Category: Economy

Economics Update

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Unemployment Claims 2008-Present

Things aren’t getting better, they are just running out of people to lay off.
H/t The Washington Independent.

It’s jobless Thursday, and initial unemployment claims are back in the 450K-480K “sweet” spot, with initial claims rising 13,000 to 462K, the 4 week moving average rising 2¼K to 459,000, though both continuing and emergency claims fell.

Seeing as how the number really needs to be below 300,000 for any meaningful recovery in jobs, we remain in a bad place.

In non-existent inflation land, we saw producer prices rise 0.4% in September, though that was largely on food, the core rate was 0.1%, and the price of imports fell by 0.3%, even as the trade deficit rose.

I would note here to all the free trade fetishists, we have a deflation problem in our economy right now, and most of it is being imported.

Meanwhile, the us dollar has fallen to a low for the year.

Economics Update

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Small Business Hiring Down


The index still sucks wet farts from dead pigeons

H/t Calculated Risk for the graph pr0n

Oh, those invisible bond vigilantes are at again, with the 3-year Treasuries hitting a record low yield, 0.57%. (!)

Meanwhile the National Federation of Independent Business released its September survey of small business optimism, and the numbers remain grim, essentially flat, up from 88.8 to 89.0 from August, still highly contractionary, and the businesses are looking to lay off more workers.

We also saw 30-year mortgage rates continue to fall, but no one is borrowing, because non one is buying.

Economics Update

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The paradox of thrift continues

It’s jobless Thursday, and initial unemployment claims fell out of the 450K-485K sweet spot that they have been bouncing around in for most of the year. Initial claims fell by 11,000 to 445,000, better than forecast, with the 4-week moving average falling by 3,000 to 455,750, with continuing claims falling by 48,000 to 4.46 million, and emergency claims rising by 257K to 5.14 million.

So fewer people are losing work, but hiring has not picked, so overall unemployment has increased (257K – 48K – 11K = 198K more people collecting unemployment).

We also had good news on the retail front, with better than expected same store retail sales in September, though I am unclear how consumers are financing this, since wages are stagnant, and consumer credit fell in August. (See graph pr0n)

I guess that it could be that people took out their credit cards more in September, and that the conflicting figures are simply the result of month to month changes.

In Europe, both the Bank of England and the ECB held rates steady, and the BoE says that it will continue quantitative easing (printing money).

ECB bank president Jean-Claude Trichet went further full inflation idiot in statement to the press, tut-tutting other central banks easing moves, andstating that the ECB will be, “gradually phase out its non-standard liquidity measures.”

Yes, we are seeing more pronouncements from the pain caucus about austerity, and the most vocal of these folks, Tory PM David Cameron, has apparently succeeded in pushing UK house prices down by 3.6% in the month of September.

Note that I am not talking about a -3.6% annual rate, I am talking about a £6,000 drop in home prices in just that month. (!)
UK home prices -3.6% in a month (!)

Economics Update

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There is a lot of news today, mostly in currency and international finance, but the lede, at least for a US focused post, which this is, is the Institute for Supply Management’s non-manufacturing index, well above forecast.

In international finance news, we are seeing central banks all over the world beginning to open the spigots again as they see the recovery sputtering.

We have the Bank of Japan engaging in another round of quantitative easing (printing money) by setting up a ¥5 trillion ($60 billion) fund to buy government and private bonds in order to keep interest rates at 0%, and Australia, one of the first countries whose central banks increased rates, has kept rates at 4.5%, surprising the experts who were expecting another rate hike.

Interestingly enough, currency has gone in the opposite direction expects from these actions, with the Australian Dollar approaching a 2-year high, and the US dollar fell.

Generally, interest rate surprises on the low side for other countries would drive the dollar up, but it appears that there is an expectation that the Fed will go heavily back into QE like the BoJ.

There is another potential blip on the horizon, as crude oil appears to be on an upswing again.

Economics Update

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The lede here is that capital goods orders fell and contracts existing home sales rose in August.

Note that the home purchase data is still well below what it was a year ago, and that capital goods orders ex-airliners was up.

On a slightly more concrete level, bankruptcies have hit the highest level since the congress sold out to the banksters with bankruptcy “reform” in 2005.

Finally, it looks like the invisible bond vigilantes remain in hiding, as, the yield on Treasuries 2-year fell to a record low, 0.37% (!).

