November JOLTS report adds to the data showing continued labor market deterioration

 

 - by New Deal democrat

The second of this morning’s reports was the JOLTS survey for November. 

Like many other statistics concerning jobs, the JOLTS series have been deceleration for several years. The question now is whether they level off or continue to decelerate towards outright declines in net job creation. Additionally, it is a slight leading indicator for both initial jobless claims and unemployment; and for wage growth as well.

In contrast to the economically weighted ISM reports I discussed earlier this morning, in November as has so often been the case in 2024, the JOLTS data was mixed, with a downward bias. The soft statistic of job openings rose to a five month high, but the hard data of hires, quits, and also layoffs and discharges declined. The below graph norms the series above (expect for quits) to 100 as of just before the pandemic:

Both actual hires, as well as quits, turned weaker than their pre-pandemic levels a little about one year ago, while openings remain higher. The trend in openings has been lower, and I suspect that the improvement in the past two months is likely to prove to be just noise.

Showing the same data as YoY% changes tells us that there has been no significant change in the decelerating trend; in other words, there remains no evidence that there has been any leveling off:

The news on layoffs and discharges was also not so good. That’s because, in addition to rising in November, October’s very good number was revised significantly higher. This suggests that the YoY increases in initial jobless claims that we have seen during December have not been a fluke, and are more likely than not to continue:

Finally, although I’ll spare you the graph this month, the quits rate (blue in the graph below) has a record of being a leading indicator for YoY wage gains (red). In the post-pandemic view, the quits rate stabilized earlier in 2024 before resuming its decline, and in November it tied September for its post-pandemic low:

This suggests that on a YoY basis wage gains will continue to decelerate as well. If inflation stabilizes or picks up again, this could create a problem later this year - and if the overall trend of the JOLTS data continues, so will it.

Economically weighted ISM indexes for December forecast continued expansion

 

 - by New Deal democrat

We got two significant economic releases this morning. First, let’s take a look at the ISM services index. I’ll examine the November JOLTS report separately.

Recall that services are about 75% of the economy. Thus, even if goods production is contracting, their share of the economy has declined to the point where that does not necessarily mean a recession is in the offing. So I average both ISM indexes by their economic weights.

And the ISM services report for December came in strong once again. The total index was at 54.1, well into expansion territory, similarly the more leading new orders component (not shown) was at 54.2:

The three month average of each is 54.1 and 55.1 respectively.

Since the ISM manufacturing index improved last week to 49.3 for the total index and 52.5 for the new orders component, and their respective three month averages are 48.1 and 50.0, the economically weighted average of the two for December is 52.9, and the new orders component is 53.8. Their respective three month averages are 52.6 and 53.8.

In short, the economically weighted average of the ISM indexes forecasts continued economic expansion in the months ahead.

2024 year end Coronavirus dashboard: the year COVID-19 turned into the flu

 

 - by New Deal democrat

A year ago I said that I would only update information about the state of COVID-19 if there was something significant to report. And as of the end of the year 2024 there is: deaths from COVID in 2024 have fallen to the point where they are equivalent to the upper end of a “normal” flu year. Because for the entire year they are likely to have been under 50,000.

This is an absolutely huge improvement over the first several years of COVID, and even much better than 2023. Let me review, first graphically, then with a few numbers.

Here is what the entirety of weekly deaths from COVID look like all the way back to the start of the pandemic:

You can see that deaths during 2020 and 2021 were much higher than in any of the three years since. But that’s not all.

Because when we take out the first two years, and only look at the last three, we can see that the substantial decline in deaths has continued in each year:

To quickly review, here are the deaths for each calendar year (keeping in mind that the numbers only begin at the end of March 2020):

2020: 393.0 thousand (9.2 months; 512.6 thousand annualized)

2021:  455.9 thousand

2022:  243.9 thousand

2023:  75.6 thousand

2024:  46.1 thousand

Since the data for the last three weeks of 2024 is only preliminary so far, it is likely that another 1,000 to 1,500 deaths will be added to that total, making it 47.1-47.6 thousand when final.

According to the CDC, deaths from the flu typically average between 12,000 and 51,000 annually. So this year’s total for COVID will be within that range. In fact, for the last 52 weeks of final data through December 7, there were 51,200 deaths - only 200 above the CDC’s average range - and the 52 week total has been declining by close to 1,000 since the beginning of October.

The pattern is similar when we look at infections as measured in wastewater. The original Omicron variant peaked at 23.6 particles per mL. One year later the Holiday peak was 10.99 particles. Last year at this time the peak was 13.23 particles:

Now let’s zoom in on the last 12 months. With one week left to go in 2024, there are only 4.75 particles per mL:

Although a number of States did not report through the Holiday period, meaning the estimates in the gray shaded area to the far fright are likely to be revised higher, It’s likely that the Holiday peak which should occur this week will see something like only about 6.0 particles per mL - not just only 1/2 of last winter’s peak, but under this past summer’s peak as well.

It looks like the decline in COVID can be attributed to three factors: (1) the % of people who have had one or usually multiple vaccinations; (2) the % of people who have developed some resistance by having been infected one or more times; and (3) the virus, as one expert put it, having “evolved itself into a corner.”

What does the last factor mean? For that, let me show you the following graphic from the CDC’s variant frequency site:

Every single variant currently in circulation evolved from the original Omicron variant, via BA.2, then BA.2.86, then JN.1, and finally JN.1.11.1. All the other lineages have been out-evolved and have died out.

