Paper Economy

This chart shows industrial production as measured by the Federal Reserve since 2006. (SoldAtTheTop)

Industrial production rises in December

By SoldAtTheTop, Guest blogger / 01.16.13

Today, the Federal Reserve released their monthly read of industrial production and capacity utilization showing an increase in December with total industrial production rising 0.26% since November and rising 2.25% above the level seen in December 2011. 

Capacity utilization also rose 0.12% from November and climbing 0.61% above the level seen in November of 2011 to stand at 78.78% 

It's important to recognize that though the "recovery" is well over two years old, both industrial production and capacity utilization are notably below the peaks set in late 2007. 

This chart shows the average interest rate for 30-year and 15-year fixed-rate mortgages since 2006. (SoldAtTheTop)

Mortgage rates jump to 3.5 percent

By SoldAtTheTop, Guest blogger / 01.16.13

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 point to 3.5% since last week while the purchase application volume jumped 13% and the refinance application volume increased 15% over the same period. 

Clearly, the Federal Reserve's QE3 announcement and implementation has had a notable effect on mortgage rates in recent weeks continuing to lift refinance application activity and possibly helping to establish a base of sorts to purchase applications.

The question is though, if the Fed is stimulating this activity by forcing artificially low rates, what would these trends look like if prevailing rates were based on a more fundamental market function? 

This graph current prices paid, current conditions, future conditions and US recessions since 2007, according to the Empire State Manufacturing Survey. (SoldAtTheTop)

A mixed bag for manufacturing

By SoldAtTheTop, Guest blogger / 01.15.13

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 slight decline for current assessments of manufacturing activity and an improvement to future assessments with the current activity index falling to a notably weak level of -7.78 while future activity improved to 22.41. 

Current prices paid rose to 22.58 while current new orders weakened to -7.18 as assessments of future new orders improved to 25.11. 

This chart shows the rise and fall of discretionary retail sales over the past two decades. Sales have been creeping up slowly over the past three years, following a drop from 2006 to 2009. Retail sales have inched up 0.5 percent since last November. (SoldAtTheTop)

Retail sales increase 4.7 percent from last year

By SoldAtTheTop, Guest blogger / 01.15.13

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing an increase of 0.5% from November and an increase of 4.7% 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 also increased 0.25% from November climbing 1.72% above the level seen in December 2011 while, adjusting for inflation, “real” discretionary retail sales declined 0.04% 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.

This 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  following chart (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.

This graph shows total continued jobless claims since 2010. Currently there are some 1.99 million people receiving federal “extended” unemployment benefits. (SoldAtTheTop)

Jobless claims rise by 4,000

By SoldAtTheTop, Guest blogger / 01.10.13

Today’s jobless claims report showed an increase for initial jobless claims and a notable decline to continued jobless claims as initial claims remained below the closely watched 400K level. 

Seasonally adjusted “initial” unemployment claims increased by 4,000 to 371,000 claims from a revised 367,000 claims for the prior week while seasonally adjusted “continued” claims declined by 127,000 claims to 3.109 million resulting in an “insured” unemployment rate of 2.4%. 

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 1.99 million people receiving federal “extended” unemployment benefits. 

Taken together with the latest 3.28 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.27 million people on state and federal unemployment rolls. 

This graph shows the percent of population on food stamps and the total US unemployment rate since 2005. Food stamp use declined to 22.93 million in October, accounting for 19.47 percent of the population. (SoldAtTheTop)

Food stamp use drops in October

By SoldAtTheTop, Guest blogger / 01.08.13

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

In fact, household participation has been climbing so steadily that it has dwarfed 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 indicated that in October, 184,954 recipients were removed from the food stamps program after August and September's addition of over 874,000 with the current total increasing 2.79% on a year-over-year basis.

Individuals receiving food stamp benefits declined to 47.52 million which, as a ratio of the overall civilian non-institutional population, increased 1.22% on the month to now stand at a whopping 19.47% of the population.

Households receiving food stamps benefits declined by 40,952 to 22.93 million after rising by over 431,000 in August and September with the current total rising 4.36% above the level seen a year earlier

As participation continues to swell, so too has the total nominal benefit cost climbing 1.74% on a year-over-year basis to $6.34 billion for the month.

This graph tracks US recession probability, which reached 7.34 percent in October 2012. (SoldAtTheTop)

Recession probability indicator rises in October

By SoldAtTheTop, Guest blogger / 01.07.13

Last year I reported on a relatively new recession probability indicator (… the “markov switching” series recently introduced to the Fed FRED/Blytic) that was giving a pretty clear, though preliminary, indication of probable recession.

While I noted that the series was highly revised, I pointed out that even taking into account the revisions, the series was giving a recession signal since using just the "maximum" reported values (values that had been all been revised lower) the reporting 20% probability was very unusual and typically associated to oncoming trouble.

In the latest release, the October data (... there is a reporting lag) indicates that the probability of recession has risen to 7.34% while the standout August value (that initially peaked interest in this series) has now been revised to 4.46%.

It's important to note though that the point of my prior post was to highlight just the "maximum" reported values and while the latest release revises down August's 19.6% and reports an additional low probability for the latest month, it makes no difference... the fact remains that this series has NOT given such a significant over estimate of recession without there being a probable recession ahead.

Now clearly, there could always be a first time... this is just estimated data... but the prior 19.6% reported figure clearly argues for following this series very closely in the coming months.  

This chart shows total private nonfarm payrolls since 2001. Unemployment went flat at 7.8 percent in December 2012. (SoldAtTheTop)

Unemployment flat at 7.8 percent in December

By SoldAtTheTop, Guest blogger / 01.04.13

Today’s Employment Situation Report indicated that in December, net non-farm payrolls increased adding 155,000 jobs overall with the private non-farm payrolls sub-component adding 168,000 jobs while the civilian unemployment rate went flat at a revised 7.8% over the same period.

Net private sector jobs increased 0.15% since last month climbing 1.73% above the level seen a year ago but remained a whopping 3.04% below the peak level of employment seen in December 2007.

This graph shows jobless claims since 2010. Currently there are some 2.06 million people receiving federal “extended” unemployment benefits. (SoldAtTheTop)

Jobless claims rise by 10,000

By SoldAtTheTop, Guest blogger / 01.04.13

Thursday's jobless claims report showed increases for both initial and continued jobless claims as initial claims remained below the closely watched 400K level. 

Seasonally adjusted “initial” unemployment claims increased by 10,000 to 372,000 claims from a revised 362,000 claims for the prior week while seasonally adjusted “continued” claims increased by 44,000 claims to 3.245 million resulting in an “insured” unemployment rate of 2.5%. 

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 2.06 million people receiving federal “extended” unemployment benefits. 

Taken together with the latest 3.24 million people that are currently counted as receiving traditional continued unemployment benefits, there are 5.31 million people on state and federal unemployment rolls.