Real retail sales remain positive for the economy, but suggest further slowing in employment gains

 

 - by New Deal democrat

Since I posted earlier about why I follow jobless claims so closely, let me briefly restate why I pay a lot of attention to real retail sales.

Retail sales have been tracked for over 75 years. When they are lower YoY, that has historically been a good (not perfect) indicator that a recession is near. That’s because that same 75 year history empirically demonstrates that consumption leads jobs. In other words, it is the change in sales that causes employers to add or lay off employees (not the other way around, as I have sometimes seen claimed).

And the news for December was mildly positive. Nominally retail sales rose 0.4%. Inflation also clocked in at 0.4%, but after rounding real retail sales rose 0.1%, continuing their general uptrend for the past six months:

One of the rare false signals of YoY sales took place in the last several years, as consumers binged on goods purchases with their pandemic stimulus money in 2021 and early 2022, resulting in a downdraft for the next several years:

As you can see, this has abated in the last few months, with YoY real retail sales up 1.0% in December. Much of this pattern has to do with what we saw in motor vehicle prices in the inflation report yesterday. After the big jump in vehicle prices in 2021-2022, consumers balked in 2023, and new vehicle prices remained flat. In the past few months, demand has increased and prices have begun to rise again as well. 

In any event, real retail sales are a positive for the economy in the next few months.

Finally, per the above paradigm, here is the update on real retail sales vs. employment. Because the distortion in shelter prices has had so much effect on consumer inflation in the past few years, last month I also added the comparison with inflation ex-shelter (light blue):

Real sales suggest that employment gains should continue to slow. Indeed, we might very well find out with next month’s annual re-benchmarking of the employment numbers that they already have.

A refresher on why I pay so much attention to jobless claims; and why they are neutral now

 

 - by New Deal democrat 

This might be a good time to reiterate why I post each week on jobless claims, and what my system is.

Initial jobless claims in particular are a recognized leading indicator. In fact, they are one of the 10 official components of the Index of Leading Economic Indicators. Additionally, together with the YoY% change in stock prices they form my “quick and dirty” forecasting tool. 

Based on the nearly 60 year history of initial jobless claims: when initial claims are lower YoY, that is positive for good economic growth in the next few months. When they are higher by less than 10%, they are neutral — still indicating growth, but more anemic. When they (especially the 4 week moving average) are higher by over 10%, that is a yellow flag indicating the risks of recession are significant. Finally, when they are higher by 12.5% or higher for a period that persists for at least two months, that constitutes a red flag recession warning, because under those circumstances a recession has almost always been close at hand. We almost triggered that red flag 18 months ago, but the high YoY change in claims backed off just short of the two month trigger. It has turned out that there is some residual seasonality that hasn’t been massaged out of the numbers that first really appeared in 2023, and that is the type of reason why I need the signal to persist for at least two months.

With that out of the way, let’s look at this week’s numbers.

Initial claims rose 14,000 to 217,000, while the four week average declined -750 to 212,750. Continuing claims also decreased -18,000 to 1.859 million:

On the YoY% basis I use for forecasting as described above, initial claims were up 11.9%, while the more important four week moving average was up 6.0%. Continuing claims were also up 7.6%:

Per the above, although the weekly number came in higher by more than 10%, because the four week average remains under that threshold, this was a neutral reading. It suggests slow improvement in the economy in the months ahead.

Finally, since I mentioned it above, here is the current state of the “quick and dirty” model (note the four week average of initial claims is inverted so that a negative reading shows as below the zero line):

Note there was a brief 2 month period in 2023 when both were negative, but jobless claims were not higher by more than 10% during that period, so there was no true recession signal.

December CPI: rebounds in gas and car prices outpace deceleration in shelter and insurance laggards

 

 - by New Deal democrat

December consumer prices indicate that we are leaving the immediate post-covid era and seeing a rebalancing of sectors, as sectors that declined sharply in the past several years rebound.

