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

A tale of two timeframes

A tale of two timeframes

No data today Monday, so while we are waiting for new home sales tomorrow, let me step back a little and give you an updated overview of my thinking.

It boils down to: the short term forecast — over the next 4 to 8 months — looks flat at best, and could develop into an actual downturn. The longer term — over one year out — looks more positive.

Let me start with the positive long term forecast first.

Long term interest rates have gone down significantly. Most importantly, mortgage rates have declined from about 5% to 4%. As a result, overall housing permits and starts, new single family home sales (which will be updated tomorrow) and through last Friday’s release of existing home sales have all turned higher:

The last big holdout, single family permits, probably made a bottom in April.


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Two articles to think about, one on opioids, the other billing for hospital care

Via Naked Capitalism:

Place based economic conditions and the geography of the opioid overdose crisis

By Shannon Monnat, Associate Professor, Syracuse University. Originally published at the Institute for New Economic Thinking website

Over 400,000 people in the U.S. have died from opioid overdoses since 2000. However, there is widespread geographic variation in fatal opioid overdose rates, and the contributions of prescription opioids, heroin, and synthetic opioids (e.g., fentanyl) to the crisis vary substantially across different parts of the U.S. In a studypublished today in the American Journal of Public Health, we classified U.S. counties into six different opioid classes, based on their overall rates and rates of growth in fatal overdoses from specific types of opioids between 2002-04 and 2014-16 (see Figure 1). We then examined how various economic, labor market, and demographic characteristics vary across these different opioid classes. We show that various economic factors, including concentrations of specific occupations and industries, are important to explaining the geography of the U.S. opioid overdose crisis.


1 in 6 hospital patients get a surprise bill for out of network care

By Rachel Bluth, Kaiser Health News reporter. Originally published at Kaiser Health News.

About 1 in 6 Americans were surprised by a medical bill after treatment in a hospital in 2017 despite having insurance, according to a study published Thursday.

On average, 16% of inpatient stays and 18% of emergency visits left a patient with at least one out-of-network charge. Most of those came from doctors offering treatment at the hospital, even when the patients chose an in-network hospital, according to researchers from the Kaiser Family Foundation. Its study was based on large employer insurance claims. (Kaiser Health News is an editorially independent program of the foundation.)

The research also found that when a patient is admitted to the hospital from the emergency room, there’s a higher likelihood of an out-of-network charge. As many as 26% of admissions from the emergency room resulted in a surprise medical bill.

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Social Security and the NYT

(Dan here….)  Via the New York Times comes an article on the Social Security shortfall.  No explanations given for what the shortfall context is, and not till the end was a fix suggested.  In comments calling SS a ponzi scheme (with no explanation) was common, or with the fix mostly was about lifting the cap.  Only one commenter referred readers to a Bruce Bartlett article from 2013 on the matter,

