The Federal Reserve’s Open Market Committee held its benchmark rate at effectively 0%, and said that it will continue its policy of monetary easing. (printing money)
It’s really no big surprise, but the other two pieces of news, that the small business optimism survey hit a 2 year high, and that retail sales rose for the 5th straight month are a bit of a surprise, though definitely ont he plus side of the ledger.
Both good pieces of news:
A rise in U.S. consumer confidence to its highest in six months and a much bigger-than-expected contraction in the country’s trade deficit pointed to a firmer economic recovery on Friday.
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Consumer sentiment in December rose to its highest level since June and was at its third-highest since the start of 2008, according to a Thomson Reuters/University of Michigan survey. Government data showed U.S. exports in October rose a robust 3.2 percent while imports declined slightly.
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The survey’s preliminary December reading for consumer sentiment came in at 74.2, up from 71.6 in November. That was above the median forecast of 72.5 among economists polled by Reuters.
This is unalloyed good news.
It’s particularly good news because we are in the Christmas shopping season that accounts for a disproportionate amount of consumer spending.
My guess is that the the exports are helped by the general trend down with the dollar over the past month. (see graph pr0n)
In an odd way, if Obama’s disastrously bad tax capitulation compromise may actually help our economy if it convinces the currency markets to go short on the dollar.
And initial unemployment claims fell to 421,000, with the less volatile 4-week moving average falling to a 2¼ year low of 427,500, continuing claims falling by 191,000 4.09 million, and extended and emergency claims fell by 393,200 to 4.51 million.
Better news, but still somewhere between 30K and 60K too high to indicate a recovery in the labor market.
A lot of what happens for the next 6 months will be driven by the what happens in the Greed Day Christmas shopping season, I guess.
It’s jobless Thursday, and initial claims rose slightly last week, up by 2000 to 439K, beating expectations, and remaining below the 450-485K range where the number has meandered much of this year, so this is good news.
Additionally, the 4-week moving average dropped to a 2 year low of 443,000 and continuing claims fell fell by 43K to 4.3 million, though extended emergency claims rose by 12K to 4.93 million.
Good news though, the extended claims number drops to 0 on November 30, thanks to the ineptitude of Congressional Democrats.
We also have Philadelphia Bank of the Federal Reserve, where its general economic index exceeded forecasts by a factor of 4, jumping to 22.5.
On the down side, as always, is real estate, where foreclosures are ramping up again, as banks tweak their fraud and corruption fine tune their foreclosure programs and documentation.
The good news is that foreclosures fell in October, the bad news is that this was just temporary, as the banks paper over their fraudulent, and likely criminal, behavior.
An better indicator of the indicator of the health of the housing market right now is house prices, which fell 5% in the three months ending in October.
Outside of real estate though, the numbers look better, with retail sales rising significantly and credit card card defaults falling, though one month does not a trend make, particularly with sales numbers being driven by volatile auto, food, and fuel sales.
On the other side of the Pacific though, things are looking up as the South Korean central bank boosted its benchmark rate by 25 Basis Points (¼%), implying that they are now more worried about their economy overheating than about a double dip recession.
Generally, this has not been a good day for economic news.
We have seen a a spike in inventories, they rose 1.5% in September, following a 1.2% increase in August, which indicates that recent increases in manufacturing activity, which were largely driven by businesses rebuilding inventories, may now be running to the wall of weak consumer demand.
The fact that job openings fell again in September, indicating that there is simply not a an opportunity for people to find their way back into the job market, might be a part of this, as would the continued increase in personal bankruptcies.
On the brighter side, the National Federation of Independent Business’s optimism index rose to a 5 month high in October.
And yes, I mean the author, as in in the Scrooge quote, “Are There No Prisons? Are There No Workhouses?”
The new Conservative government in the UK is going Charles Dickens on the unemployed:
Ministers have defended their plans to force the long-term unemployed to do manual work or lose benefits.
Chief Secretary to the Treasury Danny Alexander told the BBC the idea was not to “punish or humiliate” but to get people back into the habit of working.
But the Archbishop of Canterbury Rowan Williams said the changes could drive people “into a downward spiral of uncertainty, even despair”.
Work and Pensions Secretary Iain Duncan Smith is to unveil the plans this week.
Under the plan, claimants thought to need “experience of the habits and routines of working life” could be put on 30-hour-a-week placements.
Anyone refusing to take part or failing to turn up on time could have their £65 Jobseekers’ Allowance stopped for at least three months.
Of course, the Tories like this because they hate poor people, and their coalition partners, the Lib-Dems love this, because it hearkens back to a time when they had political relevance, those halcyon days before World War I.