Economics Update

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It’s jobless Thursday, and the initial jobless claims are out, initial claims down 16K to 453,000, and the less volatile 4 week moving average fell 6,250 to 458,000, a two month low, with continuing claims falling 83K to 4.46 million, and emergency claims falling 293K to 4.88 million.

Generally, the numbers are good, but still firmly in the 450-480K “sweet spot” where the numbers have lingered for most of this year.

Additionally, the revised GDP numbers have come out, and, for once, the numbers were revised up, from the truly anemic 1.6% annual rate releases last month to a (truly anemic) 1.7% annual rate.

In real estate, mortgage applications fell, despite falling rates, though the home purchase application index nosed up slightly.

In terms of the various indices out there, the Institute for Supply Management’s Chicago PMI rose in September, beating estimates.

Generally a good news day for this economy, this.

Economics Update

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I guess that the lede here is consumer confidence, which The Conference Board reports has fallen to a 7 month low. My personal guess is that the number is low because of the news reports that the recession has been over for over a year, which is so clearly contrary to what consumers see that it depresses them.

On the other hand, manufacturing jobs are reported to be growing strongly since the beginning of the year, which is a bit of a surprise.

In real estate, and, as Calculated Risk notes, the Case-Shiller numbers are out, and they are positively schizophrenic:

From the Financial Times: US home prices slip in July

From the WSJ: Home Prices Rose in July

From CNBC: US Home Prices Slipped In July And May Stabilize Near Lows

From MarketWatch: Home price growth slows in July

From HousingWire: S&P/Case-Shiller 20-city composite index rose 0.6% for July

Basically, some of them are reporting seasonally adjusted numbers, and some are reporting non-seasonally adjusted numbers. I would tend to go with the latter with July, since I think that the expiration of the tax credits probably overwhelmed any seasonal effects, and the composite 10 and the composite 20 numbers are a bit different, but basically it’s flat near the recent bottoms.

Finally, we have the various reports from the regional Federal reserve banks: Dallas, up slightly in September, Chicago down slightly in August, and Richmond down slightly in September.

Economics Update

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It’s jobless Thursday, and initial unemployment claims are up again, t0 465,000, with the 4-week moving average falling yp 463,250 from 466,500, continuing claims falling by 48,000 to 4.49 million, and emergency claims rising by 208,000 to 5.17 million.

All in all, not a pretty picture, and neither are home sales, notwithstanding the press noting how much better August was than July, because up 7.6% from July means less than down 19% from August 2009.

In the business world, Blockbuster video filed for bankruptcy, which is not a surprise, it’s been expected for months, but it’s still the end of an era.

Economics (Real Estate) Update

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Fasten your seat belts……it’s going to be a bumpy night!

Really, it’s a real estate news update today, with home prices dropping for the 2nd straight month in July, as did Moody’s commercial property price index, and, despite historically low rates, home loan applications fell again, showing that the current housing market is weakening following the expiration of the tax credits.

Additionally, we have the American Institute of Architects’ Architecture Billings Index continuing to show contraction, which indicates that prospects in the next 6-12 months are not great either.

It’s not all bad news though, as August housing starts rose sharply over the previous month, though as the official census figures show, this is just a anemic 2% year over year gain. (PDF)

More Federal Reserve Kremlinology

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The FOMC met and issued its report, and their policy remained unchanged, though they did say that they might engage in more quantitative easing (printing money) because they believe that the economy may be trending down.

Basically, they won’t do anything this time around, but they might later, even though, “Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability.”

So, unemployment is higher than their mandate allows, and inflation is lower than their mandate allows, and so they will do ……… nothing at all for now.

As Atrios so aptly noted, “The sociopaths at the Fed have spoken.” (Emphasis mine)

It’s the only way you can describe their behavior: They are essentially saying that we are in, or entering, a recessionary spiral, but doing their job is hard.

That being said, the US dollar weakened following the fed statement.

The full Fed statement is after the break:

Press Release
Federal Reserve Press Release

Release Date: September 21, 2010
For immediate release

Information received since the Federal Open Market Committee met in August indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months. The Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be modest in the near term.

Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.

The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh.

