Category: Economy

Economics Update

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H/t Calculated Risk


H/t Calculated Risk


The 2006 spike is just before the new bankruptcy law
h/t Calculated Risk,

Well, we are in for a bumpy ride, with the Federal Reserve Bank of New York’s Empire State Manufacturing Survey falling 21 points in November. (top pic)

It’s still positive, barely, meaning that there is expansion, but it is a rather precipitous drop.

We also saw US industrial capacity utilization rise in November, (2nd pic down) so it appears that there is an upswing going on, albeit a slow one.

Even so, we are saw both homebuilder sentiment falling (3rd pic down), credit card chargeoffs rising (bottom pic), and the Architecture Billings Index falling in November on the other side of the ticket.

In energy, oil rose for its first time in 10 days, and in currency, the dollar was up, hitting an October high.

Wanker of the Day

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Tim Fernholz.

He goes goes after Matt Taibbi on his latest article, which I called a jem, and Taibbi responds, basically blowing him out of the water, and acknowledging one minor error, confusing diplomat James Rubin, and Robert Rubin’s son Jamie Rubin, though only by calling the latter a diplomat, Jamie Rubin’s role in assembling the Obama financial team is correctly depicted.

If you want the short version, I would suggest that you review Felix Salmon’s take on this tête-à-tête, and Salmon’s take is the same as Taibbi’s: that Fernholz’s criticisms are largely conjured out of hysteria:

In other words, it’s worth cross-checking everything that Fernholz says against what Taibbi actually writes, because often Taibbi simply doesn’t say what Fernholz implies that he says.

All the schadenfreude over Fernholz’s attack on Taibbi is particularly weird since they seem to actually agree with each other. Here’s how Fernholz concludes….

….

This is quite astonishing. Fernholz is basically saying that Taibbi is right, and that not only is he right but that he will now and henceforth utterly overshadow anyone else who’s criticizing the Obama administration from the left. At the same time, however, despite Taibbi’s astonishing ability to encapsulate and personify the entire group of people who criticize the administration, he’s not even going to manage to “make a dent”, because he’s not going about his job in an evenhanded J-school manner.

Major wankerdom.

Matt Taibbi is clearly polemical writer, but he gets his facts right, and he does describe the truly sad state of affairs that is the Rubin/Summers/Geithner economic axis upon which the Obama administration spins.

Economics Update

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Bad news from the Euro Zone, with Eurozone employment falling by 0.5% in the 3rd quarter, and Euro zone industrial output fell by 0.6% in October, and by 11.1% year over year.(!)

We are also looking at a spike in food prices over the next year, leading to an increase in inflation that all the economists and the economic journalists ignore, because, after all, it’s not core, because it’s just food.

In currency, Abu Dhabi has agreed to bail out Dubai, which has made people feel more secure, so they are selling dollars, which pushes the currency down.

In energy, crude oil fell for the 9th straight day largely on demand concerns.

Economics Update

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Surprise! Geithner and Bernanke:
As popular as a case of the Clap.
H/t Calculated Risk


And ore Americans than ever are on food stamps, h/t Naked Capitalism

Well, we have a bunch of good news on the consumer front, with retail sales growing by 1.3% in November, more than the 0.6% forecast, and the Reuters/University of Michigan Consumer Sentiment Index rose to 73.4 in early December, up from 67.4 last month, and well above the forecast of 69.0, which is all very good, since the holiday season is a huge part of retail sales, but the Discover Financial Services survey is showing that consumers are looking to slash their spending by 15%.

Yeah, I’m confused too.

I would also note that the number of people collecting food stamps hit a record, 37.2 million, which raises the question if, “food stamps are the soup lines of this Great Depression?”

We are now seeing some rumblings of inflation on the other side of the pond, with UK factory input prices rising at fastest pace in a year, 4%:

Input prices gained by 4% last month from November 2008, and by 0.4% from October.

Output prices – the prices of goods leaving UK factories – rose 2.9% on the year, the fastest pace since February.

Output prices – the prices of goods leaving UK factories – rose 2.9% on the year, the fastest pace since February.

So we are likely going to have some of the central banks out there, most likely the ECB, panicking and jacking up rates at just the wrong time.

Still, the retail sales numbers drove the dollar rises to a 2-month high, though interestingly enough, oil fell for the 8th straight day, to $69.87/bbl, which is kind of odd, increased consumer sales implies increased demand, but a rising dollar may trump that in the mind of oil speculators.

Economics Update

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There is no wealth creation for ordinary folk, just bubble creation, h/t Calculated Risk


Crude prices, h/t OilEnergy

So, today is “Jobless Thursday, and initial unemployment claims spiked unexpectedly to 474,000.

