Category: Statistics

Economics Data Points for Last Week

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So, GDP growth has fallen sharply, down to a 2.4% annual rate in the 2nd quarter, as compared to the anemic-for-a-meaningful-recovery 3.7% in the 1st quarter, which appears to indicate that the recovery is running out of steam.

What’s more, the base number is overly rosy to begin with, since it is driven by inventory restocking from industries that had drawn down to the bone, home builders rushing to beat the tax credit deadline, and a significant increase in government spending.

Consumer spending rose by only a 1.6% annual rate.

What’s more, initial unemployment claims remained above 450,000, at least 50K above a tepid recovery in employment.

I’m beginning to agree with Mohamed El-Erian of PIMCO, who says that employment has become a leading indicator, since it drives consumer spending.

Economics Update

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CRE is not a pretty picture
H/t Calculated Risk

Not a good day for real estate.

We have an increase in the rate of mortgage delinquencies, as well as decrease in delinquent mortgages becoming current.

Additionally, in the world of non-residential real estate, office vacancy rates have hit a 17 year high. (See graph pr0n)

Outside of real estate, the Institute for Supply Management’s (ISM) non manufacturing index fell in June, though the number is still above 50, it’s 53.8 down from May’s 55.4, so it is showing slower expansion, not contraction.

On the brighter side, the bankruptcy filing rate in June fell from May’s level.

Well, sort of anyway. You see, June actually had about the same number of filings, but because June had 22 business days, and May, because of where weekends fell and the Memorial Day holiday, only had 20 business days, the rate for filing days was down by 10%.

I call bullsh%$ on that one.

People don’t file on a per business day basis, they do so over a period of time that is largely unaffected by holidays, and June has 1 fewer days that May.

Tin Foil Hat time

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I think that it is fairly clear by the way that Barack Obama has stacked the “deficit reduction commission,” so as to be a “very serious person.”

The two chairs, Erskine Bowles, and Alan Simpson, have both been long time advocates of privatizing and otherwise gutting Social security.

Well, we now have an oddity in statistical reporting, because the Annual Report of the Trustees of Social Security for 2010 has not yet been released.

This is the document that gives an expiration date on the Social Security trust fund, and normally, it’s released on March 31, 3 months ago.

The Angry Bear finds this odd:

I find this odd in the extreme, particularly since Social Security is front and center in the news with the ongoing meetings of the Catfood Commission with their strong suggestions that cuts to Social Security are definitely on the table. You would think that repeated delays in the release of this key Report would at least require SOME explanation and that someone in the media might be asking questions. But no like the proverbial tree falling in the forest no one was close enough to hear the sound. If any. Well the silence is deafening. The lead press item on the Social Security website is the news that Isabella is the number one name for baby girls this year. http://www.ssa.gov/ Which I guess is fascinating news for fans of the Twilight franchise but not quite satisfying for us data driven types.

I think that this is all a part of a desire to give cover to the “Cat food commission,”* so called because that is what seniors will eat if their proposals are adopted cover for their proposal.

I am not sure if the intent is to bury a good report, of if it is to release an alarmist report at the most opportune moment, but my money is on skulduggery.

*In the interest of health, I would suggest that people eat dog food, and not cat food. Cats because they are one of the few true carnivores, do not need the complex carbohydrates and fats that people, and dogs do. As such, dog food is better for you than cat food because it provides carbs and essential fatty acids. A dog can go blind if it is fed on cat food, but a cat lives just fine on dog food. The pnenomenon is known as rabbit starvation.

Economics Update

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This may be the harbinger of an economic recovery


This is not a boating accident real estate recovery!

The The Chicago Fed National Activity Index [CFNAI] has risen to its highest level since March 2006 (see top pic) indicating that there might be some sort of recovery going on.

This is further reinforced by the fact that personal income, spending and savings all rose in May.

Of course on the other side the Conference Board’s Consumer Confidence index fell nearly 10 points between May and June, and first time home-buyer traffic has fallen off a cliff, indicating that the recent bump in home sales was, as the experts* noted, was merely a sale-price time shift, not a real recovery.

