Sunday, April 28, 2013

1st quarter GDP; March durable goods, existing & new home sales…

on Friday, the Bureau of Economic Analysis released the first estimate of Gross Domestic Product for the 1st Quarter of this year; against expectations of an annual growth rate of 3.0% or more, the reported growth rate of 2.5% over the first three months of this year was a disappointment, but nonetheless it was still better than the anemic growth rate of 0.4% in the 4th quarter of last year...remember that all data in this release are quoted at a seasonally adjusted annual rate, so that actual 3 month growth rates are approximately one-fourth of the figures given: components driving the growth in the 1st quarter included personal consumption expenditures, which increased 3.2% in the first quarter, compared with an increase of 1.8% in the fourth, and which contributed 2.24% to GDP overall, a 37% rate of increase in private inventories, mostly reversing the 47% rate of decline in the 4th quarter, which added 1.03% to the annual rate change in GDP, and a 2.9% increase in exports, which had declined 2.8% in Q4 2012, and which added .40% to the GDP change...these were offset by a 5.4% increase in imports, which subtracts from net exports and hence from GDP, to the tune of a .90% hit this quarter, and an 8.4% decrease in federal government outlays, led by the defense department pullback of 11.5% which, when combined with the 1.2% decrease in state and local government spending, clipped another .80% off the 1st quarter GDP figure...fixed private investment also added to the 1st quarter GDP, but at nowhere near the clip of the last quarter; nonresidential fixed investment increased 2.1% in the first quarter, compared with an increase of 13.2% in the fourth; investment in non-residential structures decreased 0.3%, compared to the 4th quarter increase at a 16.7% rate; while investment in equipment and software increased at a 3.0% rate, compared with an increase at a 11.8% clip; meanwhile, investment in residential structures increased at a 12.6% clip, compared with their increase at af 17.6% annual rate last quarter; thus the contribution to GDP from private investment fell in this recent quarter to .53%, from the lofty 1.69% increase it contributed in the last quarter of last year...all of this is shown graphically in the above bar graph from zero hedge, which shows quarterly contributions to GDP from each major sector since the last quarter of 2010, with additions to GDP above the dashed line and subtractions below it; change in personal consumption is in dark blue, private fixed investment is in red, change in private inventories is in green, change in exports is in purple while change in imports is in teal, the impact of government spending is in orange and the net quarterly annualized rate of change in GDP is tracked by the black line...looking at the graph, a few things are obvious; first, the swing from inventory draw down in the 4th quarter to inventory rebuilding made all the difference between the quarters; GDP less inventories, what BEA calls real final sales of domestic product, was up just 1.5% in the first quarter compared to an increase of 1.9% in Q4 of 2012; most of this was a rebuilding of farm inventories, which contributed 78% of the inventory change...also note how much of a drag the government cutbacks (orange) have been on the economy over the last two & a half years; while Q4 2010 and Q1 2011 cuts were mostly at the revenue restrained state and local level, the 2.21% hit to GDP over the most two recent quarters at the federal level amounted to the largest government cutbacks since the ending of the Korean War...it's also clear that personal consumption expenditures, aka consumer spending in blue, has been carrying what anemic recovery we have had, and despite the hit to paychecks from the expiration of the payroll tax cuts, still increased in the 1st quarter at the greatest pace since the end of 2010; with spending for durable goods up 8.1%, spending for nondurables up 1.0%, and spending for services up 3.1%.. however, as real disposable personal income decreased at a 5.3% rate in the first quarter, dropping the savings rate to 2.6% over the quarter, the lowest since 2007, it would seem that consumers are about tapped out and will be unable to sustain the pace much longer...

the BEA also announced this week that there will be a major revision to the way it calculates GDP that will add approximately 3% to the national accounts starting in July...what the BEA will be adding which was previously not accounted for is what is known as intangible assets; including things like long running TV shows, art, films, music and books....research & development, previously expensed as a cost of business, will now be capitalized, in effect placing a value on patents and copyrights, and underfunded pension plans will be shown as a liability...a long time in planning, this is a once in every five year revision, the largest since computer software was added to the national accounts in 1999, and will involve rewriting US economic history to include these changes back to 1929...we will likely cover this in more detail when it happens, but the announcement does serve to highlight the inadequacy of economic data that captures only what is monetarily accounted for; volunteer work, work in the home, parenting and other work that doesnt have a cash value aren't included...

Click to View

another release of this past week was the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for March (pdf) from the Commerce Dept, which is usually watched for the forward looking new orders for durable goods; like GDP, March orders for durable goods were impacted by defense dept budget cuts and fell a seasonally adjusted $13.1 billion or 5.7% to $216.3 billion, the largest drop in seven months, and the second worst since January 2009...new orders for defense capital goods decreased $2.5 billion or 33.2%, to $5.0 billion; excluding defense, new orders still fell 4.7%, as orders for transportation equipment were especially weak, with orders for nondefense aircraft and parts down $8.5 billion from the order level of February; excluding both transportation and defense, durable goods were up 0.4%; year over year, so called "core" durable goods are up 2.6%...orders for non defense capital goods were also weak, falling $8.3 billion to $70.2 billion, a level 10.6% below February orders...orders for computers and electronic products were an isolated bright spot, with seasonally adjusted orders at $20.1 billion, up 1.0% from February's $19.9, largely driven by a 5.0% increase in orders for computers... without the seasonal adjustments, March real durable goods orders were still down 1.5%, and March is normally a seasonal peak… confirming the weakness in manufacturing overall, an early "flash" reading of the Markit manufacturing PMI fell to 52.0 in April from a final reading of 54.6 in March, the lowest in 6 months....included to the left is a chart from Doug Short which shows the correlation between orders for consumer durable goods such as appliances and unemployment, which is inverted to better show the relationship; interesting in that it seems that changes in orders for consumer durable goods precedes a change in employment, and not the other way around……

