note on the graphs used here

sometime during the third week of March, the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs, and also left us with less options we had available and used before the upgrade...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....





Sunday, February 3, 2013

4th qtr GDP, January employment and PMI, December’s income and outlays, LPS mortgage monitor, and durable goods, and November Case-Shiller

the major economic news of the week was that the US economy shrunk in the 4th quarter for the first time since the second quarter of 2009, albeit by a minuscule tenth of a percent at an annual rate; according to the first estimate of GDP for the 4th quarter of 2012 from the BEA, the output of goods and services produced in the US decreased at an annual rate of 0.1% from the 3rd quarter to the 4th quarter; a contraction in the 4th quarter was totally unexpected, a WSJ survey of fifty economists who estimated Q4 growth at 1.6% was typical of expectations elsewhere; of course, this is the first estimate based on less than complete data and as we've seen several times before the revisions can be substantial; nonetheless, with the impact of the payroll tax expiration hitting consumers who are just now discovering their paychecks are 2% short, the possibility that reduced personal consumption could turn the 1st quarter negative also, technically putting us into a new recession, looms large…

there is something of a silver lining in the underlying reasons for the reversal, however; the greatest component of GDP shrinkage was a quarter over quarter decrease in federal government spending and investment at a 15% rate, which reduced GDP by 1.28%, as defense spending fell at a 22.2% clip in the 4th quarter after rising 12.9% in the 3rd; when the department was closing out their fiscal 2012 budget; while factors relating to the looming debt ceiling and potential large cuts from the sequester caused government agencies to pull back in the 4th quarter (the 1st quarter of the federal fiscal year)...another large hit came from the declining increase in business inventories, from $60.3 billion in the 3rd quarter to $20.0 billion in the fourth quarter, which clipped another 1.27 percentage points from the fourth-quarter change in real GDP and which also could have been impacted by the effect of the fiscal cliff negotiations on business decisions...the only real bad news in this 4th quarter report was the 5.7% decline in real exports after their increase of 1.9% in the 3rd quarter, although that was partially offset by a 3.2% decline in imports (which added to GDP because gross imports subtract from it); that resulted in a .25% hit to GDP from net exports, which you can see on the adjacent table compiled by doug short for his in-depth coverage of this release, which computes changes to two decimal places to better show the change; understand, this table shows how much each component of GDP in each quarter influenced that's quarter's change and not the growth or contraction of the component; for instance, personal consumption expenditures, which accounts for around 70% of GDP, increased by 2.2% in the 4th quarter; thus that added 1.52% to Q4 GDP...also note all figures represent a quarterly change at an annual rate, ie, such that Q1 growth at a  2.0% rate is actually on the order of 0.5% growth over 3 months...

   at least the changes in the other components of GDP werent that bad; nonresidential fixed investment increased at a 8.4% rate in the 4th quarter after it had contracted at a 1.8% rate in the 3rd; investment in equipment and software also rebounded, from a decline at a 2.6% rate in Q3 to an increase at a 12.4% clip in Q4, and residential investment increased at a 15.3% rate, even better than the 13.5% rate of the 3rd quarter...and the lion's share of the increase in personal consumption expenditures was in purchases of durable goods, such as cars and appliances, which increased at a 13.9% rate, after a decent 8.9% rate of increase in the 3rd quarter...

  in a related report, thr BEA also released the Personal Income and Outlays report for December; this report gives us data on personal consumption expenditures (PCE), the major component of GDP, the amount of income we're all earning & from what sources, the percentage of that income that we're saving, and also generates a PCE price index, which provides the Fed's chosen measure of inflation in the overall economy...the December report was something of a one time aberration, as personal income increased $352.4 billion, or 2.6% above November's level, and disposable personal income (DPI), which is income after taxes, rose  $331.3 billion, or 2.7% month over month;  BEA tells us in a footnote that the jump in personal income was caused by "accelerated and special dividend payments and by accelerated bonus payments" and other manipulation of wages & salaries to avoid the year end upper income tax hikes related to the fiscal cliff; without those factors, December DPI would have increased by just $44.1 billion, or 0.4%, following an increase of $66.5 billion, or 0.6%, in November; not much of that shifted income was spent, however, as personal consumption expenditures rose just $22.6 billion, 0.2% above November's level; this is best shown on the adjacent bar graph by j picerno at the capital speculator, which shows changes in DPI in black & PCE in red monthly since last December; also note some of that income shifting started in November, so we could well guess that January DPI will show a reversal...the difference between DPI and personal outlays, $805.2 billion, was saved; that brought the personal savings rate for December to 6.5%, the highest since May 2009, when our spending was depressed by the depth of the recession...BEA also reports that the price index for all personal consumption expenditures decreased less than 0.1% in December, which brought the increase in real DPI up to 2.8% above November, when real DPI rose 1.3%...real PCE (adjusted for price changes) increased 0.2%in December, compared with an increase of 0.6% in November; doug short computes the PCE price index to 2 decimal places for clues to the Fed's outlook; he finds the headline PCE price index to have increase 1.35% and the core PCE price index to have increased 1.32%