*And loudmouth blowhards like yours truly.

Hoisted from the comments

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In a discussion of raising marginal tax rates, reader DJ wrote:

Interestingly enough, raising taxes on the rich does not result in prosperity either, it only serves to drive the economic activity out of the country derived from the holdings of the rich. The 90% tax rate in the depression only served to drive milliona[i]res out of the country.

Note here, that on the basis of his comments, DJ knows what he’s talking about and has a good grasp of the facts.

The fact that he made this comment is an indication of the truth of the old Mark Twain quote, “A lie can travel half way around the world while the truth is putting on its shoes.“

DJ has assumed that self serving statements from people who don’t want their taxes raised actually have a basis in reality.

The myth that rich people did, and will again, “go Gault,” is just that, a myth.

First, and most importantly, the 90+% tax rate was not implemented until 1944-1945 (and then again in 1951-63, not times of slow GDP growth).

Second, there is no evidence that millionaire’s fled the country during the depression. The case is generally made that the recession of 1937 was caused by this, but only by people like Amity Shlaes (who is not to be trusted, see below) in her execrable book The Forgotten Man.

They suggest that because Roosevelt pursued tax evaders, it triggered the recession of 1937, because they went “Gault” and withdrew their money from the economy and put it in their mattresses.

Of course, the fact that neither Keynes, who blamed the tightening of fiscal policy by the government (which did include a tax hike) nor Friedman who blamed the tightening of monetary policy by the Fed, viewed this argument with anything but scorn, and this is the alpha to omega of honest economic thought.

Additionally, in order for people to flee the US income tax (after the first $91,400) you have to renounce your citizenship, which also precludes the ability to make campaign donations, which makes the regulatory arbitrage that generates this income, particularly in finance, which is where most of the tax rates increase would fall.

Essentially, if they leave the country and renounce their citizenship, the government guaranteed infinite ATM that they have goes away, because the Congress will no longer feel compelled to do their bidding.

I would also note that while the top 1% of earners account for 23.5% of income (2007), they account for less than 20% of spending (2008, they do quintiles, so it’s an approximation, and I don’t want to tease it out any further), so a dollar going to a rich pig™ is much less stimulative than a dollar going to a dollar going to someone in the bottom 4/5 of the population.

There is a legitimate question as to whether or not we should raise taxes on the rich today because we are still in a depressed economy, though I favor it.

That being said, many of our long-term structural problems come from the fact that income distribution is increasingly unequal, and the the use of high marginal tax rates is one of the best ways to change this.

I would also note that if the “geniuses” at Lehman, Bear Stearns, and Citi withhold their ideas for “financial innovation” as a result, we are all the better for that.

As to Amity Shlaes, who is typical of the people supporting the “going Gault” hypothesis, and arguably one of the most prominent proponents:

  • She has no background in economics (degree in English)
  • She is in idiot who lets her ideology dictate the facts (she was fired by the Financial Times for repeatedly submitting stories about the heroism and competence of Bush and His Evil Minions™ during Katrina).
  • In order for her to justify her conclusions about 1937, she states as fact things that are unequivocally false.

I Think That This Is Misleading

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So, Gallup has a poll, which reveals a much higher level of support for regulating “Wall Street” than it does for regulating “Big Banks”.

The net goes from +3% to +14% thus “showing” that regulating Wall Street is much more popular.

The thing is, the delta for “In Favor” is only +4%, and the delta for “No Opinion” is only +3%, and, “Qne can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.”

So, we can say that while the drop in opposition -7% is significant, but the other ones are within the margin of error, though the sample size is ½ that of the full survey, and I am not sure that it effects the MOE.

If you want to argue that this points to a good frame to use on the argument for reform, feel free.

There is a measurable improvement in the polling by using “Wall Street”, but the change in terminology is not a silver bullet to Mitch McConnell’s filibuster werewolf.

The Poor Don’t Pay Taxes………My Ass!

