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December real retail sales tank; industrial production also declines; consumer slowdown seems nearly certain

3 days ago

– by New Deal democratTwo days ago, in connection with consumer inflation, I reiterated that “we certainly are at a point where a sharp deceleration beginning with the consumer sector of the economy is more likely than not.”I didn’t expect to have it show up so soon! Retail sales, one of my favorite “real” economic indicators, took a nosedive in the month of December, declining -1.9% for the month even before inflation. After inflation, “real” retail sales declined -2.4%. Ouch! Thus real retail sales are down -5.1% from their April peak: Recall that real retail sales rose 1.8% in October. So I suspect a large part of the decline is that, fearing shortages on the shelves at Christmastime, many consumers advanced their purchases of Christmas gifts by several months. Still, the net decline

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Continuing unemployment claims make new 45+ year low

5 days ago

– by New Deal democratNew claims increased 23,000 last week to 230,000. The 4 week average of new claims increased 6,250 to 210,750:The big increase is likely affected by seasonality. It’ll be another week or two before we can tell if there is any real change in trend. If there is, it is likely to be a flattening in new claims rather than any significant increase. Continuing claims for jobless benefits, meanwhile, declined by 194,000, to 1,559,000:This is a new 45+ year record low. There haven’t been continuing claims this low since 1974, when the US population was half of what it is now, as shown in the graph below that subtracts 1,559,000 from the actual number:Last week I wrote: “I don’t know if initial claims will go any lower, but I suspect continuing claims will continue to decline

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Consumer inflation lessens in December; real wages increase, but a consumer slowdown remains likely

5 days ago

– by New Deal democratConsumer prices increased 0.5% in December, a deceleration from the past several months. But this is still well above the typical monthly increase in prices pre-pandemic: On a YoY basis, at 7.1% consumer inflation is the highest since the big Reagan recession of 1981-82. My favorite measure, CPI ex energy, is also up 5.6% YoY, and tied for the worst since the 1981-82 recession as well:Inflation in new and used vehicle prices has risen again to over 20% YoY; and gas prices YoY are still up at levels that in the past have been associated with economic slowdowns or recessions:As I have been forecasting for months, house price increases have fed through into rents and “owners equivalent rent,” which has continued to increase:Interestingly, in both prior cases where

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Coronavirus dashboard for January 11: good news and bad news

6 days ago

– by New Deal democratWith no new economic releases today, let me give you a brief update on the fast-moving Omicron wave.First, the good news: as I pointed out yesterday, several States that were hit hardest first by Omicron look like they are hitting or have already hit peak:This is an increase from just several days ago. In fact, right now the only early hit State that has not peaked is Hawaii (not shown).Several other countries that were hit hard early by Omicron also appear to have peaked: the UK and Portugal, in addition to South Africa, where the strain was identified first:If the Omicron wave peaks in 30 to 45 days after onset, then the US as a whole is likely to peak between this coming weekend and the end of this month.That’s the good news.The question becomes, what happens

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Coronavirus dashboard for January 10: how “mild” Omicron is depends upon how much you lag the data

7 days ago

– by New Deal democratSo, how “mild” or not, is Omicron? It depends on whether you lag the data on hospitalizations and deaths or not.The original story out of South Africa was that Omicron was extremely mild. Despite a huge spike in infections, deaths barely budged. As Omicron took hold in Europe and the US, South Africa disappeared from the picture.  Which is too bad, because here is what has been happening with deaths: In the past week, deaths in South Africa tripled. Mind you, deaths – so far, anyway – at 13x their pre-Omicron low, are nowhere near the 80x+ increase in cases. But the point is, deaths lag cases, and until you wait about a month to see how deaths play out, you really don’t know how “mild” Omicron is.And the bad news for the US is, compared with South Africa and even

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Weekly Indicators for January 3 – 7 at Seeking Alpha

10 days ago

– by New Deal democratMy Weekly Indicators post is up at Seeking Alpha.Surprisingly, Omicron has not had any wide impact on the coincident data – at least not yet.On the other hand, the long leading forecast has become weaker, as interest rates have moved in the wrong direction.As usual, clicking over and reading will bring you up to the virtual moment on where the economy is and where it is going, and will reward me a little bit for organizing that information for you.