Existing Home Saleswe also saw reports on existing and new home sales this week; on Monday, the National Association of Realtors posted their Existing Home Sales news release for March; which showed that sales of existing homes fell from a downwardly revised seasonally adjusted annual rate of 4.95 million in February to an annual rate of 4.92 in March, which the NAR blamed on a shortage of homes for sale...nonetheless, March sales were still running 10.3% over the 4.46 million-unit clip that they were being moved at last year, and they were pretty close to the pre-bubble level of early last decade, which you can see on the adjacent chart from Bill McBride, so the NAR doesn't really have anything to complain about...homes available for sale rose 1.6% from February to 1.93 million, which NAR says is a 4.7 month supply at the current sales pace; although that's less than the 6.2 months worth of unsold homes of a year ago, this supply inventory doesn't include the majority of foreclosed homes owned by the banks that are being held off the market...with realtors reporting homebuyer traffic up 25% from a year ago, the median home price again rose in March to $184,300, which was the 13th consecutive median price increase, matching the longest string of price increases, from May 2005 through May 2006, at the height of the bubble; this left median home prices 11.8% above those of a year ago, and average prices, which were at $233,200, 9.9% over those of last March...with the Fed's mortgage bond buying contributing to home affordability at these lofty levels, the average 30 year fixed mortgage rate remained at a low 3.57%, down from 3.95% last year, and with banks reluctant to hold mortgages any longer than it takes to bundle them into a MBS, and with private investors all but having abandoned the MBS market, government agencies are now responsible for nearly 100 percent of the securitization market...of those homes sold in March, 13% were of foreclosed homes, which were said to be discounted 15% below market value, while 8% were short sales, which were discounted 13%; the total distressed sales at 21% of sales were an improvement over the 25% distressed sales seen in February and the 29% distressed sales during March a year ago...investors bought 19% of all homes sold in March, which was down from the 22% they bought in February and below the 21% they purchased last March; the type of investor has changed this year, however, from those who bought an extra house or two to rent, to large institutional buyers who are buying quantities of houses at higher price points...all cash buyers accounted 30% of sales overall, the same as February but down from the 32% all cash buyers in March of last year...just 30% of homes were purchased by first time buyers, unchanged from February and down from 33% a year ago, so like the small investors, they appear to being squeezed out by higher prices and short supply...

FRED Graph

on Tuesday, the Census Bureau reported on New Residential Home Sales for March (pdf); as you should all know by now, these census reports on new housing have such a large monthly margin of error as to render the data useless on a monthly basis, but since they're widely covered without noting that, we feel compelled to set the record straight again...and the range of variables in these reports over a year's time does also give us an idea what the new home situation is like; for March, Census reported that sales of new single-family houses were estimated to be at a seasonally adjusted annual rate of 417,000; the MoM change in sales is estimated to be 1.5% (±16.9%)* higher than February's revised annual rate of 411,000, and the asterisk points us to a census footnote whereby they explain such an expression as 1.5% (±16.9%) means that census was 90% confident that new home sales for March were at a seasonally adjusted annual rate of between 347,706 and 486,624; the actual estimates on which those seasonally adjusted projections are based are in Table 2 of the release; actual new home sales were estimated to be at 40,000 in March, up from 33,000 in February; 13,000 were contracted for but not yet started, 14,000 were under construction, and another 13,000 were already completed...on a year over year basis, March's sales are said to be 18.5 percent (±17.2%) above the 352,000 sales rate of last March; last March's actual sales rose 4,000 to 34,000, and March 2011's sales rose 6,000 to 28,000; the reported 352,000 and 417,000 numbers are projections of what those single month sales would be if seasonally adjusted and extended out to 12 months...census also estimates there were 153,000 seasonally adjusted homes for sale at the end of March, which is a 4.4 month supply at March's sales rate; the median length of time they'd been available was 5 months...the median price for new homes sold in March was $247,000, 6.8% lower than the median price realized in February  the average home sales price fell 10.8% from $310,000 to $279,900; prices are not seasonally adjusted...our FRED graph shows monthly new home sales at an annual rate in blue, with the scale on the left side; median prices received monthly are in green, and the average new home price each month is tracked in red with the prices scale in the right margin...

