CBO budget forecast, April’s retail sales, CPI, PPI, and industrial production, Q1 household debt & credit

on Tuesday, the Congressional Budget Office (CBO) released their Updated Budget Projections for Fiscal Years 2013 to 2023 (pdf; summary here); which, in creating their ten year forecast, assumes that current laws on taxes & spending do not change and no surprises intervene over the duration, chances of which happening are between slim and none; at any rate, this report is a quarterly update to the mandated Budget and Economic Outlook that they published in February, & is remarkable if only for the massive shift in their fiscal projections in such a short time (the sequester was already assumed in that forecast)…expecting revenues to rise more rapidly than spending over the short term, the CBO estimates that the budget deficit will shrink to $642 billion this fiscal year (ending Sept 30) down from their earlier estimate of $845 billion, which will make it the smallest deficit since 2008; this is a 24% reduction in their deficit projection of just 3 months ago, which was due in part to the unexpected profitability of federal mortgage giant Fannie Mae, which will contribute $59.4 billion, including a one time recredit of $50.6 billion in deferred-tax assets, after reporting a record quarterly profit, and a record $50.6 billion profit from student loans, 43% higher than expected in February…the result, according to the CBO, will be a further reduction in the relative size of the deficit to 4.0% of GDP, which will shrink further to 3.4% of GDP in 2014 and then to 2.1% of GDP in 2015, by which time they expect a GDP of $17,632 billion with the economy growing at a 5.9% annual rate…later in the decade, however, deficits are expected to rise again due to costs associated with the aging baby boomers and increased interest on new Treasury script…over the entire ten year period, CBO now forecasts the cumulative deficit to be $618 billion less than it forecast in February…to the right, we have a chart from Bill McBride wherein he has graphed the actual budget deficits as a percentage of GDP since 1980 in purple, and then added the CBO projections for the next ten years in blue…it’s fairly clear that if the CBO projections play out, the deficits of the next ten years will be no greater than those of the last 22, and certainly less than the last 10 years of Reagan-Bush…and in a prospect of an even more austere future, the CBO also scored Obama’s budget proposal (pdf) on Friday, with this report as a baseline, and found that it would take an additional $1.146 trillion from the deficit over 10 years…

the key economic release of the past week was the Advance Report on Retail Sales for April from the Census Bureau (pdf); as reported, the estimated seasonally adjusted retail and food services sales “were $419.0 billion, an increase of 0.1 percent (±0.3%)* from March”, which is footnoted with “Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different than zero”, so we should keep that uncertainty in mind as we examine the details of the report, eg, the sales decline for March was revised down to a negative 0.5%;…the major factor impacting this month’s report a 4.7% decline in gas station sales, from a seasonally adjusted $46,014 million in March to $43,869 million, without that, retail sales would have been up 0.7% for the month….total April sales were 3.7% (±0.7%) above those of April 2012, and year to date sales amounted to $1,606,433 million, 3.3% higher than the same period last year; unadjusted sales for the month amounted to $416.5 billion, so seasonal adjustments weren’t a significant factor in this month’s report…sectors showing significant sales gains include car & parts dealers, where sales rose a seasonally adjusted 1.0%, from $77,861 million to $78,644 million, building & garden supplies dealers, where sales rose 1.5%, from $25,108 million to $25,497 million, clothing & accessories stores, where sales rose 1.2%, from $20,374 million to $20,624 million, general merchandise stores, where sales increased 1.0%, from $51,661 million to $52,182 million, and non-store retailers (internet & catalog) where sales were up 1.4% to $40,938…other than gasoline, the only retail sectors where sales fell in April were food & beverage, where sales fell 0.8% to $53,686 million, and drugstores, where sales were off 0.1% to $22,830 million…on a year over year basis, nonstore or internet sales were up 15.4%, car dealers saw sales rise 8.8%, and clothing stores saw sales rise 5.7%…sectors seeing sales slip since last April included gas stations, which sold 4.6% less by dollar value, department stores, whose sales were off 3.6%, general merchandise stores, where sales slipped 0.7%, and drugstores, where sales declined 0.9% over the past year…the chart we have included here from Doug Short tracks the year over year change in monthly retail sales since 1995 (you may have to click to enlarge to see the scale)…note that while YoY sales have remained positive, the increase has generally been declining since its recent peak in June 2011…he also highlights the month before each recession (grey bars) with a red dot, showing YoY sales at those times to be in the same range as those of this current month…

 

as was the case with retail sales, the sharp decrease in the price of gasoline was the major factor in the lower April consumer price index; the Bureau of Labor Statistics reported the seasonally adjusted price index for all urban consumers (CPU-U) fell 0.4% from March to April, reducing the one year overall change in prices to 1.1%…as was the case in March, the decline in the energy index turned the broader index negative; decreases of 8.1% in the price of gasoline and 4.4% in the price of fuel oil overwhelmed the increases of 0.5% in the price of electricity and 4.4% in the cost of natural gas to leave the April energy index 4.3 % lower than March and also 4.3% lower than a year ago; otherwise, prices changes for other components were fractional and mixed; food prices were up 0.2%, as the index for food away from home rose 0.3% and the food at home index rose 0.1%, with a 1.4% decline in fruits and vegetables offsetting larger increases in other food categories; the index for all items less food and energy, aka core CPI, increased 0.1%, same as in March, leaving it 1.7% higher than a year ago; the index for shelter, the largest component of the CPI at 31.5% of the total index, was up 0.2%, with lodging away from home up 0.3% and insurance down 1.0%, while among transportation index components, prices of new cars were up 0.3%, prices of used vehicles were up 0.6%, and transportation services were down 0.2%; medical care services were also down a bit, 0.1%, as hospital costs were down 0.7% while prices doctors services rose 0.4%; medical care commodities, which includes drugs & equipment, on the other hand, were up 0.1%…the cost of recreation was down 0.1%, the relatively small component of apparel was down 0.3%, while prices for education and communication commodities fell 0.6%…below, we’ve created a fairly busy FRED graph from the CPI-U and selected components, using the percentage change monthly in lieu of the index for most of them…using the scale on the left, the black line traces the monthly percentage change in the CPI, the bright blue line traces the percentage changes in the medical care services index, the red line traces the food at home index, and the green line shows the monthly changes in the shelter index…the blue line is the actual gasoline prices index, with the scale on the right; based on gasoline prices between 1982 & 1984 = 100; we could not show the month over month price changes in this index because if it was on the same chart as the rest, the other indexes would all appear as straight lines in comparison to the gas index, which has more than doubled since the recession bottomed…

the BLS also released the Producer Price Indices for April, which is also often referred to as wholesale prices; this release includes 3 main indexes; the price index for finished goods fell 0.7%, the price index for intermediate goods in earlier stages of processing declined 0.6%, while prices of crude goods fell 0.4%…over 80% of the price decrease in finished goods, which are now up only 0.6% in price over the past year, was the result of the 2.5% decrease in prices for finished energy goods, led by a 6.0% decrease in the whole price of gasoline; in addition, wholesale prices for finished foods were off 0.8% in April on the back of a 10.6% decrease in prices for fresh & dried vegetables, which meant that prices for core finished goods (less food and energy) were actually up 0.1%; pharmaceuticals, up 0.6%, led the core prices increase…as with the CPI and finished goods, two-thirds of the decrease in the intermediate goods price index can be accounted for by declining prices for intermediate energy goods, which dropped 2.1% in April; the index for intermediate foods and feeds also fell, by 0.9%, as did the core intermediate index, which was off 0.2%; prices for intermediate goods are now 1.0% lower than a year ago…in contrast to the other major indexes, the crude energy index was actually up by 3.7%, led by a 15.5% spike in the price of natural gas; lower overall prices for crude materials, which are now down 3.2% over the past three months, were led by lower prices for crude foods and feeds, which fell 2.6% in April; about 70% of that was due to an 11.5% decrease in the price of corn, although price indexes for hay, hayseeds, and oilseeds and fresh vegetables also declined; meanwhile, the index for crude materials not including food and energy was off 2.8% in April; lower prices for copper scrap (-4.8%), paper waste (-4.5%), and non-ferrous metal ores (-3.7%) contributed to the decline…