As in November, the only two categories of “hot” numbers showing price increases of 4.0% a year or more are two laggards: shelter and transportation services. All of the former problem children are now more or less in line.

As per usual, the biggest dichotomy in the numbers is shelter vs. ex-shelter, but let’s start with the headline and core CPI readings. For the record the former increased 0.4% for the month, while the latter increased only 0.2%. On a YoY basis, headline prices are up 2.9%, an increase of 0.5% from their 2.4% low three months ago. Core prices excluding food and energy are up 3.2% YoY:

Now let’s look at CPI for shelter vs. ex-shelter:

Shelter prices increased 0.3% for the month. Everything else all together rose a sharp 0.5%. On a YoY basis, shelter increased a little under 4.6%, its lowest such reading since January 2022. Despite the “hot” monthly reading, all other prices increased 1.9% YoY, the 20th month in a row they have risen less than 2.5%.

As it has been for several years, in the broadest terms inflation in excess of the Fed target remains almost all about shelter.

Within shelter, both actual rents and “owners equivalent rent,” the fictitious measure of house prices, increased 0.3%. On a YoY basis, rent increased 4.3% while OER increased 4.8%. Both of these are the lowest since early 2022:

While the deceleration in shelter inflation has been slow, it is continuing as forecast from both the leading house price and new apartment rent indexes. To reiterate what I wrote last month, the Philadelphia Fed’s experimental new and all rent indexes, which are designed to lead the CPI for rents, for the last two quarters have forecast a decline below 4% YoY, and at the current pace of deceleration, that forecast could come to fruition within the next 2 to 3 months.

Turning to the other remaining problem child, transportation services (mainly insurance and repair costs); recall that these lag vehicle prices. In December, new vehicle prices increased 0.5%, and used car prices increased 1.2%. These have been strong monthly numbers in th past few months. But on a YoY basis, new car prices are down -0.4%, and used car prices down -3.3%. In other words, this is a rebound from the pullback since 2023 [Note: instead of YoY, graph is normed to 100 as of just before the pandemic, better to show the surge in prices and the stagnation or decline afterward]:

In December transportation services costs increased 0.5%. On a YoY basis, they rose from 7.1% to 7.3%, which is still nearly the “best” reading in 3 years:

Within transportation services, motor vehicle repairs are up 6.2% while insurance is up 11.3%.This is the real problem child is motor (for which unfortunately FRED does not provide a graph). 

What the above all means is that if we were to take out the two areas that we know lag, shelter and transportation services, consumer inflation would probably be up only something like 1% YoY.

Another former problem child of food away from home increased 0.3% this month, and is up 3.6% YoY, the lowest increase in over 4 years:

Last month I wrote that another emerging sector of concern is medical care services. This month they increased 0.2%, while the YoY measure decelerated to 3.4%, which is good news, as in the context of the past 10 years, this increase is only a little above average:

 

Before I finish, let me also update one important labor sector graph.

Nominally aggregate payrolls increased 0.4% in December, which means that after adjusting for today’s inflation number, real aggregate payrolls were unchanged, but at their record high:

This is consistent with continued economic expansion over the near term.

So let’s conclude. The lagging sectors - shelter, and motor vehicle repairs and insurance - are the primary sources of remaining high inflation. But both are decelerating as expected. At these same time, new and used car prices are rebounding from their stagnation (new cars) and deep declines (used cars) of the past several years, as are energy prices. Because the former are decelerating more slowly than the latter are rebounding, headline inflation has started to increase again.

Producer prices join the parade of yellow flags

 

 - by New Deal democrat

I generally don’t pay too much attention to producer prices, but there are a couple of exceptions. One exception is that sometimes producer prices lead consumer prices by a number of months. That hasn’t been the case recently. But the other exception is that producer prices can tell us whether profit margins are being squeezed or not. *That* is relevant at the moment.

