Manufacturing jobs, Trade, Jobless claims, Tariff news

As previously discussed, unemployment benefits have become much harder to get than in prior cycles, which means they will go up that much less as employment slows, and also that they won’t function as an automatic fiscal stabilizer to the extent they did in prior cycles, which will work to delay a recovery:

Tariff update- more to come:

Trump says tariffs on China could be raised by another $300 billion if necessary

Former Commerce secretary: Trump’s 5% tariffs on Mexico will go into place but not any further

ADP, Mtg purchase apps, Vehicle sales

Employment can be a lagging indicator, so this forecast of Friday’s employment number could be verifying the rest of the weakness that’s been reported:

US Private Sector Jobs Rise the Least in 9 Years

Private businesses in the US hired 27 thousand workers in May, less than an expected 180 thousand and compared to April’s 271 thousand increase. It was the smallest payroll increase since March 2010, as the service-providing sector added 71 thousand jobs while the goods-producing sector shed 43 thousand jobs, mainly in the construction sector.

Highlights

ADP sees private payrolls coming in at a very weak and far lower-than-expected 27,000 in Friday’s employment report for May. Forecasters expected today’s ADP estimate to come in at a solid 175,000. The consensus for Friday’s private payrolls going into today’s ADP report was also for a 175,000 increase. Private payrolls rose 236,000 in April. ADP’s forecast, one that if proves accurate would intensify expectations for a Federal Reserve rate cut, is likely to trigger at least some downward revisions among forecasters for Friday’s results.


Purchase apps down even with lower rates:

Highlights

Rates moved sharply lower in the May 31 week which gave a boost to refinancing applications, up 6.0 percent in the week, but not purchase applications which fell 2.0 percent. Year-on-year, the purchase index is suddenly showing weakness with only a 0.5 percent gain. Conventional 30-year mortgages fell 10 basis points in the week to 4.23 percent. The housing sector has been moving higher this year though improvement has been uneven.

May vehicle sales up a bit from April, but as the chart shows they are nonetheless working their way lower:

Factory orders, Fed comments, Lumber prices

US Factory Orders Fall the Most in 6 Months

New orders for US manufactured goods fell 0.8% in April, the most since October last year, due to lower demand for transportation equipment, computers and electronic orders, and primary metals. Meanwhile, shipments of manufactured goods declined 0.5% in April, the largest drop since April 2017.

Highlights

At an as-expected minus 0.8 percent, April’s factory orders report closes the book on what was a weak month for US manufacturing. The split between the report’s two main components shows a 0.5 percent rise for nondurable goods — the new data in today’s report where strength is tied to petroleum and coal — and a 2.1 percent dip for durable orders which is unrevised from last week’s advance reading.

Core capital goods (nondefense ex-aircraft) are very weak in the report, down 1.0 percent for orders and unchanged for shipments. Both readings hint at slowing for second-quarter business investment. General weakness is evident in the market breakdown with orders for primary metals, fabrications, machinery, and new vehicles all weak.

Data on civilian aircraft are always volatile month-to-month but April’s declines in new orders and unfilled orders were limited, suggesting that possible effects from the 737 grounding have yet to hit. Aside from this, however, the April factory report is consistent with a sector that continues to struggle and, unlike last year, does not look to contribute to 2019 growth.

Seems the Fed Chairman and ‘the market’ still don’t know they’ve had the interest rate thing backwards. Lower rates remove interest income from the economy as the US Treasury pays less interest on its net spending, causing net spending to decrease.

This is today’s statement that is driving today’s expectations of growth:

The Fed “will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective”, Chair Jerome H. Powell said at a conference in Chicago. The chairman also noted that the proximity of interest rates to the effective lower bound (ELB) has become “the preeminent monetary policy challenge of our time”, as it limits the central bank’s ability to support growth by cutting rates.

Industrial Production, Forecast, US personal income, Oil, ATT Presidential boycott

Slow motion trainwreck by Agent Orange, aka Tariff Man, continues…

Below 50 indicates contraction:


Demand for Saudi oil has fallen back:


Saudi pricing of discounts generally trending higher but most recently there’s been a small move back:

And how about this?

https://www.cnbc.com/2019/06/03/trump-calls-for-a-boycott-of-att-to-force-big-changes-at-cnn.html

Bloomberg interview, Shipping, Lending, Profits, Trade, Pending home sales

Interest-Rate Policy Is Backward, Modern Monetary Theory Pioneer Mosler Says

Under consumption identity: for ever agent that spent less than his income, another must have spent more, or the output would not have been sold.

In other words, deficit spending, private or public, is the ‘offset’ to unspent income (savings). The chart shows one of the components of private sector deficit spending which appears to align with economic growth:

Tariffs (levied on the grounds that China and others weren’t charging us enough…) causing the collapse in exports globally, and import weakness most often is a sign of domestic demand weakness:

Highlights

Sharp declines in exports are unwelcome headlines in April’s advance data on goods trade. The monthly deficit remains very deep, at $72.1 billion with exports falling 4.2 percent year-on-year and with imports also down, 2.7 percent lower. The deficit compares unfavorably with a $71.3 billion monthly average in the first quarter that marks a weak opening for net exports in the second quarter.

Capital goods are the US’s largest exports and these fell 6.5 percent in the month to $44.3 billion. Compared with April last year, capital goods exports are down 3.7 percent. Auto exports are also down, 7.2 percent lower to $12.9 billion and 6.7 percent below last year. The only export component showing a gain is food & feeds which rose 0.5 percent to $11.2 billion but which is nevertheless 6.2 percent below April last year.

The decline on the import side is also led by a 3.5 percent decline for capital goods ($55.4 billion) but also includes 3.1 percent and 2.3 percent monthly declines in autos ($30.9 billion) and consumer goods ($54.2 billion) as well as a 1.1 percent drop in foods ($12.8 billion).

Global trade figures have been contracting and the latest US numbers are part of that picture. Today’s report gets second-quarter GDP, already held down by contractions for April retail sales and industrial production, off to a slow start.

Weakness in housing continues:

Highlights

The forecasters were optimistic but pending home sales couldn’t deliver. The index fell 1.5 percent in April vs a consensus for a 0.5 percent gain, yet the monthly drop does follow an outsized 3.9 percent revised gain in March which makes for a hard comparison. Nevertheless a decline in April is not a good indication for momentum in the spring sales season. Existing home sales have been moving higher this year but today’s report will hold down expectations for May and June.

Durable goods orders, earnings, container board, oil chart, German exports, infrastructure, GDP forecasts

More of same as trade war takes its toll globally:

Headline Durable Goods New Orders Declined in April 2019. Inflation Adjusted New Orders Are In Contraction

Trump to Democrats: No infrastructure without trade deal

On the eve of a highly anticipated meeting with Democrats at which President Donald Trump was expected to unveil a way to fund a $2 trillion infrastructure proposal, Trump instead put Congress on notice that it will have to take a backseat to a trade deal.

“Before we get to infrastructure, it is my strong view that Congress should first pass the important and popular USMCA trade deal,” Trump wrote in a letter to House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer Tuesday evening.

At an impromptu press conference late Thursday afternoon during a photo-op with farmers, Trump lit into Pelosi, who earlier in the day said that the president had committed “impeachable offenses” and was in need of “an intervention” by family and friends. The president lashed out at the speaker, calling her a “mess.”

Investment, Mtg origination, Bank loans

Real final sales slowing, and business equipment growth negative:

From the NY Fed, reads like credit growth slowing:

Total Household Debt Rises for 19th Straight Quarter, Now Nearly $1 Trillion Above Previous Peak

The report includes a one-page summary of key takeaways and their supporting data points. Overarching trends from the Report’s summary include:

Housing Debt

  • Mortgage balances rose by $120 billion, to $9.2 trillion.
  • Mortgage originations declined to $344 billion from $401 billion, the lowest level seen since the third quarter of 2014.
  • Mortgage delinquencies improved slightly, with 1.0% of mortgage balances 90 or more days delinquent, down from 1.1% in the fourth quarter of 2018.
  • Non-Housing Debt

  • Outstanding student loan debt increased by $29 billion, to $1.49 trillion.
  • Newly originated auto loans totaled $139 billion, continuing a long-running growth trend.
  • Credit card balances fell slightly, to $848 billion from $870 billion.
  • Through year end- credit growth low and slowing:


    Only through q3 available:


    As of year end:


    Rolled over?

    Retail sales, Industrial production, Interest payments, Japan profits, Euro area fiscal balance

    Weak and weaker than expected:

    Highlights

    The second quarter gets off to a stumbling start pulled down by a 0.2 percent headline decline in an April retail sales report where the core details show unexpected weakness. Excluding autos, in which sales were already expected to fall sharply, April sales managed only a 0.1 percent gain to fall underneath Econoday’s consensus range. Excluding autos and also gasoline sales, which were already expected to rise sharply, sales fell 0.2 percent in April to also fall below the consensus range. Just making the consensus range is a no change result for the control group, a component used in the calculation of GDP and pointing squarely to early second-quarter deceleration in consumer spending which had already decelerated sharply in the first quarter.

    A 1.1 percent decline in auto sales (signaled by the prior release of unit sales at manufacturers) is no surprise and neither is a 1.8 percent jump at gasoline stations, signaled here by the price of gas. The big surprise is a 1.3 percent drop at electronics & appliance stores that follows a 4.3 percent tumble in March. Weakness here hints at lower prices for consumer electronics and also lower spending on home improvements. Furniture sales also hint at trouble for residential investment, coming in unchanged following March’s 3.1 percent decline, as do sales of building materials which fell 1.9 percent in April following, however, a 1.2 percent rise in March.

    The best news in the report comes from its weakest sub-component, department stores where April sales jumped 0.7 percent. This was enough, however, to give only a small 0.2 percent lift to the overall general merchandise component. Another positive is restaurants where sales rose 0.2 percent on top of a great monthly surge of 5.7 percent in March.

    Another negative surprise:

    Highlights

    Like retail sales earlier this morning, the headline 0.5 percent decline for April industrial production is not masking strength underneath. Also falling 0.5 percent was production at manufacturers which is even more unexpected than the headline decline.

    Motor vehicles and parts, where consumer sales have been mostly soft this year, fell 2.6 percent in April for a second monthly decline and year-over-year contraction of 4.4 percent. Business equipment fell 2.1 percent in the month for yearly growth of only 0.1 percent which doesn’t point to acceleration for business investment. Consumer goods also fell, down 1.2 percent in the month with construction supplies up only 0.1 percent that follows March’s 1.7 percent dip in readings that don’t point to strength for construction in general. Selected hi tech is a positive for April, up 0.6 percent with annual growth here at 3.2 percent.

    Also positive is a 1.6 percent jump in mining volumes which rose 1.6 percent in April that follows, however, three straight months of declines. Output at utilities fell 3.5 percent in April with the yearly rate of minus 4.7 percent also pointing to general industrial weakness.

    However tight the US labor market may be, capacity does not appear to be tight in the industrial sector as capacity utilization fell 6 tenths in April to a much lower-than-expected 77.9 percent. Utilization in the manufacturing sector is down 5 tenths to 75.7 percent.

    This report doesn’t breakdown production of goods aimed for the domestic market and those for the foreign market but it will nevertheless offer a baseline for the overall effects of increased US-China tariffs. Going into those tariffs, the manufacturing sector, which first began to slow late last year, appeared to be flat at best.


    Rolling over:

    Corporate Japan logs first profit dip in 3 years as China slows

    Fiscal has tightened in the euro area, and now with the global trade collapse prospects are looking grim:

    Euro Area recorded a Government Budget deficit equal to 0.50 percent of the country’s Gross Domestic Product in 2018. Government Budget in the Euro Area averaged -2.84 percent of GDP from 1995 until 2018, reaching an all time high of -0.50 percent of GDP in 2000 and a record low of -7.40 percent of GDP in 1995.