Weekly Indicators for September 5 - 9 at Seeking Alpha

 

 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

While interest rates continue to rise, gas prices have continued to fall, giving consumers a second wind.

As usual, clicking over and reading will bring you up to the virtual moment, and reward me a little bit for my efforts.

The spending transition from goods to services

 

 - by New Deal democrat

Today is the last day for a very light economic week of news. One item worth addressing is the relative state of consumer purchases of goods vs. services in this pandemic recovery, because it appears to be unique.

Let’s start with the ISM non-manufacturing report, which was released on Tuesday. Unlike the manufacturing report, which bounced back slightly into expansion after two months of slight contraction, the non-manufacturing portions of the economy were still going strong in August, if not at their Boom levels of last year:

The overall index level was 56.9, well into expansion and a perfectly normal level over the past 15 years. The new orders index (not shown) was 61.8, showing strong expansion.

As indicated, the ISM manufacturing index has showed the “goods” sector at a complete stall for the last few months. Worse, the measure of real (inflation-adjusted) manufacturing and trade sales, shows contraction YoY through June for the 4th month in a row:

As you can see, going back 60 years, with the sole exception of 2019 and two months at the end of 1989, this has *always* signaled recession. Not good.

That’s the sales side of the coin. Now, let’s take a look at how this plays out on the other side of the coin, i.e., personal consumption expenditures, for goods and for services.

“Real” PCE’s for goods have indeed declined ever since spring 2021; but for services they are still increasing:

Measured on a YoY basis, similarly to the real sales data, when real expenditures for goods have turned negative, there has usually been a recession (note: I’ve split the data into 2 30 year+ segments for clarity):

The exceptions have been big slowdowns that were not quite recessions, e.g., 1966-67, 1986-87, 1996.

Now here is a close-up on the last 3 years:

Note that the YoY decline only lasted 2 months, and has since rebounded. This is most consistent with a slowdown that is not a recession, or at worst, the 2001’s just-barely-a recession.

The above made use of the PCE price index as a deflator. Since 2002, there has also been a chain deflator. Here’s how that data looks:

The YoY goods downturn was steeper and lasted 4 months, but turned positive in July, while the services measure remained very positive, if declining.

Indeed, when we combine real spending on both goods and services, while we see a deceleration - to be fair, one similar to in 2007 - but no downturn as during the past 2 recessions:

The bottom line here is, that there is merit to the suggestion that what we are primarily seeing is a transition from spending on goods during the teeth of the pandemic (i.e., Amazon deliveries to your door), to spending on services now that restrictions have virtually all been lifted. In other words, not recession, at least not yet.

An update on oil and gas prices

 

 - by New Deal democrat

After stabilizing in the $87-$94 range for a little over a month, oil prices have declined further in the past several days. As of this morning they were in the $82/barrel range. The YTD graph via CNBC below shows that they have now completely reversed the Ukraine invasion increase that began in February (perhaps linked to Ukraine’s counteroffensive of the past week?):

Gas prices follow oil prices with typically a delay of several weeks. As shown above, oil prices peaked in early June, and gas prices at mid-month. 

So here is a 9 month graph, via GasBuddy, of gas prices:

The declines in gas price declines slowed down a couple of weeks after those of oil. As of this morning, nationwide gas prices averaged $3.72.

Just before the Ukraine invasion, gas prices averaged about $3.50/gallon. If oil prices hold in this new, lower range, we could see gas prices back at that level in several weeks.

This in turn would support more consumer spending, a pop in consumer confidence, and in Biden’s approval rating - as well as another good month on the consumer price index front.

Another week of good news on jobless claims

 

 - by New Deal democrat

Initial jobless claims had been in an almost relentless uptrend from the end of March through early August. Since then, they have completely reversed.

This week initial claims declined another -6,000 to 222,000, and the 4 week average declined -7,500 to 233,000. Continuing claims, which lag somewhat, increased another 36,000 to 1,473,000, a 5 month high:

There was a little caterwauling on CNBC about the increase in continued claims. I am not concerned in the slightest. As I wrote above, they lag initial claims. They will reverse lower in the next few weeks.