(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…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…)

Sunday, April 21, 2013

the Reinhart / Rogoff kerfuffle, March industrial production, consumer prices, and state unemployment

the focus of almost the entire economics blogosphere this past week was on an Excel coding error in an influential 2010 economics paper by Carmen Reinhart & Kenneth Rogoff; the paper alleged that once the ratio of debt to GDP for a country reaches 90%, economic growth for said country slows considerably; these findings, now shown to be incorrect, were one of the essential underpinnings of austerity policies pursued in europe and the contractionary cuts to government deficits in the US; now that the recomputed results show no economic benefits to cutting government debt levels, several economists have come to the realization that a simple error in spreadsheet data led to millions being unemployed unnecessarily; we might however ask where the hell was the rest of the profession while such an illogical correlation was allowed to influence policy around the world...one might think that one academic paper couldn't possibly have so great an influence as to condemn the entire civilized world to a deep and prolonged recession because policy makers were handcuffed into not using fiscal policy remedies known to be corrective and stimulative; but testament to the pervasiveness of it's influence was evident just this week; in an exclusive document released to Reuters just last Saturday (4/13) a working group representing financial ministers of the G-20 nations, who together account for more than 80% of the world GDP, propsoed that they would all cut their debt levels to well below 90% of GDP, the exact prescription advocated by Rogoff-Reinhart; however, by the end of the G-20 meeting on Thursday, 3 days after the dismantling of the Rogoff-Reinhart thesis was made public, the G-20 was in disarray, backpedaling from their plan to reduce international sovereign debt; with financial and monetary authorities both expressing "uncertainty about the way economies work and how to influence recoveries with policy”.

FRED Graph the key economic release of the past week was on March Industrial production and Capacity Utilization from the Fed; although seasonally adjusted industrial production for March was 0.4% above February's level, the better than expected increase was entirely driven by the 5.3% increase in output from utilities as a result of a colder than normal March; manufacturing output was down 0.1% for the month while production from mining was off 0.2%; the Fed does not give output dollar values in this report; rather, indexes are calculated on a basis of 2007=100; their index for total industrial production is now at 99.5, up from 98.1 in December, a gain for the 1st quarter at an annual rate of 5.0%; the manufacturing index is at 95.7, up from 95.3 at year end and up 2.5% from a year ago; the mining index (which includes drilling) is at 115.9, down a bit from December's 116.1 but still up 3.8% from last March, while the utilities index is at a record 105.8, up from 95.5 in December and up 10.5% from a year ago....our FRED graph shows shows the production index for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007; the unusual spike in utility usage in March is quite obvious...within the alternate reporting methodology of market groups, the production of consumer goods increased 1.1% in March and increased at an annual rate of 6.2% over the first quarter, it fastest growth rate since the end of 1999; the output of durable consumer goods rose 0.8% mostly on the strength of near record car production; the indexes for appliances, furniture, and carpeting and for miscellaneous durable goods declined; meanwhile, production of nondurable consumer goods was up 1.2%, largely due to gains in consumer energy products, which were up 4.8% for the month; the index for non-energy consumer nondurables was unchanged...the production of business equipment, which was up 1.9% in February, was up just 0.1% in March; a 1.8% gain in the production of transit equipment offset a 1.6% decrease in the output of information processing equipment and a 0.1% decline in industrial and other equipment, while the index for defense equipment fell 0.1% in March as was declining at an annual rate of 5.5% in the first quarter, likely as a result of the sequester...within production of nonindustrial supplies, output of construction supplies was off 1.3%, falling back from larger output gains earlier in the year, while production of business supplies rose 0.6%...except for the 1.3% jump in energy materials, the output of materials generally declined, with consumer inputs off 0.2%, equipment parts off 0.2%, paper production down 1.1%, chemicals production down 0.4% and other inputs down 1.1%...textiles production, up 1.2% in March, was still 3.0% below a year ago...this report also covers capacity utilization, which you can think of as the percentage of plant and equipment in use during the month; capacity utilization for total industry in March was at 78.5%, up from 78.3% in February and 1.9% higher than a year ago; capacity utilization for manufacturing declined 0.2% to 76.4%, but it's still 1.6% above the level from a year ago; meanwhile, gas & electric utilities were running at 82.9% of capacity in March, up 4.2% from February but still only 1.5% above a year ago, while capacity utilization for mining, which includes gas & oil extraction, decreased 0.4 percentage points to 87.5%, but it remained 4.2% higher than a year ago...

FRED Graph earlier this week, the BLS released the CPI (Consumer Price Index) data for March; partially reversing the large jump in February prices caused by higher gasoline costs, the seasonally adjusted March CPI-U decreased by 0.2% as a 4.4% decline in the gasoline index led the energy index to a drop of 2.6%; the price of fuel oil was also down 2.1%, electricity was 0.6% cheaper, while utility gas showed a 1.0% increase...with food at home down 0.1% and dining out up 0.2%, the food index was essentially unchanged, while the core CPI, which includes prices of all items except food and energy, was up 0.1% for the month...of the major core components, the cost of shelter rose 0.2% in March as rents rose 0.2% and owners' equivalent rent rose 0.1%; the cost of medical services rose 0.3% as doctor's fees rose 0.2% and hospital costs rose 0.4%; the cost of transportation service rose 0.2% mostly due to a 0.6% hike in airline fares; clothing prices were down 1.0%, new car prices rose 0.1%, but average used car prices were up 1.2% for March...like industrial production, each component of the CPI is gauged by an index, in the case of the CPI that index was set to 100 for the prices of the 1982 to 1984 period...our adjacent FRED graph has the track of the recent price indices for 6 of the CPI-U components; the volatile gasoline index is in blue, and is at 319.523 as of March; the food at home index is in red, and it was at 233.777 as of March; the shelter index, shown in green, was at 261.330; the private transportation index, shown in violet, was at 216.167; the medical care services index, shown in orange, was at 452.596, and the index for tuition, fees and childcare is shown in black, is at 638.546 (FRED does not graph tuition separately); price indices for other components and subcomponents can be viewed here and here; and the weighting for each of the components can be viewed in the first column here

