The Empire State Manufacturing Survey: January 2012

The Empire State Manufacturing Survey consists of a series of diffusion indices distilled from a monthly survey of New York regional manufacturing executives and seeks to identify trends across 22 different current and future manufacturing related activities.

Today’s report showed a notable improvement for both current and future assessments of manufacturing activity with the current activity index climbing to 13.48 while future activity jumped to 54.87.

Current prices paid increased to 26.37 while current new orders improved 13.7 and assessments of future new orders weakened slightly to 53.85.

University of Michigan Survey of Consumers January 2012 (Early)

Today's early release of the Reuters/University of Michigan Survey of Consumers for January indicated improvement in consumer sentiment with a reading of 74.0 and falling just 0.27% below the level seen last year while one year inflation expectations rose slightly to 3.2%.

The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) rose to 68.4, and the Current Economic Conditions Index climbed to 82.6.

It's important to recognize that consumer sentiment has seriously eroded over the past few months with the current results remaining near levels not seen since 1980, a major indication that consumers are in the process of tightening even further on spending.

Conspicuous Correlation: Retail Sales December 2011

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a 0.1% increase from November and an increase of 6.5% on a year-over-year basis on an aggregate of all items including food, fuel and healthcare services.

Nominal "discretionary" retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales increased 0.23% from November and increased 2.90% above the level seen in December 2010 while, adjusting for inflation, “real” discretionary retail sales declined 0.07% over the same period.

On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims January 12 2011

Today’s jobless claims report showed an increase to both initial and continued unemployment claims as seasonally adjusted initial claims jumped back near the so closely watched 400K level.

Seasonally adjusted “initial” unemployment increased 24,000 to 399,000 claims from last week’s revised 375,000 claims while seasonally adjusted “continued” claims increased by 19,000 resulting in an “insured” unemployment rate of 2.9%.

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 3.45 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.77 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.23 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – January 11 2012

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) increased 2 basis points to 4.03% since last week while the purchase application volume increased 8.10% and the refinance application increased 3.30% over the same period.

With rates trending ever lower, the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how far rates on the long end can decline.  All things being equal, falling home prices, declining purchase applications and record low long lending rates all appear to indicate a deflationary for the macro-economy.

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).

Economic Jolt: Job Openings and Labor Turnover November 2011

Today, the Bureau of Labor Statistics released their latest monthly read of job availability and labor turnover (JOLT) showing that private non-farm job “openings” declined 1.57% since October climbing 6.82% above the level seen in November 2010 while private non-farm job “hires” increased 2.11% from October and rose 5.37% above the level seen in November 2010

Job “layoffs and discharges” increased 5.68% from October falling 1.19% below the level seen last year while quitting activity increased 1.83% from October remaining 11.37% above the level seen in November 2010.

It’s important to understand that job “quits” are included as a component of the “separations” data series as “quitting” is a valid means of workers “separating” from employers but their inclusion tends to create an overall procyclical trend in what would otherwise be logically thought of as a countercyclical process (i.e. downturn leads to increase in separations not decrease).

On The Stamp: Food Stamp Participation October 2011

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

In fact, household participation has been climbing so steadily that it has far surpassed 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 shows that in October, 45,528 recipients were removed from the food stamps program with the current total still increasing 7.0% on a year-over-year basis while household participation increased 8.85%.

Individual participation as a ratio of the overall civilian non-institutional population has increased 6.22% over the same period.

Participation continues to increase with nominal benefit costs climbing a lofty 7.87% on a year-over-year basis to $6.23 billion for the month.

Radar Watching: October 2011

As I have noted in the past, since the home price index data provided by Radar Logic is more timely, unadjusted and un-smoothed it is particularly useful for gaining deeper visibility over our housing markets.

As for the latest trends, it’s important to note that the 25-MSA Composite is continuing to show significant year-over-year declines and has now dropped well below all recent lows reaching a level not seen since early 2003.

