Saturday, February 4, 2023

Weekly Indicators for January 30 - February 3 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

While yesterday’s blockbuster jobs report dominated the monthly reports, several important weekly reports, notably the 4 week average of retail sales as measured by Redbook, and the temporary Staffing Index, weakened further to new post-pandemic lows. On the other hand, January tax withholding payments had the best showing in 3 months.

As usual, clickiing over and reading will bring you up to the virtual moment as to the state of the economy, and reward me with a $ or two for my efforts.

Friday, February 3, 2023

January jobs report: like a sports car at maximum acceleration


 - by New Deal democrat

My focus on this report was on whether manufacturing and construction jobs turned negative or not, and whether the deceleration apparent in job growth would continue.

Both of those were answered emphatically in the negative. Here’s my in depth synopsis.

  • 517,000 jobs added. Private sector jobs increased 443,000. Government jobs increased by 74,000. The three month moving average of growth increased sharply to 356,000, over a 100,000 jump.
  • The alternate, and more volatile measure in the household report had 2nd very positive month in a row, increasing by 894,000 jobs. The above household number factors into the unemployment and underemployment rates below.
  • U3 unemployment rate declined -0.1% to 3.4%.
  • U6 underemployment rate rose 0.1% to 6.6%.
Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and will help us gauge whether the strong rebound from the pandemic will continue.  These tilted to the negative:
  • the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, reversed December’s decline and increased +0.3 hours to 40.9, although it remains down -0.7 hours from its February peak last year of 41.6 hours.
  • Manufacturing jobs increased 17,000.
  • Construction jobs increased 25,000.
  • Residential construction jobs, which are even more leading, increased by only 100.
  • Temporary jobs, which for the last several months were declining, reversed course and rose by 25,900.
  • the number of people unemployed for 5 weeks or less declined -287,000 to 1,946,000, the lowest for the entire last 50 years except for 3 months in 2019.

Wages of non-managerial workers
  • Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.06, or +0.2%, to $28.26, a YoY gain of 5.1%, the lowest gain since June 2021.

Aggregate hours and wages: 
  • the index of aggregate hours worked for non-managerial workers increased by a sharp1.0%, which is near a record for the past 60 years, and has only been exceeded by 3 months since 1995, all of which were earlier in the pandemic rebound.
  •  the index of aggregate payrolls for non-managerial workers also increased sharply by 1.3%, and rebounded to up 9.2% YoY. This metric had been decelerating nominally almost consistently for the prior 16 months.

Other significant data:
  • Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose 128,000, and have improved to -3.1% below their pre-pandemic peak.
  • Within the leisure and hospitality sector, food and drink establishments added 98,600 jobs, and are now only -1.3% below their pre-pandemic peak. 
  • Professional and business employment rose 82,000.
  • Full time jobs increased 278,000 in the household report.
  • Part time jobs increased 606,000 in the household report.
  • The number of job holders who were part time for economic reasons rose 172,000.
  • The Labor Force Participation Rate increased 0.1% to 62.4%, vs. 63.4% in February 2020.
  • Those not in the labor force at all, but who want a job now, increased 138,000 to 5.314 million, compared with 4.996 million in February 2020.
  • November was revised upward by 34,000, and December was also revised upward by 37,000, for a net increase of 71,000 jobs compared with previous reports. 

Finally, both the Establishment and Household report data for 2022 was revised this month. 

In the Household report, total population was adjusted upward by 954,000, and employment by 810,000. Other metrics had little or no change.

In the Establishment report, almost all months in 2022 were revised higher, with the exception of January, April and May. The net effect was an increase of 813,000 jobs in 2022, with relatively weaker growth in Q2, but stronger growth in the other 3 Quarters.


This report could be likened to a sports car accelerating at maximum thrust. Almost everything was extremely positive. The only negative was the increase in involuntary part-time employment, which translated into a slight increase in the underemployment rate.

Everything else was positive, including all the leading indicators which I had been looking to weaken. In fact, some metrics were so positive that they make me think that some Holiday seasonality worked its way into the numbers. In particular, the 74,000 increase in government jobs was one of the strongest ever outside of census hiring every 10 years. Leisure and hospitality hiring was also among the strongest in the past 50 years outside of 2021, and food and drink hiring was the strongest ever aside from the immediate post-pandemic reopening through 2021.

Needless to say, in almost all sectors the pandemic losses have been completely recovered. As I indicated above, the universal sharp increases make me think that there was some unresolved seasonality in play. In particular, the return to bigger hiring in manufacturing contradicts every other measure of manufacturing in the past few months.

So I’ll celebrate this month’s report, but with a lingering suspicion that it is going to prove an outlier.

Thursday, February 2, 2023

JOLTS and jobless claims: the labor market remains a strong positive


 - by New Deal democrat

The message from the JOLTS report for December yesterday and jobless claims for last week today is that the labor market remains the strongest sector of the economy, with plenty of unfilled job openings, and almost no layoffs.

Initial jobless claims last week declined -3,000 to 183,000, and the 4 week moving average declined -5,750 to 191,750. Both of these are close to their multi-decade lows from last March. Continuing claims also declined -11,000 to 1,655,000:

There is no danger of any imminent recession signal so long as claims remain lower YoY, which has been the case for the past few weeks:

One caution: there was relatively little seasonal hiring in November and December for the Holidays, so fewer layoffs in January makes sense. This is probably the last week for that comparison.

