Friday, January 28, 2022

Real personal income and spending both decline in December; no imminent worry but evidence of softening


 - by New Deal democrat

Nominal personal income rose 0.3% in December, while spending declined -0.6%. In real terms after inflation, personal income declined -0.1%, and personal consumption expenditures declined -1.0%. Nevertheless both remain well above their pre-pandemic levels: 

Here is what the same information looks like using May 2021 as a baseline, after all the stimulus money had been expended:

Since then spending is up 0.9%, while income has declined -1.1%.

Comparing real personal consumption expenditures with real retail sales for December (essentially, both sides of the consumption coin) reveals both faltered for the second month in a row:

Because so many people front-loaded their Christmas spending into October, the subsequent decline is not too concerning. On the other hand, the quarterly graph below shows that real personal income declined in each of the last three quarters of 2021. I think this decline (along with COVID) explains most of the decline in the approval for Joe Biden and Congressional Democrats in general:

I have been expecting the economy to soften (although no recession at least through the middle of this year), and this morning’s income and spending data adds to the evidence.

Thursday, January 27, 2022

Real Q4 GDP completes the Boom of 2021, while long leading components warn of weaker 2022 to come


 - by New Deal democrat

Nominal GDP increased 6.9% in the 4th Quarter of 2021. After taking into account inflation, it increased 1.7%:

The last six economic quarters together have been the biggest economic Boom since 1983-84, as shown in the below graph showing YoY real GDP growth, minus the 5.5% of 2021, going all the way back to 1948:

That’s pretty impressive. But it is also the rear view mirror.

To see what lies ahead, there are two components of GDP which are helpful: real residential fixed investment (housing) and proprietors income (a proxy for business profits). Both of these have long and good track records as helping forecast the economy one year in advance. And here, the news is not so good.

Proprietors income (blue in the graph below) declined -0.9%, even before taking into account any inflation adjustment. Note that this generally rises and falls with corporate profits (red), although it is not quite so leading. But since the latter won’t be reported for at least another month, it is a good placeholder:

The news is also bad in housing, as real residential fixed investment declined for the 3rd quarter in a row:

Both nominal and real residential fixed investment as a share of GDP (the actual measurement that is part of the long leading indicators) also declined:

The decline in the housing component is not surprising. Monthly data in housing permits and starts declined by recessionary margins all the way through October of 2021. That business profits may have topped out as well is not a good sign, although this is only the first quarter of decline, and obviously may be a false signal.

Both of these long leading indicators are among the array I track. I plan on posting my forecast for year end 2022 shortly at Seeking Alpha, and will reference it here.

With seasonality over, it is clear that Omicron is responsible for increased layoffs


 - by New Deal democrat

With seasonality behind us, it is apparent that Omicron has resulted in increased layoffs.

New claims declined 30,000 last week to 260,000 - still well above its pandemic low of 188,000 set early in December. The 4 week average of new claims increased 15,000 to 247,000:

Continuing claims for jobless benefits rose for the second week in a row, by 51,000 to 1,575,000, 120,000 above its 50 year low set two weeks ago:

Last week I wrote that “The effects of Omicron are going to continue for at least a few more weeks. The quirks of seasonality should resolve after another week. Until I see more going on, I do not see any reason to overreact to the last two weeks’ big increase in claims.” At this point it seems clear that Omicron has had a significant impact. At the same time, with cases nationwide down 20% from peak as of today, I still suspect Omicron will be behind us by the end of February. So I still do not see a big reason to overreact to this increase in claims, to what is still in the long run an excellent number.

Wednesday, January 26, 2022

New home sales surge, while house price measures decelerate; expect deceleration or even downturns in each


 - by New Deal democrat

Since I didn’t post yesterday, let me catch up today with a note on both new home sales and prices.

New home sales (blue in the graph below) for December rose sharply to 811,000 on an annualized basis. This is the higher monthly number since March, and while it is well above the trend since the Great Recession, it is still well below its levels from late 2020:

The red line is inventory. When it comes to new homes, inventory lags not only sales but also prices, so it is not surprising that inventory has increased sharply to a 10 year+ high.

While new home sales are the most leading of all housing metrics, they are very noisy and heavily revised. So in the below graph I compare them with single family permits (red), which have also increased in the last few months, but also are not at 2020 levels:

Because mortgage rates have increased significantly in the past several months, I do not expect this surge in new home buying to last much longer.