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December jobs report: more signs of real tightness, while new jobs added are (seasonally?) disappointing

10 days ago

– by New Deal democratThere were three big questions I had going into this jobs report: 1. whether the big decrease in new jobless claims to a half century low would translate to another big top line number in the jobs report2. is wage growth holding up? Is it accelerating?3. Would last month’s “poor” 210,000 number of new jobs be revised higher? The answers were:1. The 6 month average of monthly gains has declined significantly, from about 600,000 to 500,000 – still very good, but a significant deceleration in the past 2 months. We still have 3.6 million jobs to go to equal the number of employees in February 2020 just before the pandemic hit. At the current average rate for the past 6 months, that’s about 7 more months.2. Wage growth is still very high, at 5.8% YoY, a slight

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Initial and continuing jobless claims: 2022 starts out where 2021 left off

12 days ago

– by New Deal democratThe labor market in 2022 started out where it left off in 2021, as new claims increased slightly, by 7,000, to 207,000. The 4 week average of new claims increased 4.750 to 204,500:Readings this low haven’t been seen in half a century.Continuing claims for jobless benefits also rose slightly, by 36,000, to 1,754,000:Except for 2018-19, we haven’t seen continuing claims this low since 1974:We can expect this situation to continue so long as the pandemic keeps many potential workers (on the order of 4,000,000 or so) on the sidelines. As I wrote yesterday concerning the JOLTS report, it’s like a game of reverse musical chairs where the holders of the chairs can’t get enough people to sit in them. In those circumstances, virtually nobody is going to get laid off. I don’t

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November JOLTS report: imagine, if you will, a game of musical chairs

12 days ago

– by New Deal democratImagine a game like musical chairs, except that some players are the chairs (employers) as well as people who want to sit in the chairs (potential employees), and players, both sitters and chairs, are continually entering and exiting the game.The game would be in equilibrium if the number of sitters and chairs are always equal. If there are more sitters than chairs, sitters will be unsuccessful (unemployed). If there are more chairs than sitters, the chairs will be empty (unfilled job openings). In the former case, we would expect wages to go down (or at least increase more slowly vs. inflation); in the latter, we would expect wages to increase more sharply.The JOLTS report for November, released yesterday morning, continued to show that there are far more chairs

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First data releases of 2022 confirm manufacturing strength, construction slowdown

13 days ago

– by New Deal democratThe first December data, the forward-looking ISM manufacturing report, has been released. Yesterday construction spending for November was also released. Let’s take a look at both.The ISM index, especially its new orders subindex, is an important short leading indicator for the production sector. In December the index declined from 61.1 to 58.7, as did the more leading new orders subindex, which declined from 61.5 to 60.4 (note the breakeven point between expansion and contraction is 50):Both the total index and the new orders subindex ran extremely hot throughout 2021, and the moderate decrease in December remains consistent with a “hot” manufacturing sector. This continues to forecast a strong production side of the economy through mid year 2022.Turning to

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Grading my 2021 forecasts

14 days ago

– by New Deal democratCritical self-examination is, or at least ought to be, part of the process of making forecasts. After all, how can you learn if you don’t see how earlier hypotheses panned out? As I have usually done, let’s take a look back at how I forecast 2021 was going to look, to see how well I did.To make a long story short, according to the long and short leading indicators I track, there was never any real doubt that the economy was going to continue to expand. The only issue was how strong or weak the expansion might be.Last January, the  short term indicators suggested that the expansion would slow down in the first half of 2021: “the pandemic is still in control. The LEI has been consistently positive, but at a sharply decelerating rate, for the past 8 months. That

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Weekly Indicators for December 27 – 31 at Seeking Alpha

16 days ago

– by New Deal democratThe last edition of Weekly Indicators for 2021 is up at Seeking Alpha.I have been watching restaurant reservations for the first signs of the economic impact of Omicron. Well . . . .Additionally, interest rates are hitting an important milestone this week, that is changing some of their ratings, and with that the reading of the long leading forecast.As always, reading the post should bring you up to the moment, and reward me a little bit for bringing the information to you in a cohesive, logical format.