the other major release of the week was the Employment Situation Report for January from the BLS, which came in about as close to average as it can get; the establishment survey showed that total non farm payroll employment increased by 157,000, right in line with the average of 153,000 a month that was originally reported for all of 2011 and 2012...however, as with all january reports, it wasnt that clean; first, the annual benchmark revisions were applied to all historical Current Employment Statistics data, which, as we discussed when the preliminary estimates for these revisions were released, revised the payroll employment up to and including March of 2012 based on comprehensive examination of state unemployment insurance tax records at that time; netting a 422,000 increase in payroll jobs over what was originally reported...in addition, a revision to allow for the creation of new payroll establishments and closing of old ones, called the "birth death model", subtracted 314,000 jobs in January...and then there was another revision based on census population data which revised reported payrolls again…the net effect of these changes to government and private payrolls for every year going back to 2001 is shown in the table to the left below...and after all these revisions to prior months and years were applied, that resulted in changes to the previous months off of which the seasonal adjustment algorithms  are computed; that again changed the reported seasonally adjusted addition to payroll jobs added for every month in 2012, as is shown in the zero hedge chart to the right below, (from BLS table A) where red bars are non-farm payrolls as first reported, and blue bars are NFP as revised, and the black line shows cumulative jobs added…the net effect of these changes is a sudden jump of a seasonally adjusted 647,000 jobs in january which did not exist in previous reports…but even with those additions, we still have 3.2 million fewer jobs than we did at the employment peak in December 2007

 

Annual Change Payroll Employment (000s)
Private Public Total
2001 -2,308 551 -1,757
2002 -765 233 -532
2003 104 -42 62
2004 1,872 147 2,019
2005 2,298 186 2,484
2006 1,862 209 2,071
2007 827 288 1,115
2008 -3,797 180 -3,617
2009 -4,976 -76 -5,052
2010 1,235 -213 1,022
2011 2,420 -317 2,103
2012 2,247 -77 2,170
        so, after all that statistical magic had been applied to the months up to and including December, BLS reports January's numbers just as if nothing had changed, except now employment growth for 2012 has averaged 181,000 a month and January's reported 157,000 new payroll jobs looks weak in comparison...retail, with 33,000 new jobs, was the sector gaining the most jobs January, but only by virtue of the seasonal adjustment; obviously, there were post holiday layoffs, but because there were 33,000 less cut than normal, the seasonal adjustment counts that as a payroll jobs increase; employment in construction was reported to have increased by 28,000, some of which is also likely a result of the seasonal adjustment algorithm; other sectors gaining jobs in January include health care, with 23,000 jobs added (with ambulatory services gaining 28,000 and other areas losing a few thousand), wholesale trade, where jobs increased by 15,000, and "mining", which added 6,000 mostly oil & gas jobs...on the other hand, couriers and messengers lost 19,000 jobs (and likely more were it not for seasonal adjustments) and air transportation employment decreased by 5,000...employment in other sectors, including manufacturing, financial activities, professional and businesses services, leisure and hospitality, and government, showed little or no change...the average workweek for all employees on private payrolls was unchanged at 34.4 hours in January, while the factory workweek declined a tenth of an hour to 40.6 hours...non-supervisory employees also saw their hours slip by 0.1 hours to 33.6 hours; average earnings for all employees was up 4 cents over december to $23.78; while production and non-supervisory employees saw their pay rise by 5 cents to $19.97...

FRED Graph

   with updated population estimates from the census being applied to household survey data for the first time in January, it would seem some data isnt directly comparable to December, which is not so altered (note the "change from" column is left blank)...however, BLS reports most of the data as little changed in January, so we'll note the usual metrics we get from this survey; first, the household survey shows an employment increase of 17,000 and an in those unemployed of 126,000, which results in an increase in the unemployment rate from 7.8% to 7.9%; the population appears to have jumped 313,000, but the employment-population ratio remained unchanged at 58.6%, stuck the same range its been in sicne 2009, as you can see in blue on our FRED chart...55,000 more were among those working part time who wanted full time work, yet the U-6 unemployment rate with includes those involuntarily part time was unchanged at 14.4%...the labor force rose by 143,000, while those not in the labor force rose by 169,000 to over 89 million, yet the labor force participation rate was unchanged at 63.6%, which is shown on our chart in red...the number of those jobless for 27 weeks or more and still searching for work was down a bit from 4,766,000 million to 4,708.000 but still accounted for 38.1 percent of those unemployed...another 2.4 million of us were counted as "marginally attached to the labor force" in January, which was down by 366,000 from last January...these are those of us who are not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months, but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey...

there were also a couple of major releases on the manufacturing sector of the economy this past week; on Monday the Commerce Dept released the December Report on Durable Goods Shipments, Inventories, and Orders (pdf) which is typically watched for new orders for durable goods, and more specifically, durable goods less the volatile defense and aircraft orders; overall monthly durables orders for December rose to a seasonally adjusted $230.7 billion from November's $220.7 billion, increasing at a rather strong 4.6% monthly pace, but much of the gain was due to a sharp rise in aircraft orders, which boosted the monthly gain in transportation equipment orders $8.1 billion to $75.9 billion, an 11.9% rate of increase, following 2 monthly decreases...excluding this big jump in transport orders, durable goods orders were up 1.3% in December...there was also a big jump of $8.7 billion in new orders for defense capital goods, to $16.5 billion, a monstrous increase of 110% over November's order level; excluding defense, orders were up just 1.2%...however, excluding defense and transports, orders for capital goods, which represents business investment in new equipment, was up only 0.2% for the month...on a year over year basis, new orders for durables were up 4.1% for 2012; however, excluding transportation and defense orders, durable goods orders were down 3.9%, and core capital goods orders are down 9.8%, which you can see on the adjacent chart from zero hedge...

