to over 850,000.

Because of the huge distortions caused by the pandemic in seasonally adjusted numbers, and because we are at a time of year when seasonality causes the most distortions in any event, here are the YoY changes in all of the above metrics:

There is now an 8 week trend in the seasonally adjusted data of YoY% increases, and a less pronounced upward trend for the past 6 weeks in the 4 week average. Interestingly, the YoY trend for unadjusted claims - especially important in this case - has continued to decline. 

Both seasonally and non-seasonally adjusted continuing claims, which historically lag initial claims typically by a few weeks to several months, on the other hand, remain in a slightly downward or flat trend. Seasonally adjusted continuing claims declined again by 126,000 to a yet another new pandemic low of 5,072,000. On an unadjusted basis, they rose by 145,844 to 5,382,459, over 100,000 above their recent pandemic low:

Because these lag initial claims, I continue to suspect we will see an upward reversal in the next few weeks. 

Both initial and continued claims remain at or above their worst levels from the Great Recession.

Finally, tomorrow we will get the December jobs report. For the last 3 weeks, I have been warning that it is likely to be the weakest since April, very likely under a 200,000 gain, and quite possibly and actual loss. Yesterday the ADP reported that by their calculations, there was indeed an actual decline in jobs in December. We’ll see shortly.

Wednesday, January 6, 2021

Coronavirus dashboard for January 6, 2021: new infections vastly outpacing vaccinations


 - by New Deal democrat

Total confirmed COVID-19 infections: 21,046,195*

Infections last 7 days average: 219,253
Total deaths: 357,258
Deaths last 7 days average: 2,670
Total vaccinations: 4,836,489

*A study just released, based on random blood samples, suggests that as many as 50,000,000 Americans may have already been infected. Because some of the positive tests may be based on exposure to other coronaviruses, I do not think the number is that high. But my own guess is that the “true” number might be about 30,000,000, or 1 in every 11 Americans.

Today I want to focus on comparing this winter’s breakout with last spring’s and summer’s, by comparing the top and bottom 25 States with the “poster children” for each of the past breakouts.

Seven day average of new infections
Bottom 25

Top 25

Not only do *all* of the top 25 now exceed the infection rate of the 2 poster children for the previous breakouts, but many of the bottom 25 are in the same ballpark as well. Among the 50 States, only Vermont and Hawaii have some semblance of control.

Seven day average of hospitalizations
Bottom 25

Top 25

So far, only about 6 of the States have hospitalization rates equivalent to those of the past 2 outbreaks. But because hospitalizations lag infections by about 2 weeks, we can expect over half of all the States to have hospitalization rates at or near emergency conditions by the time Biden becomes President on the 20th.

Seven day average of deaths
Bottom 25

Top 25

Many States are already showing a rate of deaths that is roughly half of that of the peak during the summer outbreak. About a dozen have already exceeded it. Note the inclusion of South Dakota as a recent prior peak - it wasn’t broken out separately for infections or deaths because, in view of subsequent data, it doesn’t stand out there. In other words, if deaths follow a similar trajectory, by Valentine’s Day we should expect to see a death rate for most States on par with South Dakota’s recent experience, and roughly 2/3’s of that of NY and NJ during the early spring outbreak. 

This is utterly ghastly, and it is already “baked in the cake.”

Finally, here is the 7 day rate of new infections (finer line) vs. 7 day rate of vaccinations (heavier line)(note separate scales):

New infections so far are completely outrunning vaccinations, by close to a 4:1 pace.  Less than 175,000 vaccinations are taking place daily as of the most recent data point. We need to get that up to 1,000,000 per day if not more just in order to have the population vaccinated by the end of 2021.

Tuesday, January 5, 2021

December ISM manufacturing index: manufacturing, like housing, is “on fire”


 - by New Deal democrat

Data for December 2020 started out this morning with the ISM manufacturing index.

The bottom line is: it was excellent. The overall reading, at 60.7, was only 0.1 below its 20 year peak of 60.8 in 2018. The even more leading new orders subindex rose to 67.9, also equivalent to its 20 year highs:

There has been some deceleration in the positive readings from the Regional Fed manufacturing indexes. But it is nowhere evident in this report.

Simply put, manufacturing along with housing, are both “on fire.” This is one more piece of evidence that the economy is ready to soar once it is no longer held back by the pandemic.

Monday, January 4, 2021

November construction spending confirms building surge


 - by New Deal democrat

One of my consistent themes in the past few months has been how the housing market is priming the economy for strong growth in 2021 as soon as the pandemic is brought under control. In that vein, November construction spending surged, confirming what we have already been seeing in housing permits and starts.

First of all, here are both total and residential construction spending for the past 15+ years:

Note that in raw, non-inflation-adjusted terms, both are close to their all-time highs, and definitely at 10+ year highs.

Of the two, residential construction is the more important because it is more leading, indicator. Commercial and government construction, which are included in the total, relatively speaking lag.

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 YoY% change in both, which helps take care of the fact that residential construction spending isn’t adjusted for inflation:

With the exception of the brief lockdown periods last March and April, residential construction spending is increasing at a pace equivalent to its best in the past 5 years, just as permits have done even better.