The latest data shows that as of late October, prices have declined 7.31% below the level seen in
October 2010 while continuing to turn down from a seasonal peak reached in mid-June.

With the spring/summer selling season now complete and declining prices now registering with regularity, there is nowhere for prices to go but down. Look for a declining trend to continue to materialize and likely run into March or April of 2012.

Envisioning Employment: Employment Situation December 2011

Today’s Employment Situation Report indicated that in December, net nonfarm payrolls increased with private nonfarm payrolls adding 212,000 jobs and the unemployment rate declining to 8.5% over the same period.

Net private sector jobs increased 0.19% since last month climbing 1.78% above the level seen a year ago but but remained a whopping 4.91% below the peak level of employment seen in December 2007.

Full Time Workers Fully Under Pressure: December 2011

Today’s employment situation report showed that in December the full time unemployment rate declined to 9.0% of the civilian workforce but remains near the highest rate seen in 41 years.

The Bureau of Labor Statistics considers full time workers to be those “who have expressed a desire to work full time (35 hours or more per week) or are on layoff from full-time jobs”.

Full time jobless workers currently account for roughly 88.5% of all unemployed workers.

Recovery-less Recovery: Unemployment Duration December 2011

Be sure to bookmark the "Scary Unemployment Dashboard"... it's live.

Today's employment situation report showed that conditions for the long term unemployed improved slightly in December while remaining epically distressed by historic standards.

Workers unemployed 27 weeks or more declined to 5.588 million or 42.5% of all unemployed workers while the median number of weeks unemployed declined to 21.0 weeks and the average stay on unemployment declined to 40.8 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 December 2011

Today’s Employment Situation report showed that in December “total unemployment” including all marginally attached workers declined to 15.2% from the prior month's level of 15.6% while the traditionally reported unemployment rate also declined to 8.5%.

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.

ISM Non-Manufacturing Report on Business: December 2011

Today, the Institute for Supply Management released their latest Non-Manufacturing Report on Business indicating that service related business activity improved slightly throughout December with the business activity component going flat on the month while the overall non-manufacturing index increased to 52.6 from 52.0 in November.

At 56.2 the business activity index went unchanged since October and remained 10.65% below the level seen a year earlier.

Like releases of prior months, non-manufacturing sector respondents are seeing some signs of improvement but the overall outlook is still fairly mixed:

"Year-end uptick in activity." (Finance & Insurance)

"Business is stabilizing — some good signs in the private sector for commercial construction." (Construction)

"Some additional proposal requests, but clients continue to delay decisions on capital spending. Expect first quarter 2012 activity to be sluggish." (Professional, Scientific & Technical Services)

"Automotive industry growth seems to be outpacing the rest of the economy." (Information)

"Demand increasing gradually." (Wholesale Trade)

"Business is holding steady. Outlook for December and first quarter 2012 is good." (Retail Trade)

ADP National Employment Report: December 2011

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 notably in December as private employers added 325,000 jobs in the month bringing the total employment level 1.81% above the level seen in December 2010.

Looking at the chart (click for full-screen dynamic version) showing ADP’s total private nonfarm payrolls since 2001 as well as the year-over-year and month-to-month percent change, you can see that while the job recovery had been anemic throughout most of 2010, more recently the trend had been picking up momentum.

Although the level of jobs is still far below the peak seen in late 2007 and still near the lows seen during the worst period of the "dot-com" recession, the bottom looks to be clearly defined and the trend is looking comparable to past recoveries.

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.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims January 05 2011

Today’s jobless claims report showed a decline to both initial and continued unemployment claims as seasonally adjusted initial claims continued to trend lower below the so closely watched 400K level.

Seasonally adjusted “initial” unemployment declined 15,000 to 372,000 claims from last week’s revised 387,000 claims while seasonally adjusted “continued” claims declined by 22,000 resulting in an “insured” unemployment rate of 2.8%.

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 3.50 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.61 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.11 million people on state and federal unemployment rolls.