Saturday, August 7, 2021

Weekly Indicators for August 2 - 6 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

Although the Delta wave is raging, so far neither producers nor consumers appear to have altered their behavior in any significant way at all.

As usual, clicking through and reading will bring you right up to date on the economy, and bring me a little pocket change for my efforts.

Friday, August 6, 2021

July jobs report: more like this, please


 - by New Deal democrat

While the NBER has declared that the recession ended in April 2020, and income, sales, and GDP have all fully recovered, two of the series that the NBER uses have yet to have made a full recovery: Industrial production, still down -1.2% compared with February 2020, and employment, still down -4.4% as of the jobs report last month.

So the main questions for this month’s jobs report for July are how much of that 4.4% has been made up, and do the leading indicators in the report continue to suggest more growth ahead?

Here’s my synopsis of the report:

  • 943,000 jobs added. Of these, 703,000 were private sector jobs, and 240,000 were government jobs, 220,700 in local education alone. The alternate, and more volatile measure in the household report indicated a gain of 1,043,000 jobs, which factors into the unemployment and underemployment rates below.
  • The total number of employed is still -5,702,000, or -3.7% below its pre-pandemic peak.  At this rate jobs have grown this year, it will take another 10 months for employment to completely recover.
  • U3 unemployment rate declined -0.5% to 5.4%, compared with the January 2020 low of 3.5%.
  • U6 underemployment rate declined -0.6% to 9.2%, compared with the January 2020 low of 6.9%.
  • Those on temporary layoff declined -572,000 to 1,239,000.
  • Permanent job losers declined -257,000 to 2,930,000.
  • May was revised upward by 31,000, while June was revised upward by 88,000, for a net gain of 119,000 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 very 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 27,000. Since the beginning of the pandemic, manufacturing has still lost -433,000 jobs, or -3.4% of the total.
  • Construction jobs increased 11,000. Since the beginning of the pandemic, -227,000 construction jobs have been lost, or -3.0% of the total.
  • Residential construction jobs, which are even more leading, rose by 8,300. Since the beginning of the pandemic, 42,700 jobs have been *gained* in this sector, or 5.1%.
  • temporary jobs rose by 9,700. Since the beginning of the pandemic, there have still been 252,800 jobs lost, or -9.8% of all temporary jobs.
  • the number of people unemployed for 5 weeks or less increased by 276,000 to 2,257,000, which is  175,000 higher than just before the pandemic hit.
  • Professional and business employment increased by 60,000, which is still -556,000, or about -2.6%, below its pre-pandemic peak.

Wages of non-managerial workers
  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.11 to $25.83, which is a 4.7% YoY gain. This is excellent news, considering that a huge number of low-wage workers have finally been recalled to work. 

Aggregate hours and wages:
  • the index of aggregate hours worked for non-managerial workers rose by 0.7%, which is a  loss of -3.3% since just before the pandemic.
  •  the index of aggregate payrolls for non-managerial workers rose by 1.1%, which is a gain of 4.2% since just before the pandemic.

Other significant data:
  • Leisure and hospitality jobs, which were the most hard-hit during the pandemic, increased 380,000, but is still -1,737,000, or -10.3% below their pre-pandemic peak.
  • Within the leisure and hospitality sector, food and drink establishments gained 253,200, but is still -969,000, or -7.9% below their pre-pandemic peak.
  • Full time jobs increased 1,265,000 in the household report.
  • Part time jobs decreased -250,000 in the household report.
  • The number of job holders who were part time for economic reasons declined by 144,000 to 4,483,000, which is an increase of 85,000 since before the pandemic began.


This was an excellent report on virtually every front. I really can’t find any negatives or particularly soft spots. Not just the totals, but the leading internals were all positive to very positive, including leading job sectors and wages. Full time jobs increased strongly, and even the decline in part time jobs was really a sign of strength.

The only *relatively* negative thing I can say about this report is, in response to the questions I asked at the top,  that, even at this rate, it will take until the middle of next year to fully recover to where we were just before the pandemic. In particular, the leisure and hospitality sector, which was particularly hard-hit by the pandemic, still has a long ways to go.

In short, more like this, please.

Thursday, August 5, 2021

Initial jobless claims continue in range, while continuing claims sharply decline


 - by New Deal democrat

Initial jobless claims declined another 14,000 this week to 385,000, still 17,000 above their best pandemic levels of 368,000 set on June 26 and July 10. The 4 week average of claims declined by 250 to 394,000, also 9,500 above its pandemic low set on July 11:

Significant progress in the decline of initial claims remains stalled, as it has for the last 2 months.

The story is quite different for continuing claims, which declined 366,000 to a new pandemic low of 2,930,000:

This series, which had also been near a stall, now looks to have begun a new slow declining trend on May 29, and to have accelerated this week. This may reflect the termination of special pandemic benefits in many States, the impact of $15 minimum wages and signing bonuses being offered, or other items.

