Significant positive news in the goods producing sector

 

 - by New Deal democrat

Under normal circumstances, this would be the morning I would slice and dice the first important consumer data for the month: retail sales. With the government shutdown continuing with no end in sight, all we have are several dart-throws. The Chicago Fed’s final Advanced Retail Trade report for September indicated +0.5% nominal growth, and +0.2% in real terms. Meanwhile Morgan Stanley, apparently relying on credit card data, wrote that there was no growth at all.

There is a little more reliable evidence in the goods-producing sector, as both the NY and Philadelphia Feds have issued their monthly manufacturing surveys. In addition, the Department of Transportation did update their Freight Services Index earlier this week.

And the news was modestly good.

Let’s start with the headline numbers. The NY Index (dark blue) came in at +10.7, while the Philadelphia Index (light blue) slid to -12.8. But the averages for the past few months are clearly, if slightly, positive. Meanwhile the Freight Services Index (red, right scale) declined a slight -0.1% for the month, but remains at one of the five highest readings in the past 5 years:

This is significantly positive for the sector.

Additionally, new orders for both regional Fed indexes remained positive, suggesting the good news will continue a couple more months:

And the average of employment for the two Fed regions was also positive, among its best readings of the past 2.5 years:

The big fly in the ointment likely can be directly tied to tariffs, as the prices paid components on both regions continues at levels equivalent to the beginning of 2023. Note that the big surge in cost coincided exactly with the beginning of tariff-palooza:

All of this is no substitute for the more comprehensive data we deserve, but the data is reliable enough to indicate - surprisingly - modest positive momentum in the goods producing sector.

More on stock market indexes’ advance-decline lines: the healthy and the sick

 

 - by New Deal democrat

I am currently on vacation, and as the shutdown continues with no end in sight, the only sources of economic data are from the Fed and its regional banks, the States (unemployment claims and sporadic updates on tax withholding), and private sources. 

In other words, I might play hooky several days a week, so don’t be surprised.

There is one thing worth following up on today. That’s the health of the stock markets. Aside from the fact that the stock market is a short leading indicator, it is particularly important at the moment because of the “wealth effect” on consumers who have watched their paper portfolios increase sharply in value over the past 6 months.

Last week I pointed out that one bellwether for the health of the markets was the advance-decline line; that is, the number of companies in the indexes that are participating in an advance or decline. In particular, I pointed out that the advance-decline line had warned of unhealthy markets in advance of both the 2000-01 dotcom bubble collapse and the Great Recession. 

Well, we’ve had some interesting action over the past week, with the return of China Tariff-palooza and its almost immediate walk back (but not before one or more people with apparent inside information made a killing). And this morning I read that several over-levered players adjacent to the auto industry went bankrupt last month.

So let’s take a look at several different indexes, updated through yesterday.

Last week I showed the S&P 500 advance-decline line. As of yesterday, it continued to be generally neutral, with almost no advance compared with 3 months ago, but no downtrend, and indeed several new highs earlier this month:

But the NYSE a-d line has not nearly been so healthy:

It is no better at present than it was almost 3 months ago, and has been in a clear downtrend since early September.

Even worse is the small cap Russel 2000 a-d line:

It peaked at the end of last year, and although it rebounded after April, it has had a rrenewed decline since a secondary peak in August.

On the other hand, the Nasdaq a-d line continues to be positive:

Like the S&P 500 a-d line,  it made new highs earlier this month, and even the pullback in the last few days did not take it down it its August or September lows.

This confirms my general view of the economy. In the broadest terms, it is pretty unhealthy. But in the specific areas where there has been a Boom (or, maybe, Bubble), it has not cracked at all. I’ll continue to watch to see if that happens; and if it does, my suspicion is, “look out below!”

Tabulations of state level reports indicates 228,000 initial claims, 1.938 million continuing claims last week

 

 - by New Deal democrat

Among the economic data that is not being reported due to the federal government shutdown are initial and continuing jobless claims. Which, as I pointed out last week, is interesting because they were reported during the lengthy 2013 shutdown and for at least part of the 2018-19 shutdown.

But both sets of claims are simply tabulations of all the claims made at the State levels (plus DC, Puerto Rico, and the Virgin Islands), to which a seasonal adjustment is made. This means that we can reconstruct the YoY% changes in the data from the various jurisdictions’ reports; as well as provide a reasonable estimate of what the seasonably adjusted numbers would be.

Tabulating the 53 jurisdications’ reports, for the week ending October 4, unadjusted initial claims totaled 207,794 vs. 236,179 in 2024, which is -12.0% less. 

Last year this week the seasonal multiplier was *1.0966:

Applying it gives us an estimated seasonally adjusted number of 228,000, a 4,000 increase from one week ago. 