Let me start with the monthly change in raw commodity prices (gold, /2 for scale), final demand producer prices (blue), and consumer prices (red) for the past two years:

The most important component of the above graph is that the downdraft in commodity prices - which are the most upstream prices of all - appears to have ended, as the big declines of 2023 abated except for three months in 2024. And there have been no declines in the past three months. So there is no tailwind likely to help consumers downstream (okay, I’m mixing metaphors but you get it).

Now here’s the YoY look, going back three years:

Again, we see big declines in the year after June 2022, the peak for oil prices after the Ukraine invasion. For the past nine months, commodity prices have been stable on a YoY basis. 

Even more importantly, note that final demand producer prices - the ones just before products and services are finished for consumption - have risen YoY for the past several months, from 2.1% in September to 3.3% last month. That compares with 2.7% for the last month reported in the CPI. 

Producer prices increasing faster than consumer prices means producers cannot pass on their price increases to consumers, which has the effect of squeezing their profits. And that appears to be happening, as suggested by the latest actual + estimated earnings for Q3 and Q4 of last year as reported by publicly traded corporations (via FactSet):

Earnings barely increased in Q3, and so far are estimated to barely increase again in Q4. And when corporate earnings stall, CEO’s start looking for ways to cut costs.

We’ll see what happens with consumer prices tomorrow, but this is yet another yellow flag suggesting recession risks are rising (albeit still relatively low) for later in 2025.

Scenes from the last employment report of Joe Biden’s Presidency

 

 - by New Deal democrat

Friday’s jobs report was an excellent one for Joe Biden’s Presidential term to end on. In the past 4 years, 17 million jobs have been created. Even if we take out 2021 as being a COVID rebound year, in the past 3 years there were 9.8 million new jobs, an average of 272,000 jobs per month. Meanwhile the unemployment rate declined from 6.7% at the end of 2020 to 4.1%. It rose 0.2% from 3.9% three years ago, ranging from a low of 3.4% to a high of 4.2%, which is still an excellent record. Real average nonsupervisory wages are up 0.6% from December 2020, and 1.3% from December 2021 - not so great, but still positive. And since average wages in 2020 were distorted by layoffs mainly affecting lower income workers, if we measure from December 2019, real wages have risen 4.8%.

Not too shabby.

But let’s focus on a couple of items from last Friday’s report beyond the headlines.

One of the important revelations in the past year has been how the nearly 6 million new immigrants since 2020 have distorted the unemployment rate, even as job growth has been robust. So this month let’s break out this rate for native born vs. foreign born workers. Remember that new workers who can’t find jobs don’t file for jobless claims, and Los Illegales generally do not either.

The below graph breaks out the YoY% change in initial jobless claims (light blue) vs. the total unemployment rate (light red); and compares both with the total of initial + continuing jobless claims (dark blue) and the unemployment rate for the native born only (dark red):

Initial claims always lead, but those unemployed also include people with continuing claims. So while it is less leading, the unemployment rate tracks closer to the total. And in this expansion, the unemployment rate for the native born tracks even closer than that. The inclusion of continued claims helps explain why the unemployment rate never ticked lower YoY in 2024, while the limitation of the unemployment rate shows a much less noisy leading/lagging relationship. As of December, while initial claims were higher YoY by 7.4% vs. the total unemployment rate being up 7.9%*, the combination of initial plus continuing claims were up 3.9% vs. native born unemployment being up 5.7%* (*remember these are percent changes of a percentage).

Now let’s turn our attention to employment in the goods producing sector. Recall that historically, services employment almost never actually goes down more than a fraction except in severe recessions. The decline in employment during recessions is almost all about declines in goods-producing jobs. And goods producing jobs are a leading indicator, always peaking some months before a recession begins:

Goods producing jobs in turn fall almost totally into two categories: manufacturing and construction. In the following graphs I break out the two categories separately, and focus on the recession since the 1980s.

