- by New Deal democrat
Exactly one year ago today the title of this column was dueling inflection points edition, as both initial jobless claims and gasoline prices were at 52 week extremes, but in opposite directions. Here we are again, almost exactly in the same spot.
Employment related indicators were all positive:
The Department of Labor reported that Initial jobless claims rose by 3,000 to 351,000. The four week average declined by 6250 to 359,000. This too is the lowest reading since spring 2008.
The American Staffing Association Index rose by 1 to 87 last week. It is now right in between its levels of 2011 and 2007, higher than the former and below the latter.
The Daily Treasury Statement showed that for the first 15 reporting days of February, $120.7 B was collected vs. $115.6 one year ago, a gain of 4.4%. For the last 20 reporting days, $151.1 B was collected vs. $146.6 B a year ago, an increase of 3.3%.
On the other hand, Gasoline prices are markedly higher than one year ago while usage continues to be much lower:
Oil rose about $4.00 this week through Thursday to close over $108 a barrel. Gas at the pump rose another $.07 to $3.59. Both of these are significantly above the point where they can be expected to exert a constricting influence on the economy. Gasoline usage, at 8627 M gallons vs. 9101 M a year ago, was off -5.2%. The 4 week moving average is off -6.1%. The YoY comparisons went negative last March, and have continued substantially so since July.
Housing reports were mixed:
The Mortgage Bankers' Association reported that The Refinance Index decreased -4.8% from the previous week, but is still closetto its highest level in over half a year. The seasonally adjusted Purchase Index decreased another -2.9% from the prior week, and was -9.2% lower YoY. The purchase index is at the bottom of its 21 month overall flat range. Any further significant deterioration would have to be viewed as a violation of that trend to the downside.
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were positive, up +4.1%. This number has stabilized on a YoY basis in the last few weeks, which is what I would have expected. I expect this series to continue positive, but it will be interesting to see if it drifts lower as we hit the peak selling season.
Sales remained positive, while transportation turned negative:
The ICSC reported that same store sales for the week ending February 11 were off -2.2% w/w, but increased 3.2% YoY. Shoppertrak reported +6.3% YoY gains. Johnson Redbook reported a 2.9% YoY gain.
The American Association of Railroads reported a decline in weekly rail traffic for the week ending February 18, 2012, with U.S. railroads originating 281,989 carloads, down 5.2 percent compared with the same week last year. Intermodal volume for the week totaled 221,003 trailers and containers, down 5.6 percent compared with the same week last year. I am pleased to report that Railfax is back with some free graphs. While the YoY comparisons have been decidedly erratic this winter, that may be because of the batch of winter storms that hit in 2011 in the comparison period. The Railfax graphs show that rail traffic continues to trend higher on a YoY basis.
Money supply was mixed and Credit spreads were flat:
M1 was up +0.3%t last week, and also up +0.3% month over month. On a YoY basis it increased to +23.1%, so Real M1 is up 20.2%. YoY. M2 also rose +0.3% week over week, but was down -0.4% month over month. It was up 10.1% YoY, so Real M2 was up 7.2%. In short, real money supply indicators continue strongly positive on a YoY basis.
Weekly BAA commercial bond rates decreased .02% to 5.15%. Yields on 10 year treasury bonds also fell .02% to 1.97%. The credit spread between the two, which had a 52 week maximum difference in October but remained tightened this past week.
Last year I concluded my column by saying that I expected Oil to win its duel with initial jobless claims. It did as initial claims flattened and then rose in the summer. I expect the same result this year. While as I said yesterday I expect U-3 unemployment to decline to under 8% by May, that is a lagging indicator. Consumers are better able to handle $4 a gallon gasoline than they were in 2008, but depleted most of their savings since then last year. If an Oil shock is going to bring on more than a stall this spring and summer, watch the weekly same store retail sales comparisons. They held up well all last year. If their YoY readings start going under +2%, that will be a danger sign. If consumers also retrench further than they already have in terms of gasoline usage, i.e., a one week YoY usage decline of more than 10%, or a 4 week YoY decline of more than 7.5%, that would be another strong danger signal.
Have a nice weekend.
Liveblogging World War II: May 20, 1943
24 minutes ago
7 comments:
"For the last 20 reporting days, $151.1 B was collected vs. $146.6 B a year ago, an increase of 3.3%."
And inflation, as measured by the headline cpi, has been running from 3.0% to 3.5% in previous months. So we're essentially getting no income growth. This is odd considering the economy is showing employment growth. Even when you figure in lower Wall Street bonuses year over year, the country must be losing more high paying jobs and gaining more very low paying ones on net, if the employment figures are true. We're also seeing no consumer credit growth outside education and a little in autos. Govt transfer payments are probably not going up either, though I haven't seen these numbers. Overall, it paints a pretty bleak picture for consumption with gasoline prices skyrocketed as they have been.
anon:
Those cpi growth figures you mention are relative to an entire year percentage. The tax collections are a straight percentage increase over a year ago. Thus, the statement "So we're essentially getting no income growth." doesn't make sense.
The headline cpi is up 3% year over year. Incomes are up 3% year over year. Thus there has been no increase in real incomes. It's not complicated.
How could there be any significant ncome growth when there's still high unemployment? Wages only rise when there's a risk that employees will find better, higher-paying jobs.