Sales lead prices, and for most of 2021 sales were down. So it should not be a surprise that on a YoY basis, price increases are at last abating, shown both monthly (blue) and quarterly (black) in the graph below:

In December, prices were only up 3.4% from one year prior. Since the data is noisy on a monthly basis, the quarterly number, still high at just under 15%, but well below the sharp gains earlier in the year, is more telling.

The deceleration in YoY price gains, which nevertheless are still very high, was also the story yesterday in both the Case Shiller and FHFA house price indexes (light and dark blue in the graph below, /2 for scale). Also shown are the YoY% gains in rent of primary residence and owner’s equivalent rent (how the CPI measures housing inflation)(light and dark red):

My purpose in the above graph is to show that both house price indexes track one another closely, as do both “official” measures of housing inflation. Additionally, as I’ve previously pointed out, house price increases tend to bleed over into the official inflation measures with about a 12 to 18 month lag. Thus on a YoY basis price increases bottomed in 2019, but did not bottom in the official measures of rent until the beginning of 2021. Since the YoY% increase in house prices peaked in mid year 2021, we can expect the “official” CPI housing measure to continue to increase on a YoY basis through roughly late 2022.

This doesn’t necessarily mean that the *total* inflation measure will continue to increase throughout this year. Below I again show the YoY% change in owners’ equivalent rent as above, but also the total inflation index (gold). Most importantly, note that sometimes they track in tandem, but also that generally during the entire house price boom, bubble, and bust from 1995 to 2015 they tended to move in opposite directions:

Why did this happen? Sometimes, as during 1995-2015, home ownership and apartment renting are alternative goods. When more people decide to leave apartments and move into houses, house prices increase while rents flatten. This is generally what happened during the boom and bubble. Then during the bust people were forced to abandon houses and move back into apartments. This is shown in the below graph of homeownership:

Note the huge upward surge until the housing bubble popped, followed by the equally sharp deflation.

Finally, let’s factor in interest rates set by the Fed, shown in black below:

As CPI increases, the Fed typically increases interest rates. By the time the fully effect in owners’ equivalent rent is felt, Fed rate hikes have typically cooled the economy, meaning that the remaining majority of the overall consumer inflation index declines.

Bringing our discussion back to the present, we see that total inflation has been rising sharply since just after the pandemic hit. Owners’ equivalent rent started to rise about 9 months ago. Part of the delay was the big increase in the homeownership rate during that time, driving rents and house prices in opposite directions. The consensus is that the Fed will raise rates several times this year, perhaps starting as early as this spring. If they indeed do so, they will probably continue to embark on hiking rates until the economy slows or even reverses, enough so that price increases - other than rents - decelerate considerably. But while rent measures will continue to accelerate this year, house price increases themselves are likely to continue to decelerate, or even stall in the months ahead.


Monday, January 24, 2022

A historical note on US Treasury interest rates and stock prices


 - by New Deal democrat

Over the weekend I was asked by two people what is going on in the markets. That’s usually a sign that there has been a sudden downside move, and people are getting emotional.

Back 5 and 10 years ago, when I was doing perpetual battle with the DOOOMers, several times I was able to call a market bottom to the day - and once within an hour in real time - by how triumphantly the DOOOMers were trumpeting. Most of them have long since disappeared, but it’s well to keep in mind that while emotional moves in the stock market may be brutal, they are typically very short, and reverse quickly. That’s because there are always some cold-blooded sharks in the water, and at some point they see values as compelling and pile in buying.

As I draft this, the market is down 10%, which is “officially” a “correction.” (Most people define a bear market as requiring a 20% down move). I’m not interested in insta-calling a turning point, or speculating on “why” a particular daily move has taken place. In particular I don’t see any reason why anything having to do with the crypto-currency crazed would have a significant effect on the US’s $20 Trillion economy as a whole. Rather, let’s take a look at a few longer-term relationships that are fact-based and have been reliable.

Corporate profits are a long leading indicator, typically turning over 12 months before the economy as a whole. The stock market is a short leading indicator, typically turning 3-8 months before the economy as a whole. Which means corporate profits turn first; the stock market only reacts later. On Thursday the first estimate of Q4 2021 will be reported, and that will include “proprietors’ income,” a proxy for corporate profits, which won’t be reported until the “final” GDP report in two more months. That will give me what I need to make a long term forecast of the US economy through the end of this year. Last week I noted that the short leading indicators forecast the expansion would continue through mid year. 

In the meantime, because it is widely believed that the Fed is going to start raising interest rates in a few months in order to deal with inflation, let’s examine the yield curve in the US Treasury market, also a long leading indicator, and the Fed funds rates themselves, for their relationship to stock prices.

Since the 1960s, an inversion in the US Treasury yield curve, where 2 year interest rates are higher than 10 year interest rates, has preceded every single recession, typically by 12 to 18 months. The first two graphs below show that yield curve in blue, and compare it with the YoY% change in stock prices (red, /20 for scale), for the past 40+ years:

Again, notice that the yield curve has inverted roughly a year or more in advance of every single recession during that period. It even did so briefly in August 2019, although the 2020 recession was an anomaly caused by the near complete stoppage of the economy in the first several months of the pandemic. Further, aside from one month in 1998, it never inverted without a recession following. In other words, it has a near perfect record.

Now look at the red line. Stock prices turned lower YoY during every recession except for the brief 1980 one. But they also turned down a number of times when traders expected an economic slowdown (1984, 1994, 2002, 2016) - but these downturns were very brief. The only more extended YoY decline was the exact 1 year period following the crash of 1987. Also, note that stock prices typically continued higher YoY even after there was a yield curve inversion - each and every time believing “it’s different this time.” Only after an oncoming recession was obvious did stocks turn lower YoY.

Now let’s take a look at the same information zoomed in over the past 2 years:

The yield curve is not as positive as it was 1 year ago. But on the other hand, it has certainly not inverted. At roughly +0.8%, it is more or less in the middle of its range for the last 40 years. Quite simply the yield curve is not forecasting any imminent economic downturn.

But what about the Fed raising rates. Below are two graphs showing the same 40 year period, with the same YoY% change in stocks represented; this time being contrasted with the actual Fed funds rate (black, right scale):

Don’t squint too hard, because the point is that there is no strong relationship between the two. In the 1980s and 1990s, YoY stock prices moved somewhat opposite to Fed funds, i.e., an increase/decrease in the funds rate correlated with a downturn/upturn in the YoY% change in stock prices. Since 2000, in the era of zero or near zero Fed funds rates, there has been very little correlation at all, and indeed during most of the time that the Fed funds rate was increasing in 2005-07 and 2016-19, there were continued YoY gains for stock prices.

The bottom line is, there is nothing fundamental happening that justifies a major revaluation downward in stock prices for any extended period. A brief emotional - and emotionally jarring - move to negative YoY comparisons, with a swift rebound would hardly be surprising. And it would be emotionally jarring, because stock prices increased 25% last year:

So a YoY decline would mean giving that all back. But it would likely be the kind of move that the late St. Jack Bogle of Vanguard Funds fame would categorize as almost certainly being “V” shaped. Of course, it could always “be different this time.” But that has historically been the wrong conclusion.

Saturday, January 22, 2022

Weekly Indicators for January 17 - 21 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

A few months ago, in the midst of the Boom, virtually every indicator across all time spectrums was positive. In the past months, we have begun to see the deterioration in that situation, as every week one or two more indicators in one or another part of the time spectrum have shifted to neutral or negative.

This doesn’t mean that the situation is negative; more like that it is normal, with some negatives and neutrals, put still a majority of positives.

As usual, clicking over and reading will bring you up to the moment on the relevant leading and coincident economic data, and will bring me a little cash for my grocery shopping.

Friday, January 21, 2022

Coronavirus dashboard: Omicron has peaked; now what?


 - by New Deal democrat

Let’s start out with the good, or at least less catastrophic news: it’s almost certain that the Omicron wave has peaked in the US. In fact, the only Census region it is still up week over week is in the Midwest:

In almost all of the areas hit hard early - Puerto Rico, and the NYC and DC metro areas - cases are down sharply since peaking. Additionally cases are down substantially in California, Florida, and Illinois:

Only Hawaii, anomalously, has continued to increase.

This follows the pattern set in South Africa, where cases are now down over 80% from their peak, and deaths have plateaued after a 5 week lag:

Note that deaths have increased less than cases in each of the last two waves, and only increased about 30% as much as cases during Omicron.

The situation is similar in the UK:

It appears the US will follow a similar trajectory with deaths, which probably will peak at under 2500 per day in late February:

Returning to the US, although I won’t bother with a graph, cases are only up 10% or more in the past week in the States of AK, AL, AZ, HI, ID, KS, MT, KY, LA, NE, NV, NM, ND, OK, SC, TN, UT, WV, and WY. Hospitalizations have peaked simultaneously with cases, which suggests either a capacity or triage issue, and/or people are reluctant to seek treatment there. ICU admissions are still slowly increasing:

Because of the capacity/triage/reluctance issue, it is unclear the extent to which hospitalizations rose less steeply than cases,  Hospitals will remain under severe strain for several more weeks.

