Relevant and even prescient commentary on news, politics and the economy.

February consumer inflation begins to heat up a little

February consumer inflation begins to heat up a little

Seasonally adjusted consumer prices rose 0.4% in February. As a result, over the past several months there has been a significant uptick in YoY inflation to 1.7% from 1.1% in November. 


Aside from the pandemic, for the past 40 years, recessions had happened when CPI less energy costs (red) had risen to close to or over 3%/year, usually driven by increases in the price of oil by more than 40% YoY:



Despite recent increases in the price of oil, now up 30% YoY as shown in the graph below, as of this month CPI less energy is only 1.6%, showing no real price pressure at all: 

During the wintertime pandemic surge, hiring hit a brick wall

January JOLTS report: during the wintertime pandemic surge, hiring hit a brick wall

Yesterday morning’s JOLTS report for January was confirmatory of the weak jobs report for that month, showing a largely paused recovery. Further, for the second month in a row, hires were down sharply. Let’s examine this in accord with the data from the prior two recoveries covered by this report, which has only a 20-year history.

In the two past recoveries:

–  first, layoffs declined

– second, hiring rose

– third, job openings rose and voluntary quits increased, close to simultaneously

What we will see below is that the big decline in hiring in December and January is a big outlier compared with the prior two recoveries. The remaining data is largely in accord with the pattern from the last two early recoveries: the first two data series to turn – layoffs and hires – did indeed turn, while the last two – job openings and voluntary quits –  bottomed more gradually and have since risen less dramatically.

When should we begin a see a real improvement back towards “full employment”?

Pandemic job losses: when should we begin a see a real improvement back towards “full employment”?

Let’s take a deeper look at where employment stands as we begin to see the end of the pandemic in sight.

As I and many others noted last Friday, although with the exception of one month there have been job gains every month starting last May, at the pace of the last few months it would take 2 years or more just to get back to the level of employment just before the pandemic struck.

But breaking down those losses between aggregate hours and aggregate payrolls is illuminating. Here’s a look at the YoY% change in jobs, hours, and payrolls for the last 3 recessions and recoveries:

Coronavirus dashboard for March 8: Update on the effect of vaccinations

Coronavirus dashboard for March 8: Update on the effect of vaccinations

My first post on the coronavirus was almost exactly one year ago, on March 10, 2020, “This is what exponential growth looks like,” warning that exponential spread was exactly what had started to happen in the US.
 We are now finally averaging the administration of over 2 million doses of vaccine per day, and according to the CDC almost 60 million people constituting nearly 20% of the US population have already received at least their first dose:



Nursing home cases have declined by about 55,000 per week since vaccines started to be administrated, although it is noteworthy that there has been a plateau in the past 3 weeks:

Initial jobless claims make further progress towards November lows

Initial jobless claims make further progress towards November lows

Last week I “pre-debunked” the idea that a lack of reporting in Texas skewed the big decline in claims, concluding that “being very generous, the ‘real’ seasonally adjusted number of initial claims at worst probably would have been only about 30,000 higher – I.e., 760,000 – but for Texas issues.” 

That observation was validated this week, as last week’s 730,000 number was only revised higher by 6,000 to 736,000. And the *relatively* good news continued.

This week, on a unadjusted basis, new jobless claims increased by 31,519 to 748,078. Seasonally adjusted claims increased by 9,000 to 745,000. The 4 week moving average declined by 17,250 to 790,750. 

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April): 

Household debt and the pandemic

Household debt and the pandemic

This is something I used to pay a lot more attention to back around the time of the Great Recession. How stretched were American households in paying their monthly bills? The Federal Reserve publishes a quarterly update tracking this issue. Two of the metrics in that quarterly update are debt service payments and financial obligations, respectively, as percents of household disposable income. The last update was in December, for Q3 2020. The Q4 figure should be released later this month.


And the story is how strong of an impact the pandemic stimulus has made on household balance sheets. Here’s the graph, that pretty much speaks for itself:

Both measures were by far at all-time lows in Q2, and increased slightly in Q3.

The Dakotas already appear to be shambling towards herd immunity

Coronavirus dashboard for March 3: as good news on vaccinations accumulates, the Dakotas already appear to be shambling towards herd immunity

There is more and more good news on the vaccination front. In addition to the fact that the single-dose Johnson and Johnson vaccine has been approved, President Biden has made use of the Defense Production Act to enlist competitor Merck in additional production of the J&J vaccine. Biden also announced that there would be enough vaccine produced to supply doses for every American adult by the end of May.


Further, the pace of vaccination has picked up to new highs since the setbacks due to recent weather, with the 7 day average just short of 2 million per pay at 1.946 million as of yesterday:


And just shy of 80 million doses have been administered – 78.6 million as of yesterday:

Manufacturing and housing – turn even hotter

Two leading sectors of the economy – manufacturing, and housing – turn even hotter

Last month I wrote that both the manufacturing and housing sectors were “on fire.” If anything, this month they turned white hot, with both construction spending and ISM manufacturing data at levels not seen in years.


The overall ISM manufacturing reading rose from 58.7 to 60.8, tying the highest reading since the Great Recession, and indeed since 2004. The even more leading new orders subindex also rose from 61.1 to 64.8, not quite as high as readings earlier in autumn 2020:

January personal income and spending show how important government stimulus has been to keeping the economy afloat

January personal income and spending show how important government stimulus has been to keeping the economy afloat

This morning’s report on January personal income and spending shows just how important the stimulus packages enacted by the federal government both last spring and last month have been to sustaining the economy.
After adjusting for inflation both personal income and spending rose in January, by +9.7% and +2.0%, respectively:



The huge increase in income is not a mistake. It follows from the renewed Congressional stimulus package providing $600 checks to most households. And it’s pretty obvious that had an impact on spending, which rose to levels equivalent to 2019 and only about 2% off-peak.

New home sales rise m/m, but signal caution for housing market going forward

New home sales rise m/m, but signal caution for housing market going forward

New home sales increased to a three month annualized high of 923,000 in January. This is of a piece with the positive news last week on housing permits. At the same time, the pace remains below the recent high of 979,000 annualized set six months ago in July. The below graph compares housing starts (blue) with the much less volatile single family permits (red) and the even more volatile, and heavily revised, new home sales (gold), normalized to 100 as of January 2020: