Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a notable 1.1% increase from January 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 1.03% from January and increased 3.90% above the level seen in February 2011 while, adjusting for inflation, “real” discretionary retail sales increased 3.90% 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.
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Yesterday's employment situation report showed that conditions for the long term unemployed improved slightly in February but remained epically distressed by historic standards.
Workers unemployed 27 weeks or more declined to 5.426 million or 42.6% of all unemployed workers while the median number of weeks unemployed increased to 20.3 weeks and the average stay on unemployment declined to 40.0 weeks, the highest level ever recorded.
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.
Today’s Employment Situation report showed that in February “total unemployment” including all marginally attached workers declined to 14.9% from the prior month's level of 15.1% while the traditionally reported unemployment rate went flat at 8.3%.
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.
Today’s jobless claims report showed that both initial and continued unemployment claims increased slightly while seasonally adjusted initial claims continued to trend well below the closely watched 400K level.
Seasonally adjusted “initial” increased to 362,000 claims from last week’s revised 354,000 claims while seasonally adjusted “continued” claims increased by 10,000 resulting in an “insured” unemployment rate of 2.7%.
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 3.40 million people receiving federal “extended” unemployment benefits.
Taken together with the latest 3.88 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.28 million people on state and federal unemployment rolls.
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 216,000 jobs in the month bringing the total employment level 1.72% above the level seen in February 2011.
With today's report, ADP revised back data for 2010 and 2011 showing that the recovery has been fairly consistent with a few spotty periods of sluggishness while more recently, the trend had been picking up momentum.
It's important to note though that 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.
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 3.965% since last week while the purchase application volume increased 2.1% and the refinance application declined 2.0% over the same period.
With rates trending ever lower, the economy weak and the FOMC members remaining dovish, 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).
In January, 3.08% of non-credit enhanced loans went seriously delinquent while the level was 9.03% of credit enhanced loans resulting in an overall total single family delinquency of 3.90%.
The following charts (click for larger ultra-dynamic and surf-able chart) show what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.
It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers.
Today, the U.S. Census Bureau released their latest read of construction spending showing improvement from near-cycle low levels of spending in January for residential construction while indicating a slight pullback for total non-residential spending.
On a month-to-month basis, total residential spending increased 1.78% from December and rose 6.73% above the level seen in January 2011 while remaining a whopping 62.50% below the peak level seen in 2006.
Single family construction spending increased 2.46% since December and rose 5.48% since January 2011 but remained a whopping 75.78% below it's peak in 2006.
Non-residential construction spending declined 1.54% since December but climbed a whopping 16.60% above the level seen in January 2011 but remained a whopping 33.14% 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.
Yesterday, the Institute for Supply Management released their latest Non-Manufacturing Report on Business indicating that service related business activity improved throughout February with the business activity component climbing notably while the overall non-manufacturing index increased to 57.3 from 56.8 in January.
At 62.6 the business activity index increased 5.21% since January but remained 6.43% 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-over-year and month-over-month growth continues. Market conditions improved dramatically." (Information)
"Although customer traffic continues to decline, discretionary spending per capita is increasing. There is a bit more confidence regarding current economic conditions, spurring on slightly more aggressive marketing to capture new customers and encourage repeat visits." (Arts, Entertainment & Recreation)
"Business is generally flat, but showing signs of improvement." (Health Care & Social Assistance)
"Bracing for impact of fuel price increases on delivered commodity prices." (Educational Services)
"Optimism is all around, but sales remain sluggish. Activity shows interest, but market [is] very price sensitive." (Professional, Scientific & Technical Services)
"Signs are building that things are starting to settle and business is stabilizing. Although orders aren't increasing rapidly, they are steady and consistent instead of the radical swings of the past two years. We hope that this trend will continue." (Retail Trade)
"Demand [is] gradually increasing for most business sectors." (Wholesale Trade)
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 December, 227,922 recipients were added to the food stamps program with the current total increasing 5.52% on a year-over-year basis while household participation increased 7.23%.
Individual participation as a ratio of the overall civilian non-institutional population has increased 4.84% over the same period.
Participation continues to increase with nominal benefit costs climbing a lofty 5.57% on a year-over-year basis to $6.22 billion for the month.