State Unemployment on Friday, the BLS released the Regional and State Employment and Unemployment Summary for March; this is a further breakdown of the data gleaned from the weak March unemployment report we covered two weeks ago; from the establishment survey, BLS found that seasonally adjusted payroll employment increased in 23 states,  decreased in 26 states and DC, and was unchanged in New Mexico; states gaining the most jobs were Florida with 32,700 and California with 25,500 jobs added; on the other hand, Ohio lost 20,400 payroll jobs and Illinois had 17,800 less so employed; other states that had statistically significant changes in payroll jobs included Georgia, where 13,600 jobs were added, Utah, which gained 6,800, Indiana, which lost 12,400, Iowa, which lost 5,500, Kentucky, which lost 8,400, Kansas, which had 5,900 less payroll jobs in March, and Delaware, where 3,100 jobs were lost; on a year over year basis, every state except for Pennsylvania saw job gains, and gains in 29 states were large enough to be considered statistically significant; the greatest job gains were in Texas with 329,500, California with 285,900, and  Florida with 141,300...the BLS tables with the complete breakdown by of payroll jobs by state and industry sector are here...in data from the March household survey, BLS found that 26 states and DC had seasonally adjusted unemployment rate decreases, 7 states had increases, and rates in 17 states were unchanged; North Dakota again had the lowest unemployment rate with 3.3% of their participating labor force unemployed; states with the highest jobless rates were Nevada with 9.7%, Illinois, with 9.5%, California with 9.4% and Mississippi also with 9.4%... among the 9 geographic divisions, the Pacific had the highest jobless rate at 8.8% while the North Central states unemployment rate was at 5.4%...the BLS table with the seasonally adjusted labor force and unemployment rates by state and selected large metro areas is here; the unadjusted raw data is here; the WSJ has an interactive graphic map whereby you can track changes in unemployment by state from 2009 till the present, and also graph unemployment changes for up to 5 states at a time; we are going to include Bill McBride's bar graph showing current unemployment rates by state in red, with the worst unemployment rate for each state included as a appendage to that in blue...if you click on the graph, you'll see that Michigan and Nevada have seen the most improvement, while New York and New Jersey have unemployment rates still pretty close to their worst...  

(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…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…)


Sunday, April 14, 2013

chained CPI, March retail sales, February’s job openings and LPS Mortgage Monitor

Click to View

although many of the details of Obama's Budget for Fiscal Year 2014 were telegraphed well in advance, it nonetheless became the fiscal policy topic du jour when it was released Wednesday, and although chained CPI was only mentioned eleven times in the 244 page budget document, Obama's plan to use that method of calculating cost of living increases for Social Security and other government programs generated well over half the commentary around the blogosphere...you may recall we've discussed chained CPI in this regard previously (here and here, with a chart); the basic difference between using the current consumer price index (CPI-U), and the chained CPI (C-CPI-U) is that the CPI-U compares apples to apples and the C-CPI-U assumes that consumers buy cheaper oranges when the price of apples rise...the most commonly used example suggests that if the price of beef increases, consumers will switch to chicken instead, although this manner of substitution is applied across the index and not just to groceries...so in our example, if the price of beef rises, the currently used CPI-U will allow a cost of living increase to social security and other pensions to reflect the higher price of beef; if the method is changed, chained CPI will assume that the elderly will have switched to the lower cost meat, and only allow a cost of living increase insofar as the cost of the cheaper meat has increased in price....to illustrate the effects of such a change, the adjacent bar graph was constructed by Doug Short using BLS data from 2000, the 1st full year of the C-CPI-U computations, to the present ....in Doug's chart, the CPI and core-CPI are presented in light blue, the effect of changing to chained-CPI is in the darker blue shade; similarly, each of the 8 major components of the CPI is shown in pale green, with the chained-CPI equivalent the dark green beside each; he also separates the cost of energy, an element in both the housing and transportation indexes, as a red column, and the cost of tuition in purple to the far right is not compared, because a chained CPI figure for tuition is not published by BLS...if you click for a larger version, a few things are immediately apparent; first, there isn't much substitution for the housing and transportation components, probably because different types of  housing & autos tend to change price in tandem, and there isn't really a cheaper substitute for gasoline...but there are rather large substitutions for other components...for instance, the CPI recreation price index has increased 13.1% over twelve years, but it only increases 3.3% under chained CPI...apparently the old folks are expected to just play checkers if the cost of going to the movies goes up...and the cost of living allotment for education and communication under chained CPI would have also been less than half of what it is currently with CPI-U, suggesting that chained CPI assumes a lot of substitution & downsizing would take place in spending in those areas as well...

the idea of using a chained CPI is not new; the search for a method to reduce cost of living stipends was suggested by Alan Greenspan and originated in the Senate under Bob Dole, when the then House Speaker Newt Gingrich was pushing for social security “reform”…that a Democratic president should be leading the push to cut signature democratic programs such as like Social Security and Medicare has outraged those on the left, such as Elizabeth Warren, who’s brother David lives on the $13,200 per year he receives in Social Security rations...what's important to understand is that Social Security doesn't even impact the federal budget; it's payments to seniors and others by law must come from the social security trust fund, which as of March held $2.729 trillion in Treasury bonds, and according to the Trustees is capable of making full payments for another 20 years, with a minor shortfall thereafter...so why the push on both sides of the aisle to cut benefits now?  because the obvious solution to the eventual shortfall is to raise the cap on the payroll tax; currently, any income over $113,700 is not taxed to contribute to the trust fund...but  raising the cap would hit all the major political contributors with an additional 6.2% payroll tax; both those making over that $113,700, and those employers cutting the checks for those high paid individuals, who'd also have to contribute a matching amount... Obama & the rest may talk a good game, but at the end of the day they dance to the tunes of the wealthy band that pays their bills, & wont bite the hands that feed them...

