Jobs

ADP Private Sector Jobs +206,000. 

Previous was 110,000.  Consensus was 130,000.  This will revise upwards expectations for Friday's BLS Employment Situation Report.

Challegner Job-Cuts for November were 42,474.

This strong jobs data coupled with what is perceived to be some solution to the Eurozone crisis is rallying equities and hammering Treasurys sending yields and mortgage rates higher.

Housing

MBA Applications (week ending 11/25)

Composite Index - Week/Week -11.7 %
Purchase Index - Week/Week -0.8 %
Refinance Index - Week/Week -15.3 %

This data is of little meaning because of Thanksgiving.

NAR Pending Home Sales

Pending Home Sales Index -  93.3 
Pending Home Sales Index - Month/Month change +10.4%

Worker Productivity/Unit Labor Costs

This is for 3rdQ2011

Nonfarm worker productivity - Quarter/Quarter +2.3 %
Unit labor costs - Quarter/Quarter -2.5 %

What is troubling in the long term is the decrease in the past 3 years of Worker Productivity (GDP/hour worked.)

Chicago PMI

Business Barometer Index for the Chicago area was 62.6 - above previous and consensus.

What we have is a tug-of-war between some good domestic economic fundamentals and whatever the effects of the EU crisis will be.

Housing

 

FHFA House Price Index (September)
 
Month/Month +0.9%
Year/Year  -2.2%

 

Case-Shiller

 

20-city, Seasonally Adjusted - Month/Month -0.6 %
20-city, Not Seasonally Adjusted - Month/Month   -0.6 %
20-city, Not Seasonally Adjusted - Year/Year -3.6 %

 

Cash-Shiller is a 20 city metric.  FHFA is for all FNMA/FHLMC financed property.

 

The divergence of these two metrics likely indicates weakness at the high end of prices which FNMA & FHLMC do not service.

 

Consumer Confidence

 

Consumer Confidence - Level 56.0,  Previous was 39.8.  Consensus was 45.0. 

This survey measurement by the Conference Board is supposed to measure consumers predisposition to spend.  This reading is very strong and was backed by strong post-Thanksgiving retail sales.  This is the largest month/month increase for this index in the past eight years.

 

This should remind everyone that all that is done in Washington means little.  The consumer drives the economy and only the consumer can drive us from the prolonged slump. 

 

This strong reading for Consumer Confidence is helping equities and hurting Treasuries.

 

Retail

 

ICCS-Goldman

Store Sales - Week/Week  +1.7 %
Store Sales - Year/Year +4.0 %

 

Redbook

 

Store Sales Year/Year +5.4 %

 

Consumer Metrics

 

The leading indicator of on-line discretionary spending is showing recovery from the late October downturn

 

New Home Sales (October)

 

New Home Sales for October were 307,000 (annualized) down from the previous 313,000.

 

 

Dallas Federal Reserve Manufacturing Survey

 

The Production Index fell from +4.1 to -5.1.  This is the first negative reading in 2 years.

 

This is a monthly survey of manufacturers in Texas regarding their operations in the state conducted by the Dallas Federal Reserve Bank.

 

The weekly "New Pact to Make Everything in the EU OK" story is out today rallying equities and hurting Treasuries. The problem is that the situation is getting worse and these stories that a solution is near obfuscate reality.

Jobs

 
 
- Initial Jobless Claims 393,000
- Previous was 388,000
- 4-week Moving Average 394,250

 

MBA Mortgage Applications (week ending 11/18)

Purchase Index -  Week/Week 8.2 %
Refinance Index - Week/Week -4.0 %
Composite Index - Week/Week -1.2 %

 

The week/week data is blurred by Veteran's Day the previous week.

 

Durable Goods Orders

 

New Orders - Month/Month  -0.7 %
New Orders - Year/Year  7.5 %
Ex-transportation - Month/Month  0.7 %
Ex-transportation - Year/Year  11.7 %

 

This data is moderately weak.

 

Personal Income/Outlays (October)

 

Personal Income - Month/Month +0.4 %
Personal Income - Year/Year change +3.9 %
Consumer Spending - Month/Month change +0.1 %
Consumer Spending - Year/Year change +4.7 %
Core PCE price index - Month/Month +0.1 %
Core PCE price index - Year/Year +1.7 %

 

PCE is a consumer based inflation index.

 
This data shows the 99% doing better than in September when their income failed to keep pace with inflation.  The long-term story is one of decreasing real wages.

 

Consumer Sentiment

 

Consumer Sentiment, a measure of predisposition to spend, was 64.1 for November.

 

GDP

Second look at 3rdQ2011 GDP was revised downward from +2.5% to +2.0%. GDP = C(onsumer Spending) + I(nvestments) + G(overnment Spending)+ (eXports)-i(mports). The initial GDP estimate has only two months of I, X, and M. The 3rd month is guesstimated, Much of the downward revision in today's update is from decreased I. Lower investments are indicative of either 1) less confidence on the part of business regarding future Consumer Spending or 2) adjustments for having gotten to far ahead of the consumer if investments were too large in the prior quarter.

 

GDP Deflator

 

The GDP Deflator is a measure of inflation in which each component is weighted according to its percent of GDP. The GDP Deflator was +2.5% for 3rdQ2011. With interest rates slow and the economy just barely growing I find +2.5% inflation high.

 
 

Corporate Profits

Corporate Profits for 3rdQ2011 were $1.507 trillion annualized. High Unemployment and growing Corporate Profits are part of what OWS is about.

Retail

 

ICSC-Goldman Store Sales
Store Sales - Week/Week -0.9% Store Sales - Year/Year 2.8%

Redbook

Store Sales Year/Year +3.7 %

Holiday Retail data this year may be odd by comparison because of aggressive pre-Black Friday sales and the fact that Thanksgiving is relatively early this year.

 

Richmond Federal Reserve Manufacturing Index

For October this index was unchanged ending four months of contraction.

Housing

Existing Home Sales

 

Existing Home Sales - 4,970,000 (seasonally adjusted annual rate). Previous was 4,910,000. Existing Home Sales - Month/Month Change 1.4 % Existing Home Sales - Year/Year Change 13.5 %
This is moderately good news for housing. Low interest rates and lower prices are attracting buying.

Chicago Federal Reserve National Activity Index

 

This Index moved to -0.13 for October from a previous reading of -0.22.

Eurozone Debt

 

As the Eurozone debt concern spreads we are seeing flight to quality buying of U.S. Treasuries despite the fact that the debt supercommittee accomplished jack. The fact is this: politicians in most countries are incapable of achieving fiscal sustainability. The Eurozone have now seen three regimes changed by the markets.

Consumer Metrics

The Consumer Metrics Absolute Demand Index started falling again late last week. This is a sensitive leading indicator. It is most certainly not supporting to the rosy 4thQ GDP forecasts we saw pitched in the media over the weekend.

Leading Economic Indicators

 

The Conference Board's index of LEI for October was +0.9%, September was +0.1% and August was +0.3%.

 

9 of the 10 indicators increased in October.

 

This is a monthly mathematical rehash of other data.  It is supposed to indicate economic growth in the next few months.

 

This is a list of what makes up LEI and the relative weight factors:

 

Leading Economic Index Factor

Average weekly hours, manufacturing 0.2737
Average weekly initial claims for unemployment insurance 0.0322
Manufacturers' new orders, consumer goods and materials 0.0817
Index of supplier deliveries – vendor performance 0.0717
Manufacturers' new orders, nondefense capital goods 0.0195
Building permits, new private housing units 0.0264
Stock prices, 500 common stocks 0.0370
Money supply, (M2) 0.3230
Interest rate spread, 10-year Treasury bonds less federal funds 0.1052
Index of consumer expectations 0.0296

 

My view is that LEI has two flaws:  1) it puts too much emphasis on monetary policy 2) it puts too much emphasis on manufacturing hours.

Jobs

 

- Initial Jobless Claims for last week were 388,000
- 4-week Moving Average dropped to 396,750

 

While the numbers are still high the fact they they are decreasing is encouraging.

 

The bigger picture that I see is that Initial Jobless Claims and the Unemployment Rate are not as important as the Labor Participation Rate.  The Unemployment Rate will start to fall as people's 99 weeks of benefits expire.  Jobless Claims may be falling only because there are fewer people to layoff.

 

Housing Starts

 

Starts - Seasonally Adjusted Annual Rate 628,000. Previous was 658,000.
Permits - Seasonally Adjusted Annual Rate  653,000

 

We need 1,500,000 Housing Starts to keep pace with population growth.  We are still selling off the excess generated during the Housing Bubble when Starts peaked in January 2006 at 2,273,000 million. Too much of that excess was sold to people who could not afford the mortgage payments.  I don't see recovery to the "natural" level of 1,500,000 anytime before 2013.

Consumer Metrics

 

The Consumer Metrics Absolute Demand Index of on-line discretionary spending has leveled off after dropping notable from October 26 - November 9.  It still is pointing to lower GDP growth in the current quarter.

 

Philadelphia Fed

 

The Philadelphia Federal Reserve index of Manufacturing activity in the mid-Atlantic states fell from 8.7 to 3.6 in October.

Eurozone Debt concern relocated today to Spain. The longer any solution is put off for the larger will be the magnitude of the disaster.

Bloomberg Consumer Comfort Index

This Index improved from -51.6 to -50.0. 

Perhaps the name should be changed to the Consumer Discomfort Index.

Inflation (Retail)

 

CPI - Month/Month change  -0.1 %
CPI - Year/Year change   +3.6 %
CPI less food & energy Month/Month +0.1 %
CPI less food & energy - Year/Year +2.1 %

 

Industrial Production (October)

 

Production - Month/Month +0.7 %
Capacity Utilization Rate - Level 77.8 %

 

 

Mortgage Applications (Week ending 11/11)

 
Purchase Index - Week/Week  -2.3 %
Refinance Index - Week/Week -12.2 %
Composite Index - Week/Week -10.0 %

 

The hit to refinance applications was due to higher rates.

 

Home Market Index

 

NAHB (National Association of Home Builders) Index for November was 20 up from 18 in October.  Maybe not enough to cheer about but at least a reason for builders to get out of bed each day.  The home building market will recover but not in the next year.

 

Inflation

 

PPI (Wholesale Inflation)

 

PPI - Month/Month -0.3 %
PPI -Year/Year 5.9 %
PPI less food & energy - Month/Month  0.0 %
PPI less food & energy - Year/Year 2.8 %

Month/Month core could not get any flatter.

 

Retail Sales (October)

 

Retail Sales - Month/Month +0.5 %
Retail Sales less autos - Month/Month change +0.3 %

 

Retail Sales growth slowed from September's +1.1%.  This data supports the Consumer Metrics Absolute Demand Index which showed a sudden decrease in online sales of discretionary durable goods which starting on October 27.  In a bizarre coincidence that was the day the 3rdQ2011 GDP was announced at +2.5%.

Why are consumers spending less? Per-capita real private sector wages has contracted -8.6% below the peak of the 1stQ2007.  The discontent that the average person has with their income situation is backed by the data.

 

The point I would like to make here is that unless consumer spending picks up we are headed for slower GDP growth in 4thQ2011 and the increased possibility of a recession for the first 2 quarters of 2012.

 

This is backed up by:

 

ICSC-Goldman Store Sales

Store Sales - Week/Week -0.8 %
Store Sales - Year/Year  2.4 %

and

 

Redbook

 

Store Sales Year/Year change 4.1 % down from previous +4.6%

 

Business Inventories  (September)

 

Inventories - Month/Month change  0.0 %

 

Empire State Manufacturing Survey

 

Index of General Business Conditions was +0.61.  The first gain since May.