Voting against the policy was Thomas M. Hoenig, who judged that the economy continues to recover at a moderate pace. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and will lead to future imbalances that undermine stable long-run growth. In addition, given economic and financial conditions, Mr. Hoenig did not believe that continuing to reinvest principal payments from its securities holdings was required to support the Committee’s policy objectives.

Larry Summers to Resign After November Elections

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It looks like Obama needed to make some change, though it looks like they will be changes for the worse, because they are looking to replace him as director of Obama’s National Economic Council with someone who is even more of a wall street insider than Summers:

Administration officials are weighing whether to put a prominent corporate executive in the NEC director’s job to counter criticism that the administration is anti-business, one person familiar with White House discussions said. White House aides are also eager to name a woman to serve in a high-level position, two people said.…

Because appeasing whining bankers is job 1 at the White House, I guess, because we are all just little people.

… They also are concerned about finding someone with Summers’ experience and stature, one person said.

Well, if they want someone who can match Summers’ record of being right, and his record of moral rectitude, I might suggest Dick Cheney, Ben Stein, or Vlad Tepes.

As I have said many times, remember, the Cossacks work for the Czar, and I think that the basic problem here is top down, not bottom up.

A Sincere and Honest Takedown of Obama

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Blah, blah, blah!

The questioner, Velma Hart is asking for a reason to keep believing:

“I’m one of your middle-class Americans, and quite frankly I’m exhausted. I’m exhausted of defending you, defending your administration, defending the mantle of change that I voted for, and deeply disappointed with where we are right now. I had been told that I voted for a man who said he was going to change things in a meaningful way for the middle class. I’m one of those people and I’m waiting, sir. I’m waiting. I don’t feel it yet, and I thought that — while it wouldn’t be in great measure — I would feel it in some small measure.”

Obama’s response is a laundry list of accomplishments, but this misses the bigger point, which is that people are no longer willing to believe that he is willing to fight for them, because he appears to be unwilling to fight at all.

When looking at situations where there are real malefactors involved, his solution is to find common ground, whether it is health care, Wall Street, or BP, and some times, actually a lot of the time, that is simply not enough.

So the Recession is Over?

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The National Bureau of Economic Research has declared that the recession ended in June 2009:

It’s official: The Great Recession ended 15 months ago, in June 2009. That was the word Monday from the economists at the National Bureau of Economic Research, the outfit that tracks the U.S. business cycle based on a variety of economic variables.

By their calculations, the downturn that began in December 2007 lasted 18 months, or the longest on record since the 43-month plunge of the Great Depression. On the other hand, the recession was only two months longer than the 16-month downturns of 1973-1975 and 1981-82, the two other most serious post-World War II periods of falling economic growth. The 2007-2009 downturn was painful but not extraordinary in historical context.

So, my 11 months of unemployment were in a recovery?

We have been in recovery for 15 months?

You’ll also note that this is a pretty mild recovery. The brutal 1981 recession had GDP exceeding peak about 18 months later, and this “recovery,” such as it is, even if we don’t experience a double dip, or just …… dare I say it? …… malaise, and we will be looking at something over 4 years.

Well, this recovery and $3.95 will get you a small Starbucks® latte.

Economics Update

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It’s jobless Thursday, and the initial claims numbers are out, with initial claims falling to 450,000, the 4 week moving average falling to 464,750 last week’s 478,250, continuing claims falling 84,000 to 4.49 million, and emergency claims fell by over 500,000, which is all a good thing, though the story also mentions that the Federal Reserve Bank of Philadelphia’s general economic index missed expectations, remaining in the contractionary range, while the New York Fed’s Empire State Index fell but remained in positive territory.

In terms of other general measures, we have conflicting data, with inventories rising strongly, retail sales rising in more sedately, and the NFIB’s small business confidence rising modestly to an anemic 88, while on the other side we see industrial growth slowing in August.

Real estate, on the other hand is pretty grim in the post-tax credit days, with home repossession spiking, and CoreLogic’s home price index showing no year over year gain for the first time in five months, and home mortgage applications fell this week.

On the inflation front, the Producer Price Index came out, and while there is still little inflation in the core rate, but food and energy costs are rising more sharply, though still well below a 6% annual rate.

Japan Makes Banzai Charge Against Chinese Currency Manipulation

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As a result of Chinese currency manipulation, the Bank or Japan has started selling Yen to keep it from strengthening it too much, which wold kill exports and likely create a trade deficit.

