Initial jobless claims for week ending June 10 – no concern yet

I have started to monitor initial jobless claims to see if there are any signs of stress.

My two thresholds are:
1. If the four week average on claims is more than 10% above its expansion low.
2. If the YoY% change in the monthly average turns higher.

Here’s this week’s update.

Initial claims last week were 222,000. The four week moving average was 217,750.
First, the four week average is only 8.1% above its recent low:

Second, the YoY% change for this week is only lower by -1.8%. For the first two weeks of June, it averages +0.5% higher:

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May real wages grow, but real aggregate payrolls on the verge of a red flag warning

The consumer price index rose +0.1% in May and declined YoY to 1.8%. Again the main reason was gas prices, which declined in during the month. Below is overall CPI (blue) vs. CPI less energy (red) for the past 20 years:

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Scenes from the May employment report: expect more lackluster reports, and layoffs in manufacturing

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For party voting preference, which is more important, age or education? Looks like we have an answer

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May jobs report: this is the kind of report you see at negative inflection points

Wages and participation rates

Here are the headlines on wages and the broader measures of underemployment:

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ISM manufacturing and residential construction spending trends continue

May data has started out where April left off, with continuations of trends in both manufacturing and construction.

First, manufacturing: it is still expanding, but at a much lower rate than last summer’s red hot numbers. The overall ISM manufacturing index declined a bit to 52.1, but the leading new orders sub-index rose slightly from 51.7 to 52.7:

Looking forward to Friday’s employment report, the ISM employment sub-index also rose slightly from 52.4 to 53.7. This suggests that Friday will show an increase in the leading manufacturing jobs sector.

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The sources of the next recession

While we are waiting for the ISM May manufacturing survey and construction spending data to be released later this morning, both of which will give us important clues to Friday’s jobs report, let me write down some thoughts on the nerdy question I ruminated about this weekend: what is the most likely source of the next recession?

That’s because housing isn’t always the source of a recession, and occasionally, as in 2000-01, it doesn’t turn down very much at all. In fact, housing has turned down since the beginning of last year about as much as it turned down in 2000 – which didn’t prevent the 2001 recession, did it?

So what are other sources of recessions? Here’s my take:

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Q1 corporate profits and real gross domestic income

Yesterday the second estimate of Q1 GDP came out, which means that corporate profits for Q1 were finally reported.

In my post earlier this week at Seeking Alpha, I wrote that corporate profits are of higher forecasting importance because of the contradiction in the signals being sent by the bond market vs. the housing market. So what light do they shed on the forecast for the next 12 months?

I wrote a follow-up post, and it is up on Seeking Alpha.  As usual, clicking over and reading should be informative for you, and helps to the tune of a couple of pennies for me.

P.S.: As a bonus, another important Q1 metric, gross domestic income, was also reported in yesterday’s revision. There is some evidence that, when they diverge, GDI leads GDP. Here’s what that relationship looks like for the past 30 years:

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Trucking tops ailing rail (nerdy)

Since the beginning of this year, weekly rail volumes have usually been negative.  The full year to date volumes have also been negative YoY:

Since all manufactured goods have to be transported to market, if this is something confirmed in other transportation readings, it would clearly be recessionary – as in, a recession has already started.

One alternative measure of the transportation sector is the Cass Freight Index.

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The Western Hemisphere’s portion of the Arctic looks set for a record low

Given Donald Trump’s view that global warming is a hoax, I am surprised that almost 2 1/2 years into his Presidency NOAA’s “Arctic Sea Ice” page is still with us. And since I am a nerd, during the spring and summer it is something I check.

In past years, sea ice melted much more in the Eurasian arctic at the extremities of the Gulf Stream than on the North American side. In contrast, the decline in ice cover in the North American sector of the Arctic is particularly advanced this year. Here’s what it looks like as of yesterday:

With the exception of Hudson’s Bay, it looks much more like the end of June for the past decade in that sector of the Arctic. In order, here are June 2018, 2017, and 2012

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