Adding it to the three previous weeks of data we arrive at a four week moving average of 225,500, which is 6,750 less than one year ago, or -3.1% lower. 

There is an important caveat about last year in that these were affected by hurricane related layoffs, particularly in Florida and North Carolina. 

Next, continuing claims with the typical one week delay, i.e., for the week ending September 27, totaled 1,683,327 vs. 1,614,324 last year, or 4.3% higher.

The seasonal adjustment for the applicable week last year was *1.510:

Applying it gives us an estimate of 1.938 million continuing claims, or +19,000 higher than one week ago.

Absent hurricane distortions, this continues the general neutral trend of initial and continuing claims, forecasting a weak but not contracting economy in the next several months. I will continue to estimate this data for the duration of the shutdown.

Weekly Indicators for October 6 - 10 at Seeking Alpha

 

 - by New Deal democrat

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

More roiling of the waters in commodities, in between signs of economic weakness and another re-ignition of the China trade wars. Meanwhile the Treasury Department, for no apparent valid reason, but only out of spite, has taken its “Daily Treasury Statement,” which enables us to measure tax withholding and tariff revenues, offline. And not just new updates, but all of the already published data.

As usual, clicking through and reading will bring you up to the virtual moment as to the state of the data, and reward me a little bit for obtaining and organizing it for you.

The “Big Picture” nowcast and forecast

 

 - by New Deal democrat

We are well into our data blackout, as no federal economic data whatsoever was released this week. Even sites that functioned in previous shutdowns, such as the Treasury Department’s “Daily Treasury Statement,” have been taken offline. This is simply not the way a functioning country works.

So let me conclude this week by offering the proverbial “30,000 foot view” of the economy, together with some links and graphs to relevant privately sourced data that is partially filling in some of the gaps.

The Big Picture nowcast and forecast are dominated by two different events.

The nowcast is that the economy is currently sharply bifurcated into an AI-related part and the rest. The AI-related part of the economy is booming. Corporate profits in the 3rd quarter are set to make another record, powered by the “magnificent 7” tech companies (Note: many of the below graphs are sourced from Carl Quintanilla’s excellent Bluesky feed. Several are also due to the extremely helpful “Alternative Data” graph pack from Apollo Investments, see https://www.apolloacademy.com/wp-content/uploads/2025/10/AlternativeData100525.pdf ):

Data centers are still being built at a fast pace, creating more demand for energy, and also (as I wrote yesterday) creating a “wealth effect” that is fueling consumer spending by the upper echelons of owners of stocks, as shown in this graph by B of A:

But the rest of the economy probably began a recession several months ago, with real personal income and jobs stagnant or even having begun to decline. The Bank of America published its proprietary employment indicators for September several days ago, and here are the important graphs:

Employment gains hovering just above 0 and the unemployment rate rising is a classic signal at the beginning of recessions.

There are also reports that bankruptcies have been increasing:

And consumers are falling behind on important installment loans such as for motor vehicles:

At least some of this, by the way, may be due to the resumption of the full requirements of repayment of crippling student loans, which may not be discharged in bankruptcy.

So why aren’t I on “Recession Watch” already? Because the size of the AI Boom is so big that for the moment at least it is more than counterbalancing the malaise in the rest of the economy.

The Big PIcture forecast, generally for the rest of the T—-p Administration, is gloomy. That’s because the entire US fiscal and economic policy is being run as a gargantuan mafia-style “bust-out,” or what Darin Acemoglu and James Robinson called “extractive economies” in their book “Why Nations Fail.” In extractive economies, an elite group of cronies around the ruler uses political and economic power to enrich themselves. Part of this paradigm is the mafia-style shakedown: “got a nice company/product/industry there; be a shame if something happened to it.” 

T—-p’s entire economic “policy” has been built around this. Want to export to the US? Wet my beak. Want your merger to go through? Wet my beak. Want your State’s biggest industry (agriculture, vehicle production, tourism) to stay intact? Wet my beak:

We’re even seeing the government directly invest in the stocks of companies; viz., Intel. Even the $20 Billion bailout of Argentina, unsurprisingly, looks like it was mainly to rescue the investment portfolios of several Billionaire T—-p cronies.

And of course the “Big Beautiful Budget Bill” amounts to a massive upward transfer of wealth that will so explode deficits in the coming decade that it will leave little if any room for stimulative policies to counteract the next downturn.

Extractive economies grow anemically or even contract, because it is simply not worth it to innovate when the ruler and his clique will muscle in.

Exactly how the US economy will degenerate during the next 3 years (or whatever the duration of T—-p’s time in office) is impossible to know or predict. But it is a virtual certainty that it will degenerate. And in the meantime we are flying blind, because the flow of reliable statistical data has also been mainly shut off.