retail sales March 2013the major economic release this past week was the Advance Retail Sales Report for March (pdf) from the Census Bureau; much like last week's employment report, it came in well below expectations, with seasonally adjusted aggregate sales for the month declining 0.4% from the level of February, the largest retreat in 9 months....February's sales were revised down as well, from +1.1% to a gain of 1.0%, and January's sales, first reported as up 0.1%, we revised to show a 0.1% decrease; as with most census reports from a small sampling, this one also has a significant enough margin of error to call into question the results; to wit: "estimates of U.S. retail and food services sales for March...were $418.3 billion, a decrease of 0.4 percent (±0.5%)* from the previous month, but 2.8 percent (±0.7%) above March 2012", which of course means sales could have even been up 0.1%...on an unadjusted basis, March sales were at $427.1 billion, well above February's $380.2 billion...Doug Short at Advisor Perspectives has again studied & charted the revisions to this report from the first to third estimates over the six year period from January 2007 through December 2012 and finds there were 33 upward revisions averaging an an additional 0.30% in sales and 39 downward revisions averaging a sales decline of 0.46%, so this advance estimate isnt anything you want to hang your hat on...in this initial March report, significant sales declines were seen at autos & parts dealers, where sales dropped 0.6%, from a seasonally adjusted $78.3  billion to $77.8 billion, and at gas stations, where sales dropped 2.2%, while prices were 2.7% lower, meaning volume gas sales rose; ex auto and gas, sales for the month were off 0.1%...other than gas, the biggest hits were to electronics & appliance stores, where sales fell 1.6% for the month, from $8.257 billion to $8,122 billion, capping off a quarter where worldwide shipments of PCs fell 13.9%, and general merchandise stores, where March sales fell 1.2%, from $51.8 billion to $ 51.1 billion, apparently continuing to lose volume to nonstore retailers (ie online), where sales rose 0.3% for the month but where sales are now up 13.5% from a year ago...other retail categories that saw strength over the month included home furnishings, where sales rose 0.9%, restaurants and bars, where sales rose 0.7%, and miscellaneous store retailers, where sales rose 0.8%…other than online, the largest year over year sales gains were 6.5% in autos & parts, 4.4% in miscellaneous stores, and 3.9% for sporting goods, hobby, book & music stores...department store sales are down 7.6% year over year, and electronic store sales are down 3.2% since last march...to show the relative magnitude of each of these census retail sales categories, we're including the pie graph to the right from Robert Oak's coverage of this report at the Economic Populist; also be aware that although it's often noted that consumption is 70% of the economy, this report just captures about a third of that; the larger service sector spending is covered in the personal income & expenditures report from the BEA...

Job Openings and Labor Turnover Survey we got a bit of better news from the BLS in their Job Openings and Labor Turnover Summary for February than we got last week in the unemployment report for March; according to the BLS, seasonally adjusted job openings rose 8.7% from January to February to show 3.925 million job postings unfilled at month end; the most since May 2008, the month this recession's job losses started in earnest; the largest number of openings were in the broad BLS categories of  professional and business services, which saw a total of 722,000 openings, up from January's seasonally adjusted 690,000, and education and health services, where there were 673,000 openings, up from 579,000 in January; although 617,000 of those were in health care and social assistance... accommodation and food service job openings also increased, from 401,000 in January to 458,000 in February, as did openings working for state and local governments, from 340.000 to 370,000...openings in construction and manufacturing also increased modestly, to 116,000 and 259,000 respectively, while the only area to see openings fall in February was the rather broad job category of trade, transportation, and utilities, where openings slipped from 645,000 to 608.000; the largest subcomponent of that, job openings in retail, fell from 390,000 to 378,000...this report also includes labor turnover for the month, with data for hires and separations by each of of those broad job classifications, and the difference between them should correspond to the revised non-farm payrolls total from the establishment survey; in February, there were 4,418,000 were hired to start new jobs, more than the 4,298,000 hired in January, while at the same time another 4,202,000 either quit or were laid off, fired or had their job terminated; expressed as a percentage of those employed, the hires rate rose from 3.2% to 3.3% but was still lower than last year's 3.4%; the separations rate was unchanged at 3.1%; separations is further divided into quits, or those who separated of their own volition,  at a rate of 1.7% and layoffs and other discharges, at a rate of 1.2%; the following two tables break hires & separations into components as listed: Table 2. shows hires levels and rates by industry and region, seasonally adjusted - Table 3. shows total separations levels and rates by industry and region, seasonally adjusted ...in the adjacent chart, Bill McBride manages to get all the data since Jan 2001 onto one graph…the bar portions of the graph indicate separations for each month; each bar is further divided to show quits in blue and layoffs, discharges and others separations in red...the blue line tracks monthly hires; obviously slightly more than total separations over the last few years, and atop all of that the yellow line indicates the number of job openings for each month...