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Hopeful New Year

17 days ago

– by New Deal democratIn view of the continued conflagration of the COVID pandemic, I am eschewing the traditional “Happy New Year!” salutation as we end 2021 and begin 2022 in favor of the above “Hopeful New Year.” I always try to stick with the data – one of the favorite things anyone has ever said about my writing is that I appear to be “praeternaturally detached” – and that almost always staying away from the “We’re DOOOMED!!!” references, because there is always some sort of reason for hope out there, even in the darkest times.Pandemics do not go on forever. Even before vaccinations, eventually sicknesses got around to infecting everybody who was susceptible, and ran out of quick kills. This one will be no different. As I wrote the other day, my best guess is that about 40% of the

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The labor market closes out 2021 on the best note yet

19 days ago

– by New Deal democratThe final economic data in 2021 was this morning’s report on initial and continued jobless claims. And the good news for workers continued.New claims declined back under 200,000 to 198,000, the best pandemic showing except for November 20’s 194,000, and December 4’s 188,000. The 4 week average of new claims declined to 199,250:This is the best showing for the 4 week average in over 50 years, since the end of 1969:Continuing claims for jobless benefits also declined to a new pandemic low of 1,716,000:Except for 2018-19, this is also the lowest showing since 1974:This is essentially the tightest market for employees in nearly 50 years. It is no surprise that wages have been rising sharply. We can expect this situation to continue so long as the pandemic keeps many

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Coronavirus dashboard for year-end 2021: the Graph of the Year, where we are now, and where we are probably going

19 days ago

– by New Deal democratAt the end of the 2nd year of the pandemic, a little self-assessment of what I got right and wrong, where we are and where we are probably going.The one thing I got wrong in a big way is explained by this Coronavirus Graph of the Year:I thought sure that once the effectiveness of the vaccines was widely known, opposition and reluctance to taking them would sharply decline. I did not expect the volume and intensity and orchestration of the anti-science, anti-vax campaign by Fox News and RW nutjobs. As a result, since mid-April the number of people getting vaccinated steadily declined from 2 million per day in early April until by July it was only about 250,000 per day. Just stunning. And it never picked up meaningfully since, only hitting about 500,000 per day

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House price increases continue to show strong market at the end

20 days ago

– by New Deal democratThe last housing market data for 2021, the FHFA and Case Shiller house price indexes, were reported this morning. Both showed a very slight deceleration in the soaring prices that have marked this year.The FHFA purchase only index rose 1.1% for October. The YoY% increase was 17.4%, down from the 19.3% YoY peak in July. Meanwhile the Case Shiller national index rose 0.8% m/m, and is up 19.1% YoY, vs. its peak of 19.8% in August. This is similar to what we have already seen with the median prices of new houses for sale (gold):As I always note, prices follow sales. Below are new home sales and single family housing permits (red, /2 for scale) vs. the FHFA index as above:As expensive as houses are, they have not yet reached a crisis point as they did in 2006. This is

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Weekly Indicators for December 20 – 24 at Seeking Alpha

22 days ago

– by New Deal democratMy Weekly Indicators post is up at Seeking Alpha.Surprisingly, so far the Omicron variant has had no deleterious effect on any of the data, and in particular, on restaurant reservations.As usual, clicking over and reading will bring you up to the economic moment, and bring me a little late Christmas cash in my stocking.Also – Programming Note: This week will also be very light on data, with two house price indexes on Tuesday, and jobless claims on Thursday. While I suspect there will be the need for a coronavirus update < sigh >, don’t be surprised if I play hookie one or two days again.

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Income, spending, layoffs, and new home sales all point to a continuing expansion in 2022

25 days ago

– by New Deal democratWe got our last batch of data before Christmas this morning. Almost all of the news was positive. I will be very brief.In the “coincident indicators” department, real personal income declined -0.2%, while real personal consumption expenditures increased less than 0.1%, although both remain well above their pre-pandemic levels: Comparing real personal consumption expenditures with real retail sales for November (essentially, both sides of the consumption coin) reveals both faltered, but not in any way worth being worried about:In the “short leading indicators” department, nobody continues to get laid off. Initial claims were unchanged for the week at 206,000, while the 4 week average rose slightly to 206,250. Continuing claims (right scale) declined to yet another