Note that in the mid-1980s manufacturing already had a substantial downturn, but construction jobs grew strongly. It was only when both turned down in 1989-90 that a recession was forecast:

The 2001 recession by contrast was producer-led.  Construction jobs continued to grow very slowly into that recession, but manufacturing turned down sharply in advance:

Manufacturing jobs continued to decline during the “China shock” of the 2000’s, but the downturn accelerated in advance of 2007, and was joined by a downturn in construction jobs in 2007:

At present construction jobs are still increasing, while manufacturing jobs have turned down slightly:

It’s helpful to also compare this information YoY, which the next two graphs do in 20 year increments:

The closest comparison to the present is with the 2001 recession, but by the onset of that recession manufacturing jobs were down -2.1% YoY, while construction jobs were only up 1.3% and in a sharply deteriorating trend. At present, manufacturing jobs are down only -0.7%, while the trend in construction jobs has been one of slow deceleration, currently at 1.6% YoY. 

While the downturn in goods producing jobs as a whole from a peak three months ago is definitely cautionary, such minor downturns have happened many times before without a recession beginning. In other words, we have a necessary but not sufficient leading indicator at present. Most importantly, at present I am focusing on construction jobs, which seem to be levitating in the face of a downturn in the housing market and a small downturn in total construction spending. If the construction sector joins the manufacturing sector in deterioration, it will be much more concerning. But it isn’t now.

Weekly Indicators for January 6 - 10 at Seeking Alpha

 

 - by New Deal democrat

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

The big changes this week were the sharp increases in long term interest rates, along with similarly sharp increases in commodity prices and the US$. Some of this is due to a feeling that the economy is running “hotter” than recently thought, and frankly a lot is almost certainly due to the belief that the policies of the incoming T—-p Administration are likely to create lots of international friction and inflationary money-printing.

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me a little bit for categorizing and organizing it all for you.

December jobs report: ho ho ho, Santa brought a gift - but with a couple of lumps of coal mixed in

 

 - by New Deal democrat

My theme for the past several years as to employment has been “deceleration,” as in a gradual cooldown from white hot to red hot to hot to warm. But at some point past “warm,” we get to lukewarm, and then cool, and then chilly. In other words, if it continues at some point “deceleration” transitions into “deterioration.” A “soft landing” would require that the deceleration end, and the numbers stabilize. That’s what I was watching out for last year. 

So this month I have continued to be on the lookout for stabilization vs. deterioration.

Additionally, we have to be particularly careful at this time of year to overweight any one month, due to seasonality. Yes, of course these numbers are seasonally adjusted, but the Holiday season is particularly hard to get right.

Below is my in depth synopsis.

HEADLINES:

• 256,000 jobs added. Private sector jobs increased 223,000. Government jobs increased by 33,000. Even including October’s poor number, the three month average was an increase of +165,000.
• The pattern of downward revisions to previous months continued in part this month.. October was revised upward by 7,000, while November was revised down by -15,000, for a net decline of -8,000.
• The alternate, and more volatile measure in the household report, showed an increase of 478,000 jobs. On a YoY basis, this series increased 537,000 jobs. This is good news after two of the previous three months had shown a YoY decline.
• The U3 unemployment rate fell -0.1% to 4.1%. Since the three month average is 4.133% vs. a low of 3.7% for the three month average in the past 12 months, or an increase of just over 0.4%, this means the “Sahm rule” is once again not triggered. The rate for native born workers declined -0.2% (NSA) to 3.7%, up 0.2% YoY and that for foreign born workers also declined -0.2% (NA) to 4.3%, but was higher by 0.5% YoY. 
• The U6 underemployment rate declined -0.2% to 7.5%, 1.1% above its low of December 2022.
• Further out on the spectrum, those who are not in the labor force but want a job now increased 22,000 to 5.505 million, vs. its post-pandemic low of 4.925 million in early 2023, but showing a continued slow decline in the past 12 months.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. This month they were mixed:

• the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, rose 0.1 hour to 40.9 hours, and November was also revised higher by 0.1%. This remains down -0.6 hours from its February 2022 peak of 41.5 hours, but on the other hand is the highest since December two years ago.