Truth be told, it’s not a surprise. Non-farm payrolls need to rise at about 300,000 a month, so the “really good” NFP numbers in November, which had a -11,000 number indicates that things still really suck.

We have seen a drop in the U.S. trade deficit in November, which has been driven by export growth, though falling oil prices (see lower pic), and the fact that US consumers are still not in the mood to buy anything, including imports.

We have some good news on household net worth which grew by $2.7 trillion in the 3rd quarter, largely on the recent stock market bubble rally.

In real estate, the 30-year fixed mortgage rate rose this week, and
foreclosures fell in November, though, as the article notes, this may be a a pause more than anything else:

“They’re artificially low because of underlying causes,” said Rick Sharga, vice president of RealtyTrac.

He cites three reasons why foreclosures have dropped in certain states: The holiday season, when foreclosures typically slow down; the government’s mortgage modification program, which has created a slowdown in delinquent loans; and mandatory mediation in more states between homeowners and lenders before going into foreclosure.

In the world of central banks, the Bank of England left its benchmark rate unchanged at ½%, while maintaining its asset purchase (printing money) program.

Something interesting occurring in the world of US Treasurys though, the yield curve is the steepest since 1980.

The nickel tour is that when you buy a 2-year bond, you get less interest than if you buy a 30-year bond, because the risks of a 30-year bond are higher, not in terms of default, but because your money is locked up, and interest rates can go up, or you can need the money in a hurry, etc.

The difference is now 373 basis points (3.73%), with average over the past 5 years being 132 basis points.

It may be a market burp, or it may be inflationary concerns.

In currency, the dollar was essentially unchanged, while in energy, oil fell for the 7th day in a row on economic concerns.

Economics Update

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H/t New York Observer

We have another sign of “green shoots,” with wholesale inventories rising for the first time in 13 months.

I’m not sure if this is a trend, or if wholesale inventories are hitting a kind of “zero bound”, where it just cannot go any lower.

We also saw treasurys falling, and yields rising, after a weak auction of 10 year treasuries.

In real estate, mortgage applications hit a 2-month high, largely on people refinancing to lock in lower rates, but more significant is the fact that the best estimate of losses in home value in 2009 was $500 billion, which, surprisingly enough is a major improvement, as home values fell $3.6 trillion.

In currency, the dollar fell today, most likely on profit taking after 3 straight days of gains, and in energy, oil fell on more reports of strengthening inventories.

Economics Update

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The Conference Board’s Index of Leading Economic Indicators rose for 7th straight month in November, as did the Japanese coincident indicator index for the month of October.

On the other side of the coin, the National Federation of Independent Businesses is reporting that small business optimism fell in November, and a recent poll is showing that Americans are becoming more pessimistic about the economy, and the Australian consumer is in a foul mood too.

In real estate, by dint of many government efforts to reinflate the bubble, Freddie Mac is reporting that home prices are up for the 2nd straight quarter.

So, we can expect more tax credits and suchlike in order to put off a final day of reckoning.

We had a major monkey wrench thrown into the the works of international finance today, when Fitch’s downgraded Greece’s credit rating from A- to BBB+, which has spooked the markets generally, most notably this news has pushed the Euro lower, with investors moving to the dollar and Yen, mostly the Yen, the dollar was up vs the € and down vs the ¥, looking for a safe haven.

Additionally, an update on Japan’s GDP numbers for the 3rd quarter slashed growth from the initial reading of 4.8% to 1.3%.

The rising dollar, along with reports of strong inventories, drove oil to below $73/bbl.

Economics Update

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Falling Consumer Credit, H/t Calculated Risk

So, consumer credit continues its decline, down $3.51 billion in October, a 1.7% annual rate, so the 70% of the economy that is consumer spending is still contracting in what exonomists call the “paradox of thrift.”

In energy, oil fell to less than $74/bbl, while in currency, the dollar hit a 5-week high, largely on the employment numbers from last week.

Economics Update (Yeah, Way Late)

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Unemployment h/t Calculated Risk


Unemployment over recessions h/t Calculated Risk


Back to where we started before Congress gave the credit card companies a big wet kiss.

I think that this is the first time that I’ve tot this since Thanksgiving. Sorry, it’s been hectic.

The lede, of course, it the unemployment numbers, and we now have the official numbers for November, and they are surprisingly not bad (using the phrase “good” for double digit unemployment is an absurdity): Non Farm Payroll fell by only 11,000 in November, and the Unemployment rate fell by 0.2% to 10.0%. (The ADP prediction from earlier this week was way off)

Initial unemployment claims fell by 5K, to 457,000, with the 4-week moving average falling 14,250 to 481,250, both of which are the lowest since the 3rd quarter of last year.