If cases in the US decline roughly as a mirror image of how they rose during Omicron, what next?

Trevor Bedford, the biostatistician whose work has been invaluable throughout the pandemic, has a guess: 

“We estimate that as of Jan 17 the US as whole has had a cumulative ~15M confirmed cases of Omicron, or approximately 4.5% of the population recorded as confirmed cases. The large majority (>90%) of these accumulated since Dec 14

Assuming between a 1 in 4 and 1 in 5 case reporting rate suggests that between 18% and 23% of the country was infected by Omicron by Jan 17, with the large majority infected in a span of just ~4 weeks.

“There may be a longer tail of circulation after the peak (as seen in South Africa), but a rough expectation would have an equivalent number of cases in the next 4 weeks on the other side of the peak. This would suggest 36-46% of the US infected by Omicron by mid-Feb. 

“My big question now is to what extent will Omicron-like emergence events characterize "endemic" circulation of SARS-CoV-2? Given it occurred once, having it occur again would not be at all surprising, but I don't know whether to expect this every year or every ten.”

Note the big assumption that only 20% to 25% of all COVID cases under Omicron have been “confirmed,” with the rest flying under the radar.

My own rule of thumb has been a ratio of 2:1 or 2.2:1. The reason for this is the experience of North and South Dakota one year ago, where there were massive outbreaks - the biggest of any States before Omicron - one year ago, with 60% of all tests being positive. That hasn’t prevented both States from having Omicron outbreaks more than 50% higher than the worst of that wave:

If North and South Dakota’s previous wave, with 10% of their populations having *confirmed* cases and 60% test positivity strongly suggesting a huge number of unconfirmed cases, didn’t lead to sustained resistance to reinfection, is a 10% *confirmed* outbreak in the US as a whole, with 45%+ test positivity, going to have a different result?

In other words, the situation going forward very much depends on whether and when the next unusual variant hits, and how much resistance has been obtained by the vast unvaccinated idiot population in the US. As the below graph shows, only 15% more of the US population got vaccinated in the past 7 months, despite both the Delta and Omicron waves:

If “real” cases are 2.2x confirmed cases, then about 45% of the US population has had COVID since the pandemic started, with the distribution presumably skewed with a greater percent among the unvaccinated during the past 7 months.

With COVID circulating freely among wild mammal populations (and domesticated cats as well), there are going to be more variants. Our best hope is that Trevor Bedford is right, and in general most succeeding waves of COVID from here on exact less and less of a toll, with occasional bigger spikes. For my part, I continue to be hopeful that there will be a big respite in spring.

Thursday, January 20, 2022

Omicron and seasonality bedevil new jobless claims


 - by New Deal democrat

It is likely that the effects of Omicron as well as quirks of seasonality were behind this week’s big jump in new jobless claims.

New claims jumped 55,000 on a seasonally adjusted basis last week to 286,000. The 4 week average of new claims increased 20,000 to 231,000:

Continuing claims for jobless benefits rose 84,000, to 1,635,000, which is still very close to a 50 year low (not shown):

There are probably two reasons for the big jump in new claims. The first is Omicron. We won’t have the State by State breakdown for one more week, but it would hardly be surprising if the big increases were most profound in those States hardest hit by Omicron in the previous weeks (generally, the NYC and DC metro areas). Certainly in the last several weeks Omicron has hit restaurant reservations, which have declined by 25% or more compared with a year ago (graph shows global reservations, but US reservations are nearly identical):

Layoffs in the service industries as a result of gigantic rises in infections would not be a surprise at all.

Secondly, here is a comparison of seasonally adjusted (blue) vs. not seasonally adjusted (red) claims in the past 18 months:

Note that in the corresponding week last year non-seasonally adjusted claims were no higher than seasonally adjusted. This year they failed to decline to that level. More generally, non-seasonally adjusted claims typically are below the seasonally adjusted number from August through November, and then rise to a peak in the second full week of January, as shown above, and also below in this graph of the 10 years just before the pandemic:

The past 6 months have resulted in levels of new claims equivalent to the range of those  during 2016 and 2017, except that typically claims rise slowly during autumn from a low point in August, and in 2021 they declined slowly through autumn. Because of the typically sharp declines from peak in new claims in mid-January, something as simple as the creep of the days of the week for equivalent dates can make a big difference. In other words, next week there may be a much bigger drop than there was for the equivalent week in 2016 and 2017.

The effects of Omicron are going to continue for at least a few more weeks. The quirks of seasonality should resolve after another week. Until I see more going on, I do not see any reason to overreact to the last two weeks’ big increase in claims.

Wednesday, January 19, 2022

Housing ends 2021 with a bang


 - by New Deal democrat

Housing ended 2021 with a bang, as housing starts (blue in the graph below, left scale) increased to 1.702 million annualized, and permits (gold) to 1.873 million annualized, in both cases the highest level since 2006 with the sole exception of last March / January, respectively. Single family permits (red, right scale), which are the least noisy, increased to 1.128 million annualized, the highest reading since May, but well below the 8 months previous to that:

Because this is December data, even though it is seasonally adjusted, it may still be affected by Christmas seasonality, as exacerbated by the pandemic (right scale below). To some extent it may also be a reaction to the recent increase in mortgage rates (blue, left scale) off their bottom:

We have seen this dynamic before, where prospective homeowners, seeing an increase in mortgage rates and expecting more, “lock in” purchases before they become more expensive. 

Below is the same data on mortgages and single family permits, but presented YoY:

This makes it easier to see that housing permits have historically followed mortgage rates (inverted), with a 3 to 6 month lag. Mortgage rates have turned higher than they were 1 year ago, and permits have turned lower than one year ago.

According to Mortgage News Daily, mortgage rates yesterday averaged 3.7%, the highest in over a year. Should these higher rates continue, we can expect a significant decline in new housing permits and starts in the next few months.

In the meantime, because housing permits and starts are an important component of the long leading indicators, this data will play an important role in my long term forecast, which will be determined after data for Q4 GDP is reported next week.

Tuesday, January 18, 2022

Short term economic forecast through mid year 2022


 - by New Deal democrat

My short term forecast for the first half of this year is up at Seeking Alpha.

This forecast is based on the same system I have successfully used since before the Great Recession. Most forecasters, deliberately or not, cherry pick data points to fit a previously arrived at intellectual point of view, and simply project the current trend ahead (or else default to the inevitable “We’re DOOOMED!). The short leading indicators, in contrast, forecast a change in the trend before the lion’s share of the data is affected.

Clicking through and reading will give you a good idea of what is ahead from now till the 4th of July, and will pay for some bourbon and firewood to help get me through the cold winter nights still ahead.

Monday, January 17, 2022

Fox News and white grievance

 - by New Deal democrat

In his recent book “Kill Switch,” Adam Jentleson, a former aide to the late Senator Harry Reid, persuasively argues that the Senate filibuster arose by accident, when a rule revision in 1805 failed to include the “previous question” resolution, which would require a vote on the issue pending, because it was thought superfluous. He also shows by overwhelming evidence that for the past 200 years, by far the single most common use of the filibuster was to defeat civil rights legislation benefiting Blacks.

And in the past week, it has become apparent that Senators Manchin and Sinema would join GOPers to uphold a filibuster against voting rights legislation once again. 

Which brings me to a couple of recent graphs posted by Kevin Drum. He is the sort of commentator I read, even though I frequently disagree with him, because his arguments are worthy of thinking through, and sometimes he finds genuine gold nuggets.

An example of the former is when he argues,  as he did today  , that “the progressive wing of the party [“blew it” by] insist[ing] on pushing voting rights laws that had zero chance of passing. Biden knew this from the start and said so. Then Bernie Sanders insisted on an insane BBB bill that would have been unprecedented in the history of the country,” and as a result is responsible for “Joe Biden's disastrous approval rating and the chaotic shape of the Democratic Party.”

I am trying to think of the counterfactual situation where the progressive wing of the Democratic Party simply allowed the infrastructure bill to pass and then sat back somnolently while nothing else happened. Somehow I fail to see that Joe Biden’s approval rating would be any better. Hmmmm . . . I rather think that, whether they articulate this blame or not, the public is really pissed off at being governed by John Roberts’ reactionary 6 on the Supreme Court, with an assist by co-Presidents Manchin and Sinema, and that the attempt by progressives to get more done has not worsened this perception.

But, as an example of the latter, Drum has shown very persuasive data many times showing that the decline in the crime rate since the early 1990s correlates really well with the abatement of lead paint beginning 20 years before. Less lead poisoning in boys leads to less crime in young men 20 years later. Q.E.D. And it really does seem to be true.

Anyway, that brings me to the point of today’s post. Because recently Drum has also been arguing that the main source of the US’s turn to proto-fascism has overwhelmingly been Fox News (much moreso than even Facebook). Below are a couple of graphs he has posted over the past several months to that point.