A similar thing happened with the flu. Every single flu variant in the past 100 years has been a descendant of the original “Spanish flu” which was so deadly during and after World War 1. The original death toll declined over time to the “normal” range I cited above. That, by the way, is why scientists are so concerned about the new bird flu. If it makes the full jump to human to human transmission, it will be the first entirely new flu strain separate from that of the past 100 years.

In the meantime, we can breathe something of a sigh of relief, and hope that COVID-19 continues to wane over time.

Year end Weekly Indicators at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

Both the long leading and short leading indicators have weakened in the past two weeks. The former is due to the short end of the Treasury yield curve re-inverteg. The latter is due in part to continued weakness in new jobless claims, but mainly to commodities weakening, and the flip side of that coin, a major strengthening of the US$. Here’s a graph of the US$:

As you can see, it made new all-time highs this week against other currencies (blue, right scale), and has surged YoY by well over 5% (red, left scale), one of the strongest moves in the past 20 years.

When the US$ increases sharply like that, imports get cheaper and exports suffer. This negatively affects GDP. Starting new trade wars obviously won’t exactly help that situation.

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

ISM manufacturing index improves in December, signaling near term continued economic expansion

 

 - by New Deal democrat

Unusually this month, the ISM manufacturing index was delayed one day after the first business day of the month. In other words, it was released this morning instead of yesterday.

In any event, a refresher that because manufacturing is of diminishing importance to the economy, and was in deep contraction both in 2015-16 and again in 2022 without any recession occurring, I now use an economically weighted three month average of the manufacturing and non-manufacturing indexes, with a 25% and 75% weighting, respectively, for forecasting purposes.

In the indexes, any number below 50 indicates contraction. It used to be the case that numbers below 48 indicated recession. Now the ISM says that any number above 42.5 is consistent with expansion. 

In December, the total index rose 0.9 to 49.3, while the more leading new orders subindex improved 2.1 further into expansion territory at 52.5. 

Including this month, here are the last six months of both the headline (left column) and new orders (right) numbers:

JUL. 46.8. 47.4

AUG 47.2. 44.6

SEP 47.2. 46.1

OCT 46.5. 47.1

NOV  48.4. 50.4

DEC 49.3. 52.5

Here is what the total index looks like graphically for the last three years:

And here is the graph of the last three years for the new orders subindex:

The three month average for the manufacturing index is 48.1, and for the new orders component 50.0. For the past two months, the average for the non-manufacturing headline has been 54.0 and the new orders component has been 55.5. Thus, unless the non-manufacturing index for December completely tanks when it is reported on Monday, the combined indexes strongly suggest continued expansion for the next few months.

More worrisome signs as construction spending, especially for residential construction, declines with negative revisions

 

 - by New Deal democrat

Last month I started by report on construction spending by writing “ Construction spending for October also came in generally positive. On a nominal basis, total construction spending rose 0.4% to a new record, and residential spending rose 1.5%.”

Well, you can forget that, because this month was one of those times when revisions to past data make all the difference.

On a nominal basis, total construction spending was unchanged, while residential construction spending rose 0.1%. But total construction spending for both September and October was revised downward by 1.0%. The carnage in residential construction spending was even worse, with both September and October revised down by -3.2%! Thus what was a (surprising) rising trend line for residential construction spending in particular was completely reversed, as shown in the graph below:

As revised, even nominally both series peaked in May of 2004.

The prices of construction materials were declining through September, making real construction spending even better. But that has reversed as well, with prices rising in both October and November, making the “real” declines in the nominal graph above even steeper:

This is particularly worrisome, because manufacturing has been in a slight downtrend for two solid years. Thus it has been construction which has been aiding improvement in the economy since then. If construction has also rolled over, then goods production as a whole - and employment in goods production - are probably close behind. As to which, recall that employment in construction and goods production generally lag construction and sales. Thus if they have rolled over, employment will likely follow - and indeed in last two months, such employment has been below September’s peak.

Typically the ISM manufacturing survey is reported on the same day as construction spending. This month that is not true, as the ISM index will be reported tomorrow. If it continues to show contraction, that is trouble.

The final jobless claims report of 2024 is good weekly, but the trend indicates substantial weakening

 

 - by New Deal democrat

Welcome to 2025! The data this year starts out with jobless claims for the last week of 2024, which of course is heavily influenced by seasonality.

The news was mainly good this week, with claims declining -9,000 to 211,000, the lowest number in over half a year. The four week moving average, which is particularly important in the midst of Holiday seasonality, declined -3,500 to 223,250, about average for the past six weeks. With the typical one week delay, continuing claims declined -52,000 to 1.844 million:

As usual, the YoY% comparisons are more important for forecasting purposes, and here the news is not so good. Initial claims were higher by 6.6%, and the four week moving average by 8.5%. Continuing claims were also higher by 1.6%:

The poor comparison of the four week moving average is particularly noteworthy, because, excluding the hurricane affected weeks of early October, it is the worst YoY read since September 2023. It is *not* recessionary, since it has not even crossed the 10% threshold, and I would need to see it remain above that threshold for a sustained period of time. But it does indicate a significant weakening of the employment situation.

The jobs report for December won’t be released for another week, but we now have almost all the information we will have to compare with the unemployment rate, which typically follows jobless claims. The below graph presents the YoY% of the data, which in the case of the unemployment rate, becomes a percent change of a percent:

The immigration situation makes this particularly hard to read. The best I can say is that, absent effects from the surge in immigration in the past several years, the unemployment rate probably would not have increased over 4.0% this summer, and even the present initial claims monthly averages forecast an unemployment rate in the range of 3.9%-4.1%. Anything above that is likely due to the continued effects of the immigration situation.