Lower gas prices continue to bring lots of good short term news to the economy. I tipped off Menzie Chinn of Econbrowser to their correlation to consumer confidence and presidential approval, and he helpfully calculated their correlation, with graphs, in this post.

I want to caution that the long term outlook in next year remains negative; but as noted above, this takes the pressure off the short term.

Coronavirus dashboard for September 7: the slow ebbing on the way to endemicity continues

 

 - by New Deal democrat

I promised a COVID update, so I suppose I ought to follow through.

Let’s start today with a graph of South Africa’s cases and deaths for the past year:

South Africa is where BA.1 and BA.4&5 originated. You can see the huge spike in cases last December from original Omicron, and the smaller spike this June from BA.4&5. And yet deaths never approached the peak from Delta in summer 2021. 

Even more importantly, both cases and deaths are now as low as, and in the past month have even been lower than at any point since the pandemic started over 2 years ago.

I think this is a foretaste of what the future of COVID is likely to be.

Here is the same information for the US for the past 6 months:

Neither cases nor deaths came even close during the BA.2.12.1 or BA.4&5 waves to their peak from original Omicron last winter (or, in the case of deaths, to their peak during Delta).

And with no new variant showing signs of breaking out, cases have declined by over 40% from their recent peak in July. Deaths, which with the exception of June and July 2021 had always been over 1000/day, have not gotten significantly above 500/day for the past 4 1/2 months.

Meanwhile, hospitalizations have also declined nearly 25% from the July peak:

What is most remarkable is that this is despite the near total abandonment of both government and individual mitigation measures. As shown in the graph below, the % of people who have been fully vaccinated has virtually ground to a halt at a little over 67% since last winter:

Meanwhile total confirmed cases have continued to increase to nearly 30% of the entire population. Since we know that 1/2 or more of cases are asymptomatic, so those people probably won’t bother to get tested, the likelihood is that over 60% of the entire US population has been infected at some point.

Indeed, several months ago, a study of seroprevalence (bloodwork showing reaction to COVID) showed that almost 80% of school age children had at one point or another been infected:

Additionally, we know that since home testing was widely available in January, many symptomatic people haven’t bothered to get “officially” tested either. Biobot wastewater data has shown that since that time something like 2/3’s of all cases are likely not officially confirmed.

Speaking of which, here is their most recent regional update:

After declining 45% nationally, cases turned up a little bit in the past week, mainly in the South and Northeast. That may just be an anomaly due to incomplete data, or it may herald something else. Since there has been no indication that any variant, including BA.4.6, is able to outcompete BA.5, my guess is that it is an anomaly.

With vaccinations and advances in treatment - and also the fact that a large majority of the US population is no longer “immunologically naive” via either vaccination, infection, or both - only about 1 in 750 cases now results in death, with those skewing to the unvaccinated and the elderly. I suspect that we will continue to see slow declines until the cold weather arrives, or else some new even more competitive variant appears.

I told you so

 

 - by New Deal democrat

Not much economic news this week. I’ll post an update on COVID later, but for now, a follow-up on my Mar A Lago search warrant post last week.

Last week I concluded my observations as follows:

“Despite how devastating the DoJ response apparently is, it is important to remember that this judge, on Friday [actually Saturday, sorry], publicly declared that she had made up her mind on an issue before the other party had an opportunity to respond to the request, without even proper service on the defendant, without asking for any sworn factual assertions by the plaintiff, and to provide information to her about, inter alia, highly classified documents that goes beyond normal search warrant practice.

“There is no substantial reason to believe that she will change the conclusion she obviously arrived at last week. So prepare for the judge to completely disregard the information put forward by the DoJ, and issue an unprecedented, broad, and novel ruling.”

On Saturday, on another forum, I followed up with the following prediction:

“I see her issuing a broad order, including executive privilege, and under a rubric of “extraordinary circumstances” and “equitable jurisdiction,” essentially placing herself in the role of “supervising judge” overseeing anything having to do with this search warrant. She will have to avoid relying on the PRA; avoid enjoining the government from taking certain actions (because that’s appealable); and finding that this case is sui generis for purposes of avoiding Nixon as controlling precedent.”

