Friday, January 28, 2011

Weekly Indicators: Good bye Recovery Edition

- by New Deal democrat

The big news this week was 4th Quarter GDP, which was +3.2% unadjusted, and up 2.6% in real terms, and up 2.9% for all of 2010 in real, inflation-adjusted terms. This means that all those people who say we aren't in a Recovery are now correct - but only in a backhanded sense. Since real GDP is now higher than it was at any time before the recession, we are no longer in a "recovery," but in an economic "expansion" instead. As an aside, I frequently read on some blogs that we shouldn't pay attention to GDP because it doesn't have anything to do with Main Street America. I disagree, for one simple reason. If you know the YoY% change in real GDP, and subtract 2%, that will give you a good idea what the YoY % change in employment will be in the next 3-6 months. As of today that gives a forecast of +.9% YoY employment in the next 3-6 months. Indeed, pending next week's BLS revisions, as of now for all of 2010 employment was up +.87%. That suggests that we will get employment gains about equal to working-age population growth on average for the next few months.

Meanwhile, consumer expectations for January rose to their highest level in over 6 months. This is one of the smaller components of the LEI. New home sales were also higher, while house prices continued to decline (enough so that yours truly is looking into a bargain). Durable goods orders unexpectedly fell.

Here is this week's high frequency data:

The BLS reported initial jobless claims of 454,000. This, needless to say, is bad news. My best guess is that we are looking at the result of renewed state and municipal layoffs. For now, the trend to under 400,00 claims is definitely halted. Maybe somebody in Versailles should think about creating some jobs.....

The Mortgage Bankers' Association reported a net decrease of -12.9% in seasonally adjusted mortgage applications last week. This number has declined substantially over the last 6 weeks, and is at its lowest point since October. Refinancing decreased 12.0%, and is at its lowest point in a year. Increasing mortgage rates are killing this index (which may be a substantial part of ECRI's leading indicator index).

Gas at the pump went up 1 more cent again to $3.11 a gallon, while Oil went down to as low as about $86 a barrel. Gasoline usage is perhaps beginning to be affected by prices, as it was up less than 0.2% on a weekly basis from last year's levels.

The American Staffing Association Index increased 1% to 89 for the week ending January 16. This was 13% above a year ago, but about 5% below 2007 levels. Seasonality is no longer an issue. This is the closest so far the index has come to pre-recession levels.

Railfax showed seasonal improvement as would be expected. Total rail shipments, however, were only 1.8% higher in the week ending January 22 than during the same week the year before. Shipments of waste and scrap metal and auto shipments were both at last year's levels. In general rail traffic is still improving YoY, but the rate of that improvement has been decreasing for months. It is possible that there is still some seasonality at play, but if the YoY comparisons remain week for a couple more weeks, then the slowdown cannot be dismissed.

The ICSC reported that same store sales for the week ending January 22 decreased -1.2% w/o/w, but increased 2.7% YoY. Shoppertrak reported that sales rose 3.7% YoY for the week ending January 22, and were up 4,7% from the week before.

Weekly BAA commercial bond rates rose to 6.12%. This was similar to the +.06% increase in the yields of 10 year treasuries.

A reminder that on a trial basis I am using Matt Trivisonno's +1.07% adjustment to withholding data this year vs. last year, due to the recent payroll tax political deal. So adjusting, the Daily Treasury Statement showed adjusted receipts in the first 16 reporting days of January of $134.1 B vs. $123.5 B a year ago, for a gain of $10.6 B or almost +9% YoY. Over the last 20 reporting days, this year shows $158.6 B collected vs. $144.4 B one year ago, or an adjusted gain of $14.2 B or +9.8%YoY.

While I'm gone, if you want to do something really nice, go over to Frank Chow's blog and congratulate him on his engagement!

Have a nice weekend!