Industrial Production and Capacity Utilization: December 2015

Today, the Federal Reserve released their monthly read of industrial production and capacity utilization showing further declines in December with total industrial production declining 0.36% since November and falling 1.75% below the level seen in December 2014.

Capacity utilization also declined falling 0.48% from November and plunging 3.19% below the level seen in December 2014 to stand at 76.487%.

It's important to note that industrial production is now showing significant weakness which, if all past periods were to serve at least as a rough guide, now clearly indicates notable trouble for the macro-economy.

The Empire State Manufacturing Survey: January 2016

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 decline for current and future assessments of manufacturing activity with the current activity index falling to a recessionary level of -19.37 while future activity dropped to a weak level of 9.51.

Current prices paid rose to 16 while current new orders slumped notably to -23.54 while assessments of future new orders fell to 12.18.

Retail Sales: December 2015

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing declining activity in December with sales falling 0.1% from November but rising 2.2% 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 improved, climbing 0.56% from November and rising 2.38% above the level seen in December 2014 while, adjusting for inflation, “real” discretionary retail sales increased 0.09% on the month and rose 1.12% since December 2014.

Index of Stress: January 2016

The Federal Reserve Bank of St. Louis recently began publishing a new weekly index that seeks to track the general level of financial stress.

As periods of financial stress come and go a whole host of fundamental economic indicators immediately adjust to meet the near and long term expectations of market participants

Interest rates, yields spreads, popular market volatility indices all move in real time giving observers unequivocal evidence of changes general sentiment.

The St. Louis Fed has devised a method of crunching eighteen of these sensitive indices down into one convenient index it calls the St. Louis Fed Financial Stress Index (STLFSI).

The latest results of the STLFSI indicate that the level of financial stress is low but is trending up with January's results increasing to -.492.

The Philly Fed Business Outlook Survey: December 2015

The December release of the Federal Reserve Bank of Philadelphia Business Outlook Survey (BOS) indicated a notable pullback in the regions manufacturing activity with the current activity index falling to a weak level of -10.2 while assessments the future activity also worsened to a level of 24.1.

The above chart shows the current and future activity indexes both with their corresponding 3-month moving averages. The red line marks the threshold between contraction and expansion for these diffusion indexes.

Weekly Unemployment Claims: Initial and Continued January 14 2015

Today’s jobless claims report showed a increase to both initial and continued unemployment claims as seasonally adjusted initial claims remained just below the 300K level.

Seasonally adjusted “initial” unemployment claims increased by 7,000 to 284,000 claims while seasonally adjusted “insured” claims increased by 29,000 to 2.263 million resulting in an “insured” unemployment rate of 1.7%.

Reading Rates: MBA Application Survey – January 13 2016

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) decreased 7 basis points to 4.01% since last week while the purchase application volume increased 18% and the refinance application volume increased 24% 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).

SNAP Food Stamp Participation: October 2015

As a logical consequence of the prolonged weak economic conditions, participation in the federal food stamp program remains at historic levels.

The latest data released by the Department of Agriculture indicated that in October, 47,097 individual recipients were removed from the food stamps program with the current total declining 2.43% on a year-over-year basis.

Individuals receiving food stamp benefits declined to 45.36 million which, as a ratio of the overall civilian non-institutional population now stands at a whopping 18.03% of the population.

Households receiving food stamps benefits declined to 22.38 million households with the current total falling 1.73% below the level seen a year earlier

Total nominal benefit cost declined 4.01% on a year-over-year basis to $5.73 billion for the month.

The Farce Is Strong with this Fed Chair

The dot-com boom went bust… the housing boom went bust… now we have the Fed boom.

These booms are all identical in that they were all founded on an irrationally exuberant belief in some fundamental story that, eventually, gives way to the cold hard truth of reality.

The Fed boom farce is founded on a belief that the “masters of the universe” at the Fed can, from the comfort of their FOMC meeting room in Washington DC, not just plan the most fundamental trends in our massive macro-economy (namely prices and employment) but also manage to erase all the errors accumulated by millions of foolish and fraudulent participants (households and firms) during past economic tumult.

One very problematic way that this boom is different though is that it’s not a belief in a single industry sector or a particular asset class but in the institution that many believe currently backstops the entire system itself.

When the trends turn on this boom… look out!

So, that begs the question… Does Janet Yellen, a frail diminutive academic, have what it takes to meet the demands of the ensuing crisis?

I think not...

The Fed is going to need a new Chairman.

Employment Situation: Nonfarm Payrolls and Civilian Unemployment December 2015

Today's Employment Situation Report indicated that in December, net non-farm payrolls increased by a by a notable 292,000 jobs overall with the private non-farm payrolls sub-component adding 275,000 jobs while the civilian unemployment went flat at 5.0% over the same period.

Net private sector jobs increased 0.23% since last month climbing 2.15% above the level seen a year ago and climbing 4.54% above the peak level of employment seen in December 2007 prior to the Great Recession.

Employment Situation: Unemployment Duration December 2015

Today's employment situation report showed that conditions for the long term unemployed generally went flat in December.

Workers unemployed 27 weeks or more increased to 2.085 million or 26.3% of all unemployed workers while the median term of unemployment declined to 10.5 weeks and the average stay on unemployment declined to 27.6 weeks.

Employment Situation: Total Unemployment December 2015

Today's Employment Situation report showed that in December “total unemployment” including all marginally attached workers went flat at 9.9% while the traditionally reported unemployment rate also remained unchanged at 5.0%.

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.

Weekly Unemployment Claims: Initial and Continued January 07 2015

Today’s jobless claims report showed a decline to initial unemployment claims as well as an increase to continued unemployment claims as seasonally adjusted initial claims remained just below the 300K level.

Seasonally adjusted “initial” unemployment claims declined by 10,000 to 277,000 claims while seasonally adjusted “insured” claims increased by 25,000 to 2.230 million resulting in an “insured” unemployment rate of 1.6%.

The Fed's Unraveling: Fisher's Reverse Wimpy Factor

While it should come as no surprise that former Federal Reserve Bank President (and former voting member of the FOMC) Richard Fisher speaks directly about Fed activities and his dissent of the committee's support of QE3, the level of candor of yesterday's CNBC interview appears pretty shocking.

Given that one of the main accomplishments outlined by former Federal Reserve Chair Ben Benrnanke was the creating of a "wealth effect" by working to boost the stock market, Fisher's assertion that market is now due for a correction appears to indicate that he has completely broken ranks and further, is looking to distance himself from the Fed policy decisions made during the Great Recession.

The below video quality is very poor but well worth the watch given that the clip currently posted at CNBC edited out most of the interesting commentary.

ISM Non-Manufacturing Report on Business: December 2015

Today, the Institute for Supply Management released their latest Non-Manufacturing Report on Business indicating that service related business activity slowed slightly in December with the overall non-manufacturing index falling to 55.3 from last months reading of 55.9.

At 58.7 the business activity index improved since last month but rose just a slight 0.170% above the level seen a year earlier.

Overall, respondent sentiment indicated strength with the service sector clearly continuing to expand with improving employment, orders and general activity.