  another important release this week was on Industrial production and Capacity Utilization for April from the Fed, which showed the seasonally adjusted industrial production index fell 0.5% in April, the worst showing in eight months, largely because of a 3.7% decline in utility production, reflecting the partial unwinding of the 5.3% jump in utility production in a colder than normal March, which boosted that month’s total production to a 0.3% gain…the manufacturing index also fell, 0.4%, from 96.6 to 96.2, cutting it’s year over year increase to 1.3%, while the mining index, which includes gas & oil production, rose by .0.9%, from 115.9 to 116.9, and is now 4.2% above the level of last April…our above FRED graph shows the tracks of these major production indexes since 2005: the production index for all industry is in black, the manufacturing production index is in blue, the utility production index track is green, the mining production index is in red, and the grey bar marks the official recession (recall all industrial production indices were reset at the peak where 2007=100); in addition to these major industry groups, the Fed also reports industrial production by market group: production of consumer goods fell 0.6% in April, but the consumer goods index index is still a full point above its year end level at 94.2; production of consumer durable goods was off 0.8%, with output of cars, appliances, furniture, and carpeting all down significantly, and only consumer electronics showing a half percent increase; the index for consumer nondurables was down 0.5%, mostly due to a 3.1% drop in the output of consumer energy products; the index for non-energy nondurables rose 0.4%….production of business equipment was down 0.5%, with output of transportation, info processing, and industrial equipment all down by a similar fraction, while production of defense and space equipment slipped 0.3% after a 0.2% increase in March….within non-industrial supplies, output of construction supplies was down 0.8% after falling 1.5% in March while the output of business supplies fell a full percent after smaller gains in each earlier month this year; meanwhile, output of materials to be processed further fell 0.4% due to pullbacks in all major components, led by a 1.6% drop in output of consumer parts and a 1.5% drop in textile production…this release also reports on capacity utilization, which is given as a percentage of plant and equipment in use during the month; in April, capacity utilization for total industry decreased from a revised March figure of 78.3 percent to 77.8 percent, meaning at any given time during the month, over 22% of our plant and equipment was sitting idle…just 75.9% of our manufacturing capacity was in use, down from 76.3% in March and 76.1% a year ago, while capacity utilization for utilities was at 79.4%, down from 82.4% in March but up from 77.8% in April of last year, and capacity utilization for mining, which includes oil & gas, was at 88.0%, up from 87.5% in March and 87.9% a year ago…

another report released this week was The 1st Quarter Report on Household Debt and Credit (pdf) from the NY Fed, which showed that aggregate consumer debt declined by $110 billion to $11.23 trillion in the first quarter, and is now down from the peak of $12.68 trillion in the 3rd quarter of 2008; most of the fall could be attributed to lower mortgage debt, which was down $101 billion from the 4th quarter to $7.93 trillion, although the portion of that which was discharged through foreclosure or short sales apparently wasn’t noted; home equity lines of credit dropped $11 billion, or 2.0%, and stood at $552 billion as of March 31st; outstanding student loan balances rose by $20 billion and had reached $986 as of the end of the quarter, while auto loans outstanding rose by $11 billion, credit card balances fell by $19 billion and other consumer loan balances were $10 billion lower…co-incident with this report, the NY Fed released a special report on student indebtedness, The Geography of Student Debt, which broke down student debt by state and percentage delinquent and included an additional set of maps; they find 16.2% of americans are burdened with student debt, from a low of less than 12% in Hawaii to a high of more than 25% in the District of Columbia; outstanding balances average $24,810 nationally but the average 2013 graduate starts out life already $35,200 in debt, and while 90 day delinquency rates average 11.7% nationally, they vary widely regionally, from a low of 6.5% in North Dakota to levels approaching 18% in West Virginia and the deep south…the above bar graph from the NY Fed report shows the quarterly changes in each type of household debt over the past ten years; the orange codes for mortgage debt outstanding, gradually coming down but still 71% of the total, above that in purple is home equity lines of credit, amounting to 5% of outstanding debt; the green represents auto loans outstanding, now at 7% of all debt outstanding, while the blue represents credit card debt, which has shrunk to 6% of the total, while the red indicates student indebtedness, now up to 9% of all consumer debt outstanding…at the top in grey is the last 3%, which the Fed classifies as “other”…

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

the MBA & LPS on mortgage delinquencies & foreclosures, March consumer credit, & a new CO2 record..

it’s been a pretty slow week, with neither major monthly economic reports nor widespread kerfuffles in the blogosphere…as we figured, all the budget proposals floated earlier this year have gone nowhere, and it now appears that the republicans wont negotiate on any compromise until they have the democrats and the president and backed up against the debt ceiling…in case you forgot, the artificial federal debt limit is set to kick back into effect a week from now, on May 19th, after a three-month hiatus…according to the inane deal negotiated with the tea party contingent in late January, the debt ceiling was suspended until that date so the anti-everything crowd would not be on record as having raised it; then, on May 19th, the new debt ceiling will suddenly become whatever amount of script the Treasury has outstanding at that time, effectively forcing the government immediately into accounting legerdemain to run the show while the clock runs out…estimates were that would be by mid August, but with revenues now higher than expected, it could be stretched till early September or even October, around the same time the stop gap continuing resolution to fund government functions expires, September 30th, at the end of the fiscal year…

despite the slow week, we did have a once in a blue moon coincidence of the 1st quarter Mortgage Delinquency Survey from the Mortgage Bankers Association’(MBA) and the March Mortgage Monitor from LPS (pdf) that both look at the condition of US home mortgages as of the same last day of March date, giving us an opportunity to compare them in the same week… the MBA reported that their seasonally adjusted delinquency rate for mortgage loans on one-to-four-unit residential properties increased to 7.25% of all loans outstanding at the end of the 1st quarter, up from 7.09% at the end of the year; these are mortgages that are at least one payment past due, but yet not in the foreclosure process… however, the percentage of loans in the foreclosure process, also called the foreclosure inventory rate, decreased to 3.55% from the 4th quarter’s 3.74% rate; meanwhile, new foreclosure actions were initiated on 0.70% of mortgages in the 1st quarter, the same percentage as were started in the 4th quarter of 2012…a year ago, the seasonally adjusted delinquency rate was 7.40% while the foreclosure inventory rate was 4.39%…MBA also gives the unadjusted rates, which we’ll need to compare to the LPS report; at the end of the first quarter, 6.75% of home mortgages were at least one payment overdue but not in foreclosure; that’s down from a 4th quarter delinquency rate of 7.51%…note that the net seasonal adjustment was 0.92% and swung the quarter over quarter change from a decrease to an increase; what that’s showing us is the long standing tendency of homeowners to skip mortgage payments during the holiday shopping season and catch up again by the end of March…MBA also gives a “serious delinquency rate” by adding those homeowners in foreclosure to those more than 90 days past due on their housepayments at 6.39% as of the end of March, which is down from 6.78% at year end and down from 7.44% a year earlier; combined with those who have missed at least one mortgage payment, total delinquent mortgages at the end of march amounted to 10.30% of all mortgages on an unadjusted basis, so despite the ongoing improvement in the overall delinquency rate, there were still more than one in ten homeowners who were behind on housepayments at the end of March…two graphs are included below; the calculated risk bar graph on the left is sourced from this MBA report; it shows the seasonally adjusted percentage of mortgages past due in each quarter since 2005 by the length of time overdue, with the percent in foreclosure in red, those more than 3 months behind but not in foreclosure are shown in yellow, those between 60 and 89 days overdue are shown in blue, and those just a month behind are shown in violet…at a seasonally adjusted rate of 10.8% delinquent, there’s been obvious improvement from the late 2009 & early 2010 delinquency rates over 14%, but we’re still far from the normal rates around 5.5% in the middle of the last decade….the graph on the right from the MBA shows the percentage of loans in the foreclosure process by state (click to enlarge); the judicial states, where the banks must prove the right to foreclose in court, are indicated by the dark navy coloring, whereas the non-judicial states, where banks can seize homes without proof, are indicated in red; the largest foreclosure inventory rates are seen here to be in Florida at 11.43%, New Jersey at 9.00%, New York at 6.18%, and Illinois, where 5.89% of all mortgages are in foreclosure; those are all judicial states; obviously, with the banks having scrambled the property records both electronically through MERS and through securitization, it’s made judicial foreclosure next to impossible (without fabricating documents after the fact), so large court backlogs have built up in judicial states; Nevada, the only non-judicial state with a foreclosure backlog over 5%, passed a law in 2011 making it a felony if a mortgage servicer made fraudulent representations concerning a title, and imposed fines up to $5,000 for falsifying documents, which brought foreclosures in that state to a standstill…

the Mortgage Monitor for March (pdf) from LPS (Lender Processing Services) is a similar report, released monthly, which we’ve been tracking for a few years as a proxy for the national mortgage crisis…consistent with the last time we compared these reports, the LPS delinquency data seems to be a bit lower than the MBA’s; the March summary statistics and LPS 12 month history on are page 19 of the pdf…in figures that correspond to MBA’s unadjusted percentages, LPS reported that 6.59% of mortgages were delinquent in March, down from 6.80% in February and 7.17% at year end, the typical seasonal high…of March delinquencies, 1,842,000 homeowners were more than 30 days but less than 90 days behind on their mortgages, while 1,466,000 mortgages were 90 or more days delinquent but not yet in foreclosure; in addition, LPS counted 1,689,000 homes still in the foreclosure process (ie, notices had been served but the homes had not yet been seized); these amounted to 3.37% of all mortgages, down from 3.38% last month and 3.44% in December; combining mortgages over 90 days past due with those in foreclosure yields a serious delinquency rate of 6.29%; the average time of serious delinquency before foreclosure starts is now up to 492 days nationally, while the average days delinquent for those already in foreclosure is 834 days (see page 21)…LPS reported 121,012 new foreclosure starts in March, down 8.2% from February, and a 10.1% increase in foreclosure sales, which is an industry euphemism for home seizures, although they note that the passage of the Homeowner Bill of Rights in California appears to have slowed down the foreclosure sale process in that state considerably…since most of the data in the 32 page mortgage monitor is graphically presented, we”ll present a few below with explanations…

the bar graph on top above from page 4 of the Mortgage Monitor is roughly the LPS analogue of the first MBA graphic above; each bar represents a month of data and shows the number of mortgages 30 days delinquent in blue, the number 60 to 89 days overdue in red, those more than 90 days delinquent but not in foreclosure in green, and the number of mortgages in the foreclosure process during that month in violet; the gauge for those counts in thousands is on the left margin…in addition, there is a blue line showing the count of active mortgages each month with the count in thousands on the right axis, and text on the graph gives active mortgage counts and number not current for 3 dates; January 2005, when the chart starts, January 2010, when the number of non-current mortgages peaked at 7,700,000, and the current counts of 50,200,000 active mortgages with 5 million not current…the 2nd graph above from page 7 of the pdf shows the track of the national foreclosure inventory rate in black (now 3.37%), and the contrast between the percentage in the foreclosure process in judicial states tracked in blue (now 5.65%) and the percentage of those in the process in non judicial states tracked in red (now 1.72% of active mortgages…and last, from page 20 of the Mortgage Monitor, below we have the LPS states table showing the percentage delinquent, the percentage in foreclosure, the total non-current, and the year over year change in that non-current total for each state…again we see Florida with the greatest fraction in foreclosure at 11.1%, followed by New Jersey at 8.6% and New York at 6.2%…note that Hawaii shows 6% in foreclosure here, compared to less than 4 1/4% on the MBA’s chart …also note high delinquency rates in Mississippi at 12.5%, Alabama at 9.3%, and Louisiana at 9.1%

one regular release of this past week that we’ve been following was the G19 on Consumer Credit for March from the Fed…in a credit expansion only half of what was forecast, aggregate seasonally adjusted consumer credit increased by just $7.97 billion to $2,807.5 billion, which works out to an annual rate of 3.4%, the smallest increase in eight months; the February credit increase was also revised a bit lower, to $18.14 billion…credit card, or revolving debt, decreased for the first time this year by $1.71 billion, at a 2.4% annual rate, following a $452.7 million increase in February, while non-revolving credit, which is borrowing for such as cars, yachts, and college tuition, (but not real estate) rose by $9.68 billion in March, or a 5.9% annual rate…on an unadjusted basis, overall credit outstanding actually fell from $2,766.3 billion in February to $2,762.4 billion in March; the revolving credit portion fell from $810.7 billion to $802.0 billion, while the non-revolving component rose from $1,955.5 billion to $1,960.4 billion…the bar graph below from ZeroHedge shows the seasonally adjusted monthly change in revolving credit outstanding in blue, the change in non-revolving credit in red, with the black line tracking the total change in credit monthly…as you all know by now, the reason we’ve been following this report has been to track the expansion of the government funded student debt bubble…to do that, we scroll down to the 2nd table in the release, under the heading “Consumer Credit Outstanding”, for the actual unadjusted data; under the subheading “Major types of credit, by holder” we see loans made by the Federal government directly to consumers, all of which are for education…at the end of March, these amounted to $560.8 billion, up from $556.9 billion in February and $452.6 at the end of the 1st quarter last year, a 19.3% increase…so although the rate of increase has slowed, student debt owed to the Federal government alone is still increasing at over $100 billion a year; students are now paying 3.4% interest on those loans, but because last year’s extension of the interest rate break was only for a year, interest rates on Federally subsidized student loans are set to rise to 6.8% on July 1st…Elizabeth Warren introduced her first piece of legislation as a Senator this week to not only roll that back, but to lower it to 0.75%, the “same deal on interest rates the banks get”

finally, we would be remiss if we didnt at least make note of the milestone marker that atmospheric carbon dioxide concentrations hit on Friday morning (Thursday Hawaii time, where official readings are taken)…CO2 measurements at the mountaintop Mauna Loa Astronomical Observatory (chosen for it’s remoteness from local influence) averaged 400.03 parts per million on Thursday, the first time that level has been breached in known history…the estimates of a previous time when CO2 might have reached that level would be in the pre-historic Pliocene, when jungles covered northern Canada and the north pole averaged 60 degrees and the sea level was around 125 feet higher than today…we have two charts below which will serve to explain graphically how this change in the atmosphere came about…on the left, we have a graph of the average monthly atmospheric concentrations of CO2 as per the readings taken at Mauna Loa; you’ll note it is a jagged line; that’s because each summer green vegetation removes carbon dioxide from the atmosphere, lowering it’s concentration down to a november minimum, when carbon dioxide again begins to increase, to end up at a annual higher high each May, when the growing season and photosynthesis again turn the levels down..the only pause in the continuous upslope was caused by the 1991 eruption of mount pinatubo, which belched millions of tons of sulfur dioxide into the atmosphere, which resulted in an increase in cloud cover cooling and a corresponding increase in the solubility of carbon dioxide in sea water…on the right, we have a graph of atmospheric CO2 levels as measured from data from air bubbles trapped in ice taken from ice cores drilled into the Antarctic ice sheet, where what’s graphed on the left appears vertical…you can see that over most of the last 800 thousand years, atmospheric carbon dioxide has roughly averaged between 180 and 280 parts per million, only once briefly touching 300 parts per million about 325,000 years ago…so it’s quite obvious that at 400 ppm we’re already living in an entirely different atmosphere than we or any of the plants and animals that we know have ever experienced, a new atmosphere which will persist for thousands of years even if new emissions are controlled… and the oceans, where much of the carbon dioxide we’ve emitted has ended up as carbonic acid, are already 30% more acidic than preindustrial times, and now acidifying 10 times faster today than 55 million years ago when a mass extinction of marine species occurred…

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

March LPS graphics

loan counts:

foreclosure inventory rates:

states non-current:

April’s jobs report, March’s income & outlays and trade deficit, February’s Case-Shiller

the April unemployment report was better than expected, and positive revisions of nonfarm payrolls over the past two months took some of the sting out of the lousy jobs report in March… the Bureau of Labor Statistics reported that seasonally adjusted payroll jobs rose 165,000 and the unemployment rate ticked down to 7.5% in April; in addition, the establishment survey payroll job numbers were revised to show 138,000 jobs added in March instead of the 88,000 reported last month, and 332,000 jobs added in February, up from the 268,000 reported last month and the originally reported 236,000…according to the establishment survey, 73,000 professional and business service jobs were added in April, of which 22,800 were in professional and technical services and 30,800 were in temporary help services; another 38,000 jobs were added by restaurants and bars, and 29,000 were in retail, 15,000 of which were in general merchandise stores..and another 19,000 were in health care, more than accounted for by the 14,000 in ambulatory care services and 7,000 in social services…net government payrolls were down 11,000 workers, including 8,000 at the federal level, suggesting a minimal impact from the sequester to date…jobs in construction were little changed, with 13,300 new jobs in residential construction more than offset by almost 14,000 less jobs in nonresidential buildings and civil engineering; likewise, payrolls jobs in both durable and non durable goods manufacturing, wholesale trade, transportation and warehousing, and financial activities were little changed for the month...however, with the increase in payroll jobs came a significant drop in the average workweek for all employees on private payrolls; from 34.6 hours in March to 34.4 hours in April; in manufacturing, the workweek was down 0.1 hour to 40.7 and overtime was also down 0.1 hour to 3.3 hours, while the average workweek for production and non-supervisory employees slipped to 33.7 hours; to show the significance of this, zero hedge took that decline of 0.2 hours in the workweek and multiplied it by the 135,474,000 payroll jobs reported this week and figured that the workweek decline was the equivalent of a loss of 618,000 payroll jobs; partially offsetting that cut in hours, the average hourly earnings for all private payroll employees rose by 4 cents to $23.87, while nonsupervisory employees saw their pay edge up by 2 cents to $20.06 an hour…our FRED graph shows total number of employees in manufacturing in blue, those employed in retail in green, and those employed in construction in red…

the April results of the smaller BLS household survey mitigated some of the extreme swings in labor force data we saw in March, which suggests the +/-400,000 margin of error may have been a factor in last month’s report; in April, those counted as in the labor force increased by 210,000 to 155.238 million, while those not in the labor force declined 31,000; we also saw a 293,000 increase in those reporting they were employed, while those meeting the criteria for being unemployed (actively looking for work during the reporting period) declined by 83,000, resulting in a drop in the official unemployment rate to 7.5% in April from the 7.6% reported in March; within demographic groups, the seasonally adjusted jobless rate for adult women fell from 7.0% to 6.7%, as unemployment for white women declined from 6.1% to 5.7% while the jobless rate for black women fell from 12.2% to 11.6%; meanwhile, the jobless rate for adult men rose from 6.9 to 7.1%, driven mostly by a surge in the jobless rate for adult while males from 6.1% to 6.4%; seasonally adjusted unemployment rates for Hispanics at 9.0%, Asians at 5.1%, and teenagers at 24.1% were little changed…the metrics we follow as a better indicator of the employment situation remained dismal; the labor force participation rate was unchanged at 63.3%, again the lowest since before women entered the labor force en masse in 1979, while the employment-population ratio increased to 58.6% in April from 58.5% in March; the track of both those metrics since 2000 is shown on our FRED graph below; over the past year, those “not in the labor force” and hence not counted as jobless increased by 1,604,000; there are now 6,329,000 of us who are not counted but still report that they want a job…the number of those jobless or 27 weeks or more and still actively looking for work declined by 258,000 to 4.353 million; their share of the total unemployed declined by 2.2% to 37.4%; there was a corresponding 230,000 increase in those unemployed 15 to 26 weeks…another 2,347,000 of us were classified as marginally attached to the workforce, up 21,000 from March; these are those who looked for work sometime over the preceding 12 months but not in the 4 weeks preceding the survey; of those, 835,000 were considered discouraged workers because they reported they werent looking for work because they believed no job is available for them; their numbers are up from 803,000 in March…there was also a significant jump in the number of employed just working part time; 26.8 million workers reported they only worked part time in April; of those, 7,916,000 either had hours cut or could only find part time work, a 278,000 increase over the number who reported they’d rather work full time in March; as a result, the broader U-6 measure of unemployment rose from 13.8% to 13.9%; several writers blame the ongoing increase in part time jobs on obamacare, due to the $2,000 per employee penalty for uncovered full time workers under ACA; there have been anecdotal reports that this is happening, but no hard numbers to quantify the effect…

another important economic release this week was for Personal Income and Outlays for March from the BEA; seasonally adjusted personal income inched up $30.9 billion, or 0.2%, from an annual rate of $13,599 billion in February to a rate of $13, 630 billion in March, wages and salaries increased $14.9 billion to $7,039 billion, compared with an increase of $44.6 billion in February, supplements to wages and salaries increased $3.2 billion in March, compared with the previous increase of $5.7 billion; proprietors’ income increased $8.8 billion, compared with their increase of $17.1 billion in February; $6.3 billion of that increase went to farmers, while other business owners saw their incomes increase at a $2.5 billion annual rate; income from rents increased $9.5 billion, while interest & dividend income decreased $7.3 billion, in contrast to an increase of $68.2 billion in February; these month over month fluctuations are apparently still reflecting the accelerated and special dividend distributions paid during November and in December; in addition, personal transfer receipts, which are government payments to individuals, were up $3.7 billion over February’s level…disposable personal income (DPI), which is income after taxes, also rose at a seasonally adjusted rate of 0.2%, from an annual rate of $12,059 billion in February to a rate of $12,080 billion in March; this is after February’s figures were revised to show personal income up $151.2 billion, and DPI up $134.0 billion, or an increase of 1.1% for both, rebounding from depressed levels of January…because of an inflation decrease of 0.1%, real (adjusted) DPI was up 0.3% for the month…regarding outlays, personal consumption expenditures (PCE) increased $21.0 billion in March, from an annual rate of $11,384 billion to a rate of $11,405.1 billion, or 0.2% above February’s rate…spending on goods overall was down from an annual rate of $3,890.5 billion to $3,857.7 in March, as spending on durable goods declined $3.0 billion or 0.2% and spending on non-durables declined $29.8 billion, or 1.3%…spending on services rose $53.8 billion from $7,493.6 billion in February to $7,547.4 billion in March, which was the 2nd largest jump in spending on services on record; nearly half of that was a jump in spending on gas and electric, roughly matching the jump in utilities we saw in the industrial production data, due to a colder than normal March…total personal outlays, which includes PCE plus interest and transfer payments, increased $22.6 billion, compared with an increase of $83.1 billion in February; personal saving, which is DPI less personal outlays, was $329.1 billion in March, compared with $330.9 billion in February, which left the personal saving rate, which is personal saving as a percentage of disposable personal income, virtually unchanged in March at 2.7%, a post recession low…our FRED graph shows gross real DPI in blue and real PCE in red in billions of 2005 dollars since 2000, with the savings rate in green on the right scale… the price index for personal consumption expenditures, which is the Fed’s preferred inflation gauge, was down 0.1% in March, while the core PCE price index, which excludes food and energy, was up less than a tenth of a percent…year over year inflation for the headline PCE index is now under 1% at .97%, while the Core PCE index has slipped to 1.13%…

 

our trade deficit for March was less than expected as daily oil imports dropped to a 17 year low and our bilateral trade deficit with china fell to a 3 year low (china new year)….the Department of Commerce reported that seasonally adjusted exports of $184.3 billion and imports of $223.1 billion lowered our international goods and services deficit  in March to $38.8 billion, down from $43.6 billion in February; an immediate impact will likely be a revision to 1st quarter GDP which we reviewed last week, as this report represents an annualized 4.6% decline from reported first quarter net trade…in March, exports of goods fell $4.6 billion to $56.1 billion while exports of services rose $0.1 billion to $53.9 billion; meanwhile, imports of goods fell $6.4 billion to $186.5 billion and imports of services fell $0.1 billion to $36.6 billion…seasonally adjusted month over month changes to major export components included a $1.052 billion decrease in exports of foods & grains, a $0.331 billion decrease in exports of cars & parts, a $0.288 billion decrease in exports of industrial materials & supplies, a $0.269 billion decrease in exports of capital goods, & a $0.260 billion decrease in exports of consumer goods; decreases in imports components included $1.417 billion less industrial materials & supplies, including the $1.919 billion decrease in oil imports, $3,406 billion less imports of consumer goods, $1.505 billion less imports of capital goods, and $0.771 billion less imports of cars and parts…exports in advanced technology products, which are not seasonally adjusted, amounted to $27.9 billion in March and imports of same were at $31.3 billion, resulting in a March  deficit of $3.4 billion, which was down $1.5 billion from the advanced technology deficit of $4.9 billion in February…our major bilateral trade deficits in March, also not seasonally adjusted, were $17.9 billion with China, down from February’s $23.4 billion, $9.9 billion with the European Union, up from $8.8 billion, $6.6 billion with Japan, up from $5.9, and $5.3 with Mexico, $5.1 billion with Germany, and 4.5 billion with OPEC….smaller bilateral trade surpluses were recorded with Hong Kong at $3.2 billion, Brazil at $1.7 billion, Australia at $1.5 billion, and Singapore at $1.4 billion…Bill McBride’s graph shows our trade deficit in Blue through March; our petroleum deficit is also charted in black, and our deficit without petroleum in red; note that despite our lower than ever oil imports, the oil trade deficit has remained in a range between ~$20 billion and ~$30 billion for over 3 years due to higher oil prices; oil averaged $96.95 a barrel in March, up from  $95.96 per barrel in February… 

the widely followed Case-Shiller home price indexes for February were also released this week, which are the average of home price increases over 3 months (December, January and February); with the Fed continuing to subsidize mortgage interest rates, the 20 city index was up 9.3% year over year, the most in almost 7 years; while the ten city index showed an annual increase of 8.6%; for the month, the 10 city rose 0.4% and the 20 city rose 0.3%, while on a seasonally adjusted basis both indexes were up 1.2% in February…cities showing the greatest year over year price appreciation were Phoenix, where prices climbed 23%, San Francisco where prices were up 18.9%, Las Vegas, which saw a 17.6% home price increase, and Atlanta, where home prices were 16.5% higher than last February…the smallest annual gain was in prices of homes in New York, which were up 1.9%; as per usual, the wall street journal has an accessible, sortable interactive table including the Case-Shiller index for February, the monthly and the annual change; Case-Shiller individual city indexes are all set at January 2000 = 100…included below is a bar graph from Robert Oak’s coverage at the Economic Populist showing the home price increases in each of the 20 case-shiller cities over the past year…mortgage rates are falling again; Freddie Mac reports the 30-year fixed-rate mortgage at 3.35%, just above its all-time record low of 3.31% set during November, while the 15-year fixed-rate mortgage is at a new all-time record low of 2.56%, breaking the record low set last week…much of the home buying continues to be driven by investors; the Census Bureau reported this week that US home ownership fell to 65% in the first quarter, down from 65.4% a year earlier and the lowest home ownership rate in nearly 18 years…

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

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1st quarter GDP; March durable goods, existing & new home sales…

on Friday, the Bureau of Economic Analysis released the first estimate of Gross Domestic Product for the 1st Quarter of this year; against expectations of an annual growth rate of 3.0% or more, the reported growth rate of 2.5% over the first three months of this year was a disappointment, but nonetheless it was still better than the anemic growth rate of 0.4% in the 4th quarter of last year…remember that all data in this release are quoted at a seasonally adjusted annual rate, so that actual 3 month growth rates are approximately one-fourth of the figures given: components driving the growth in the 1st quarter included personal consumption expenditures, which increased 3.2% in the first quarter, compared with an increase of 1.8% in the fourth, and which contributed 2.24% to GDP overall, a 37% rate of increase in private inventories, mostly reversing the 47% rate of decline in the 4th quarter, which added 1.03% to the annual rate change in GDP, and a 2.9% increase in exports, which had declined 2.8% in Q4 2012, and which added .40% to the GDP change…these were offset by a 5.4% increase in imports, which subtracts from net exports and hence from GDP, to the tune of a .90% hit this quarter, and an 8.4% decrease in federal government outlays, led by the defense department pullback of 11.5% which, when combined with the 1.2% decrease in state and local government spending, clipped another .80% off the 1st quarter GDP figure…fixed private investment also added to the 1st quarter GDP, but at nowhere near the clip of the last quarter; nonresidential fixed investment increased 2.1% in the first quarter, compared with an increase of 13.2% in the fourth; investment in non-residential structures decreased 0.3%, compared to the 4th quarter increase at a 16.7% rate; while investment in equipment and software increased at a 3.0% rate, compared with an increase at a 11.8% clip; meanwhile, investment in residential structures increased at a 12.6% clip, compared with their increase at af 17.6% annual rate last quarter; thus the contribution to GDP from private investment fell in this recent quarter to .53%, from the lofty 1.69% increase it contributed in the last quarter of last year…all of this is shown graphically in the above bar graph from zero hedge, which shows quarterly contributions to GDP from each major sector since the last quarter of 2010, with additions to GDP above the dashed line and subtractions below it; change in personal consumption is in dark blue, private fixed investment is in red, change in private inventories is in green, change in exports is in purple while change in imports is in teal, the impact of government spending is in orange and the net quarterly annualized rate of change in GDP is tracked by the black line…looking at the graph, a few things are obvious; first, the swing from inventory draw down in the 4th quarter to inventory rebuilding made all the difference between the quarters; GDP less inventories, what BEA calls real final sales of domestic product, was up just 1.5% in the first quarter compared to an increase of 1.9% in Q4 of 2012; most of this was a rebuilding of farm inventories, which contributed 78% of the inventory change…also note how much of a drag the government cutbacks (orange) have been on the economy over the last two & a half years; while Q4 2010 and Q1 2011 cuts were mostly at the revenue restrained state and local level, the 2.21% hit to GDP over the most two recent quarters at the federal level amounted to the largest government cutbacks since the ending of the Korean War…it’s also clear that personal consumption expenditures, aka consumer spending in blue, has been carrying what anemic recovery we have had, and despite the hit to paychecks from the expiration of the payroll tax cuts, still increased in the 1st quarter at the greatest pace since the end of 2010; with spending for durable goods up 8.1%, spending for nondurables up 1.0%, and spending for services up 3.1%.. however, as real disposable personal income decreased at a 5.3% rate in the first quarter, dropping the savings rate to 2.6% over the quarter, the lowest since 2007, it would seem that consumers are about tapped out and will be unable to sustain the pace much longer…

the BEA also announced this week that there will be a major revision to the way it calculates GDP that will add approximately 3% to the national accounts starting in July…what the BEA will be adding which was previously not accounted for is what is known as intangible assets; including things like long running TV shows, art, films, music and books….research & development, previously expensed as a cost of business, will now be capitalized, in effect placing a value on patents and copyrights, and underfunded pension plans will be shown as a liability…a long time in planning, this is a once in every five year revision, the largest since computer software was added to the national accounts in 1999, and will involve rewriting US economic history to include these changes back to 1929…we will likely cover this in more detail when it happens, but the announcement does serve to highlight the inadequacy of economic data that captures only what is monetarily accounted for; volunteer work, work in the home, parenting and other work that doesnt have a cash value aren’t included…

another release of this past week was the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for March (pdf) from the Commerce Dept, which is usually watched for the forward looking new orders for durable goods; like GDP, March orders for durable goods were impacted by defense dept budget cuts and fell a seasonally adjusted $13.1 billion or 5.7% to $216.3 billion, the largest drop in seven months, and the second worst since January 2009…new orders for defense capital goods decreased $2.5 billion or 33.2%, to $5.0 billion; excluding defense, new orders still fell 4.7%, as orders for transportation equipment were especially weak, with orders for nondefense aircraft and parts down $8.5 billion from the order level of February; excluding both transportation and defense, durable goods were up 0.4%; year over year, so called “core” durable goods are up 2.6%…orders for non defense capital goods were also weak, falling $8.3 billion to $70.2 billion, a level 10.6% below February orders…orders for computers and electronic products were an isolated bright spot, with seasonally adjusted orders at $20.1 billion, up 1.0% from February’s $19.9, largely driven by a 5.0% increase in orders for computers… without the seasonal adjustments, March real durable goods orders were still down 1.5%, and March is normally a seasonal peak… confirming the weakness in manufacturing overall, an early “flash” reading of the Markit manufacturing PMI fell to 52.0 in April from a final reading of 54.6 in March, the lowest in 6 months….included below is a chart from Doug Short which shows the correlation between orders for consumer durable goods such as appliances and unemployment, which is inverted to better show the relationship; interesting in that it seems that changes in orders for consumer durable goods precedes a change in employment, and not the other way around…

we also saw reports on existing and new home sales this week; on Monday, the National Association of Realtors posted their Existing Home Sales news release for March; which showed that sales of existing homes fell from a downwardly revised seasonally adjusted annual rate of 4.95 million in February to an annual rate of 4.92 in March, which the NAR blamed on a shortage of homes for sale…nonetheless, March sales were still running 10.3% over the 4.46 million-unit clip that they were being moved at last year, and they were pretty close to the pre-bubble level of early last decade, which you can see on the chart below from Bill McBride, so the NAR doesn’t really have anything to complain about…homes available for sale rose 1.6% from February to 1.93 million, which NAR says is a 4.7 month supply at the current sales pace; although that’s less than the 6.2 months worth of unsold homes of a year ago, this supply inventory doesn’t include the majority of foreclosed homes owned by the banks that are being held off the market…with realtors reporting homebuyer traffic up 25% from a year ago, the median home price again rose in March to $184,300, which was the 13th consecutive median price increase, matching the longest string of price increases, from May 2005 through May 2006, at the height of the bubble; this left median home prices 11.8% above those of a year ago, and average prices, which were at $233,200, 9.9% over those of last March…with the Fed’s mortgage bond buying contributing to home affordability at these lofty levels, the average 30 year fixed mortgage rate remained at a low 3.57%, down from 3.95% last year, and with banks reluctant to hold mortgages any longer than it takes to bundle them into a MBS, and with private investors all but having abandoned the MBS market, government agencies are now responsible for nearly 100 percent of the securitization market…of those homes sold in March, 13% were of foreclosed homes, which were said to be discounted 15% below market value, while 8% were short sales, which were discounted 13%; the total distressed sales at 21% of sales were an improvement over the 25% distressed sales seen in February and the 29% distressed sales during March a year ago…investors bought 19% of all homes sold in March, which was down from the 22% they bought in February and below the 21% they purchased last March; the type of investor has changed this year, however, from those who bought an extra house or two to rent, to large institutional buyers who are buying quantities of houses at higher price points…all cash buyers accounted 30% of sales overall, the same as February but down from the 32% all cash buyers in March of last year…just 30% of homes were purchased by first time buyers, unchanged from February and down from 33% a year ago, so like the small investors, they appear to being squeezed out by higher prices and short supply…

on Tuesday, the Census Bureau reported on New Residential Home Sales for March (pdf); as you should all know by now, these census reports on new housing have such a large monthly margin of error as to render the data useless on a monthly basis, but since they’re widely covered without noting that, we feel compelled to set the record straight again…and the range of variables in these reports over a year’s time does also give us an idea what the new home situation is like; for March, Census reported that sales of new single-family houses were estimated to be at a seasonally adjusted annual rate of 417,000; the MoM change in sales is estimated to be 1.5% (±16.9%)* higher than February’s revised annual rate of 411,000, and the asterisk points us to a census footnote whereby they explain such an expression as 1.5% (±16.9%) means that census was 90% confident that new home sales for March were at a seasonally adjusted annual rate of between 347,706 and 486,624; the actual estimates on which those seasonally adjusted projections are based are in Table 2 of the release; actual new home sales were estimated to be at 40,000 in March, up from 33,000 in February; 13,000 were contracted for but not yet started, 14,000 were under construction, and another 13,000 were already completed…on a year over year basis, March’s sales are said to be 18.5 percent (±17.2%) above the 352,000 sales rate of last March; last March’s actual sales rose 4,000 to 34,000, and March 2011′s sales rose 6,000 to 28,000; the reported 352,000 and 417,000 numbers are projections of what those single month sales would be if seasonally adjusted and extended out to 12 months…census also estimates there were 153,000 seasonally adjusted homes for sale at the end of March, which is a 4.4 month supply at March’s sales rate; the median length of time they’d been available was 5 months…the median price for new homes sold in March was $247,000, 6.8% lower than the median price realized in February  the average home sales price fell 10.8% from $310,000 to $279,900; prices are not seasonally adjusted…our FRED graph shows monthly new home sales at an annual rate in blue, with the scale on the left side; median prices received monthly are in green, and the average new home price each month is tracked in red with the prices scale in the right margin…

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

the Reinhart / Rogoff kerfuffle, March industrial production, consumer prices, and state unemployment

the focus of almost the entire economics blogosphere this past week was on an Excel coding error in an influential 2010 economics paper by Carmen Reinhart & Kenneth Rogoff; the paper alleged that once the ratio of debt to GDP for a country reaches 90%, economic growth for said country slows considerably; these findings, now shown to be incorrect, were one of the essential underpinnings of austerity policies pursued in europe and the contractionary cuts to government deficits in the US; now that the recomputed results show no economic benefits to cutting government debt levels, several economists have come to the realization that a simple error in spreadsheet data led to millions being unemployed unnecessarily; we might however ask where the hell was the rest of the profession while such an illogical correlation was allowed to influence policy around the world…one might think that one academic paper couldn’t possibly have so great an influence as to condemn the entire civilized world to a deep and prolonged recession because policy makers were handcuffed into not using fiscal policy remedies known to be corrective and stimulative; but testament to the pervasiveness of it’s influence was evident just this week; in an exclusive document released to Reuters just last Saturday (4/13) a working group representing financial ministers of the G-20 nations, who together account for more than 80% of the world GDP, propsoed that they would all cut their debt levels to well below 90% of GDP, the exact prescription advocated by Rogoff-Reinhart; however, by the end of the G-20 meeting on Thursday, 3 days after the dismantling of the Rogoff-Reinhart thesis was made public, the G-20 was in disarray, backpedaling from their plan to reduce international sovereign debt; with financial and monetary authorities both expressing “uncertainty about the way economies work and how to influence recoveries with policy”.

the key economic release of the past week was on March Industrial production and Capacity Utilization from the Fed; although seasonally adjusted industrial production for March was 0.4% above February’s level, the better than expected increase was entirely driven by the 5.3% increase in output from utilities as a result of a colder than normal March; manufacturing output was down 0.1% for the month while production from mining was off 0.2%; the Fed does not give output dollar values in this report; rather, indexes are calculated on a basis of 2007=100; their index for total industrial production is now at 99.5, up from 98.1 in December, a gain for the 1st quarter at an annual rate of 5.0%; the manufacturing index is at 95.7, up from 95.3 at year end and up 2.5% from a year ago; the mining index (which includes drilling) is at 115.9, down a bit from December’s 116.1 but still up 3.8% from last March, while the utilities index is at a record 105.8, up from 95.5 in December and up 10.5% from a year ago….our FRED graph above shows shows the production index for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007; the unusual spike in utility usage in March is quite obvious…within the alternate reporting methodology of market groups, the production of consumer goods increased 1.1% in March and increased at an annual rate of 6.2% over the first quarter, it fastest growth rate since the end of 1999; the output of durable consumer goods rose 0.8% mostly on the strength of near record car production; the indexes for appliances, furniture, and carpeting and for miscellaneous durable goods declined; meanwhile, production of nondurable consumer goods was up 1.2%, largely due to gains in consumer energy products, which were up 4.8% for the month; the index for non-energy consumer nondurables was unchanged…the production of business equipment, which was up 1.9% in February, was up just 0.1% in March; a 1.8% gain in the production of transit equipment offset a 1.6% decrease in the output of information processing equipment and a 0.1% decline in industrial and other equipment, while the index for defense equipment fell 0.1% in March as was declining at an annual rate of 5.5% in the first quarter, likely as a result of the sequester…within production of nonindustrial supplies, output of construction supplies was off 1.3%, falling back from larger output gains earlier in the year, while production of business supplies rose 0.6%…except for the 1.3% jump in energy materials, the output of materials generally declined, with consumer inputs off 0.2%, equipment parts off 0.2%, paper production down 1.1%, chemicals production down 0.4% and other inputs down 1.1%…textiles production, up 1.2% in March, was still 3.0% below a year ago…this report also covers capacity utilization, which you can think of as the percentage of plant and equipment in use during the month; capacity utilization for total industry in March was at 78.5%, up from 78.3% in February and 1.9% higher than a year ago; capacity utilization for manufacturing declined 0.2% to 76.4%, but it’s still 1.6% above the level from a year ago; meanwhile, gas & electric utilities were running at 82.9% of capacity in March, up 4.2% from February but still only 1.5% above a year ago, while capacity utilization for mining, which includes gas & oil extraction, decreased 0.4 percentage points to 87.5%, but it remained 4.2% higher than a year ago…

earlier this week, the BLS released the CPI (Consumer Price Index) data for March; partially reversing the large jump in February prices caused by higher gasoline costs, the seasonally adjusted March CPI-U decreased by 0.2% as a 4.4% decline in the gasoline index led the energy index to a drop of 2.6%; the price of fuel oil was also down 2.1%, electricity was 0.6% cheaper, while utility gas showed a 1.0% increase…with food at home down 0.1% and dining out up 0.2%, the food index was essentially unchanged, while the core CPI, which includes prices of all items except food and energy, was up 0.1% for the month…of the major core components, the cost of shelter rose 0.2% in March as rents rose 0.2% and owners’ equivalent rent rose 0.1%; the cost of medical services rose 0.3% as doctor’s fees rose 0.2% and hospital costs rose 0.4%; the cost of transportation service rose 0.2% mostly due to a 0.6% hike in airline fares; clothing prices were down 1.0%, new car prices rose 0.1%, but average used car prices were up 1.2% for March…like industrial production, each component of the CPI is gauged by an index, in the case of the CPI that index was set to 100 for the prices of the 1982 to 1984 period…our adjacent FRED graph has the track of the recent price indices for 6 of the CPI-U components; the volatile gasoline index is in blue, and is at 319.523 as of March; the food at home index is in red, and it was at 233.777 as of March; the shelter index, shown in green, was at 261.330; the private transportation index, shown in violet, was at 216.167; the medical care services index, shown in orange, was at 452.596, and the index for tuition, fees and childcare is shown in black, is at 638.546 (FRED does not graph tuition separately); price indices for other components and subcomponents can be viewed here and here; and the weighting for each of the components can be viewed in the first column here…

 

on Friday, the BLS released the Regional and State Employment and Unemployment Summary for March; this is a further breakdown of the data gleaned from the weak March unemployment report we covered two weeks ago; from the establishment survey, BLS found that seasonally adjusted payroll employment increased in 23 states,  decreased in 26 states and DC, and was unchanged in New Mexico; states gaining the most jobs were Florida with 32,700 and California with 25,500 jobs added; on the other hand, Ohio lost 20,400 payroll jobs and Illinois had 17,800 less so employed; other states that had statistically significant changes in payroll jobs included Georgia, where 13,600 jobs were added, Utah, which gained 6,800, Indiana, which lost 12,400, Iowa, which lost 5,500, Kentucky, which lost 8,400, Kansas, which had 5,900 less payroll jobs in March, and Delaware, where 3,100 jobs were lost; on a year over year basis, every state except for Pennsylvania saw job gains, and gains in 29 states were large enough to be considered statistically significant; the greatest job gains were in Texas with 329,500, California with 285,900, and  Florida with 141,300…the BLS tables with the complete breakdown by of payroll jobs by state and industry sector are here…in data from the March household survey, BLS found that 26 states and DC had seasonally adjusted unemployment rate decreases, 7 states had increases, and rates in 17 states were unchanged; North Dakota again had the lowest unemployment rate with 3.3% of their participating labor force unemployed; states with the highest jobless rates were Nevada with 9.7%, Illinois, with 9.5%, California with 9.4% and Mississippi also with 9.4%… among the 9 geographic divisions, the Pacific had the highest jobless rate at 8.8% while the North Central states unemployment rate was at 5.4%…the BLS table with the seasonally adjusted labor force and unemployment rates by state and selected large metro areas is here; the unadjusted raw data is here; the WSJ has an interactive graphic map whereby you can track changes in unemployment by state from 2009 till the present, and also graph unemployment changes for up to 5 states at a time; we are going to include Bill McBride’s bar graph showing current unemployment rates by state in red, with the worst unemployment rate for each state included as a appendage to that in blue…if you click on the graph, you’ll see that Michigan and Nevada have seen the most improvement, while New York and New Jersey have unemployment rates still pretty close to their worst…  

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

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chained CPI, March retail sales, February’s job openings and LPS Mortgage Monitor

although many of the details of Obama’s Budget for Fiscal Year 2014 were telegraphed well in advance, it nonetheless became the fiscal policy topic du jour when it was released Wednesday, and although chained CPI was only mentioned eleven times in the 244 page budget document, Obama’s plan to use that method of calculating cost of living increases for Social Security and other government programs generated well over half the commentary around the blogosphere…you may recall we’ve discussed chained CPI in this regard previously (here and here, with a chart); the basic difference between using the current consumer price index (CPI-U), and the chained CPI (C-CPI-U) is that the CPI-U compares apples to apples and the C-CPI-U assumes that consumers buy cheaper oranges when the price of apples rise…the most commonly used example suggests that if the price of beef increases, consumers will switch to chicken instead, although this manner of substitution is applied across the index and not just to groceries…so in our example, if the price of beef rises, the currently used CPI-U will allow a cost of living increase to social security and other pensions to reflect the higher price of beef; if the method is changed, chained CPI will assume that the elderly will have switched to the lower cost meat, and only allow a cost of living increase insofar as the cost of the cheaper meat has increased in price….to illustrate the effects of such a change, the above bar graph was constructed by Doug Short using BLS data from 2000, the 1st full year of the C-CPI-U computations, to the present ….in Doug’s chart, the CPI and core-CPI are presented in light blue, the effect of changing to chained-CPI is in the darker blue shade; similarly, each of the 8 major components of the CPI is shown in pale green, with the chained-CPI equivalent the dark green beside each; he also separates the cost of energy, an element in both the housing and transportation indexes, as a red column, and the cost of tuition in purple to the far right is not compared, because a chained CPI figure for tuition is not published by BLS…if you click for a larger version, a few things are immediately apparent; first, there isn’t much substitution for the housing and transportation components, probably because different types of  housing & autos tend to change price in tandem, and there isn’t really a cheaper substitute for gasoline…but there are rather large substitutions for other components…for instance, the CPI recreation price index has increased 13.1% over twelve years, but it only increases 3.3% under chained CPI…apparently the old folks are expected to just play checkers if the cost of going to the movies goes up…and the cost of living allotment for education and communication under chained CPI would have also been less than half of what it is currently with CPI-U, suggesting that chained CPI assumes a lot of substitution & downsizing would take place in spending in those areas as well…

the idea of using a chained CPI is not new; the search for a method to reduce cost of living stipends was suggested by Alan Greenspan and originated in the Senate under Bob Dole, when the then House Speaker Newt Gingrich was pushing for social security “reform”…that a Democratic president should be leading the push to cut signature democratic programs such as like Social Security and Medicare has outraged those on the left, such as Elizabeth Warren, who’s brother David lives on the $13,200 per year he receives in Social Security rations…what’s important to understand is that Social Security doesn’t even impact the federal budget; it’s payments to seniors and others by law must come from the social security trust fund, which as of March held $2.729 trillion in Treasury bonds, and according to the Trustees is capable of making full payments for another 20 years, with a minor shortfall thereafter…so why the push on both sides of the aisle to cut benefits now?  because the obvious solution to the eventual shortfall is to raise the cap on the payroll tax; currently, any income over $113,700 is not taxed to contribute to the trust fund…but  raising the cap would hit all the major political contributors with an additional 6.2% payroll tax; both those making over that $113,700, and those employers cutting the checks for those high paid individuals, who’d also have to contribute a matching amount… Obama & the rest may talk a good game, but at the end of the day they dance to the tunes of the wealthy band that pays their bills, & wont bite the hands that feed them…

the major economic release this past week was the Advance Retail Sales Report for March (pdf) from the Census Bureau; much like last week’s employment report, it came in well below expectations, with seasonally adjusted aggregate sales for the month declining 0.4% from the level of February, the largest retreat in 9 months….February’s sales were revised down as well, from +1.1% to a gain of 1.0%, and January’s sales, first reported as up 0.1%, we revised to show a 0.1% decrease; as with most census reports from a small sampling, this one also has a significant enough margin of error to call into question the results; to wit: “estimates of U.S. retail and food services sales for March…were $418.3 billion, a decrease of 0.4 percent (±0.5%)* from the previous month, but 2.8 percent (±0.7%) above March 2012“, which of course means sales could have even been up 0.1%…on an unadjusted basis, March sales were at $427.1 billion, well above February’s $380.2 billion…Doug Short at Advisor Perspectives has again studied & charted the revisions to this report from the first to third estimates over the six year period from January 2007 through December 2012 and finds there were 33 upward revisions averaging an an additional 0.30% in sales and 39 downward revisions averaging a sales decline of 0.46%, so this advance estimate isnt anything you want to hang your hat on…in this initial March report, significant sales declines were seen at autos & parts dealers, where sales dropped 0.6%, from a seasonally adjusted $78.3  billion to $77.8 billion, and at gas stations, where sales dropped 2.2%, while prices were 2.7% lower, meaning volume gas sales rose; ex auto and gas, sales for the month were off 0.1%…other than gas, the biggest hits were to electronics & appliance stores, where sales fell 1.6% for the month, from $8.257 billion to $8,122 billion, capping off a quarter where worldwide shipments of PCs fell 13.9%, and general merchandise stores, where March sales fell 1.2%, from $51.8 billion to $ 51.1 billion, apparently continuing to lose volume to nonstore retailers (ie online), where sales rose 0.3% for the month but where sales are now up 13.5% from a year ago…other retail categories that saw strength over the month included home furnishings, where sales rose 0.9%, restaurants and bars, where sales rose 0.7%, and miscellaneous store retailers, where sales rose 0.8%…other than online, the largest year over year sales gains were 6.5% in autos & parts, 4.4% in miscellaneous stores, and 3.9% for sporting goods, hobby, book & music stores…department store sales are down 7.6% year over year, and electronic store sales are down 3.2% since last march…to show the relative magnitude of each of these census retail sales categories, we’re including the pie graph below from Robert Oak’s coverage of this report at the Economic Populist; also be aware that although it’s often noted that consumption is 70% of the economy, this report just captures about a third of that; the larger service sector spending is covered in the personal income & expenditures report from the BEA…

we got a bit of better news from the BLS in their Job Openings and Labor Turnover Summary for February than we got last week in the unemployment report for March; according to the BLS, seasonally adjusted job openings rose 8.7% from January to February to show 3.925 million job postings unfilled at month end; the most since May 2008, the month this recession’s job losses started in earnest; the largest number of openings were in the broad BLS categories of  professional and business services, which saw a total of 722,000 openings, up from January’s seasonally adjusted 690,000, and education and health services, where there were 673,000 openings, up from 579,000 in January; although 617,000 of those were in health care and social assistance… accommodation and food service job openings also increased, from 401,000 in January to 458,000 in February, as did openings working for state and local governments, from 340.000 to 370,000…openings in construction and manufacturing also increased modestly, to 116,000 and 259,000 respectively, while the only area to see openings fall in February was the rather broad job category of trade, transportation, and utilities, where openings slipped from 645,000 to 608.000; the largest subcomponent of that, job openings in retail, fell from 390,000 to 378,000…this report also includes labor turnover for the month, with data for hires and separations by each of of those broad job classifications, and the difference between them should correspond to the revised non-farm payrolls total from the establishment survey; in February, there were 4,418,000 were hired to start new jobs, more than the 4,298,000 hired in January, while at the same time another 4,202,000 either quit or were laid off, fired or had their job terminated; expressed as a percentage of those employed, the hires rate rose from 3.2% to 3.3% but was still lower than last year’s 3.4%; the separations rate was unchanged at 3.1%; separations is further divided into quits, or those who separated of their own volition,  at a rate of 1.7% and layoffs and other discharges, at a rate of 1.2%; the following two tables break hires & separations into components as listed: Table 2. shows hires levels and rates by industry and region, seasonally adjusted – Table 3. shows total separations levels and rates by industry and region, seasonally adjusted …in the chart below, Bill McBride manages to get all the data since Jan 2001 onto one graph…the bar portions of the graph indicate separations for each month; each bar is further divided to show quits in blue and layoffs, discharges and others separations in red…the blue line tracks monthly hires; obviously slightly more than total separations over the last few years, and atop all of that the yellow line indicates the number of job openings for each month…

the February Mortgage Monitor from LPS (pdf), a report we cover monthly as a proxy for the ongoing mortgage crisis, was also released this week; February saw the normal seasonal decline in delinquencies, as those who fell behind on house payments over the holidays were starting to get caught up, while the number of mortgages in the foreclose process remained little changed…according to LPS, 1,927,000 mortgages were over 30 but less than 90 days past due at the end of February, another 1,483,000 homeowners were more than 90 days past due on their mortgage but not yet in foreclosure, meaning 6.80% of mortgages in the LPS database were delinquent in February, down from the 7.03% of homeowners who were behind on their house-payments in January; in addition, another 1,694,000 homes were in the foreclosure process, which was 3.38% of mortgages outstanding in February, down from 3.41% in foreclosure in January; hence,10.18%, or more than one in ten homeowners, were behind at least one payment at the end of the month; nonetheless, this is an improvement from the 11.44% who were either delinquent or in foreclosure at this time last year….foreclosure starts were at 132,000 during February, down 10.7% from January, while completed foreclosures numbered 56,000, down 15.0%, suggesting that nearly 80,000 of homeowners who were in foreclosure at the beginning of the month exited the process either through a mod of short sale..most of the Mortgage Monitor (pdf) itself is mostly graphs with very little text; the data summary for this report is on page 22 of the pdf, the glossary is on page 28, and the updated state delinquency and foreclosure table, which we featured last month, is on page 23; Florida remains the state with the most non-current mortgages at 18.5%, but mortgages in new jersey continue to deteriorate and they’re now second worst with 16.3% not current as of February…below, we have selected two charts from this month’s monitor; on the left we have a graph of those mortgages that have “cured” each month, or that were behind but got caught up on their payments; the red line tracks the monthly “cures” that were one or two months behind as of the previous month – the scale is on the right axis; you can see February’s cures from such mortgages is on the order of  ~500,000; the violet line, with the scale of the left, tracks each month’s cures that were 3 to 5 months behind previously, while the blue line tracks cures that had been more than 6 months behind; the yellow line indicates the number of mortgages that had foreclosure proceedings ongoing at the time the homeowner was able to exit foreclosure, either by a mod, a short sale, or by catching up on payments…the bar graph on the right shows the number of serious delinquencies by the number of months delinquent; within each monthly bar, blue represents the count of those 3 to 6 months behind on mortgage payments, red are those 7 or 8 months behind, green are those 9 to 11 months behind, and the violet in each monthly bar represents mortgages which are over 12 months behind in payments…what you can see indicated in the text on the graph, at the peak of the crisis in January of 2010, 2.9 million homeowners were behind on their mortgage payments, but just 22% were behind by more than a year, and the average length delinquency was 252 days; as of February, the total number of delinquencies had fallen to 1.5 million homeowners, but the percentage delinquent more than a year had risen to 42%, and the average length of delinquency had widened to 474 days…

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and which also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)