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

Need to remember

Many of the photos were taken before water and air pollution were fully regulated. The Clean Air Act was passed in 1970, and the Clean Water Act was passed in 1972.

Baltimore, Birmingham, Cleveland, Delaware, Denver, Kansas, Los Angeles, New Orleans, New Jersey, New York, Philadelphia, Pittsburgh, and San Francisco all feature here, in shots filled with smoke, smog, acid, oil, rubbish, and sewage.

None of the 35 photos are pretty (other than the film-photo haze), but it’s worth remembering what US cities used to be like before we cared what we put into the air, soil, and water.

Via Business Insider

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Weekly Indicators for August 12 – 16 at Seeking Alpha

by New Deal democrat

Weekly Indicators for August 12 – 16 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

The data continues to be dominated by a steep decline in long term interest rates. These have both inverted further portions of the yield curve and reinvigorated the housing market.

As usual, clicking through and reading should not only be educational for you, but put a penny or two in my pocket to reward me for my efforts.

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Positive July housing permits and starts

Positive July housing permits and starts

The housing starts and permits report this morning for July adds to the positive data looking forward to H2 2020 (or, possibly, less bad – but that’s another discussion).

First, here are overall permits (red) and starts (blue):

While the very volatile starts declined, the slightly more forward looking and less volatile permits rebounded off their low to a 6 month high.

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Industrial production, jobless claims, and retail sales

Industrial production, jobless claims, and retail sales

As I noted this morning, a slew of important data was released. Let me deal with the “normal” weekly and monthly data in this post.

First, industrial production continues to languish, down significantly from the end of last year, whether measured in total or just as to manufacturing:

The saving grace here is that it has not declined as much as it did during the 2015-16 “shallow industrial recession” which was not sufficient to cause the economy as a whole to contract.

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Quick hits on a major Thursday economic news blitz

Quick hits on a major Thursday economic news blitz

There has been a ton of significant economic news this morning. I’m not going to be able to get to all or even most of it in depth. So I am going to leave a quick rundown here.

Starting with the positive:

-nominal retail sales up +0.6%, up +0.3% in real terms, up +0.2% Per Capita. This is another new high and suggests the US consumer continues to be in good shape (relatively speaking). Note that much of this apparently has to do with Amazon “Prime Day” purchases, and if the seasonal adjustments are off, this could easily be a false positive.

-Both the NY and Philly Fed indexes higher, including new orders for both. No indication here that manufacturing is rolling over.

-The manufacturing component of industrial production higher, again suggesting that manufacturing is not rolling over (although this is still below its December high point).

The negative:

– overall industrial production was negative – again! Industrial production as a whole has remained in a decline off its high in December of last year. This is the premier coincident economic indicator, even more than payrolls.

– initial jobless claims higher YoY on both a weekly and monthly measure. It is not more than 10% higher than its recent lows, so overall is a neutral not a negative.

– the 2 year to 10 year treasury spread briefly inverted again this morning, although once again it has rebounded to positive.

-a MAJOR negative: unit labor costs for the last five years revised higher, meaning that adjusted corporate profits (a long leading indicator) peaked back in 2014, and were almost 15% lower than that as of Q1 of this year. The placeholder proprietors income is also slightly lower through Q2 than its peak in Q4 of last year.

I’ll try to post one or two things in detail later.

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Quality Spreads

While the yield curve turning negative is getting a lot of attention and seems to be the main excuse for yesterdays stock market drop, there are other financial indicators that are also signaling weaker economic growth ahead.

The primary one is quality spreads as the yield on corporate bonds are rising relative to treasuries.  This is driven by investors fear that in a weak economy, recession environment the risk of corporate defaults rises and bond buyers demand a larger premium to take that larger risk.It is easy to see that quality spreads are driven largely by economic weakness by comparing them to capacity utilization.

 

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Traffic Jam in Shenzhen, China

” The long line of trucks is a traffic jam of military trucks. Shenzhen (China), to state the obvious, is across the border and located just north of Hong Kong (see map). This show of force could still be a well poised threat to Hong Kong warning them to discontinue their protests or else. Shenzhen is an approximate 20 miles from Hong Kong and can be traveled by rail, bus, or limo.

Click on the images to enlarge.

In an update, it appears the Chinese military have started military exercises in Shenzhen as well as hundreds of the People’s Armed Police (PAP) in preparation of an invasion. Another saber rattling action intent on intimidating Hong Kong protesters. This is an scalation from previous efforts when Traffic Police were the ones used to make a similar point. It remains to be seen if China is willing to break the “one – country, two governing systems model” allowed Hong Kong and at the heart of China’s delay in deploying. Hong Kong is a global economic hub. Any intrusion would be noticed, lead to a destabilization, and potential sanctions on China.

On a forced (German VP boss) business trip, I was scheduled to visit a PCB manufacturer in Shenzhen. The travel agency routed me through Shanghai instead of Hong Kong which added hours to my trip (1 hour sitting in Shanghai) as compared to an ~ hour coming out of Hong Kong. A train would have stopped near the Westin where I was staying.

It was obvious the company travel agency did not know the route or bother to look at a map. I arrived after midnight. I informed my Chinese associate, we would be meeting later in the morning so I could be rested enough to negotiate the return of the excess air freight costs charged and my own agenda of negotiating the freezing of gold prices for two years. I was successful in both cases. My boss saved face, I became a star, and my American Planning associates did mot suffer a boot in the pants for their deliberate laziness.

As you can see on the map going back and forth between Shenzhen and Hong Kong is easy to do for travelers and the military too.

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Real average and aggregate wage growth for July 2019: yellow flag for aggregate wages

Real average and aggregate wage growth for July 2019: yellow flag for aggregate wages

Now that we have the July inflation reading, let’s take a look at real wages.

First of all, nominal average hourly wages in June increased +0.2%, while consumer prices increased +0.3%, meaning real average hourly wages for non-managerial personnel decreased -0.1%. This results in a slight decline of real wages to 97.0% of their all time high in January 1973:

On a YoY basis, real average wages were up +1.5%, a decline from their recent peak growth of 1.9% YoY in February:

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My preliminary long leading forecast through midyear 2020

by New Deal democrat

My preliminary long leading forecast through midyear 2020

This post is up at Seeking Alpha.

This is my first look at economic conditions into next summer. I suspect that it is contrary to most punditry that you will read.

In any event, as usual clicking over and reading helps reward me for the effort I put in to this endeavor.

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