On The Stamp: Food Stamp Participation December 2012

As a logical consequence of the prolonged economic downturn, participation in the federal food stamp program is continuing to rise.

In fact, household participation has been climbing so steadily that it has dwarfed the last peak (which looks like a minor blip by comparison) set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture indicated that in December, 109,924 recipients were added to the food stamps program with the current total increasing 2.75% on a year-over-year basis.

Individuals receiving food stamp benefits increased to 47.79 million which, as a ratio of the overall civilian non-institutional population, increased 1.16% on the month to now stand at a whopping 19.55% of the population.

Households receiving food stamps benefits increased by 48,683 to 23.06 million with the current total rising 4.07% above the level seen a year earlier

As participation continues to swell, so too has the total nominal benefit cost climbing 2.78% on a year-over-year basis to $6.39 billion for the month.

Outstanding Contraction!: Commercial Paper Outstanding February 2013

The Commercial Paper (CP) market is essentially a private debt market used by corporations as a generally cheaper means of funding typical recurring operations than drawing on a line of bank credit.

Commercial paper, as financial instrument, is by no means a recent innovation and, in fact, you can read about how the CP market was affected by the many historic financial shocks experienced by the U.S. (read Panic on Wall Street: A History of America’s Financial Disasters)

Although the Federal Reserve was able to artificially bring CP rates down significantly since the shocking 615 basis point spread blowout (A2/P2 spread) of late 2008, they have not been successful in preventing an overall contraction in the CP market.

The Federal Reserve calculates and published the total amount of CP outstanding every week and as of February commercial paper declined since last month while still rising 13.35% on a year-over-year basis to $1062.90 billion, a level that is still substantially lower than even the worst periods of the last two recessions.

Big Old Government

Big government doesn't work.  It's that simple.  Also, it's immoral to obligate generations of individuals to operate within and contribute to a system rife with massive policy delusions, particularly a system they had little to no part in creating.

Of course, that's using my definition of morality... policy junkies value things exactly the other way round.

Who's right?

Watching some random FDR-era YoutTube videos brings some insights on the basis for "New Deal" policies but more importantly, you can feel the antiquity.

Roosevelt hardly carried himself in a way that would please the modern eye... the affect of his speech and his mannerisms... watching him conjures images more reminiscent of Oliver Hardy than of a modern presidential figure.

But that's not his fault of course... one can't be expected to operate, down to gesture and tone, in a manner that would hold up over generations... even the avant-garde aren't avant-garde for long!

But therein lays the dilemma...

Big government policies and philosophies, like the antiquated vaudeville style huckster politicians of 1930s, never hold up over time.

Social Security has “benefited” millions from its inception in 1930s, but after it goes cash-flow negative (... purportedly in 2017) and then deep in debt from then on, one has to wonder how assessment’s of this massive and antiquated policy will fare in the minds of the households facing its crushing burden in the 2030s?

The policies that resulted in the creation of Fannie Mae and the twelve federal home loan banks must have seemed innovative in 1938, a move ushering in an unprecedented “public-private” partnership in the effort to sponsor home ownership in the U.S. but as these policies reached their 7th decade, the nation’s housing market reflected, very dramatically, their massive stimulation of mal-investment and all the attendant "unintended" consequences… Consequences that were brought to bear on virtually every household by 2008.

Would the electorate present at the time of the adoption of compulsory unemployment insurance ever have anticipated that future politicians would abandon this program’s simple, actuarially driven approach in favor of one that provides essentially a never-ending stipend to recipients?

How about Food Stamps? Would the electorate of the “Great Society” ever have supported the expansion of this program had they know that in a mere 50 years some 1/6th of the population, nearly 50 million individuals, would be drawing on its “benefits” at a cost of over over $6 billion per month?

Envisioning Employment: Employment Situation February 2013

Today’s Employment Situation Report indicated that in February, net non-farm payrolls increased notably adding 236,000 jobs overall with the private non-farm payrolls sub-component adding 246,000 jobs while the civilian unemployment rate declined to 7.7% over the same period.

Net private sector jobs increased 0.22% since last month climbing 1.86% above the level seen a year ago but remained 2.13% below the peak level of employment seen in December 2007.

Recovery-less Recovery: Unemployment Duration February 2013

Today's employment situation report showed that conditions for the long term unemployed worsened notably in February while still remaining distressed by historic standards.

Workers unemployed 27 weeks or more increased to 4.797 million or 40.2% of all unemployed workers while the median term of unemployment increased to 17.8 weeks and the average stay on unemployment increased to 36.9 weeks.

Looking at the charts below (click for super interactive versions) you can see that today’s sorry situation far exceeds even the conditions seen during the double-dip recessionary period of the early 1980s, long considered by economists to be the worst period of unemployment since the Great Depression.

On The Margin: Total Unemployment February 2013

Today’s Employment Situation report showed that in February “total unemployment” including all marginally attached workers declined slightly 14.3% while the traditionally reported unemployment rate also ticked down to 7.7%.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit definition of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims March 07 2013

Today’s jobless claims report showed a decline to initial unemployment claims and a slight increase to continued unemployment claims as initial claims trended below the closely watched 400K level.