And sure enough, here is the money quotation from her ruling:

“Pursuant to the Court’s equitable jurisdiction and inherent supervisory authority, and mindful of the need to ensure at least the appearance of fairness and integrity under the extraordinary circumstances presented, the Plaintiff’s Motion is Granted in Part….

“The Court takes into account the undeniably unprecedented nature of the search of a prior President’s office…”

The Court literally hit all of my buzzwords in those two sentences. 

The only thing I got wrong is that she *did* enjoin the government “from further review and use of any of the materials seized from Plaintiff’s residence on August 8, 2022, for criminal investigative purposes pending resolution of the special master’s review process as determined by this Court.”

So, what happens now? The same practicing lawyers who Genuflected before the Majesty of the Law two weeks ago, assuring us that this judge would quickly laugh this case out of court, now suggest that the DoJ should probably just “power through” the special master process.

Nuh uh. Here’s why.

First of all, the Court ordered that:

“On or before September 9, 2022, the parties shall meaningfully confer and submit a joint filing that includes:

a. a list of proposed special master candidates; and

b. a detailed proposed order of appointment in accordance with Rule 53(b), outlining, inter alia, the special master’s duties and limitations consistent with this Order….”

Again, I have no special knowledge of criminal procedure, but let’s just examine the behavior of the parties, particularly Trump. 

And here is the simple fact: it is in Trump’s interest to drag this process out as long as possible, because until the process is concluded, the government may not “review or use” any of the materials. This in my opinion likely includes arresting and charging Trump. The Court’s order is unclear, but given her behavior so far, it is at least quite likely she would view arrest and/or charging as being in contempt of her order. I would not like to be the DoJ attorney having to appear in front of her for that reason.

So, here’s what will happen. The parties will *not* in fact be able to agree on “proposed special master candidates.” Trump will propose clearly biased candidates that the DoJ will never agree to. This will give rise to further litigation before the judge, which will delay the matter further; and since the judge has already clearly shown she will bend over backwards for Trump, the likelihood is she will use her “supervisory authority” to resolve the deadlock by appointing a pro-Trump master.

For the same reason, it is not in Trump’s interest to agree to *any* limitations on the “special master’s duties.” He wants the special master to be able to declare any documents “privileged” and further to both preclude the government from making any use of them, and even further, to return the documents to him.

So there will be litigation over that in front of a biased, pro-Trump judge. More delay. More likely pro-Trump rulings.

See how this works?

Next, There is already much discussion in legal Twitter about the fact that the Judge did not give any parameters as to how the special master could determine if “executive privilege” applies. As far as I can tell, there are none that could apply. The special master is going to have a tabula rasa on which to write; all of which will be further subject to this judge’s “supervision,” no doubt exercised to declare as much as possible privileged for Trump.

Indeed, Trump will now claim executive privilege as to *all* the documents, and refuse to budge. 

Result: this creates yet another issue that can be litigated for a full year or two - as will any decisions by the special master adverse to Trump.

Further, because the judge is ultimately reserving the issue to herself under her undefined “equitable” “supervisory authority,” this will also create a huge morass of issues, that could take several years to untangle via further litigation.

In the meantime, so long as her restraining order on the DoJ is in effect, I don’t see how they can prosecute Trump for anything having to do with these records, because the prosecution would “make use” of the records.

One final note about the judge’s bias. In her opinion, she says she is granting the motion so that there will be “at least the appearance of fairness and integrity.”

Excuse me? Shouldn’t this judge first and foremost be concerned about *actual* fairness? Try to read that sentence without arriving that the conclusion that the judge has already determined that the entire seizure of documents from Mar a Lago was substantively unfair. There’s simply no other way to read it. Unfair to whom? Clearly not the DoJ! So this judge has already determined that the seizure was substantively unfair to Trump, but at least her order can create a fair-appearing process to resolve it.

That’s how this “special master” process is going to play out, unless Cannon’s order is reversed, and promptly, by a higher court.

On Labor Day 2022, how well is labor doing?