the February Mortgage Monitor from LPS (pdf), a report we cover monthly as a proxy for the ongoing mortgage crisis, was also released this week; February saw the normal seasonal decline in delinquencies, as those who fell behind on house payments over the holidays were starting to get caught up, while the number of mortgages in the foreclose process remained little changed...according to LPS, 1,927,000 mortgages were over 30 but less than 90 days past due at the end of February, another 1,483,000 homeowners were more than 90 days past due on their mortgage but not yet in foreclosure, meaning 6.80% of mortgages in the LPS database were delinquent in February, down from the 7.03% of homeowners who were behind on their house-payments in January; in addition, another 1,694,000 homes were in the foreclosure process, which was 3.38% of mortgages outstanding in February, down from 3.41% in foreclosure in January; hence,10.18%, or more than one in ten homeowners, were behind at least one payment at the end of the month; nonetheless, this is an improvement from the 11.44% who were either delinquent or in foreclosure at this time last year....foreclosure starts were at 132,000 during February, down 10.7% from January, while completed foreclosures numbered 56,000, down 15.0%, suggesting that nearly 80,000 of homeowners who were in foreclosure at the beginning of the month exited the process either through a mod of short sale..most of the Mortgage Monitor (pdf) itself is mostly graphs with very little text; the data summary for this report is on page 22 of the pdf, the glossary is on page 28, and the updated state delinquency and foreclosure table, which we featured last month, is on page 23; Florida remains the state with the most non-current mortgages at 18.5%, but mortgages in new jersey continue to deteriorate and they're now second worst with 16.3% not current as of February...below, we have selected two charts from this month's monitor; on the left we have a graph of those mortgages that have "cured" each month, or that were behind but got caught up on their payments; the red line tracks the monthly "cures" that were one or two months behind as of the previous month - the scale is on the right axis; you can see February's cures from such mortgages is on the order of  ~500,000; the violet line, with the scale of the left, tracks each month's cures that were 3 to 5 months behind previously, while the blue line tracks cures that had been more than 6 months behind; the yellow line indicates the number of mortgages that had foreclosure proceedings ongoing at the time the homeowner was able to exit foreclosure, either by a mod, a short sale, or by catching up on payments...the bar graph on the right shows the number of serious delinquencies by the number of months delinquent; within each monthly bar, blue represents the count of those 3 to 6 months behind on mortgage payments, red are those 7 or 8 months behind, green are those 9 to 11 months behind, and the violet in each monthly bar represents mortgages which are over 12 months behind in payments...what you can see indicated in the text on the graph, at the peak of the crisis in January of 2010, 2.9 million homeowners were behind on their mortgage payments, but just 22% were behind by more than a year, and the average length delinquency was 252 days; as of February, the total number of delinquencies had fallen to 1.5 million homeowners, but the percentage delinquent more than a year had risen to 42%, and the average length of delinquency had widened to 474 days...

LPS Feb cures

LPS Feb serious delinquent

(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 which 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…)

Tuesday, April 9, 2013

she’s worth dying for…

gaia: in memory of her martyrs…

Sunday, April 7, 2013

March unemployment, February’s trade, factory orders and consumer credit, US & eurozone March PMIs

the March report on employment from the BLS was one of the weakest we've seen in a long time...according to the seasonally adjusted establishment survey, just 88,000 payroll jobs were added during March, the slowest job growth since last June, and the second lowest number of jobs created in any month since January 2011...even worse, the government job cuts that will result from the sequester will not kick in till April so that wasn't yet a major factor…while not even enough to cover the typical 125K monthly increase in working age population, some consolation could be taken from the revisions to the two previous months; 32,000 more jobs were added to the 236,000 first reported in February to put that month's total at 268,000, while January's total was revised from 119,000 to 148,000...more than half of the March payroll gains were in professional and business services, where 51,000 jobs were added, 20,300 of which were temps, and 11,000 of which were in accounting & bookkeeping...the big loser was retail, where 24,000 jobs vanished; March saw 15,000 less working in clothing stores, 10,000 fewer jobs at building and garden supply stores, and 6,000 less working at electronics and appliance stores..meanwhile, health care work saw a gain of 23,000 jobs, 15,000 of which were ambulatory care workers while 8,000 were added by hospitals, and construction saw a 18,000 job gain, possibly aided by post-Sandy reconstruction...food services, another sector that has been strong throughout the recovery, added 13,000 jobs, while the postal service shed 12,000...other major sectors, including manufacturing, mining, wholesale trade, transportation and warehousing, information, financial activities, state government, and local government saw little change in employment....BLS also reported that the average workweek for all non-farm employees increased by 0.1 hour to 34.6 hours, while the manufacturing workweek decreased by 0.1 hour to 40.8 hours.and the average workweek for production and nonsupervisory employees was unchanged at 33.8 hours....average hourly earnings for all non-farm employees was up a penny at $23.82, while average hourly earnings of production and nonsupervisory employees fell a penny to $20.03...we have previously noted the margin of error on this survey as 100,000, but that has been changed in the BLS technical notes to +/- 90,000; with that in mind, doug short has started tracking the revisions made to non-farm payrolls in subsequent months and presents it as a chart which we've included to the above right..as you can see, most of the revisions recently have been positive, but over the longer term the record is unclear...doug notes that since 2000, there have been 91 upward revisions, shown in blue, averaging + 48,000, and 63 downward revisions (red) averaging a monthly change of - 44,000 jobs...