On the other hand, continuing claims rose by 28K to 5.47 million, and the number of people who were collecting extended (emergency) unemployment benefits the number of people collecting extended benefits under federal programs rose by 327K to 4.53 million for the week ending November 14, when the bill that Congress passed extending benefits kicked in, so there are more people collecting benefits now than there were last week….A lot more.

Seeing as how the US Economy needs to add roughly 150,000 jobs a month just to account for a growing workforce, at best we are in a “getting crappy less quickly” stage, and at worst, it could be a dead cat bounce.

In non-employment related metrics, we have the both the ISM Non-Manufacturing Index and the ISM Manufacturing Index falling, though the latter is still indicating expansion, just very slow expansion, though the November Chicago Purchasing Managers Index rose to a 15-month high, and the Fed’s Beige Book is showing improvement.

The reason that I am not optimistic, in addition to being bearish by temperament, is because retail sales fell below estimates for the start of the holiday season, and because personal bankruptcy filings are still horrific, (see pic) they were down in November from October, but still up 12% from Year over Year.

In real estate, 30-year fixed mortgages fell.

And in the world of central banks, the European Central Bank has kept its benchmark rate at 1%, though it gave indications that it would be walking away from its quantitative easing, which drove both oil and the dollar down.

What a F$#@ing Tool

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Greg Mankiw, who argues that healthcare reform will be less efficient than the free market because poor people will get a better deal.

Seriously, even though the US spends more per capita, and more as a percentage of GDP than any other nation on earth, and even though the outcomes are worse than the developed worlds, and efficiency is results divided by resources, healthcare reform will make us less efficient.

He argues that higher marginal tax rates shrink the economic pie, even though the historical numbers belie that.

You see, he thinks that “fairness” means “reduced work incentives”, which, I guess is why we have to pay bankers hundreds of millions of dollars to screw up our economy.

At the end, he suggests that improving healthcare will result in, “future generations of Americans will likely spend more time enjoying leisure.”

What is going on, of course, is that people are terrified of losing a job and healthcare, and, you know, dying, and so are less likely to take part-time jobs and/or tell their employer to go Cheney himself.

We already know that our healthcare system is deterring people from becoming entrepreneurs, but people like Mankiw just want wage slave drones.

You know, with ideas like this, you’d think that he would have been a part of Bush’s Evil Minions™….Oh…Right…He was.

He was head of Bush’s Council of Economic Advisors.

Economics Update (Catching Up)

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H/t Calculated Risk

The lede here is that the corrected numbers for US GDP are out, and it’s way down, to +2.8%, down from the initial estimate of 3.5%.

Even more worrying is that the primary reason for the drop is that that consumer demand is way down, which does not bode well for the holiday season.

Some things to note on this:
GDP is still down year over year, and at this won’t be back to the pre-recession level until sometime in 2011.

Also, the credit card data has more evidence of consumer deleveraging, with late payments on credit cards falling in the 3rd quarter, though delinquencies were up in October.

The Conference Boards Consumer Confidence index roses in November, but still at levels indicating contraction, 49.5, where 90 is more or less neutral.

The Federal Reserve Bank of Chicago also released its National Activity Index, and it fell slightly (PDF), to -1.08, which indicates that things are still moving in a recessionary direction.

In real estate, the 3rd quarter numbers are in, and the S&P/Case-Shiller Home Price Index showed home prices increasing 3.1%, though it’s still down 9% year over year, and existing home sales rose an astounding 10% in October.

The timing here shows why this housing “recovery” is a mirage. Existing home sales rose in October because these were people scrambling to get in under the wire for the new home tax credit.

Some quick math shows that the median existing home prices in the US is $173,100, and $8000 is 4.62% of that, so the the degree to which the tax credit is driving price deltas is probably pretty significant.

Meanwhile, we are having some significant movement in the bond/central bank world, both nationally and internationally, with Fitch cutting its rating Mexico’s sovereign debt, the Bank of Israel yesterday raising its overnight lending rate by a 25 basis points (¼%), and Colombia’s central bank cutting its rate by 50 basis points (½%), because inflation is below expectations, and they want to give their economy a boost.

My guess is also that Columbia wants to push its currency down to help with its trade balance.

US Treasuries rose in their most recent auction, probably because investors are looking for safe havens following the downward GDP revision.

Certainly the GDP revision pushed oil down, though interestingly enough the dollar fell against both the Yen and Euro.

Calls for Timmy to be Fired.

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Congressman Peter DeFasio Calls for “Timmy” Geithner to be fired.


Also coming from right wing ‘Phant Kevin Brady

Representative Peter DeFasio (D-OR-4) has now explicitly called for Barack Obama to fire Timothy Geithner, though you will note in the video (top) that he calls him “Timmy” (at about 1:35), which I think is a very deliberate slight.