With unemployment at the highest levels since the great depression, and unemployment in the UK among the highest in western Europe.
As Deputy Labour leader Harriet Harman notes, “But she said the government needed to understand that to get people back into work, there had to be jobs for them to go to – and at the moment there were five people chasing each vacancy.”
I think that Labour doesn’t get it. The Conservatives plan to destroy enough so that people will be ready to dismantle the National Health Service for something more disastrously like the US system.
The barbarians are not at the gates, the barbarians are in the gate.
We have two different data points, first mortgage delinquencies were up in the 3rd quarter, but we also saw that U.S. household debt shrunk by 0.9% over the same period.
So, are people paying down their debts, or are they having their debts written down by banks that realize that they will never get the money?
Coupled with this, crude oil is getting close to $90/bbl again, which may put another crimp in the economy.
Finally, the other shoe has dropped for monoliner bond insurer Ambac, and it has filed for bankruptcy, chapter 11 reorg, not chapter 7 liquidation.
And initial unemployment claims are back up to 457,000, with the 4-week moving average rising slightly to 566,000, continuing claims fell by 42K to 4.34 million, and emergency claims, which, by the way expire on November 30, rose by 357.7K to 5.01 million.
Total up those numbers and things are getting worse, and come November 30 they expire.
Extended unemployment insurance will likely not be renewed, because the threat of electoral punishment is gone from the Republicans, and over 5 million people lose UI benefits, which will crush consumer demand in the middle of the all-important holiday season.
So we have a cohort of 99ers who would be losing their unemployment benefits anyway, along with millions of people who will be abruptly cut off.
This is going to get very ugly very fast.
The lede here is that the Federal Reserved has announced another round of quantitative easing (printing money), $600 billion over the next 9 months, more than the the widely forecast $½ trillion, which pushed the US dollar down in currency markets.
Accompanying the statement was a mild, to my mind too mild, statement about how the recovery is not progressing as rapidly as planned.
With the Michigan Consumer Sentiment Index falling, and US GDP growing at a truly anemic 2% rate, I think that they are being too timid, though there is good news with the Chicago Purchasing Managers Index, the Institute for Supply Management’s manufacturing index and non-manufacturing index, and ADP’s private employment survey: all show an increase.
Even more significantly, it appears that retail sales are beating expectations, which may bode well for the all-important holiday shopping season.
Still, real estate looks dead, with mortgage applications remaining flat despite historically low rates.
BTW, here is a blast from the past, monoliner bond insurer Ambac is warning that it might go bankrupt this year.
I’m wondering if this will put a whole raft of municipal bonds in technical default, since if Ambac goes BK, then it no longer has an obligation to fulfill its insurance contracts.
I really don’t know. Does anyone else know?
Full Fed Statement after break:
Release Date: November 3, 2010
For immediate release
Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. 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 continue to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.
To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
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 will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at 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; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
Voting against the policy was Thomas M. Hoenig. Mr. Hoenig believed the risks of additional securities purchases outweighed the benefits. Mr. Hoenig also was concerned that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.
Statement from Federal Reserve Bank of New York Leaving the Board
H/t Calculated Risk for the September Philly Fed chart Pr0n
Since the tech bubble burst, the economy has been running on the consumer and on home sales, and both consumer confidence and home prices continue to disappoint.
Additionally, new home sales remain at pathetic levels, and mortgage applications increased, largely in response to lower rates.
Also, we did see the Philadelphia Bank of the Federal Released its State Coincident Indexes for September, and more states were up than down, though those advances were, once again, anemic.
And it’s better, but still awful. Initial claims fell to 452,000, remaining in range where they have been most of the year, and the less volatile 4-week moving average fell to 458,000, while continuing claims fell by a minuscule amount, and emergency benefits rose.
This is not even close to being a recovery in the job market.
Catching up on the economic number dump, first we have the Federal Reserve’s so-called Beige Book, which shows that growth has continued, but it is very sluggish.
This is reinforced by the fact that consumer confidence fell in October, factory production and capacity utilization fell in September, for the first time in a year, though home builder confidence rose (to a truly pathetic 16 where 50 is neutral), and housing starts rose.
We also have some importing news out of China, with their central bank making a surprise increase in its benchmark rate, and Chinese government published new statistics showing that its growth slowed and inflation edged up.
Certainly, it looks like the Central bank is concerned about inflation, and the statistics, even considering the general unreliability of official government statistics, indicate a problem.
One interesting effect of the rate hike is that it should place additional upward pressure on the Yuan.
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.
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.
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 (!)
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.
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% (!).
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.
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.