From the long term perspective, this level of continuing claims is consistent with early to mid-expansions over the past 40 years (graph subtracts -2,930,000 so that current level = 0):

The decline in continuing claims is good news, provided those whose claims have ended are able to start new jobs, and not just being arbitrarily tossed to the economic wolves.

My theme for the present remains that whether claims will continue to stall, reverse, or improve from here is under the control of the Delta variant, and whether new vaccinations continue to stall. My best guess is that August and September will not be good months, as Delta burns through the dry tinder.

Wednesday, August 4, 2021

Coronavirus dashboard for August 4: in which I see reason for optimism


 - by New Deal democrat

It seems pretty clear that Delta burns through the dry tinder very fast - on the order of 9 to 12 weeks from onset to peak, based on the experience of the UK and India, respectively. The US is 7 weeks past its trough in cases, so it is a fair hypothesis that the Delta wave will reach its peak at some point in the next 2 to 5 weeks - roughly at some point in the second half of August or early September. 

But what does that mean for the number of cases and deaths? And what exactly is the “dry tinder” for Delta?

Let’s start with a graph of the 1 week average in cases per capita for the US, UK, and India, all of which have seen Delta wave spikes:

As I indicated above, from prior trough to peak took 12 weeks in India, and 9 weeks in the UK. During that time, in India *confirmed* cases rose 35x. In the UK it was 25x. Seven weeks in, the US has seen an 8x rise in cases. If we use the UK and India as our range, when it comes the peak in the US will be about 280,000 to 400,000 cases/day!

Now let’s turn to deaths.

In India, deaths peaked 3 weeks after the peak in cases, up 43x from their previous trough:

In the UK, many have taken heart from the fact that the rate of deaths is but a small percentage of previous peaks:

But deaths are presently at 12.6x their trough just before Delta, 2 weeks after the peak in cases. Another doubling to the same 25x multiple as the UK had in cases, before deaths peak in a week or two seems a reasonable estimate:

Similarly in the US, deaths are only about 1/8 of their worst levels in previous waves:

But deaths are 1.9x the level of their trough 4 weeks ago, and 1.7x from 2 weeks ago:

If these keep increasing at the same pace, that is a range of between 774 to 1720 deaths per day when the peak arrives.

Turning to the second issue, what exactly is the “dry tinder” for Delta? Is it the unvaccinated? Everybody? Or just those with a particular genetic or other predisposition? If it is one of the first two, then in a couple of months the US will have stumbled into herd immunity. If it is the latter, then the door is open for yet another variant to raise hell this winter.

In India, a study showed that seroprevalence increased by more than 50% of the entire sampled population post-Delta, rising from 14% to 78% of the population. If this is true, then it appears that an absolute majority of the unvaccinated population at least is likely to  become infected by Delta, whether or not the case is “confirmed.” In India, the “confirmed” cases only rose by 2% of the population! 

In India, the positivity rate for COVID testing peaked at about 22.5% 12 weeks ago (I have truncated the graph because of a glitch in the data from early 2020):

Now let’s consider the curious cases of South Dakota, which had a horrid outbreak last fall with over 60% positive test rates (similar to that of Oklahoma right now):

but which is among the States with the lowest per capita new infections now:

If over 50% of the population of India got infected with Delta and only showed a 22.5% positivity rate, what are we to make of the US, which as of a week ago had roughly a 12% positivity rate (the most recent data), but where many States are running higher (the top 10 are shown below, plus the regional South as a whole:

Testing is running at close to a 20% rate in the South.
To a virtual certainty there are simply multiples of actual cases that are going undiagosed.

If I am correct that Delta is going to infect at least 50% of the US’s unvaccinated population over about the next month, then the remainder of this month and September are going to be brutal. But if about 70% of US adults are fully vaccinated by then, and over half of the rest have antibodies due to recent Delta infection, then with over 85% of US adults immune either the easy or the hard way, by late this autumn there may an actual return to near-normal life.

Monday, August 2, 2021

Manufacturing sector continues to be on fire; but real construction spending plunges


 - by New Deal democrat

August data started out mixed. 

The ISM manufacturing index continued to show strong expansion. Both the overall and new orders components declined slightly m/m, but at 59.5 and 64.9 remained far about the breakeven point between expansion and contractions of 50.0:

The simplest way to read this is that the manufacturing sector remains on fire.

The story is different with this morning’s release of June construction spending. Total nominal spending increased 0.1%, and spending in the long leading residential construction sector increased 1.1%, the former less than 0.1% below its all time record from a few months ago, and the latter to the highest level ever:

But when we deflate by the cost of construction materials, that increase disappears, and in fact shows a plunge, down -3.6% and -2.7% monthly, respectively:

In other words, in real terms construction has been faltering badly. This is a substantial negative indicator for spending in the second half of 2022.