 

 - by New Deal democrat

This is Labor Day, so let’s take a look at a few metrics of how labor is doing.

As an initial aside, occasionally I get asked why I write about expansions and recessions. An important reason is, pretty much by definition during recessions jobs and income decline. During expansions they, well, expand. So forecasting whether the period ahead will feature better or worse conditions for job-holding and income for average workers is a social good in my book.

Last Friday in the jobs report, there was an apparent anomaly in that the unemployment rate went up (bad), but the labor force participation rate increased (good). How could that be, and what does it mean?

Not everybody participates in the labor force. People are retired, or homemakers, or full-time students, or disabled. Or discouraged, thinking they can’t get a job. All other adults - those who are in the labor force - either have a job (employed) or they don’t (unemployed). The LFPR measures the combined total of the two, while the unemployment rate only measures the latter.

There is a problem working with the long term LFPR, because the cyclical trends are swamped by the secular tsunami of women entering the labor force between the 1960s and 1990s, together with the very slow ebbing of male participation that has been going on ever since the 1950s. So I only measure beginning in the mid-1990s.

Since 1994, the LFPR has been a “long lagging” indicator coming out of recession. It only bottoms significantly *after* the unemployment rate peaks, sometimes by years. Generally speaking, people don’t bother entering the work force unless they think there is a likely prospect of landing a job. There isn’t a magic number, but over the past 30 years, that has been about once the U6 underemployment rate has fallen below 10%. In the below graph, I subtract the U6 rate from 10% so that any number below 10% shows as a positive and any number above it shows as a negative:

The LFPR bottomed in 1994, 2005, and 2015, *long* after the last recession had ended, and also several *years* after the underemployment rate was at its worst. At peaks the behavior is different, as the LFPR peaks coincident with or even slightly *before* the underemployment rate. This is particularly true if we use a 3 month average of the LFRP rather than noisy monthly data.

Now here is the same graph for the last 2 years:

This last Friday’s report looks like an anomaly, because the underemployment rate worsened, but the LFPR increased. But because the LFPR is noisy, if we look at the 3 month average, the peak of the LFPR as of now is still March through May. In other words, the pattern of the last 3 expansions may repeat in this one, although the jury is still out.

Another way of looking at the LFPR is to decompose it into the monthly change in employment vs. unemployment, which is what the below graph does for the past 21 months (before that the #s would be off the scale):

The decelerating trend in the gains in the number employed (blue) is apparent, as is the decelerating trend - and perhaps reversal of trend - in the decreases in the number of unemployed. I suspect the big increase in the number of employed in August is going to prove to be a positive outlier, but we’ll have to wait a month or two to find out.

One other metric I wanted to address this Labor Day is “real aggregate payrolls” for nonsupervisory workers. This is the total income reaped by the working and middle class, after adjusting for inflation. This information goes back almost 60 years, so I am splitting it into 2 graphs; first, 1964-1993:

And here is 1994-2022:

This metric has lots of signal and not much noise. With the exception of the 2020 pandemic, it always decelerated for months before the onset of recessions, and with one exception also turned down for about 6 months or more before a recession began (in 1969, it peaked one month before the recession).

Now here are the past 2 years:

We see clear deceleration beginning in September 2021, and an actual downturn this past spring, before rebounding in July.

The spring downturn was primarily about the spike in gas prices due to the Ukraine invasion, and the July rebound due to the big decline in gas prices that month. *Nominally,* according to Friday’s report, aggregate payrolls increased 0.3%. Because gas prices continued to decline in August, that will probably turn into another month of real aggregate income gains, but we’ll have to wait for the CPI report next week to be sure. 

Bottom line, we could yet see a new record high in real aggregate income, but the trend of sharp deceleration at least will likely remain intact. This series continues to warn of a likely recession in the coming months.

Weekly Indicators for August 29 - September 2 at Seeking Alpha

 

- by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

The consumer portion of the economy continues to benefit from lower gas prices, while the producer side continues to suffer from higher interest rates.