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Final existing home sales report of 2021 is positive

26 days ago

– by New Deal democratAs we wind down the year, most of the remaining data will be from the housing sector. Tomorrow we get new home sales, then next week one final round of house price indexes. Two months ago I wrote that “I suspect new home sales will increase, since interest rates stabilized at very low rates earlier this year, and the increase in existing home sales is some confirmatory evidence.” Since then, sales increased in October by 0.8%, and today existing home sales for November were reported, and the news continued positive, as sales increased another 1.9%, from 6,340,000 annualized to 6,460,000. This is the highest number since January of this year, and aside from the period from September last year through January, the highest since 2007 (note the NAR only permits FRED to

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Coronavirus dashboard for December 21: exponential spread is here

27 days ago

– by New Deal democratAs I warned you on Saturday, there might be some hooky-playing this week; and as I also said, that was “Omicron permitting.”Well, Omicron warrants an update today. Because exponential spread is underway especially in those parts of the country most exposed to international visitors.But first, in the spirit of leading indicators, let’s take a look at South Africa, where Omicron was first reported, and which has an excellent reporting system.Here are deaths (solid line) vs. cases (dotted line) per capita for the whole country (note differences in scale) for the past year. In all previous waves of infection, including a previous wave during summer 2020 not shown, deaths followed cases by one month or less:Cases began to rise almost exactly 5 weeks ago, from just under

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Weekly Indicators for December 13 – 17 at Seeking Alpha

December 18, 2021

– by New Deal democrat[Brief programming note: this coming week will only see existing home sales on Wednesday, and new home sales plus jobless claims on Thursday. In other words – don’t be surprised if I take a couple of days off. Omicron permitting]My Weekly Indicators post is up at Seeking Alpha.While the large majority of the strictly economic data continues positive in all time frames, it can be trumped at a moment’s notice by Omicron.I expect the comments on this week’s post at that site to be “interesting,” but not in an intellectually challenging way, if you catch my drift and I think you do.In any event, clicking over and reading will bring you up to the virtual economic moment and pay for my postage to send out all my Christmas gifts.

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Coronavirus dashboard: an urgent warning about Omicron’s exponential spread

December 17, 2021

– by New Deal democratHere is a graph of the growth in Omicron vs. Delta cases in London from 2 days ago:Shocking, isn’t it?Now here is the same data, updated yesterday, just one day later:Do I have your attention? In one day, the number of Omicron cases literally went through the top of the previous graph.Dr. Trevor Bedford, a geneticist who was the first to demonstrate that there was community spread of Covid-19 in the US back in late February 2020, is now tracking the daily exponential growth of Omicron, with a 10 day lag because that is how long it takes for reliable testing data to be accumulated. Here are his current graph of 5 countries including South Africa, the UK, and the US:https://github.com/blab/rt-from-frequency-dynamics/tree/master/results/omicron-countriesDepending on

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Production, layoffs, housing hit the positive trifecta in November

December 16, 2021

– by New Deal democratWe got a blizzard of November and December data this morning across all three – coincident, short leading, and long leading – timeframes: industrial production, jobless claims, and housing permits and starts. All three were positive.Let’s start with the King of Coincident Indicators, industrial production, which rose 0.5% in November. Manufacturing production rose 0.7%. They are 2.3% and 0.6% above where they were before the pandemic:Both also are at 2.5 year highs, although below their peak levels during the last expansion. At this point the *only* important metric which has not exceeded its pre-pandemic level is employment, which as I explained last week, has a persistent 4,000,000 shortfall compared with job openings, which will only be closed once the pandemic

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Real retail sales declined in November, but continue to auger well for strong jobs growth

December 15, 2021

– by New Deal democratRetail sales, one of my favorite “real” economic indicators, were reported this morning for November. They increased 0.3% for the month, and October’s blockbuster report was revised 0.1% higher, to +1.8%. After inflation, though, “real” retail sales declined  -0.5%. Although real retail sales are down -2.6% from their April peak, they are +12.9% higher than they were just before the pandemic hit, and are also 4.4%  higher than January of this year: They are also up 10.6% YoY. How extreme is that? The below graph subtracts 10.6% YoY growth from retail sales from 1948 through 2019:In the past 70+ years before the pandemic, real retail sales have only been higher for about 16 months, all in the 1940s, 50s, and 60s – over half a century ago. Which, not coincidentally,

