Saturday, June 5, 2021

Weekly Indicators for May 31 - June 4 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

On the one hand, it’s amazing just how positive the indicators are almost across the board - including long term Treasuries getting relaxed about the inflation scare.

On the other hand, the surge in commodity prices looks like it’s about to bite corporate profits in the rear quadrant.

Also, I’ve tried out a new summary spreadsheet format which should make the concluding information easier to read.

As usual, clicking over and reading will bring you up to the virtual moment on the economy and the forecast. And it will reward me with my lunch money for next week.

Friday, June 4, 2021

May jobs report: almost all positive, but not good enough


 - by New Deal democrat

  • 559,000 jobs added: 492,000 private sector plus 67,000 government. The alternate, and more volatile measure in the household report indicated a gain of 444,000 jobs, which factors into the unemployment and underemployment rates below.
  • The total number of employed is still 7,629,000, or 5.0% below its pre-pandemic peak.  At the rate jobs have grown this year, it will take another 12 months for employment to completely recover.
  • U3 unemployment rate declined -0.3% to 5.8%, compared with the January 2020 low of 3.5%.
  • U6 underemployment rate declined -0.2% to 10.2%, compared with the January 2020 low of 6.9%.
  • Those on temporary layoff declined -291,000 to 1,823,000.
  • Permanent job losers declined -295,000 to 3,234,000.
  • March was revised upward by 15,000, while April was revised upward by 12,000, for a net gain of 27,000 jobs compared with previous reports.
Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and will help us gauge how strong the rebound from the pandemic will be.  These were mainly positive: 
  • the average manufacturing workweek increased 0.1 hour to 40.5 hours. This is one of the 10 components of the LEI.
  • Manufacturing jobs gained 23,000. Since the beginning of the pandemic, manufacturing has still lost -509,000, or 4.0% of the total.
  • Construction jobs declined -20,000. Since the beginning of the pandemic,  -225,000 construction jobs have been lost, or 2.9% of the total.
  • Residential construction jobs, which are even more leading, rose by 4,400. Since the beginning of the pandemic,  32,400 jobs have been gained in this sector, or 3.9%.
  • temporary jobs rose by 4,400. Since the beginning of the pandemic, there have still been -294,100 jobs lost, or 10.0% of all temporary jobs.
  • the number of people unemployed for 5 weeks or less declined by -391,000 to 2,023,000, which is  -59,000 *less* than just before the pandemic hit.
  • Professional and business employment increased by 35,000, which is still -708,000, or about 3.3%, below its pre-pandemic peak.

Wages of non-managerial workers
  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.14 to $25.60, which is a 2.4% YoY gain. This contrasts with the 5%+ YoY gains recently seen, and reflects the rehiring of low-wage workers in sectors like food and beverage serving. 

Aggregate hours and wages:
  • the index of aggregate hours worked for non-managerial workers rose by 0.2%, which is a  loss of 4.3% since just before the pandemic.
  •  the index of aggregate payrolls for non-managerial workers rose by 0.7%, which is a gain of 2.2% since just before the pandemic.

Other significant data:
  • Leisure and hospitality jobs, which were the most hard-hit during the pandemic, increased 292,000, but is still -2,538,000, or 15.0% below its pre-pandemic peak.
  • Within the leisure and hospitality sector, food and drink establishments gained 186,000, but is still -1,480,400, or 12.0% below its pre-pandemic peak.
  • Full time jobs increased 223,000 in the household report.
  • Part time jobs increased 178,000 in the household report.
  • The number of job holders who were part time for economic reasons rose by 28,000 to 5,271,000, which is an increase of 873,000 since before the pandemic began.


This was a very positive report, but still one which shows how far we still have to go.

Negatives were almost non-existent, consisting of declines in nonresidential construction jobs and temporary jobs (but the latter may be temps transitioning to permanent employment).

The more consistent theme, though, was that while there were gains, they weren’t nearly of the order we need for a quick recovery to pre-pandemic levels. Overall jobs are still 5% below where they were in February 2020, and the hard hit leisure and hospitality sector is 15% below its pre-pandemic peak! The upward revisions in March and April were tepid, confirming my suspicion that March may have been as much as or more of an outlier than April. This month’s number was close to the combined March and April average.

Further, the YoY gains in hourly wages have been more than eaten up by inflation. As the stimulus payments wear off, I suspect we are going to see a faltering in sales, which would not be good.

The brightest spot was the new low in short-term unemployment, which was even lower than before the pandemic, and among the 10 lowest months in the past 10 years. 

In essence, this report showed that there are very few new layoffs, but not enough new hires to keep the new expansion growing robustly.

Thursday, June 3, 2021

New jobless claims continue strong decline, consistent with ongoing recovery, while continuing claims continue mixed


 - by New Deal democrat

New jobless claims continue to be the most important weekly economic datapoint, as increasing numbers of vaccinated people and outdoor activities have led to an abatement of the pandemic - deaths are at their lowest point in over a year, and new infections at their lowest points since the onset of the pandemic. 

Several weeks ago we hit my objective for claims to be under 500,000 before Memorial Day, and this week  we hit second objective, for claims to be below 400,000 by Labor Day. 

REMINDER: Because of the unprecedented number of layoffs during the April and May 2020 lockdowns, for the last year I have given heightened importance to the non-seasonally adjusted numbers. This will be the last week I include them.

New jobless claims declined 20,000 to 385,000. On a unadjusted basis, however, new jobless claims rose 6,014 to 425,450. The 4 week average of claims declined by 30,500 to 428,000. Both seasonally adjusted numbers were new pandemic lows.

At the peak of the pandemic lockdowns, new claims were running 6 million to 7 million per week. Here is the trend since the beginning of last August:

In the past 3 months, claims have trended down an average of roughly 100,000 per month. If this continues for just 3 more weeks, new claims will be at levels which in the past have been consistent with full or nearly full employment deep into expansions. At their current level, claims are consistent with early to mid-recovery levels in the past:

Continuing claims, which are reported with a one week lag, and lag the trend of initial claims typically by a few weeks to several months, rose 169,000 from their revised pandemic low of 3,602,000 last week to 3,771,000. On an unadjusted basis (gold), they also rose 22,860 from their revised pandemic low of 3,504,163 last week to 3,504,163:

The long term perspective again shows that these are equivalent to the worst levels of most previous recessions, versus at 2,000,000 or below during strong expansions:

I am not sure if the recent strong declines in new jobless claims will continue from here, as we approach past levels of full or nearly full employment. The issue with continuing claims has become more complex, as unadjusted claims show a slowly declining trend, while after adjustments they have essentially been flat since the beginning of March. The picture has become much more clouded as half of the States have announced early terminations of supplemental pandemic benefits for ideological reasons. 

Finally, as I wrote two weeks ago, March’s employment gains may have been more of an outlier than April’s. If we simply averaged the 2 months together that would be an average jobs gain of 518,000, then the continued big decline in initial claims would give us a May jobs gain of over 500,000 when that report is issued tomorrow. There may also be big revisions to March and April’s numbers as well. We’ll see.

Wednesday, June 2, 2021

Coronavirus dashboard for June 2: most of US approaches herd immunity threshold; COVID still spreading among the remaining idiots


 - by New Deal democrat

In the past week new COVID-19 cases declined almost 30%, by about 7,000 to 17,289/day; however, deaths actually increased by about 10% to an average of 589/day, mainly due to a data dump by California 5 and 6 days ago - thus I expect a new low in deaths within the next several days:

Total deaths are 595,213. Over 60% of all adults have received at least one dose, and over half are fully vaccinated. Slightly over half of the US population, including all children, has received at least one dose.

But the overall situation masks a large divergence between States where there have been the most vaccinations vs. States with the least. Here is the map of vaccination administration by State as of one week ago:

In the Northeast, only NY, at 67.9%, is slightly below 70% of all adults who have received at least one dose of vaccine. California also is over 70%.