Vehicle Salesthe other manufacturing report this week was the January 2013 Manufacturing Survey of Purchasing Managers from the Institute for Supply Management, which produced quite a surprise to the upside, after the dismal run of similat surveys conducted by the regional Fed banks last week; the headline composite PMI (purchasing managers index) came in at 53.1%, up from 50.2% in December and the highest reading in nine months; the PMI and other subindexes had also gone through an annual revision that left the readings for most of 2012 mostly lower; December's PMI had originally been reported as 50.7%;...the expansionary readings in January included an increase in the new orders index of 3.6, from 49.7 to 53.3, growth in the production index, which moved up a point to 53.6, and a 2.1 point increase in the employment index to 54.0; customers inventories were indicated as being too low at 48.5, leaving room for restocking...13 of the 18 industries covered are reporting growth in january, led by plastics and rubber products, textile mills, furniture production, printing, and apparel...

and in yet another Friday report, light vehicle sales for January were estimated to have been at a 15.29 million seasonally adjusted annual rate, up 10 from a year ago but down a tad from last month; Ford reported deliveries of cars and trucks rose 22% over last year, whiile Chrysler and GM report sales rose 16%…the chart included to the above right here from Bill McBride shows light vehicle sales since the BEA started keeping car sales data in 1967….
case shiller index levels SA November 2012 SA

earlier in the week Case-Shiller released their monthly home price indices for November (pdf), which you'll recall is a 3 month average of prices for completed transactions in September, October and November; on a month over month basis, the ten city composite showed a 0.2% decline in prices while the more widely watched 20 city index declined just 0.1%; on a seasonally adjusted basis, the Composite 20 would be up 0.6% for the month...the 20 city index is 5.5% higher that it was a year ago, and the 10 city index is up 4.5% on that same basis; this brings average home prices across the country back to their autumn 2003 levels for both the 10-city and 20-city Composites...cities showing the greatest monthly home price gains in November were Phoenix and San Francisco, which were both up 1.4%, while Chicago home prices showed a 1.3% decline...the greatest year over year price increases were seen in Phoenix, where prices were up 22.8%, in San Francisco, where home prices rose 12.7%, Detroit, where prices are up 11.9%, and Minneapolis, where prices rose 11.1%...only New York City shows declining home prices on a year over year basis; prices there are down 1.2%...the WSJ provides an interactive sortable table of the 20 cities in the Case Shiller home price index, where you can view the month over month and annual price change for each city; note that the city index given for each is on the basis of January 2000 = 100.0; this is also shown in the bar graph to the right from robert oak's excellent coverage of this report at the economic populist... 

  also late this week, LPS released their Mortgage Monitor for December (pdf); according to this report, 7.17% of mortgages were delinquent in December, up from 7.12% in November, and down from 7.89% a year ago; mortgage delinquencies were further divided into 2,031,000 home loans that were more than 30 days and less than 90 days past due, but not in foreclosure, and 1,545,000 home mortgages that were 90 or more days delinquent, but not in foreclosure...LPS also reported that 3.44% of home mortgages were in the foreclosure process in December, which was down from 3.51% in foreclosure in November and 4.20% in foreclosure a year ago; this still leaves us with 10.61% of home loans delinquent or in foreclosure at the end of 2012...the state table, which shows delinquencies and foreclosures by state, is on page 20 of the pdf; florida continues to show the highest percentage of non-current mortgages  at 19.3%, followed by Mississippi with 16.9%, New Jersey with 16.7% non-current, Neveda with 14.7%, and New York state, where 13.8% of homeowners are not currently paying on their mortgages... this report also includes data on home loans that are underwater, where the homeowner owes more on the property than it is worth; at year end, 9.8 million homeowners nationwide were still showing negative equity on their properties; this was down 35% from the 15.5 million showing negative equity a year ago; roughly 4 million loans are well below conforming loan-to-value thresholds, meaning they would not qualify for refinancing, but an additional 3.4 million loans are on the cusp of conforming loan-to-value thresholds and stand to benefit if home prices continue to rise...

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

1 comment:

  1. HOLY SHIT STORM...declining increase in business inventories, from $60.3 billion in the 3rd quarter to $20.0 billion in the fourth quarter

    nothing fucking cyclical about that...even when prior Q4's showed balance sheet manipulations (ex: CAT moving long term investments to cash and back to short term) did we see this hell of a glut

    we gone need a whole lot more toilet paper


    appreciate the workup rj

    ReplyDelete