Meanwhile, yesterday most of the metrics in the JOLTS report for December were positive, with an increase in job openings and hires, with a very small decline in quits:

Layoffs and discharges did increase to their highest level since March 2021 with the exception of one month:

Overall the JOLTS report showed a moderating, but still positive labor market, and the weekly jobless claims report shows that it is still the case that very few people are getting laid off.

In tomorrow’s jobs report for January, I’ll be looking for signs in manufacturing and construction employment of weakening in those leading sectors, as well as whether short term unemployment is rising in any significant way, and whether the trend of decelerating gains has continued.

Wednesday, February 1, 2023

January manufacturing at recessionary levels; December construction spending also declines


 - by New Deal democrat

The first data for the month of January is in, and with one exception, it is pretty bad.

The ISM manufacturing index declined -1.0 to 47.4. According to the ISM, 48 is the cutoff below which is more consistent with a recession. Even worse, the new orders subindex cratered, falling 2.6 to 42.5:

Going back 75 years, the *only* time that new orders have been this low and a recession did not occur was in the middle of the Korean War:

This highlights focusing on the change in manufacturing employment, which has yet to turn down, when nonfarm payrolls is reported this Friday.

Construction spending for December was also reported, with a decline of -0.4% overall (blue), and a decline of -0.3% in the more leading residential construction sector (red):

The one caveat to this negative news is that the PPI for construction materials declined -1.1% in December, meaning that “real” construction spending increased. Below I show the YoY% change in residential construction spending (blue) vs. the PPI for construction materials (gold):

Note that, generally speaking, the cost of materials follows the change in construction with a lag. We’ve had the housing boom; now we are in the beginnings of a housing bust.

Again, I’ll be watching to see if there is a decline in construction employment of Friday.

The December JOLTS report was also posted this morning. I’ll deal with it separately tomorrow, but note that it, unlike the other reports, was pretty positive, with a positive reversal in job openings in particular. Contra that, ADP’s private payrolls number for January reported this morning was the lowest in over a year at only +106,000. Again, on my list for special focus on Friday is whether the deceleration in the three month average of employment gains since early last year continues.

Tuesday, January 31, 2023

House price indexes for November: up like a rocket, down like a feather


 - by New Deal democrat

As I’ve repeated many times in the past 10 years, in housing prices follow sales with a lag. Housing permits peaked at the beginning of 2022, and starts followed several months later. 

This morning the FHFA and Case Shiller house price indexes for November showed continued declines from their seasonally adjusted June 2022 peak, and also continued to decline sharply from their YoY growth peak, presaging a similar decline in CPI for shelter by the end of this year.

Here is what both look like normed to 100 as of their June peaks:

The FHFA index is down -1.0% since then, and the Case Shiller national index down -2.5%.

Between June 2020 and June 2022, the FHFA index increased by an average of about 1.5% a month! Since June, it has only declined by -0.3% a month. The Case Shiller national index also increased by an average +1.5% a month until June 2022, and has declined an average of -0.5% a month since.

In other words, in the aftermath of the pandemic house prices shot up like a rocket, but to date are only drifting down like a feather.

On the other hand, the YoY comparisons are getting much better. At their peaks during spring 2022, both measures of house prices were up about 20% YoY. As of November, the FHFA is down to +8.2% YoY, and the Case Shiller index +7.7% YoY:

At this rate, YoY prices will turn down by sometime this spring.

But as measured by households’ ability to make the down payment (leaving mortgage rates aside for this purpose), as shown in the below graph which norms house prices by the average weekly paycheck for nonsupervisory workers, house prices are still close to their all time highs:

Finally, as I have been emphasizing for over a year, house prices lead the CPI measure of Owners’ Equivalent Rent by 12 or more months. Here is the last 20 year history of the YoY% change in the Case Shiller Index (blue, /2.5 for scale) vs. Owners’ Equivalent Rent YoY (red):

The good news is that, whether we measure with reference to the FHFA or Case Shiller Indexes, the CPI measure for housing is on track to decline to about 3.0%-3.4% YoY by about the end of 2023 - very much within what ought to be the Fed’s comfort range. 

The bad news that we probably have a few months to go before the official measure of CPI for shelter peaks, likely at 8.0% or higher. So far the Fed seems to be paying a lot more attention to current OER rather than forward-looking house prices.

Monday, January 30, 2023

What to watch most for in this Friday’s jobs report


 - by New Deal democrat

After a two week drought, this week a plethora of economic stats get reported. Most importantly for my purposes that includes house prices, construction spending, the ISM manufacturing report, and of course on Friday nonfarm payrolls.

Speaking of which, 3 of the 5 short leading indicators that haven’t rolled over yet are included in the jobs report - construction and manufacturing employment, and short term unemployment. 

Since there aren’t any reports today, and since I’ve suddenly picked up a bunch of new followers at Seeking Alpha (probably because my articles document the economy sliding towards recession, which always seems to appeal to more folks than saying the economy is expanding or OK), I’ve posted a nice article there going into detail about what to look for in this Friday’s jobs report.

Clicking over and reading will not just give you the details, but hopefully give me enough coin to cover another lunch at my favorite watering hole.