It's fairly easy to put any name you want to for posting here, with everyone posting as anonymous it's hard to keep straight who's saying what. You can still make up a name and most people do.
I don't doubt that the oil choke collar is one of the biggest areas to be concerned about, but several things have changed since this time last year. Firstly, the Japan earthquake was a factor in stalling the economy, and another such random negative event isn't particularly any more likely to happen during 2012 than at any other time.
Secondly, in 2011 Washington's Herbert Hoover austerity destroyed public sector jobs, thus increasing initial jobless claims for a while and keeping the unemployment rate high. Wasn't austerity, moreso than the oil shock, the primary cause of the temporary spike in initial jobless claims during 2011? Didn't the oil shock and Japan earthquake contribute to depressing hiring rather than increasing initial jobless claims? In other words, private sector employers have been robust since early 2010 in not laying workers off, but hiring has been weak and prone to being derailed -- at least, until the present uptick, I'm hoping.
Obama may have been correct to let the austerity damage take place in 2011 rather than 2012, thus keeping the unemployment rate higher in 2011 but opening the way for a declining slope in 2012. There's less that Republicans can try to cut this time around, and my prediction is that Obama and the Democrats are more likely to fight back this time. Time will tell.
The 2011 Democratic strategy seemed to be to play possum, allowing some austerity garbage in 2011. During the debt ceiling "crisis" that Republicans manufactured, Obama's strategy of offering a compromise whilst asking for some tax increases for the rich (which Republicans rejected) was effective in forcing Republicans into an unpopular position. John Boehner, Mitch McConnell and Congressional Republicans started 2011 with higher approval ratings than the Democrats, but after their debt ceiling antics Republicans lost a lot of ground with swing voters whereas Obama's approval rating didn't do any worse than gradually decreasing with the economic slump.
Having baited the Republicans into lowering their approval ratings, Obama may be in a stronger position to run against the Do-Nothing Republican Congress and oppose austerity during 2012. You'll notice that he wasted no time in mentioning Harry Truman's name once the debt ceiling debate was over and he pivoted to jobs.
Thirdly (back to the economic issues), the uptick in early 2011 was (IIRC) being driven by increased consumer confidence, as was the uptick in May 2010 that got ruined by Euro fears driving down consumer confidence and spending. The present uptick, however, is more robust and less dependent on consumer spending; it seems to be based more on employers shifting from increasing productivity per worker to actually starting to hire more workers.
Of course, the amount of hiring will be affected by consumer spending, but an oil price based stall may not be bad enough to derail this uptick, at least by itself. I predict that initial jobless claims will stay low (unless there's more austerian stupidity like last year's, which I'm not expecting), but that the increase in hiring may or may not be derailed. Hopefully it won't be, but time will tell. Employers may slow their hiring, but I don't anticipate notable private-sector layoffs unless something goes really badly wrong, i.e. a general economic crash where further layoffs would be a lagging indicator resulting from other problems happening first.
On the negative side, there's a concern that consumers may be getting closer to running out of their savings. I don't know the details of this so I'm not sure of the timeframe for when it's likely to hit. Also, to what extent will consumers be able to go into more debt rather than decreasing their spending when it hits?
If I'm mistaken about any of this, I'm of course open to being corrected. Just wanted to put some thoughts out there as something to consider.
To consolidate my points on oil prices and initial jobless claims: initial jobless claims won't skyrocket unless either (a) further Herbert Hoover austerity destroys more government jobs; or (b) private employers resume laying people off as per 2008-9. For reasons I explained above, neither of those things seem likely, at least to me.
High oil/gasoline prices will likely exert downward pressure on consumer spending, which will in turn exert some downward pressure on private sector -hiring-. However, that probably won't be enough to lead to private sector firing/layoffs; and furthermore, this present uptick in private sector hiring may be more robust and less dependent on consumer spending and consumer confidence to prop it up.
Even if my latter point falls flat, and private sector hiring stalls again, initial jobless claims should remain low unless there's a resumption of mass private sector layoffs (unlikely). So, initial jobless claims should remain low and continue to exert downward pressure on the unemployment rate. The real question is the extent to which increased private sector hiring will -also- exert downward pressure on the unemployment rate.
The change in the unemployment rate essentially represents a combination of initial jobless claims and hiring (with baby boomer retirement being an extraneous variable that also exerts downward pressure on the unemployment rate). That being said, hiring someone who already has a job will affect initial jobless claims differently to hiring someone who's made a claim already -- this is a minor point that probably won't be consequential. To all intents and purposes, hiring and initial jobless claims are largely separate variables which each have an effect on the unemployment rate.
Under normal circumstances, high oil prices may indeed lead to private sector layoffs, resulting in higher initial jobless claims, and thus high oil prices can function as a leading indicator for an increase in initial jobless claims. Under the present conditions, though, I just don't think that's going to happen. At worst, the private sector will decrease hiring but they won't be laying people off over higher oil prices, thus initial jobless claims won't be decreasing over it.
With a lower unemployment rate, the private sector would be more sensitive to an oil shock and thus it would lead to some layoffs in the private sector. Right now, the threshold that needs to be crossed before employers will lay off further workers is quite a lot higher than under normal circumstances. It's the threshold for a -stall- in private sector -hiring- that's been lower and has been being easily triggered.
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