This the first time that this has happened in 6 years, but there is a twist to what the BoJ is doing:

At first glance, the action looks like a something-must-be-done-this-is-something -therefore-this-must-be-done move: a new prime minister and a “bold action” doomed to be proved ineffectual. The FX markets are so enormous (dollar/yen alone trades some $750 billion per day) that it’s hard to believe a single sale of less than $20 billion in yen could even have the short-term effect we saw last night, let alone have any lasting consequences.

But this isn’t just about FX-market intervention. This is also about monetary policy, and that could make a real difference:

………

In other words, the Bank of Japan isn’t simply selling yen, it’s printing yen. (And then selling them.) Given (a) that it’s the central bank and that it can print as many yen as it likes, and (b) that it would actually welcome a bit of inflation, there’s actually a non-negligible chance that this kind of non-sterilized intervention could work.

The term “non-sterilized” means printing money.

The Federal Reserve could do the same thing, and getting the dollar to a reasonable level versus the Chinese Yuan, and some inflation right now would be a good thing.

It Looks Like a Commenter on the Blog Will Become Chairman of the Council of Economic Advisors

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Austan Goolsbee, who I’ve posted about a dozen times or so, objected to a post of mine, and I (with permission) posted his response to my blog.

Well, Goolsbee has written extensively suggesting that things like Obama’s proposed R&D tax cut don’t offer a whole bunch of bang for the buck, though he has argued that he thinks the current situation **cough** incipient deflationary spiral **cough** create a somewhat different dynamic.

Well, the scuttlebutt is that Dr. Gooolsbee is going to replace Christina Romer as the chairman of the President’s CEA, and J.W. Mason has the best line that I’ve heard in a while about this:

Looks like Goolsbee is the perfect pick to succeed Romer — his advice is already being ignored even before he’s been hired.

It’s a reference to the fact that Romer’s thoughts on the stimulus were not even passed on to Barack Obama for review, and the point being made is that in a choice between economists and the economy (Goolsbee, Volker), and shills for finance and the finance industry (Summers, Geithner), that Obama will go with the latter unless absolutely forced to do so.

It’s a great line.

Obama Calls for Weak Tea, and Cedes Ground to the Right Wing

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So now, instead of trying for something that works to reduce unemployment, Obama is calling for a modest public works program, $50 Billion over 6 years, significantly less than what we are flushing down the toilet on the unnecessary F-35 Joint Strike Fighter.*

What’s more, once again, he throws a bargaining chip to the Republicans, who have shown their unwillingness to negotiate in good faith, by also proposing that the R&D tax credit be extended and made permanent.

Once again, when trying to put forward even the most modest proposal, he kneecaps himself by taking what could have been used as a lever to derive support, and handing it to his enemies so that they can use it as a cudgel against him.

Week tea, constructed to make it even weaker, once again.

*This is not meant to be a commentary on the capabilities of the F-35, simply a statement that these capabilities are simply not necessary in current of foreseeable future conflicts, and the same goes for the F-22, so please don’t make this a Raptor/Lightning II pissing contest.

81% of the American Public Think that the Economy Sucks

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So says a CNN/Opinion Research Corporation survey.

This is unsurprising, and it may explain why efforts like Clinton’s, Blair/Brown’s, and Obama’s to dismantle the New Deal/Social Democrat structure, because they believe, even more than Republicans, that “Reagan changed everything,” are driving people back into the arms of an increasingly delusional Republican Party, because a bad something always wins over a better nothing.

This is a foreseeable consequence of the “3rd Way.”

Economics Update

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There is more scary graph pr0n at Calculated Risk


And workforce participation is the lowest since 1984

The non-farm payroll numbers came out, and, though better than expected, they really suck, with NFP falling by 54,000 and unemployment rising slightly to 9.6%, though most of that was the demobilization of the US census, and private payrolls increased by a better than expected 67,000.

Once again, the Panglossian members of the financial 4th estate cast this as unbelievably good news.

It isn’t. It’s no where near the 100-125 K new jobs needed every month just to absorb new entrants to the job market.

Things are still getting worse.

And we have more evidence that the stimulus package that has driven the economy is running out of steam with the Institute for Supply Management’s Non-Manufacturing index, a measure of activity in the service industry, continues to decline.

It’s still showing meager growth, but only barely, and it missed expectations.