And here are the results: cases in the Northeastern States have rapidly declined to their best levels since the beginning of the pandemic. Only Maine and Pennsylvania, while still showing sharp declines, are lagging:

Meanwhile California has also seen over a 95% decline in cases since winter, when they averaged over 110 new cases per 100,000 population daily:

At the other end, there are 8 States which have seen *no* meaningful declines in cases over the past 8 weeks:

Four of them - WA, WY, LA, and AZ - are among the 10 worst States for new cases, which MO close behind. AR, MS, and AL are roughly in the middle of the pack. Note that with the exception of Washington State*, all of them are among those with the lowest rate of vaccinated population.

*A perusal of news sources in Washington State suggests that the recent increase in new cases is due to the admission of unvaccinated new residents to long term care facilities. When the disease is re-introduced into the facility, with close quarters and recirculated air among the most immune-compromised population, the disease spreads even among the vaccinated (although there is no indication of increased deaths among that group). 

Basically, most of the US is at least very close to achieving herd immunity, while the disease continues to spread among those with recalcitrant populations, and if the new cases are all or virtually all among those who have voluntarily decided not to get vaccinated, then the disease is spreading among them at rates similar to last spring and summer, with little decline at all.

Tuesday, June 1, 2021

May manufacturing continues white hot; April construction spending shows signs of being constrained by materials and costs


 - by New Deal democrat

It’s the first of the month, which means we get our first look at May data in the form of the ISM manufacturing index, as well as April construction spending. The questions we are looking for information to answer from these two leading sectors of the economy, manufacturing and residential construction, are: (1) is the Boom still ongoing, and is it likely to continue in the coming few months; and (2) is there evidence that inflation is creating a bottleneck on growth?

The answers for the two sectors appear to be different.

First, the May ISM manufacturing index increased slightly from 60.7 to 61.2. The new orders component of the index, which is the most leading, increased even more, up 2.7 from 64.3 to 67.0, very close to its December and March highs:

The boom in manufacturing is continuing, with no evidence of a slowdown in the near future.

Residential construction spending is not quite as leading as new home sales or permits, but it has the virtue of having very little noise and almost all signal. But there is a quandary, because for the first time in 20 years, the direction of this indicator differs sharply depending on whether or not one factors in the prices of construction materials.

The below graph shows residential construction spending unadjusted for inflation (red), which made another all-time high in April; compared with the same but adjusted for the cost of building materials (blue), which has turned down by 11.5% since December (red); and single family permits (gold), which have turned down by 9.5% since January:

This looks like a bottleneck putting the brakes on growth. Spending is growing, but only because the price of materials has gone up sharply. That the downturn in construction permits and spending adjusted for the cost of materials occurred nearly simultaneously and by similar percentages looks like it is the cost of materials which is decisive - I.e., costs - due to shortages in materials - are driving the numbers.

Monday, May 31, 2021

Memorial Day 2021


 - by New Deal democrat

Memorial Day is that most somber of national observances, in which we remember all those, of whatever race, creed, color, or nationality, who gave their lives so that government of the People, by the People, and for the People shall not perish from the Earth.

Here are some of their resting places:

Gettysburg National Cemetery

Antietam National Cemetery

Arlington National Cemetery

Normandy, France:

May they Rest In Peace, and may our generation be worthy of their sacrifice by maintaining the Republic that they bequeathed to us.

Weekly Indicators for May 24 - 28 at Seeking Alpha


 - by New Deal democrat

There was a delay over at Seeking Alpha in posting my latest Weekly Indicators note, but it is now up.

The underlying strongly bullish fundamentals of the economy have not changed.

This week, in conjunction with Robert Dieli of the No Spin Forecast, I initiated coverage of a metric that he and the late Jeff Miller initiated called the “C-Scorre,” essentially a weekly estimate of the trade off between inflation and unemployment (the Philips curve) on the one hand, and the yield curve on the other hand. Jeff Miller passed away early in May, so I am now continuing the series.

As usual, clicking over and reading will bring you up to the virtual economic moment, and reward me with some lunch money.