And, according to The Hill, that removing him, as well as Larry Summers, is now the consensus position for the Congressional Populist Caucus (CPC).

We are also seeing similar calls from the right wingers in the Republican Party too, note the calls made to Geithner’s face by Texas whack-doodle Kevin Brady (R-TX-8).

Of note, it appears that Brady’s accusation actually got under Geither’s skin (bottom video).

When Brady brought up his performance as President of the New York Bank of the Federal Reserve, and suggested that his performance there was sub-par, it’s clear that Geithner was irate at this suggestion.

My Congratulations to Speaker Boehner, Majority Leader McConnell, and President Palin

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You know, we all thought that we elected FDR or JFK in 2008, but it appears that we elected Herbert Hoover instead:

This recession has taught us that we can’t return to a situation where America’s economic growth is fueled by consumers who take on more and more debt. In order to keep growing, we need to spend less, save more, and get our federal deficit under control. We also need to place a greater emphasis on exports that we can build, produce, and sell to other nations – exports that can help create new jobs at home and raise living standards throughout the world.

(emphasis mine)

Unemployment is, 10.2%, 17½% if you use U6, which the metric that most closely matches the numbers used to arrive at the 24.9% level during the Great Depression, and he thinks that it’s time to cut the deficit.

It’s the wrong prescription, and notwithstanding polls, people don’t vote on the deficit, they vote on the economy, and except for little Timmy Geithner’s friends in wall street, the economy has consistently gotten worse, and it will continue to get worse as Obama plays to Wall street, and not Main Street.

H/t the artist formerly known as Armando

Economics Update

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The Number Needs to be Under 400,000
H/t Calculated Risk

The Index of Leading Economic Indicators rose for the 7th straight month, indicating that a recovery is underway, as does the Philadelphia Bank of the Federal Reserve’s survey of manufacturing hitting 16.7, the highest level since June, 2007.

Unemployment though, is not cooperating, with initial unemployment claims unchanged from last week, they are still 505,000, unemployed is still on a pace to increase.

Basically, if it is above 400K, it still sucks, and this applies to the 4 week moving average too, which fell to 514,000, down 6,500

The continuing claims numbers are better, down 39,000 to 5.61 million, but still pretty grim too.

I would note that the continuing claims number does not count people who have moved to extended benefits, and that jumped 119,000 to 4.16 million.

You do the math 39,000 on the up side, 119,000 on the down side, gives us 80,000 of ugly.

In any case, concerns about continued growth, which I think were driven by the lack of improvement in first time claims, has people fleeing to safety again, with yields on 3-month Treasury Bill maturing in January going negative for the first time since December of last year, because people are willing to pay to keep their money safe for the next month or so..

Additionally, we have the Bank of Japan sending out signals that it will be keeping rates low, because it is concerned about deflation.

These concerns have driven oil down and the dollar and yen up.

Economics Update

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The Consumer Price Index is up again, largely on rising fuel prices, with CPI up 0.3%, and down -0.2% year over year, and the “core” CPI, which strips out food and energy, is up 0.2%, up 1.7% year over year for the core rate.

This is raising concerns about inflation (stupid, but it’s the way that these folks think) because energy is still about 14% lower than it was last year, so if equilibrium in oil prices is higher than it is now we may see non trivial (over 2% annual according to the inflation hawks) inflation rates.

Meanwhile, the bad news continues along (see graph pr0n), with housing starts and applications for building permits falling unexpectedly in October. (pics 1, 2, 3, and 4)

Additionally, the Architecture Billings Index (ABI) while rising, remained below 50, indicating a continuing contraction in future commercial real estate construction. The ABI leads construction by 9-12 months, so 2010 looks bleak for non-residential building. (pic 5)

There is also the fact that rents are continuing to fall, and since the best metric of house prices is their ratio to renting, this indicates that there housing in general, not just the price of a single family dwelling are still overpriced, and have a way to fall.

Additionally, I think that home sellers are running out of buyers, as mortgage applications fell even though rates were down this week.

The inflation that I mention has spooked the bond market, driving prices down and yields up.

And some news on the weird side, monoliner insurer Ambac announced in its SEC filing that its capital levels were well in excess of regulatory requirements.

Everyone figured that they were due for a takeover by regulators…I guess that “everyone” was wrong.

We are seeing some signs of recovery in international trade, with the Baltic Dry Index, an indicator of the demand for shipping hitting a high for this year.

It appears to be driven by increased Chinese demand for raw materials, and the fact that there are large fleets of ships that have been mothballed that won’t be able to address marked demand for months.

Meanwhile, in energy, oil rose above $80/bbl on a drop in US inventories, and in currency, the dollar fell on statements by a Federal Reserve member that rates would stay low.