As usual, clicking over and reading will bring you up to the virtual moment on the data, and reward me a little bit for my labor. Speaking of which, enjoy the last days of summer over this Labor Day weekend!

August jobs report: despite a good headline number, the decelerating trend resumes

 

 - by New Deal democrat

I have written a number of times since February that the short leading indicators have signaled that we should expect weaker monthly employment reports, with both fewer new jobs and a higher unemployment rate. That was completely *not* the case in July, In August, would the decelerating trend kick in again?

That it did. Since February the 3 month average in new jobs has decelerated from over 500,000 to 378,000. And this month the unemployment rate increased to a 6 month high.

Here’s my in depth synopsis.

HEADLINES:

• 315,000 jobs added. Private sector jobs increased 308,000. Government jobs increased by 7,000. 
• The alternate, and more volatile measure in the household report indicated a  gain of 442,000 jobs. The above household number factors into the unemployment and underemployment rates below.
• U3 unemployment rate rose 0.2% to 3.7%.
• U6 underemployment rate rose 0.3% to 7.0%.
• Those not in the labor force at all, but who want a job now, declined -351,000 to 5.549 million, compared with 4.996 million in February 2020.
• Those on temporary layoff declined -0,000 to 782,000.
• Permanent job losers increased 187,000 to 1,354,000.
• June was revised downward by -105,000, and July was also revised downward by -2,000, for a net decrease of -107,000 jobs compared with previous reports.

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 were mixed:

• the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.2 hours to 40.9 hours.

• Manufacturing jobs increased 22,000, and are at a level higher than before the pandemic.
• Construction jobs increased 16,000, also at a level higher than before the pandemic. 
• Residential construction jobs, which are even more leading, rose by 2,300.

• Temporary jobs rose by 11,600. Since the beginning of the pandemic, nearly 300,000 such jobs have been gained.
• the number of people unemployed for 5 weeks or less rose by 143,000 to 2,223,000, slightly above its pre-pandemic level.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel rose $0.10 to $27.68, which is a 6.1% YoY gain, a further decline of -0.1% from last month and its 6.7% peak at the beginning of this year.

Aggregate hours and wages:

• the index of aggregate hours worked for non-managerial workers was unchanged which is above its level just before the pandemic.

•  the index of aggregate payrolls for non-managerial workers rose by 0.3%, which was higher than inflation for the month, but at just under 0.7%averaged over 3 months remains slightly below the average inflation gain monthly in that period.

Other significant data:

• Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose 31,000, but are still about -7% below their pre-pandemic peak.
• Within the leisure and hospitality sector, food and drink establishments added 18,200 jobs, but are still about 600,000, or -5% below their pre-pandemic peak.
• Professional and business employment increased by 68,000, over 1,000,000 above its pre-pandemic peak.
• Full time jobs declined -242,000 in the household report.
• Part time jobs increased 413,000 in the household report.
• The number of job holders who were part time for economic reasons rose  225,000 to 4,149,000.
• The Labor Force Participation Rate increased 0.3% to 62.4%, vs. 63.4% in February 2020.

SUMMARY

This report was positive, but much more mixed than last month’s report. The overall employment gain continued strong by historical standards, with gains in manufacturing, construction, and high paying professional and business jobs, as well as temporary positions. The hard-hit leisure and hospitality sector also continued to recover. The labor force participation rate also increased. Although the YoY pace of wages decelerated, it was still strong.

But there were lots of disappointing and outright negative indicators as well. Full time jobs decreased; the household gain was driven by part time employment. Average hours in manufacturing, which lead manufacturing jobs, declined to a 12 year low, and are down -0.5% YoY, a change in line with past steep slowdowns and recessions. Aggregate hours, a more finely grained measure than the number of jobs, were completely flat. Revisions to past months were negative, re-asserting a pattern that has been in place most of this year.

Most of all, both the unemployment and underemployment rates rose. As I have written a number of times in the past several months, I have been expecting this, as it was telegraphed by the rise in initial jobless claims.

My take is that this report is in line with a weakening jobs picture, although the headline number of gains remained historically strong.

