Today (Dan here….Jan. 23) is a traveling day, so no detailed posting.
This morning’s initial jobless claims were in line with the range over the past two years. There has been virtually no change YoY. This negatives any imminent recession fears.
Yesterday’s existing home sales, though touted as “the best in nearly two years,” just continue the baseline that this metric has been in since late 2015, with the exception of the 2018 decline. Of more interest is that (1) inventory is at a cycle low, and – not coincidentally – YoY price increases, up 7.8%, show a continuing acceleration:
A few months ago I offered up the idea that housing now had its own “choke collar,” where prices were bumping up against the limit of what buyers in the aggregate could afford, even with lower interest rates. We’ll get much more information on whether that is the case when new home sales and prices are reported next week.
Every month for at least the past half year there is a spate of bearish economic commentary that relies upon one or both of two metrics: AAR rail carloads and/or the Cass Freight Index.
I have a post up at Seeking Alpha showing why the first measure is not a representative slice of transport as a whole, and the second has a history of being very volatile and with a slew of negative readings in the teeth of continuing expansions.
As usual, clicking on the link and reading helps reward me with a $ or two for my efforts.
Addendum: after I put together and posted the article, I came up with the idea of averaging the Cass Freight Index and the Dept. of Transportation’s Freight Index after adjusting for the former’s volatility (shown below). It gives us an even less noisy overview of the transportation sector, although it still does go negative during slowdowns without there being a recession. In any event, none of the current negative readings are sufficiently below zero to accord with recessionary readings over the indexes’ short history:
Let me catch up on some data I didn’t examine last week: the November JOLTS report.
It decomposes the jobs numbers into a number of metrics, but is less than 20 years old, so only covers one full business cycle, so is of limited forecasting use.
To reiterate, here is the order in which the JOLTS series peaked during the 2000s expansion:
So to start, here are YoY hires and quits for the entirety of the series, measured YoY
Hires has turned negative for some months in the past year, while quits remain positive YoY.
In observance of Martin Luther King’s birthday, almost all US markets are closed and there is no economic data.
So on this day let’s see the extent to which economic opportunity in several neutral metrics has improved since the passage of the Civil Rights Acts in the 1960s.
Here in unemployment for African Americans (blue) vs. whites (red) since the former began to be measured in 1972 (white unemployment had been measured since the 1950s – interesting that black unemployment wasn’t even deemed worthy of being separately measured before the 1970s!):
Unemployment for whites made a 50 year low at 3.1% earlier in 2019. It was only lower, at 3.0%, in 1969 (not shown). African American unemployment made its all time low, at 5.4%, in August of last year.
Housing is a very important long leading indicator, and it reflects both the consumer and producer sides of the economy. And this morning, at least in terms of starts, it hit a grand slam.
Total housing starts were 1.608 million units annualized, the highest number since the end of 2006. The less volatile and slightly more leading permits declined slightly to 1.416 million units annualized, but the three month average of each made new expansion highs:
The story is the same with the less volatile single family starts and permits:
In December consumer inflation was +0.2%. Since in last Friday’s jobs report average hourly earnings also increased +0.1%, real average hourly earnings declined slightly:
In a longer term perspective, this means that real wages also declined from 97.8% to 97.5% of their all time high in January 1973:
Let’s take a more detailed look at last Friday’s December jobs report.
First, as usual for the past few months, let’s look at the more leading jobs sectors. This month, let’s also take a more detailed look at wage growth and why it may have suddenly decelerated.
As an initial note, revisions going back to late 2017 are going to be available next month, and preliminarily it was already indicated that these will be strongly negative to the tune of several hundreds of thousands overall. In short, as weak as some of the numbers look now, they are likely to be even weaker when we see them next month.
Here is this month’s update to the three leading sectors of employment that I have been tracking: temporary help (blue in the graph below), manufacturing (gold), and residential construction (red). Here’s what they look like compared with 2018, showing the slowdown this year (remember that the GM strike is responsible for the big swings in manufacturing in October and November):
In November, residential construction had looked like it had rebounded from its losses earlier this year, more confirmation of the rebound in the long leading housing sector – but that was revised away this month!
Let’s take a more detailed look at last Friday’s December jobs report.
First, as usual for the past few months, let’s look at the more leading jobs sectors. This month, let’s also take a more detailed look at wage growth and why it may have suddenly decelerated.
As an initial note, revisions going back to late 2017 are going to be available next month, and preliminarily it was already indicated that these will be strongly negative to the tune of several hundreds of thousands overall. In short, as weak as some of the numbers look now, they are likely to be even weaker when we see them next month.
Here is this month’s update to the three leading sectors of employment that I have been tracking: temporary help (blue in the graph below), manufacturing (gold), and residential construction (red). Here’s what they look like compared with 2018, showing the slowdown this year (remember that the GM strike is responsible for the big swings in manufacturing in October and November):
In November, residential construction had looked like it had rebounded from its losses earlier this year, more confirmation of the rebound in the long leading housing sector – but that was revised away this month!
January 7: Remarks by Rep. Benjamin M. Boyer, Democrat from Pennsylvania:
Mr. Chairman, the issues supposed to have been settled by the election of General Grant to the Presidency formed the subject of an elaborate speech by the honorable gentleman from Maine [Mr. Blaine] a few days before the adjournment of the Congress for the holidays* in December….. I propose to make [a few brief remarks] upon this the first occasion I have had for reply. [*Note: oh noes! The War on Christmas in 1869!]
The late Presidential election decided, of course, that the Republican Party should continue to administer the government through the elected Chief Magistrate of their own choice and a majority of the Forty-First Congress. But it settled scarcely anything else ….
The gentleman lays it down as an inevitable consequence of General Grant’s election that negro suffrage must be accepted as a permanent establishment in the southern States, ‘and at no distant day throughout the entire Union.’ Yet if negro suffrage, which is the very corner-stone of the entire Radical reconstruction, had been divested of all other issues and had been fairly submitted to a vote of the whole people, what man acquainted with the national sentiment will deny that its defeat would have been overwhelming? No other proof is needed to establish this proposition than the decisive vote upon this question when lately presented by itself in several of the great Republican States of the North and the continued exclusion of negroes from the polls in nearly all of them?
It is said, however, that negro suffrage ‘is of necessity conceded as one of the essentials of reconstruction.’ But has the Radical policy of reconstruction itself been so approved and established that it can never be disturbed by future elections? Is there nothing to be apprehended from the continual violation of natural laws and a possible collision of races? Are the reconstruction laws themselves so firmly entrenched upon constitutional grounds that a general revulsion of feeling upon the superior race might not find a ready excuse for sweeping from its foundations the whole work of Radical reconstruction?
…. Those caricatures of republican government imposed by the stranger and the negro upon the disenfranchised white race of the South had become abhorrent to the public mind of the North long before the late presidential election….
Anyway, while there is obviously some variation from month to month, the latest two months shown below in chronological order, November and December, show – in shades from light pink to red – all of those States that the Democratic candidate has the most decent chance of carrying: