Category Archives: Economic Releases

Data

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Karim writes:

Data ‘mixed’, with durables and income weak, but claims strong.

  • New capital goods orders ex-aircraft and defense -2.9%; 3rd drop in 4mths
  • Personal income 0.2%, but wage and salary income flat and down 3.6% y/y
  • Core PCE deflator +0.2% m/m and 1.4% y/y
  • Initial claims down 35k to 466k (prior week revised down 4k)
  • Continuing claims down 190k; extended and emergency benefits down 18k
  • Some seasonals may be at play in the claims data from now thru year-end but still opens possibility of positive payrolls next week


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productivity up 9.5%

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Lower labor costs for the same sales (top lines were relatively flat) mean revenue is being shifted from compensation to profits, which carry a much lower propensity to consume than wages.

This reduces aggregate demand, which is a good thing, as it means, for example, we can cut taxes to sustain incomes, sales, output, and employment.

Unfortunately, our leaders don’t understand the monetary system and take no constructive action in the name of ‘fiscal responsibility,’ while the main stream forecasts project unemployment to linger around the 10% level for an extended period of time:

The Labor Department said non-farm productivity surged at a 9.5 percent annual rate, the quickest pace since the third quarter of 2003. Productivity grew at a 6.9 percent pace in the April-June period.

Hours worked fell at a 5 percent rate in the third quarter, the Labor Department said. Unit labor costs, a gauge of inflation and profit pressures closely watched by the Federal Reserve, fell 5.2 percent after declining 6.1 percent in the second quarter. Analysts had expected unit labor costs to fall 4 percent in the third quarter. Compensation per hour rose at a 3.8 percent pace and, adjusted for inflation, was up 0.2 percent.

Compared with the July-September quarter of 2008, non-farm productivity rose at a 4.3 percent rate. Unit labor costs fell 3.6 percent year-on-year.


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ISM Employment/Small Business Employment

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Karim writes:

The employment component of ISM yesterday was much stronger than expected at 53.1.

Based on the chart below, one would expect to see claims near 350k and payrolls turn positive.

We should find out soon enough if true or not, but the lower chart shows good reason for skepticism.

Small businesses have been the largest contributor to job losses (way more than the typical downturn). ISM companies typically have more than 1000 employees.

Small businesses also depend most on small and regional banks for credit; helping to explain the Fed’s sensitivity to this issue


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ISM

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Karim writes:

Inventory rebuild in full swing—gap between orders and inventories at 34yr high; Timing of CARS definitely a factor but inventory rebuild more broadly to contribute anywhere from 2-3% to GDP gwth in H2.

Employment reading still weak and outlook for final demand still poor due to employment, wealth, and income factors.

And subsequent release of car sales numbers weaker than expected.

  • “Production is picking up as demand [for] orders is being accelerated.” (Nonmetallic Mineral Products)
  • “Demand from automotive manufacturers increasing thanks to ‘Cash for Clunkers.'” (Fabricated Metal Products)
  • “In addition to improved business come the complications of a supply chain drained of inventory.” (Paper Products)
  • “The sudden increase in customer demand, plus the low inventories held at services centers, is causing a shortage in the supply of raw steel.” (Transportation Equipment)
  • “[It] appears customers’ inventories are getting low, and they are cautiously placing orders.” (Apparel, Leather & Allied Products)



August July
Overall 52.9 48.9
Prices paid 65.0 55.0

This did not take long to reverse, helped by the weaker dollar.



Production 61.9 57.9
New Orders 64.9 55.3
Inventories 34.4 33.5
Employment 46.4 45.6
Export Orders 55.5 50.5

Exports up and imports down as real terms of trade continue to weaken.



Imports 49.5 50.0


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Chicago Purchasing Managers’ Index Increased to 50 in August

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Just enough to keep additional fiscal measures off the table while unemployment remains around 10%.

Chicago Purchasing Managers’ Index Increased to 50 in August

By Courtney Schlisserman

Aug. 31 (Bloomberg) — A measure of U.S. business activity rose more than forecast in August, adding to signs that the economy may be entering a recovery.

The Institute for Supply Management-Chicago Inc. said today its businessbarometer increased to 50, the highest level since September, from 43.4 in July. Readings below 50 signal a contraction.


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Claims/Philly Fed

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Karim writes:

Data tug-of-war continues as manufacturing rebounding under inventory rebuild, but labor market stays weak and indicating that underlying demand not improving all that much

  • Claims weaker than expected
  • Initial up 15k to 576k with prior week revised +3k
  • Continuing claims up 2k (prior week revised up 37k), extended benefits down 48k and emergency benefits up 92k
  • Overall, weak labor market data
  • Philly Fed firmer than expected in keeping with inventory rebuild that is driving manufacturing
  • National ISM may exceed 50 in next 2-3mths, consistent with inventories adding about 2% to GDP gwth in H2


August July
Activity 4.2 -7.5
Prices paid 10.0 -7.5
New Orders 4.2 -2.2
Shipments 0.6 -9.5
# of Employees -12.9 -25.3



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