A respite in manufacturing in August, continued decline in construction in July

 

 - by New Deal democrat

As usual, the new month’s first data is for manufacturing and construction. Here’s a look at each.

The ISM manufacturing index, and especially its new orders subindex, is an important short leading indicator for the production sector. In August, after two months of showing slight contraction, the leading new orders subindex improved to 51.3, indicating expansion. The overall index also continued to show expansion, with a reading of 52.8 for the second month in a row:

This index has a very long and reliable history. Going back almost 75 years, the new orders index has always fallen below 50 within 6 months before a recession, and in three cases did not actually cross the line until the first month of the recession itself - although the recession did not begin until after the total index fell below 50, and in fact usually below 48.

This print means we are not out of the woods, but on the other hand aren’t in a recession now.

Turning to construction for July, the report indicates a nominal decline of -0.4%, although June’s original - 1.1% decline was revised to only -0.5%. The more leading residential sector declined -1.5%, although June’s original -1.6% decline was revised higher to -1.1%:

Adjusting for price changes in construction materials, which declined -0.6% for the month, “real” construction spending actually increased +0.1% m/m, and residential spending fell -0.9% m/m. Here is what “real” construction spending looks like for the past several years:

The decline in residential construction spending, while substantial, is less than its 2018-19 decline, and was nowhere near the -40.1% decline it suffered before the end of 2007. 

While residential construction spending lags other housing data, such as permits, starts, and sales, it has the virtue of being much less noisy. Over a period of several months, it is almost pure signal. And what this tells us is - unsurprisingly at this point - the housing decline is real, and will likely be reflected as a negative component of Q3 GDP.

More good news on jobless claims

 

 - by New Deal democrat

Initial jobless claims, which had been in an almost relentless uptrend from the end of March until several weeks ago, declined again this past week.

Initial claims declined -4,000 to 232,000, while the 4 week average also declined -4,000 to 241,500. Continuing claims, which lag somewhat, increased 26,000 to 1,438,000, a 4.5 month high:

I mainly put this down to the decline in gas prices since early June relieving the system of some stress. This also puts a recession on hold for the immediate future.

In which I parse and war-game the Trump “special master” litigation

 

 - by New Deal democrat

And now, for something completely different .. .. 

While I have zero special knowledge about Federal criminal procedure, I *do* pay very close attention to “tells” in human behavior. (See, for example, my parsing of Bill Barr;s ‘summary’ of Mueller’s report summary, in which i accurately forecast what cherry-picking elisions Barr had made to Mueller’s document, which actually concluded things quite different from what Barr claimed.) So far, the response to Judge Cannon’s preliminary Order to appoint a special master as to the MAL search warrant documents has played out according to my view of those “tells.”

There are three such “tells” in this litigation:

1. Judge Cannon issued her preliminary order on a Saturday.

2. That preliminary order nowhere includes the term “attorney-client” privilege.

3. The DoJ split its response into two parts, filing one Monday and one Tuesday.

All three of those things were choices. Why did the actors make those choices? The likely reasons behind those choices tell us a lot about their mindset.

1. Judge Cannon issuing her preliminary order on a Saturday. This tells me that the Judge viewed this matter as an *emergency.* 

She came to work *on*a*Saturday* and issued an order Saturday night. Further, although she did not enjoin any government behavior, she ordered them to reply on an emergency time schedule. Why was this an issue that couldn’t wait until Monday? Why not have Trump’s attorneys call their DoJ counterparts Monday and get them on a phone conference with the Judge, where she could order them to accept service electronically and set forth a briefing schedule, on an expedited basis if needed, before ruling? 

Because she deemed the matter an emergency.

Once we understand that, it puts a very different gloss on her behavior last week advising Trump’s attorneys of the deficiencies in their pleadings. This was not simply patiently lecturing inexperienced counsel. No; this was a judge who viewed the matter before her as an emergency, but as to which the initial pleading was insufficient to allow her to issue the order she wanted to issue. So, she gave plaintiff’s counsel a road map covering 5 issues towards adequacy, and told them to have the information to her by close of business Friday. 

When they still didn’t quite do that, and in particular never effectuated service of process on the defendant, she accepted their papers anyway and issued her preliminary ruling. 