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The state of the American consumer

December 14, 2021

– by New Deal democratYesterday I updated my alternative “consumer nowcast” fundamentals-based model of the economy, which serves as a check on my other models, and posted it over at Seeking Alpha.Hard to believe that I first wrote up that model over 15 years ago way back when I was a fledgling diarist at Daily Kos. The one surprise has been that, back then, I didn’t think interest rates could decline further in any meaningful way. Silly me!Anyway, for a review of the economy based on the state of the average American household, go over and take a look. Any my lunch money will thank you.

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How to track the Omicron variant in close to real time

December 13, 2021

– by New Deal democratNo economic data today, and Covid information is pretty useless because of lack of reporting over the weekend. I drafted a long piece about the state of the American consumer, which I’ve decided to put up at Seeking Alpha, since, hey!, why shouldn’t I earn some lunch money for it? I’ll post a link when one is available.But in the meantime let me drop this link by Dr. Trevor Bedford, an expert in the genetic evolution of viruses. He is tracking the number and percentage of all cases that are the Omicron variant in several countries, including the US, from daily reporting. Here is what today’s graph for the US shows:Note that this is in log scale, and the data lags by 10 to 14 days. What we can say is that IF the trend has continued, by now about 10% or more (10,000

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Weekly Indicators for December 6 – 10 at Seeking Alpha

December 11, 2021

– by New Deal democratMy Weekly Indicators post is up at Seeking Alpha.While stock prices made a new record yesterday, the more significant change this week was that Omicron most likely has already put a dent in peoples’ dining plans, as restaurant reservations declined significantly.Also, the weekly measure of consumer spending continues to be strong, even though real wages have declined in recent months.As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and will bring me my lunch money for the coming week.

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Real average and aggregate wages continue decline in November; a sharp deceleration in the consumer sector now appears likely

December 10, 2021

– by New Deal democratAs you may already know, consumer prices increased 0.8% in November. In the past two months, there has been a re-acceleration in CPI, with the monthly numbers equal to earlier this year and the worst since the Great Recession: On a YoY basis, consumer inflation is now the highest since the big Reagan recession of 1981-82. My favorite measure, CPI ex energy, is also up 5.1% YoY, the worst in 30 years:Inflation has shown up in all the wrong places: houses, cars, and gasoline. And remember that house prices are only indirectly reflected via owners’ equivalent rent, which has also started to increase:Aside from the fact that “real” wage income has indeed actually declined this year (as I’ll discuss immediately below), the impact of house prices on consumers’ inflation

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The Great Resignation and jobless claims

December 9, 2021

– by New Deal democratInitial and continuing jobless claims continue at or near their best levels in the past half-century.Initial claims declined 43,000 to 184,000, a new 50 year low, while the 4 week average declined 21,250 to 218,750, also a new pandemic low, and in the past 50 years only bettered by the period from late 2018 until February 2020:For all intents and purposes, nobody is getting laid off.Continuing claims rose 38,000 to 1,992,000 from last week’s pandemic low:Still, since 1974, aside from last week, only two weeks in the late 1980s, and the last 3 years of the last expansion were below this number:This is further confirmation of what was reported yesterday in the JOLTS report for October, where layoffs and discharges were a hair above their all time low set in May.Below

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October JOLTS report: at least the jobs market isn’t getting any worse in disequilibrium

December 8, 2021

– by New Deal democratThe JOLTS report for October was released this morning. While it did not indicate any significant progress towards a new labor equilibrium, at least the trends did not get any more destabilized.Job openings (blue in the graph below) increased to 11.033 million, which remains below the July peak of 11.098 million. Voluntary quits (the “great resignation,” gold, right scale) decreased to 4.157 million, a decline of over 200,000 from last month’s peak. Actual hires (red) decreased slightly to 6.464 million, in line with the past few months, and better than the early part of this year:Layoffs and discharges (violet, right scale in the graph below) decreased to 1.361 million, slightly above the May all-time low of 1.353 million. Total separations (blue) decreased to

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