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Yeah, right, only the rich pay all the taxes

The latest right wing meme is that 47% of the population pay no taxes.

Of course, it’s not true, though it is true that that number owe no federal income tax, but the do owe significant amounts of Social Security, Medicare, and state and local taxes.

As this handy, dandy chart shows, it’s simply not true, and my guess would be that if this were broken up into deciles, as opposed to quintiles, that the top 10% would pay even less, since they are above the social security cutoff, and get far more of their income in capital gains and dividends.

Warren Buffet once noted that his receptionist paid a greater percentage of her wages in taxes than he did, and that still holds true.

You Know that the ‘Phants are Crapping Their Pants When……

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That look in his eyes is terror

When Karl Rove is so concerned about teabagger paranoia over the census that he as recorded a PSA for the decennial survey.

You see, the numbers are coming back, and it turns out that all over the Republican heartland, people are refusing to fill out the forms, because people like Michelle Bachmann and Glen Beck are telling them that it’s all a ploy for Barack Obama’s concentration camps for white folks.

What this means is that, probably for the first time in a very long time, that the under counting of minorities and immigrants may be balanced out by non-compliance among the suburban and rural white populations, which could move a few Congressional districts to bluer states, and change the shapes, of a few more.

I know that the census is important, and I know that it should be filled out promptly and accurately, but still, my initial thought is, “Heh. Hoist by their own petard.”

Nate Silver Can be Annoying,* But

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He knows his math, as shown by his take-down of the study by Veronique de Rugy of George Mason University and the National Review† claiming to show that stimulus went disproportionately to Democratic districts.

You see, much of the aid under the stimulus package was direct aid to the states, which, of course, was sent to state capitals, like Sacramento, and Albany, and then disbursed from there to the rest of the state.

It turns out that state capitals, with their generally urban character, and having a large, and usually significantly unionized workforce, tend to be more liberal than the state as a whole, but what is more significant, is that the money that goes to these state capitals does not generally end up there; it is allocated by the governors or legislatures all over the states:

That de Rugy has testified before Congress on the basis of her evidence, and never paused to consider why the top five congressional districts on her list overlap with Sacramento, Albany, Austin, Tallahassee and Harrisburg, is mind-boggling. The presence of a state capital is the overwhelmingly dominant factor it predicting the dispensation of stimulus funds. This could have been discerned in literally five minutes if she had bothered to look at the apparent outliers in her dataset and considered whether they had anything in common — a practice that should be among the first things that any researcher does when evaluating any dataset.

Once you read his analysis, it’s pretty simple to see the flaw, but it is one that is hard to spot in the first place.

Basically, if you make any sorts of block grants to the states, they go to the capitals, and are then disbursed all around the states, so if you only go 1 or 2 levels down, you make it look like the stimulus program is a Democratic pork project.

The reality is far different.

*I tend to find his political analysis largely directed at either cock-punching DFH’s,‡ or mindlessly contrarian, kind like a mini-Michael Kinsley.
†2 strikes against her credibility there to start.
‡Dirty F%$#ing Hippies.

Interesting Picture

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H/t Barry Ritholtz

He wonders about what caused stock market capitalization to grow so much relative to GDP starting in the late 1980s.

I think that the answer is simple: The US government started to subsidize stock purchases, specifically the IRA and the 401(K), and it drew more money in to the markets, and that money bid up asset prices.

Of course, I like simple answers, and I am not a stock broker or an economist, so I would appreciate hearing alternate theories.

Economics Update

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The decades long downward trend is improvements inventory tracking, largely from automation


It appears that stability looms

Again, abbreviated, because in addition to not fullying balancing work and blogging, I’m feeling a bit off today.

The lede is obviously that the Thomson Reuters/University of Michigan survey showed a decline in consumer sentiment.

On the other side of the coin is that economics retail sales retail sales rose unexpectedly in February, confounding economists who thought that the snowpocalypse would push the numbers down.