This further tells me she had her mind already made up, probably as early as when she first received Trump’s filing. She literally (yes, literally) pre-judged the issue, issuing a ruling, subject to whatever subsequent papers she might receive. It would not surprise me at all - in fact, I consider it more likely than not - that she already had a draft opinion ready Friday. All that was needed were paragraphs beginning, “The Federal government has argued…” and “These arguments are unpersuasive because …”.

2. The silence of the preliminary order on the scope of the proposed “special master’s” authority.

The commenters who are not alarmed with the Judge’s order generally took the position that a special master for attorney-client privilege would almost certainly be moot by the time the government replies, so there will be nothing for a special master to do. So the Court was just cutting to the chase.

For example, here’s Berkeley law professor Orin Kerr:

https://twitter.com/OrinKerr/status/1563649285878476800?cxt=HHwWgMCj4bWvmbMrAAAA

“I don’t think this amounts to much either way. It’s effectively an indication that the judge wants to hear from DOJ and is going to have a hearing. I assume DOJ will say the search is done, so there’s no search left for a special master to oversee.“

And Popehat:

https://twitter.com/Popehat/status/1563651603034304513

“Eh. She may just be cutting to the chase. She’s a recent ex-AUSA and understands the issues. And judges frequently jump fast on post-search special master requests.”

But the Judge’s Order nowhere limits the proposed special master to attorney-client issues. The relevant sentence reads:

“the Court hereby provides notice of its preliminary intent that it intends to appoint a special master in this case.”

If the Court had intended to limit the scope of a special master’s review to attorney-client issues, as Kerr and Popehat seemed to think, it could have specified so. It did not. And Trump clearly wants the purported issue of “executive privilege” visited as well.

In short, a telling omission.

3. Why did the DoJ issue its response in two parts?

I think the DoJ team assigned to this case was at least as smart as I am, and figured out the same things I lay out above (and a lot more of course).

If I were the DoJ, faced with the above, given the emergency deadlines,  I would have appointed two teams to draft two different sort of responses: (1) a more milquetoast, courteous response targeted at attorney-client privilege; and (2) a planet-killing space lasers response blasting all of the reasonably possible deficiencies in both Trump’s pleading, and the Judge’s proposed order.

Monday morning’s filing was on the order of version (1) above. I think it was a test. If the Judge really did just intend to limit the special master to attorney-client privilege, and not upend the entire DoJ investigation for reasons she considered emergent, this was her opportunity to either withdraw her original order as moot, or to grant more time to fully brief the issue. Certainly she hadn’t worried about procedural niceties on Saturday; why not give her the same opportunity on Monday?

When the Judge did not respond to the first brief, the DoJ followed up with a motion to allow an extra-long (planet-killing laser cannon) second brief. Again, the judge could have extended the briefing schedule (since attorney-client matters appear to be moot). She didn’t.

AT this point the DoJ had to figure that it was looking at a worst case scenario in terms of the ruling that the judge intended to make. So the DoJ filed a (probably toned down and a little more polite) final version of its planet-killing space laser brief Tuesday night.

A few closeting comments.

4. A petition to intervene amicus curiae was filed by a number of prominent criminal attorneys. The court may not grant the petition, but it itself is noteworthy for the legal broadsides it fires at both Trump’s attorneys and the judge. 

The movants - all prominent members of former GOP Administrations write in part:

“ First, the relief sought is unprecedented. The former President has not cited—and Amici are not aware of—any precedent involving the appointment of a special master to adjudicate a claim of executive privilege (as opposed to attorney-client privilege)…

“ Second, Congress has established a specific procedure, set out in the Presidential Records Act (“PRA”), through which a former president may challenge a sitting president’s invocations of (or refusals to assert) executive privilege…. including the requirement that any challenge by a former president to the Executive Branch’s rejection of his claim of privilege be brought in the jurisdiction available under the PRA, the United States District Court for the District of Columbia…. [This] court [ ] is statutorily precluded from hearing the matter.