FRED Graph

the results from the smaller survey of 60,000 households were an unmitigated disaster, even though the headline unemployment rate fell from 7.7% in February to 7.6% in March....according to the BLS household survey, there were 206,000 less of us employed but also 290,000 fewer counted as unemployed in March than in February, which resulted in a 496,000 decline in the civilian labor force, even though the non-institutional population older than 16 rose by 167,000...what that means is that those "not in the labor force" and hence not counted when computing the unemployment rate jumped 663,000 to almost 90 million in March, driving the labor force participation rate, shown in red on our FRED graph, down from 63.5% in February to  63.3%, a level not seen since 1979, before significant numbers of women were included...the other metric we follow, the employment population ratio shown in blue, which you can think of as the "employment rate", also fell in March, to 58.5% from February's 58.6%, meaning 5.0% less of us are employed than at the 2007 peak, while we're still stuck in the same 58.2% to 58.7% range it's been in since 2009...there were few major changes in the headline unemployment rates for most age, sex and racial groupings, except in that the overall jobless rate for Blacks fell from 13.8% to 13.3%, and although the jobless rate for teens fell from 25.1% to 24.2%, there was no breakout as to how many went back to school or quit looking for for work and werent counted...similarly, the number of those reported as unemployed longer than 27 weeks fell from 4,797,000 to 4,611,000, but there was no telling how many of those 186,000 were discouraged & just no longer counted...and even those "marginally attached to the labor force", a category which should catch some of the uncounted, was essentially unchanged from a year ago, dropping from 2,352,000 to 2,326,000; these are those who've looked for a job in the past twelve months but werent counted in this survey because they hadnt looked for work in the 4 week period ending March 12th...of those, 803,000 were considered "discouraged workers" because they reported they hadnt looked for work because they believe no jobs are available for them... 

U.S. Trade Deficit also released on Friday, the report on International Trade and Services for February from the Commerce Dept (pdf) was barely mentioned in a blogosphere focused on employment data...it provided a bit of good news, as seasonally adjusted exports rose from $184.4 billion in January to $186.0 billion in February while seasonally adjusted imports of $228.9 billion were barely changed from January's $228.8 billion resulting in a $1.5 billion decrease in the trade deficit, from a revised $44.5 billion in January to $43 billion in February...the January to February increase in exports of goods was driven by $1.8 billion additional exports of industrial supplies and materials, as fuel oil, organic chemicals and other petroleum products each saw exports grow on the order of $0.5 billion; in addition, exports of autos parts, and engines increased $0.2 billion, while exports of capital goods decreased $0.8 billion, exports of consumer goods fell $0.3 billion, and exports of foods, feeds, and beverages fell $0.1 billion...the change in imports reflected a $2.6 billion decrease in imports of industrial supplies and materials, as we saw a decrease in imports of crude oil from $25,064 million in January to $23,605 million in February, even though the average price of oil rose from $94.08 to  $95.96; that was partially offset by a $1.1 billion Increase in imports of autos, parts, and engines, and  increases of $0.7 billion in imports of consumer goods, $0.3 billion of capital goods; and $0.2 billion of foods, feeds, and beverages...the decline in the February dollar value of imports of oil completely reversed the increase that boosted oil imports in January from December, despite falling prices then, so there must have been a change around year end that was not captured in the seasonal adjustments...as has been the case for years, our largest bilateral trade deficit was $23.4 billion with China; other major trade deficits were recorded with the EU at $8.8, Japan at $5.9  billion, Germany at $4.5  billion, Mexico at $4.3 billion, and OPEC at $3.6 billion; meanwhile, small trade surpluses were recorded with Hong Kong at $3.3 billion, Australia at $1.3 billion, Singapore $0.9 billion, and Brazil at $1.7 billion...we will again include to the above right Bill McBride's chart which shows the overall trade deficit in blue, the petroleum deficit in black, and the trade deficit without oil in red; note that all numbers charted are negative, with the top of the chart at zero...

FRED Graph another release on Friday which received little coverage was the February report on Consumer Credit from the Fed; you may recall that this report has usually shown that most of the increase in lending in the economy has originated with the Federal Government in the form of students loans; in February, seasonally adjusted consumer credit outstanding increased $18.14 billion to $2,799.1 billion from $2,780.9 billion in January, or at a seasonally adjusted annual rate of 7.8%; the revolving credit portion of that total, which is the credit card component, increased at an annual rate of 0.8%, from $847.5 billion to $848.0 billion, while non revolving credit, which is longer term loans for such as cars and tuition but not including real estate, rose at an annual rate of 10.9%, from January's $1,933.5 billion to $1.951.1 billion...as we've been watching this report for the increasing level of student debt, we want to determine what portion of that consumer credit increase is originating with the Federal government; to do that, we scroll to the 3rd table in the release, under the heading "Consumer Credit Outstanding", and check the subheading "Major types of credit, by holder" which gives us actual data which is not seasonally adjusted; there we see the actual increase in February non revolving credit is just $2.5 billion, from $1,952.5 billion to $1,955.0 billion, a far cry from the seasonally adjusted amount....looking further to see what portion of that was from the federal government, we see federal loans outstanding increased from $552.7 billion to $556.9 billion. or $4.2 billion dollars, $1.7 billion greater than the total...that means the increase in student loans outstanding was at a rate 168% greater than the rate that overall non-revolving credit expanded...in fact, since the unadjusted revolving credit numbers actually show a decrease of $15.6 billion, from $826.4 billion to $810.8 billion, that means that the only portion of consumer credit that showed an actual, unadjusted increase in February was the Federal portion of student loans...FRED only graphs the seasonally adjusted data, so our adjacent graph shows total consumer credit outstanding in blue, the total non-revolving credit outstanding in red, revolving, or credit card debt outstanding, in orange, and student loans owed to the Federal government in green; it’s pretty clear that all the growth in non-revolving credit (red) and total credit (blue) since 2009 has been driven by that green line’s increase...