• Manufacturing jobs declined -13,000. This series is firmly in decline.
• Within that sector, motor vehicle manufacturing jobs declined -4,100.
• Truck driving declined -800.
• Construction jobs increased another 8,000.
• Residential construction jobs, which are even more leading, rose by 3,500 to another new post-pandemic high.
• Goods producing jobs as a whole declined -8,000, and are now -27,000 below their September peak. This is especially important, because these typically decline before any recession occurs. As I wrote two months ago, “in the absence of special factors this would be a serious red flag for oncoming recession.”

• Temporary jobs, which have generally been declining since late 2022, rose by 5,300, the second increase in a row.  These had declined over -550,000 since their peak in March 2022, so this is good news which may signal that the bottom in this metric is in. 
• the number of people unemployed for 5 weeks or fewer fell -52,000 to 2,166,000. This is in line with its range for the past 12 months.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.06, or +0.2%, to $30.62, for a YoY gain of +3.8%, the lowest since their post pandemic peak of 7.0% in March 2022. Nevertheless, and importantly, this continues to be significantly higher than the 2.7% YoY inflation rate as of last month.

Aggregate hours and wages: 

• The index of aggregate hours worked for non-managerial workers rose 0.2%. This measure remains up 1.1% YoY, which is in line with its trend for the past 18 months.

• The index of aggregate payrolls for non-managerial workers was rose 0.4%, and is up 4.9% YoY. This resumes the pattern of slow deceleration since the end of the pandemic lockdowns, and is the lowest since early 2021. Nevertheless in real inflation adjusted terms this remains powerful evidence that average working families have continued to see gains in “real” spending money.

Other significant data:

• Professional and business employment rose 9,400 to the highest number since July. These tend to be well-paying jobs. Their YoY comparison, however, remained 0.4%, which in the past 80+ years has almost always happened immediately before, during, or after recessions. 
• The employment population ratio rose 0.2% to 60.0%, vs. 61.1% in February 2020.
• The Labor Force Participation Rate remained steady at 62.5%, vs. 63.4% in February 2020. The prime 25-54 age  participation rate declined -0.1% to 83.4%, vs. its all time peak of 83.9% in June and July.

SUMMARY

Needless to say, in the main this report was strongly positive, as all the headline numbers moved in the right direction. There was also good news in aggregate payrolls, in the construction sector, and in the previously suffering professional and business as well as temp jobs sectors. The native born unemployment rate continues to be consistent with the very low initial jobless claims numbers we’ve been seeing each week. 

As I noted above, the leading indicators in the survey were mixed, as construction continued to power forward, and short term unemployment declined; but on the other hand, manufacturing continues to suffer and the goods producing sector as a whole has failed to make a new high for the past 3 months. Although this is hardly dispositive, it is a red flag. Meanwhile real wages remained positive, but this too has continued to decelerate. Much depends on the immediate future course of inflation.

But to return to my main theme, this month was consistent with the “soft landing” scenario, although the longer term trend of deceleration has not been broken. And because of Holiday seasonality, take it with an extra grain of salt.

Jobless claims still rocked by seasonality; native born unemployment rate of under 4% forecast

 

 - by New Deal democrat

Due to today’ official Day of Mourning for the late President Jimmy Carter, initial and continuing claims were released yesterday, but since I didn’t cover it then, let’s catch up now on the normal day.

It is important to note right off the bat that the two weeks after Christmas and New Year’s are those most affected by seasonality, and are extremely difficult to adjust for. So the numbers need to be taken with liberal helpings of salt. In particular, for the last two years the pattern has been steep declines to annual lows those two weeks, followed by an increasing trend - probably also a leftover from the distortions of the pandemic years.