From an e-mail by Dale Coberly

Forgive me,  I have studied this problem and may actually know what I am talking about.
All we have to do is pay an extra dollar per week per person per year.  After next year It will be more like a dollar and ten cents.  And if we wait another year it will be about a dollar and twenty cents for the first few years,  then a great deal less than a dollar per week on average. This would keep Social Security solvent essentially forever.  The Deputy Chief Actuary at Social Security agrees that this is true.
This would mean people are paying more, but not a lot more, for their Social Security.  That is they would be setting aside enough money through Social Security to save enough to live on when they will no longer be able to work.  Don’t fool yourself:  working longer is not going to be possible for at least half the population.  And since they will have paid for it themselves, there is no reason they should not be able to retire if they want to even if they “could” work longer.
The Social Security Trustees Report says that about a one and a half percent (about fifteen dollars per week) one time “immediate and permanent” increase  would keep SS solvent for the next seventy five years.This would not be a real burden, or even noticeable once people got over their overreaction to the increase.  Even the about twenty dollars per week that would come in 2035 or so if we wait to the last minute will not be a real burden.  Wages will have risen by about two hundred dollars per week by then.  Again, no no one would think twice about it if it weren’t for the Big Liars making it sound like some kind of tragedy:  “You are going to have to put aside an extra twenty dollars per week, out of your two hundred dollar raise, in order to have enough to live on for the extra two to four years you will expect to live.” [Dollar amounts are in present terms.  SS pay as you go financing automatically takes care of inflation and real interest.]
The thing is they keep talking about it as if “we” — that is “the government”– can’t afford it.    But we — that is each of us — certainly can afford it.
But “they” want to talk about it as if “the government” was going to have to come up with trillions of dollars.  And they call it “socialism.”  Meanwhile the “progressives”  want to make it socialism by “making the rich pay” for it.
Social Security was carefully designed to NOT be welfare. It’s just the worker saving enough of his own money to pay for his own food and shelter when he will be too old to work, and insuring himself against the possibility that otherwise he might not be able to save enough. The government does not pay for any of this. The “rich” do not pay for more than they will get back with reasonable interest, including its insurance value.
Since you have been lied to intensively for at least the last thirty years,  you will not easily understand this or believe it. But it can be proven with attention to real math and real facts. There is no hope the people will understand it if no one tells them. The question is are you willing to do the work?

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Regional Fed indexes confirm that manufacturing is flat

Regional Fed indexes confirm that manufacturing is flat

[A reminder: this week I’m on vacation, so light posting is the rule.]

Earlier this week the Empire State Manufacturing Index went negative. This morning the Philly Index just barely avoided the same, reported at up +0.3 for June:

The more leading new orders index declined to +8.3.

This means the average of NY and Philly is a little below -1, while the average of all five regional Fed indexes as of their last reports is +0.8.

Last week I pointed out that the average manufacturing work week had fallen to a point consistent with an oncoming recession, and based on past patterns, I expect layoffs to follow. This week’s two regional indexes show that the leading manufacturing sector, as of the most recent readings, is not in decline, but on the other hand, it is almost exactly flat.

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Trucking suggests transport slowing, but has not rolled over

Trucking suggests transport slowing, but has not rolled over


I have been paying particular attention to the monthly report of the American Trucking Association, to compare its performance with rail, which has been sagging since the beginning of this year. A few other people are relying on the Cass Freight Index, but since that includes international shipping and air transport, it does not exclusively measure the US economy.

In April this index rose 7.7%, and was up 7.4% YoY as well. In May it gave almost all of that back:

According to the ATA, truck traffic declined 6.1% in May, and is now up only 0.9% YoY.

The trend remains neutral to slightly positive, in contrast to rail, suggesting that overall the economy, at least as measured by transport, has slowed down substantially but not yet rolled over.

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Will Libra Destroy Cryptocurrencies Or Vice Versa?

Will Libra Destroy Cryptocurrenciees Or Vice Versa?

Yesterday, Facebook released a White Paper on their planned supposed cryptocurrency, Libra, which has apparently long been under development.  This triggered two stories in the New York Times, as well as lots of commentary by lots of people, including several posts by Tyler Cowen at Marginal Revolution, who is moderately favorable to the proposal.  This is supposed to become an international currency backed by a reserve account provided initially by 27 major corporations such as Uber and VISA, which will be tied in value to a basket of currencies.  While tied to Facebook, it is supposed to have a firewall separating FB’s data on individuals from data arising from anybody’s activities in connection with Libra.  It is to be overseen by an association based in Geneva and run by the 27 companies, each of which will have control over a node in the supposed blockchain of the currency.  It is to use a new program, “Move,” and will have potential features that resemble Etherium, such as an ability to set up contracts.

First of all, it may be that Libra will not be allowed to get off the ground by politicians or regulators.  Rep. Maxine Waters (D-CA) has demanded a halt in the development until Congress can look at it more closely.  There  is concern that it may be too much of a real currency in competition with the USD, which might be illegal.  Other nations reportedly are worried about regulatory issues based on the apparent partial resemblance to a bank, with no banks among the 27 companies, with France being one nation also expressing such concerns.  There are also no  Wall Street firms in the 27, for better or worse.