Sales rose by 0.3%, which is beat expectations, but this is off a January where the delta in retail sales was revised from 0.5% to 0.1%, so the delta from is .3%-.4%=-.1%, so the total picture at the end of February is actually down from what it was on February 1.

Finally, Calculated Risk points out (see chart pr0n) that inventories are now basically in line with sales, which means that inventory replenishment bumps to GDP are pretty much done.

Big Surprise

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What causes this?

Could it be ………… Satan?

Barry Ritholtz finds a rather delicious piece of information showing that fraud in earnings statements is rather widespread, to be fair, it originally came from the Wall Street Journal, but since that’s behind a pay wall, and Ritholtz summarizes nicely, he gets the link.

You see, when you look at companies reporting earnings per share, the general number is rounded to the whole cent, but when you delve deeper into the numbers you get fractions of a cent per share, and lo and behold, a fraction of 0.4¢ a share is conspicuously absent from these numbers?

Why would this be?

It’s not the work of Satan, but the work of accountants.

Basically, if your earnings are 13.4¢ a share, you announce earnings of 13¢ a share, but if they are 13.5¢ a share, you announce earnings of 14¢ a share.

This number is statistically significant.

If you saw this in a poll you would immediately conclude that someone was just making sh%$ up.

Quoting Ritholtz, quoting the Journal:

The study, which examined nearly half a million earnings reports over a 27-year period, reached its conclusion by going beyond the standard per-share earnings results that are reported in pennies and analyzing the numbers down to the 10th of a cent.

That deeper look showed that companies tend to nudge their earnings numbers up by a 10th of a cent or two. That lets them round results up to the highest cent. Investors often snap up shares of companies that beat earnings expectations, even by a cent, and, likewise, sell off shares of companies that don’t make their numbers.”

I love the euphemism “meet investor expectations” as opposed to the more colloquial “lie cheat and steal.”

It also points out the need for the SEC to develop a Department of Quantitative Analysis filled with math geeks and computers, doing nothing but sifting through data looking for investor fraud. I’d bet they would get more convictions than the rest of the SEC combined. (If someone in the SEC would call me, I’ll help you set it up).

(emphasis mine)

This is the sort of application of “quants” in finance that I could wholeheartedly get behind.

Cracked.com Gets Serious

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They just listed the, “The 6 Most Statistically Full of Sh%$ Professions, (%$ mine) and they are:

  1. Stock Market Experts
  2. Wine Tasters
  3. Art Critics
  4. Criminal Profilers
  5. Weather Forecasters
  6. Sportswriting

Note that this is not just a slam at these professions. It is a statistical analysis about how they perform relative to random chance.

Stock market experts underperform the market, wine tasters cannot tell the difference between “Grand Cru” and “vin de table”, art critics cannot identify clear forgeries, criminal profilers don’t beat control groups, weather forecasters don’t beat chance, and sportswriters bat about .476 at predicting games.

Just to let you know what it means when you allow non-peer reviewed professions to declare themselves “experts.”

Home Prices Fell 12% in 2009

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Better, but still grim

Actually, 11.9%, but why quibble over 10 basis points?

If you listen to the National Association of Realtors, (and if you have 2 brain cells to rub together, don’t listen to the NAR) they say that this is encouraging because the 4th quarter drop was the smallest quarterly drop in 2 years, but that’s because we had the little gold rush for the tax credit.

If you look at the latest rent-to-own ratio, we still have some price declines to go, though, as I have noted before, rents are trending downward too, which would indicate that there is a lot more pain on the way than the rather facile analysis at the first link.

Big Change in Birth/Death Adjustment

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Last night, I made a brief mention of changes to the birth/death adjustment for jobs numbers.

Birth/death is basically a way to deal with the fact that small companies are being formed and ceasing to exist all the time, and the normal methods, the survey of employers miss the effect on net employment.

Well, tomorrow, the Department of Labor will release their annual adjustment, and it looks like the statistical fudge factor missed 824,000 job losses.

I guess they thought that all those people had chucked it all to become professional eBay merchants, but they were wrong:

As bad as the government’s jobs readings numbers have been during the Great Recession, we’ll soon find out the real situation likely was worse.

Much worse.

ob losses during the recession may have been underestimated by close to a million jobs. So instead of employers cutting just over 7 million jobs from their payrolls since the economic downturn began in December 2007, it’s expected that the Labor Department’s new estimate will be a loss of 8 million jobs.

“It’s an enormous understatement of the severity of the crisis,” said Heidi Shierholz, labor economist with the Economic Policy Institute, a union-supported think tank. “It confirms that things were actually worse on the ground than what the reports suggested.”

(emphasis mine)

The phrase, “The problem is that BLS models appear to have grossly overestimated the number of new businesses that opened during the recession.” is kind of an understatement.

With banks not lending to anyone how can someone start a business anyway?

I’m inclined to think that this was something that was driven in some manner by electoral concerns from Bush and His Evil Minions™, but that might just be tinfoil hat.

Speaking of Michelle Bachmann’s Frothing at the Mouth Lunacy on the Census

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The Crazy, It Burns US!!!!

She has stopped asking people not to fill out the Census over the past few months.

Why is this? Well, perhaps it’s because if Minnesota loses a Congressional district, it’s likely it will be her district that goes the way of those dinosaurs that she does not believe in:

State demographer Tom Gillaspy has been
warning for months that the next census
could result in the loss of one congressional s
eat in Minnesota. In fact, he confessed last
week that, until the recession hit, he was
almost resigned to the probability that
Minnesotans would be allowed to elect only
seven U.S. House members from newly
drawn districts in 2012.

……………

It’s ironic that a Minnesota member of Congress, Republican Michele Bachmann, went so far last summer to declare her intention to only partially complete her census forms, and to suggest reasons for others not to comply with the census law. If Minnesota loses a congressional seat, Bachmann’s populous Sixth District could be carved into pieces. She likely would have to battle another incumbent to hang on to her seat. We’ve noticed that her anticensus rhetoric has lately ceased. We hope she got wise: Census compliance is not only in Minnesota’s best interest, but also her own.

As Eric Kleefeld notes at TPM:

The really fun fact, as I’ve learned from Minnesota experts, is that Bachmann’s district would likely be the first to go if the state lost a seat. The other seats are all fairly regular-shaped, logical districts built around identifiable regions of the state (Minneapolis, St. Paul, the Iron Range, and so on). Bachmann’s district is made of what’s left over after such a process, twisting and turning from a small strip of the Wisconsin border and curving deep into the middle of the state. As such, the obvious course of action if the state loses a seat is to split her district up among its neighbors.

Basically, her district is made up of all those areas left over after they did the first 7, which are made up, in classic “Minnesota Nice” manner to be contiguous and to represent regions accurately and fairly.

I’d say that Karma was a bitch, but that would probably make Brit Hume angry.

Tyler Durden of Zero Hedge Spots Something Odd

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Past 3 Months


From March, when the Rally Started

For the past few months, the market runup has almost entirely happened after hours, when the markets are closed.

In fact, as he (or they, Tyler Durden is a nom de plume) note, “All the upside since September 14th has come exclusively from after hours action.” (emphasis original)

The money quote is:

The observant among you will immediately realize what this implies: not only is there no volume breadth to the recent move in the markets, but the actual push higher likely occurs on at most tens of thousands of futures contracts on a daily/weekly basis. The fact that literally several blocks of AH trades, used persistently, can move the market higher by 6% over the past 3 months, even as regular trading accounts for absolutely no part of this move, and that the SEC finds nothing troubling about this phenomenon, should be sufficiently telling about how “efficient” US markets have become.

If someone wanted to manipulate huge markets, they would do it at 3 in the morning, when the markets are small, and no one is watching for the last few months.

He thinks that it’s the, “HFT brigade to come in and scalp their trillions of pennies while leaving the market unchanged, then at 4pm handing it off again to leveraged futures manipulation and dark pools,” better known as, “That great vampire squid wrapped around the face of humanity,* Goldman Sachs.”

*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.