Seasonally adjusted “initial” unemployment claims declined by 7,000 to 340,000 claims from 347,000 claims for the prior week while seasonally adjusted “continued” claims increased by 3,000 claims to 3.094 million resulting in an “insured” unemployment rate of 2.4%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 1.78 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.53 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.31 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – March 06 2013

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) declined 7 basis points to 3.58% since last week while the purchase application volume jumped a notable 15% and the refinance application volume also rose 15% over the same period.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

ADP National Employment Report: February 2013

Today, private staffing and business services firm ADP released the latest installment of their National Employment Report indicating that the situation for private employment in the U.S. improved in February as private employers added 198,000 jobs in the month bringing the total employment level 1.64% above the level seen in February 2012.

Perusing the rest of the data in the ADP dataset you can see the the economy is currently showing the most growth for small to mid-sized service providing jobs with goods-producing jobs remaining near trough levels.

Look for Friday’s BLS Employment Situation Report to likely show somewhat similar trends.

ISM Non-Manufacturing Report on Business: February 2013

Today, the Institute for Supply Management released their latest Non-Manufacturing Report on Business indicating that service related business activity continued to expand in February as assessments of service-sector related activity generally improved with the business activity component increasing slightly while the overall non-manufacturing index climbed to 56.0 from last months reading of 55.2.

At 56.9 the business activity index improved a slight 0.89% since January but remained 5.64% below the level seen a year earlier.

This month, service industry respondents are sounding very positive with all respondent quotes citing improving activity and "positive signs":


"Our business is beginning to turn up slightly." (Health Care & Social Assistance)

"Business seems to be improving; RFQ volume and orders also up." (Management of Companies & Support Services)

"Continuing to see slight uptrend in activity, primarily related to 1st quarter initiatives started." (Finance & Insurance)

"Construction market showing some positive signs." (Real Estate, Rental & Leasing)

"The economy continues to slowly pick up, perhaps at an even faster pace than had been previously projected. New housing permits and business licenses are at a multiyear high, although still lower than pre-recession." (Public Administration)

"February bouncing back to forecast levels, which was 11 percent over 2012." (Wholesale Trade)

"Business is picking up; more projects to bid and things are improving." (Construction)

Hong Kong Bubble?: Hong Kong Residential Property Prices December 2012

The latest release of the University of Hong Kong's Hong Kong Residential Real Estate Series (HKU-REIS) indicating that, in December, the price of residential properties declined 0.8% since November but climbed 26.77% above the level seen in December 2011.

The HKU-REIS is a set of property price indices constructed monthly using a “modified” repeat-sale methodology similar to that of the S&P/Case-Shiller indices yet suited to the Hong Kong property market.

Constuction Spending: January 2013

Today, the U.S. Census Bureau released their latest read of construction spending showing mixed results in January with total construction spending and non-residential construction spending declining while single family residential construction spending improved.  

On a month-to-month basis, total residential spending declined 0.02% from December climbing 22.05% above the level seen in January 2012 while still remaining a whopping 54.97% below the peak level seen in 2006.

Single family construction spending climbed a notable 3.62% since December rising 30.21% since Janaury 2012 but remained a whopping 68.00% below it's peak in 2006.

Non-residential construction spending declined a whopping 5.08% since December but still climbing 3.95% above the level seen in January 2012 and remained a whopping 27.36% below the peak level reached in October 2008.

The following charts (click for larger dynamic versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year, month-to-month and peak percent change to each since 1994 and 2000 – 2005.

Bull Trip!: GDP Report Q4 2012 (Second Estimate)

Today, the Bureau of Economic Analysis (BEA) released their second "estimate" of the Q4 2012 GDP report showing that the economy barely registered growth in Q4 2012 with real GDP improving at an annualized rate of just 0.1% from Q3 2012.

On a year-over-year basis, real GDP increased 1.61% while the quarter-to-quarter non-annualized percent change was an increase of a slight 0.03%.

The latest quarterly results indicate that the most notable source of weakness in the economy came from declines in exports with the "net-exports" component declining at an annualized rate of 3.9% from Q3, and notable declines in government spending particularly on national defense with a 22.0% decline in federal national defense spending from Q3.

Residential investment, on the other hand, worked to buoy the overall fixed investment component growing at an annualized rate of 17.5% from Q3.

Keep in mind that these results are likely very poorly estimated and are sure to be revised notably in following quarters and even years to come.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims February 28 2013

Today’s jobless claims report showed a notable decline to both initial and continued unemployment claims as initial claims trended below the closely watched 400K level.

Seasonally adjusted “initial” unemployment claims declined by a notable 22,000 to 344,000 claims from 366,000 claims for the prior week while seasonally adjusted “continued” claims declined by 91,000 claims to 3.074 million resulting in an “insured” unemployment rate of 2.4%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 2.00 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.66 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.67 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – February 27 2013

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) went flat at 3.66% since last week while the purchase application volume declined a notable 5% and the refinance application volume declined 3% over the same period.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).