FRED Graph another release from earlier this week was the Full February Report on Manufacturers’ Shipments, Inventories and Orders (pdf) from the Dept of Commerce, which is typically covered as "new factory orders"; this release revises and includes the Advance Report on Durable Goods (pdf), which comes out a week earlier & is based on less complete data, but which nonetheless seems to get all the attention...seasonally adjusted new orders for manufactured goods, or "factory orders", rose 3.0% in February, increasing $14.5 billion to $492.0 billion, to the highest level since this series was started; excluding new orders for transportation equipment, new factory orders were only up 0.3%...new orders for durable goods in February were up $12.3 billion, or 5.6%, to $232.2 billion; that increase in new orders for durable goods was slightly revised from the 5.7% increase reported last week; orders for transportation equipment drove the increase, as they were up $13.3 billion or 21.8% to $74.5 billion; most of that in turn was driven by a surge in civilian aircraft orders, which were up 95.1% for the month, as Boeing reported orders for 179 aircraft, up from just 2 in January...excluding aircraft, orders for core capital goods, which include machinery and equipment orders, fell 3.2%, to $65,405 million from January's $67,593 million...orders for construction equipment and supplies also slipped from $42,772 million to $42,536 million, while orders for computers and electronic products rose slightly...orders for consumer goods rose 2.0%, to $215,616 from January's $211,338; orders for consumer durables were up 4.3%, from $37,073 to $38,667 while orders for consumer nondurables were up 1.5% from $174,265 to $176,949….our FRED graph for this report goes back to the beginning of this series in 1992; it shows total factory orders in green, orders for durable goods in red, and new orders for non-defense capital goods excluding aircraft, or so called core capital goods, in blue…

FRED Graph this week also brought us the March results of both purchasing manager's indexes (PMIs) from the Institute of Supply Management (ISM); the March 2013 Manufacturing ISM Survey continued to indicate expansion in March, albeit at a slower pace than February, as the PMI came in at 51.3% in March, down from 54.2% in February; recall that readings above 50 indicate expansion... the fall in the PMI was driven by a fall in the new orders index, which dropped 6.4 points from 57.8 to 51.4; that is below the 52.3% inflection point in that index that would be consistent with an expansion in the Census new factory orders, which we just looked at...the production index also saw a significant decline, from 57.6% to 52.2%, while the employment index rose 1.65, from 52.6% to 54.2%, indicating more managers were considering adding workers...the prices index also tumbled, from 61.5 to 54.5, as the list of commodities up in price was far fewer than in February, and the inventories index fell into contraction at 49.5% from last month's expansionary reading of 51.5%...the backlog of orders slipped 4.0 points but remained positive at 51.0, while the export index rose 2.5 points to a more expansionary 56.0% and the import index remained unchanged at 54.0...of the 18 manufacturing industries classified by ISM, 14 indicated growth in March, led by wood products & furniture, plastic & rubber products, and electrical equipment and appliances...
         the ISM Non-manufacturing index also slipped in March to the lowest level since last August but remain positive with a reading for the NMI at 54.4%, down from 56.0% in February; their business activity index came in at 56.5%, which was 0.4 points lower than the 56.9% reported in February, while the new orders index slipped 3.6 from 58.2 to 54.6 and the employment index fell 3.9 from 57.2 to 53.3...the service industries price index also tumbled from 61.7 to 55.9, indicating a slowing increase in prices in March...inventories were also growing slower in March, as the index slipped 2.5 from 54.0 to 51.5, while the backlog of orders index remained unchanged at 54.5...supplier's deliveries rose from 51.5 to 53.0, as did the import index, which jumped from 52.5 to 57.5...the new export orders index, however, fell 4.0 points, from 60.5 to 56.5...15 non-manufacturing industries reported growth in March, led by construction, management and support services, transportation and warehousing, and food & lodgingour FRED graph above shows the track of the PMI for manufacturing in red, and the NMI (non-manufacturing index) in blue since its inception in January 2008; the grew bar marks the official recession…

purchasing manager indexes were also released for most countries around the globe, as is typical for the beginning of each month...they're worth pointing out this week because economic activity worldwide appears to be slowing again, especially in Europe; the final Markit March manufacturing PMI for the euro area showed an accelerating slowdown, dropping from 47.9 to a three-month low of 46.8; with all major eurozone countries in contraction...the German PMI was at 49.0, the French PMI was at 44.0, the Italian PMI was at 44.5, a 7 month low, while Spain's PMI fell to a 5 month low at 44.2; even Ireland and the Netherlands, countries which had been holding up, saw their PMIs tumble; the Dutch to a 10 month low at 48.0 and the Irish to a 14 month low at 48.5...for others, the WSJ provides an interactive table of world wide factory activity by country from Markit and JP Morgan...along with those leading indicators, official Eurostat data for February showed that unemployment across the Eurozone hit a record high 12%..and we would be remiss if we didn't note that Canada saw a decline of 54,500 payroll jobs, the worst job loss for them in more than four years; for a country their size, that would be the equivalent of the US losing a half million...

(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…)