Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a 0.4% increase from December and an increase of 5.8% 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 0.47% from December and increased 4.86% above the level seen in January 2011 while, adjusting for inflation, “real” discretionary retail sales increased 2.23% 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.
Today, the University of Hong Kong released their Hong Kong Residential Real Estate Series (HKU-REIS) indicating that, in December, the price of residential properties declined a notable 3.82% since November but still remained 7.87% above the level seen in December 2010.
It appears that after a stunning run of monthly increases that saw prices climb dramatically, prices are beginning to show a notable pullback with all measures declining on the month.
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.
Friday's early release of the Reuters/University of Michigan Survey of Consumers for February indicated a decline in consumer sentiment with a reading of 72.5 dropping 6.45% below the level seen last year while one year inflation expectations declined slightly to 3.2%.
The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) declined to 68, and the Current Economic Conditions Index dropped to 79.6.
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.
Today’s jobless claims report showed a decline to initial unemployment claims and an increase to continued unemployment claims as seasonally adjusted initial claims continued to trend below the closely watched 400K level.
Seasonally adjusted “initial” unemployment declined 15,000 to 358,000 claims from last week’s revised 373,000 claims while seasonally adjusted “continued” claims increased by 64,000 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 4.05 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.55 million people on state and federal unemployment rolls.
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 6 basis point to 3.33% since last week while the purchase application volume increased 0.1% and the refinance application jumped 9.4% 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).
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” increased 8.79% since November climbing 20.36% above the level seen in December 2010 while private non-farm job “hires” declined 2.28% from November but rose 3.69% above the level seen in December 2010.
Job “layoffs and discharges” declined 4.74% from November falling 1.36% below the level seen last year while quitting activity declined 2.45% from November remaining 3.41% above the level seen in December 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).
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 November, 94,086 recipients were removed from the food stamps program with the current total still increasing 5.82% on a year-over-year basis while household participation increased 7.46%.
Individual participation as a ratio of the overall civilian non-institutional population has increased 5.06% over the same period.
Participation continues to increase with nominal benefit costs climbing a lofty 6.86% on a year-over-year basis to $6.20 billion for the month.
Today’s Employment Situation Report indicated that in January, net nonfarm payrolls increased with private nonfarm payrolls adding 257,000 jobs and the unemployment rate declining to 8.3% over the same period.
Net private sector jobs increased 0.23% since last month climbing 2.06% above the level seen a year ago but but remained a whopping 4.47% below the peak level of employment seen in December 2007.
Today's employment situation report showed that conditions for the long term unemployed were mixed in January and remained epically distressed by historic standards.
Workers unemployed 27 weeks or more declined to 5.518 million or 42.9% of all unemployed workers while the median number of weeks unemployed increased to 21.1 weeks and the average stay on unemployment declined to 40.1 weeks, the highest level ever recorded.
Looking at the chart above (click for super interactive version) 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 January “total unemployment” including all marginally attached workers declined to 15.1% from the prior month's level of 15.2% while the traditionally reported unemployment rate also declined to 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.