“ Third, the appointment of a special master to adjudicate the claims of executive privilege would be a waste of time because the claim of executive privilege against the Executive Branch in this case is manifestly frivolous.… it is abundantly clear that the Executive Branch, including the President and the Acting Archivist of the United States, have determined that the records at issue should be reviewed by the U.S. Department of Justice (“DOJ”) and the Federal Bureau of Investigation.“

Shorter version: “Judge, if you do what you apparently are planning to do, you will be expressly and flagrantly violating statutes and rules governing the judiciary, Expect to be mercilessly shot down on appeal.”

5. I think the DoJ would have preferred *not* to publish the photo of classified documents which has gotten so much publicity today. Even the limited information disclosed - most importantly, the dates of the documents, in conjunction with the type of information they cover - gives US adversaries a glimpse of how close in time to certain events the US had important information about them, and the means by which it gained that intelligence.

I think the inclusion of this document is a figurative slap across the face of Judge Cannon, warning her graphically about how egregious and blatant Trump’s violations were, and whether she tacitly approves of this behavior by interfering with the Intelligence Services processing of damage potentially done by Trump’s potential use of this material, found not coincidentally in a desk drawer with his passports.

6. Despite how devastating the DoJ response apparently is, it is important to remember that this judge, on Friday, publicly declared that she had made up her mind on an issue before the other party had an opportunity to respond to the request, without even proper service on the defendant, without asking for any sworn factual assertions by the plaintiff, and to provide information to her about, inter alia, highly classified documents that goes beyond normal search warrant practice.

There is no substantial reason to believe that she will change the conclusion she obviously arrived at last week. So prepare for the judge to completely disregard the information put forward by the DoJ, and issue an unprecedented, broad, and novel ruling.

June house price indexes show no peak yet; no respite likely in the “official” consumer housing measure

 

 - by New Deal democrat

Yesterday the Case Shiller and FHFA house price indexes were updated through June (technically, the average of April through June.

Because the Case Shiller index is not seasonally adjusted, the best way to show them is YoY. Here are YoY% changes for the last 2 years of each (although the FHFA *is* seasonally adjusted, and increased only +0.1% for the month to a new record):

Remember, my rule of thumb for non-seasonally adjusted data is that the peak is most likely when the YoY gain declines to only 1/2 of its maximum in the last 12 months. By that standard, although both decelerated to 12 month lows, at +18.0% and 16.2% respectively, this is not much below their recent highs of 20.6% and 19.3% earlier this year. 

Also, the FHFA has a tendency to turn slightly ahead of the Case Shiller index, and the FHFA YoY gains appear to have peaked in February, slightly ahead of Case Shiller.

Anyway, these two indexes are telling us - with a delay - that prices did not peak during the spring. 

Remember that the median price for new homes appears to have peaked in April (below data *is* seasonally adjusted):

Additionally, below are the YoY% changes for every month in median existing home sales prices for the past 15 months (again, the NAR does not seasonally adjust this data):

Apr 2021 +19.1%

May +23.6% [peak]

Jun +23%

Jul +20%

Aug +15%

Sep +13%

Oct +13.1%

Nov +13.9%

Dec 2021 +15.8%

Jan 2022+15.4%

Feb 2022 +15%

Mar 2022 +15%

Apr 2022 +10.4% [lowest]

May 2022 +14.8%

June 2022 +13.4%

July 2022 +10.8%

The price of existing homes appears to be close to a peak as of the last 4 months.

Put all this together, and the result is that while prices for new homes probably peaked several months ago, existing home prices were still increasing as of mid year. It will take another month or two to know if they peaked during the summer.

Finally, as I have written many times over the past 9 months, the CPI measure of housing, “owners equivalent rent,” lags actual house prices by about a year or more. Here are the YoY% changes of the house price indexes vs. OER(*2 for scale) over the past 20 years:

Through July, YoY% increases in OER have continued to accelerate. They may have more to go, or they may be close to their peak YoY. But I do not expect any meaningful downturn in OER, which plus rents contribute a full 1/3rd of the entire value of the CPI, aside from contributions from lower gas prices I see very little relief in the official inflation measure for months to come.