First, commitment to democracy in the US by political party:

Second, anger or dissatisfaction with the direction of the country in the United States:

While correlation is not causation, it is certainly true that Fox News’s almost entire worldview of white grievance overlays quite well with both the collapse of commitment to democratic institutions by GOPers, and anger at the direction of the country.

Saturday, January 15, 2022

Weekly Indicators for January 10 - 14 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

In addition to Omicron, commodity prices and interest rates are having an impact across the board on the long and short term forecasts and the nowcast. (Just for spite, two weeks ago some RW nut jobs had a fit about my including a meteor as the image for the article, so this week I including an even more graphic representation of the Giant Flaming Meteor of Death).

As usual, clicking over and reading will not only bring you fully up to date, but will pay my pizza tab for the week.

Friday, January 14, 2022

December real retail sales tank; industrial production also declines; consumer slowdown seems nearly certain


 - by New Deal democrat

Two days ago, in connection with consumer inflation, I reiterated that “we certainly are at a point where a sharp deceleration beginning with the consumer sector of the economy is more likely than not.”

I didn’t expect to have it show up so soon! Retail sales, one of my favorite “real” economic indicators, took a nosedive in the month of December, declining -1.9% for the month even before inflation. After inflation, “real” retail sales declined -2.4%. Ouch! 

Thus real retail sales are down -5.1% from their April peak: 

Recall that real retail sales rose 1.8% in October. So I suspect a large part of the decline is that, fearing shortages on the shelves at Christmastime, many consumers advanced their purchases of Christmas gifts by several months. Still, the net decline since September has been -2.2%

Nevertheless they remain 9.2% higher than one year ago. In the past 70+ years before the pandemic hit, real retail sales were only higher YoY briefly in the early 1980s, as well as for about 16 months during the 1940s, 50s, and 60s.

Next, let’s turn to employment, because real retail sales are also a good short leading indicator for jobs.

As I have written many times over the past 10+ years, real retail sales YoY/2 has a good record of leading jobs YoY with a lead time of about 3 to 6 months. That’s because demand for goods and services leads for the need to hire employees to fill that demand.  The exceptions have been right after the 2001 and 2008 recessions, when it took jobs longer to catch up, as shown in the graph below, which takes us up to February 2020:

Now here is the same graph since just before the pandemic hit:

Note the two have been right in line for over half a year. I have written for the past several months that this “argues that we can expect jobs reports in the next few months to average out about even with those from one year ago, which averaged about 500,000 per month.” Although the last two jobs reports started out poor, November followed the pattern of upward revisions, and I expect more such revisions when next month’s jobs report is released. But comparisons will be very difficult YoY beginning in March, which means - to be consistent - that a big slowing of employment growth seems likely by about summer this year.

Finally, real retail sales per capita is one of my long leading indicators. Here’s what it looks like for the past 30 years:

With a -5.3% decline since April, this is a decidedly negative signal. Frankly, it’s recessionary looking out to midyear and beyond. Since it is only one indicator among the array, it isn’t a big concern yet. But it absolutely adds to the evidence that a big consumer slowdown as we go forward this year looks likely.


Before I go, let’s also briefly take a peek at industrial production, which also declined, by -0.1%, this morning. Manufacturing production declined -0.3%. Additionally, November was revised downward for both total and manufacturing production. Here’s the current view:

Both are still higher than they were just before the pandemic. While this isn’t good news, it is within the range of noise, but on the other hand, it is one more bit of evidence for a slowing expansion.

Thursday, January 13, 2022

Continuing unemployment claims make new 45+ year low


 - by New Deal democrat

New claims increased 23,000 last week to 230,000. The 4 week average of new claims increased 6,250 to 210,750:

The big increase is likely affected by seasonality. It’ll be another week or two before we can tell if there is any real change in trend. If there is, it is likely to be a flattening in new claims rather than any significant increase. 

Continuing claims for jobless benefits, meanwhile, declined by 194,000, to 1,559,000:

This is a new 45+ year record low. There haven’t been continuing claims this low since 1974, when the US population was half of what it is now, as shown in the graph below that subtracts 1,559,000 from the actual number:

Last week I wrote: “I don’t know if initial claims will go any lower, but I suspect continuing claims will continue to decline to or even below their 2018-19 levels.” Wow! Only one week later and the forecast is already correct. I expect even further declines in continuing claims, until the extreme tightness in the labor market brought about by the pandemic starts to loosen its hold.