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Women Strike in Switzerland for Equal Pay

Interesting there is not a peep on this in the US and literally hundreds of thousands of women gathered in the streets of the Swiss cities. 40,000 in front of parliament in Bern and the same was repeated in the cities of Lausanne, Geneva, and other places. It is said the turnout is greater in numbers than the protest in 1991. Much of the same inequalities are recognized in Switzerland as they are in the US. Women lose is salary if they take time off. This is not only in gross income, it is in hourly, weekly, or month income when compared to equivalent paid time period.

However in Switzerland, there is a movement afoot to again equalize the differences experienced between genders which has been written into the Swiss constitution. In Switzerland, equal rights for women and men were enshrined in the Federal Constitution by voters on June 14, 1991. 40 years after the popular vote to make it a part of the constitution, the goal of equality has yet to be achieved.

Five key indicators illustrate the day-to-day gender inequality in Switzerland:

– Lack of wage (median gross) equality with women making 12% less than men. The difference was even greater with women earning 14.6% less than their male colleagues which could not be explained by education, years of service, or role in the company.
– The majority of men work full time while only 41% of women do. Much of this is explained by the difference in out of home and at home workloads which men are impacted less in their careers.
– The division of housework in couple’s households remains the same. Women choose part-time work to care for children followed by other family responsibilities. Men working part time are pursuing an apprenticeship, a course of study, or are simply not interested in full-time work. This difference is reflected in the unequal distribution of domestic work of which women do the bulk.
– Due to working less paid hours, women get less from the Old-age and Survivors Insurance as well as the Occupational Pension fund. provision.
– Women in City, Canton, and Federal government are underrepresented.

In a country where even a labor strike action is rare, women have been concerned about neglecting their jobs and workplaces. To adjust for the time off, women demonstrators have decided they will finish their work day at 15.24 on Friday afternoon a time chosen to reflect the differences in pay for the same or a similar job done by men. The 15:24 reflects the almost 20% wage disparity with men. Many women and men in support of the movement are wearing fuchsia purple clothing on Friday the symbolic color chosen to reflect the event.

The strike has been covered in foreign media such as the Financial Times and on the BBC. There was also support from the United Nations.

Huge turnout for women’s strike in Switzerland, SwissInfo

Minding the gap between the sexes in Switzerland, Kai Reusser (graphics) and Sonia Fenazzi (text), Swiss Info.

Hundertausende Frauen fordern rasche Fortschritte bei Gleichstellung, Regula Bühlmann, SGB/USS

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May real retail sales positive, but industrial production remains in a shallow recession

May real retail sales positive, but industrial production remains in a shallow recession

Retail sales are one of my favorite indicators, because in real terms they can tell us so much about the present, near term forecast, and longer term forecast for the economy.

This morning retail sales for May were reported up +0.5%, and April was revised upward by a net +0.5% as well. Since consumer inflation increased by +0.4% over that two month period, real retail sales have risen +0.6% in the past two months.  For the past two months I have noted that sales were still slightly below their peak last November, and YoY real sales remained in a downshift. This morning’s report helps those comparisons substantially, as YoY real retail sales are now up +1.4%.

Here is what the last five years look like:

Real retail sales turned flat for about a year before both of the last two recessions. Even with this morning’s positive revisions, since late last year we’ve hit the biggest soft patch since 2013.

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Empire State Manufacturing: OUCH!

Empire State Manufacturing: OUCH!

I’m on vacation this week, so fair warning that there is probably going to be light posting!

The only economic news of note today was the Empire State Manufacturing Index.  Only one district, only one survey, in a noisy series, but just the same, the overall index fell to -8.6 and the new orders component fell to -12:

This brings the average of all five regional Fed Indexes down to +1. If the Philly Index simply declines to +5 or less later this week, then the average will turn negative.

Even that would not be a disaster. Note that in 2015-16 when the Empire State Index was this low or lower, the overall economy remained positive. But unless housing turns around quickly, we have a problem.

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

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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