That being said, initial claims declined another -10,000 to 201,000, their lowest number since last February. Similarly, the four week moving average declined -10,250 to 213,000, their lowest print since April. Continuing claims, with the usual one week delay, rose 37,000 to 1.867 million, in line with their numbers for the past several months:

Given the outsized effect of seasonality this week, the YoY% changes are all the more informative. On that basis, initial claims were up 1.5%, the four week moving average up 4.4%, and continuing claims were up 6.1%:

These are all neutral readings, telling us the economy continues to expand, but at a much more attenuated pace than even earlier 2024.

Finally, here is our final look at what jobless claims are forecasting for the unemployment rate:

Absent the strong effects of the surge in new immigrants post-COVID, claims continue to suggest downward pressure on the unemployment rate. Indeed, the Household Survey does break out the unemployment rate by native born (dark blue in the graph below) vs. foreign born (light blue), and you can see that the significant increase in the latter has been primarily responsible for the outsized increase in the unemployment rate:

If we compare initial claims with just the native born unemployment rate, the figures track much more closely, with the exception of last January and February:

In any event, on a monthly basis, initial claims were roughly 7% higher YoY, and continuing claims up 3.5%. Since one year ago the unemployment rate was 3.7%, a 3.5% to 7% increase in that rate (as usual, note that we are calculating a percent of a percent) brings us up to 3.8%-4.0%, which is lower than the 4.2% we saw last month - but right in line with the native born unemployment rate of 3.9%. We’ll find out tomorrow!

Truck sales sound a warning

 

 - by New Deal democrat

Twenty years ago Prof. Edward Leamer made a big splash with a speech to the Fed in which he proclaimed that “Housing IS the Business Cycle,” highlighting how downturns in the housing sector tended to lead recessions by an average of 7 quarters. For today’s purposes, though, I want to focus on his conclusion, which was that after housing turned down, the next sector that turned down was durable goods spending by businesses.

An excellent barometer of durable goods spending by businesses in the past has been their purchase of heavy weight trucks. While car and light truck sales have been very noisy, sales of heavy weight trucks have had a very good record of turning down by -10% or more well before recessions, with the sole exception of 1970 (averaged quarterly in the graph below):

Which of course brings me to the latest data. For some reason FRED does not update their graph until several weeks after the BEA publishes the data, so let me tell you that in December seasonally adjusted sales of heavy trucks were .422 million annualized (light blue in the graph below). For the 4th quarter, on average, sales were .459 million (dark blue). As the below graph, which norms both values to 0 shows, each of these were the lowest such number, in 2 1/2 years:

Now let’s bring Prof. Leamer’s paradigm into the mix. Below I show the entire history of housing permits (red, left scale) vs. heavy weight truck sales (blue, right scale):

With the sole exceptions of the pandemic and the 1981 Fed-induced “double dip,” housing permits have not only always turned down before recessions, but also peaked before heavy weight truck sales. The lag time is very variable, but the median is about 6 months. 

Now let’s zoom in on that same graph for the last five years:

Housing permits peaked at the beginning of 2022. Heavy truck sales did so in early 2023. Permits took another small leg down since early 2024. I am very reluctant to rely on one month alone, but the suggestion from the three month average is that heavy truck sales may be doing the same thing now.

Per Leamer’s theory, the next domino to fall would be consumer durable goods orders. As the below graph shows, the broad measure of such orders appears to have peaked in spring 2024, but car and SUV purchases have continued to increase (again, December is not shown, but was actually higher than November at 17.1 million annualized):

It’s important to state that recessions are not about the *level* of data like sales, but rather their *trend.* Both housing and truck sales have continued down into the first part of recessions in the past. Housing permits were relatively stable during 2024. It may yet be the case with one or two months of data that heavy truck sales have stabilized at a lower level as well.

Still, that heavy truck sales may be sounding a warning is an added reason to keep an eye on all of the components of goods-producing employment when Friday’s employment report for December comes out, because if the downturn has spread to employment in the goods sector, odds of a recession in 2025 have risen indeed.

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.