Marketwatch details:
Sales were stronger than the 2.3% expected by economists surveyed by MarketWatch, largely because of widespread sales gains outside of the gas stations and the auto lots.
Sales are down 5.3% compared with a year earlier. The figures are adjusted for seasonal differences, but not for price changes.
FT Alphaville reports:
So where’s the deflation which Bank of England governor Mervyn King is so desperate to avoid?
The UK’s rate of inflation is slowing — but it’s certainly not nearing deflation levels. The Consumer Prices Index annual inflation rate was 1.6 per cent in August, down from 1.8 per cent in July, and its lowest since January 2005. Expectations, however, were for a 1.4 per cent year-on-year rate.
Inflation is proving stickier than expected.Furthermore, if you strip out food and energy, you get 1.8 per cent for core inflation in August — hardly deflationary. Likewise, while the Retail Price Index, which includes housing costs and mortgage interest payments, fell by 1.3 per cent in August. If you remove those mortgage payments, however, you get a rise of 1.4 per cent — up from 1.2 per cent in July.
Japanese and European industrial production figures for July showed the diverging levels of collapse and (in the case of Japan at least) recovery.
A report from Japan's Ministry of Economy, Trade and Industry showed that industrial production grew 2.1% month-on-month in July, revised up from the initial estimate of 1.9%. Annually, production was down 22.7%.
Monthly growth in shipments was revised to 2.4% for July from 2.3%, while inventory dropped 0.3% compared to a 0.2% fall estimated initially. Compared to July 2008, shipments and inventory plunged 22% and 10.6%, respectively.
Euro zone industrial output fell in July and employment dropped again in the second quarter, pointing to continued weakness in the economy despite signs that euro zone recession may be ending.
Industrial output in the 16 countries using the euro fell 0.3 percent month-on-month in July for a 15.9 percent year-on-year fall, the European Union's statistics office Eurostat said on Monday.
Economists polled by Reuters had expected a 0.2 percent monthly decline and a 16.6 percent annual drop.
The year-on-year numbers, however, showed clearly the contractions in output are becoming smaller. In June, production was 16.7 percent lower than a year earlier and in May it was 17.6 percent, better than the 21.3 percent in April.
For the record, I love 4 day work weeks. Maybe the possible shift to a European'ish society wouldn't be a horrible thing...
Update: I like 4 day weekend's so much, I'm doing it again. Posts to resume Tuesday.
Economic Data
Consumer
Consumer Sentiment Improves
Consumer Credit Freefall
Household Income Blues...
Employment Trends
No Growth in Private Sector in 10 Years... Manufacturing in 70
More on U.S. Manufacturing
Female Workforce on the Move
Employment: The Good, The Bad, and The Ugly
Other
Importation of Deflation Reversing
Trade Plunge
Budget Deficit Improving
Health Care
The Power of Oratory
The Costs of Health Care
Assets
Risk Appetite Supporting the Euro
Hedge Funds Continue to Shine in '0-9
And a new feature... video of the week. Presenting Liam Finn.
Forex Yard with the latest:
A surprise to the upside (though still very negative), but an improvement none-the-less. We can see this below with a chart that details the year over year change, smoothed out over three month time frames.The U.S. government posted a $111.40 billion budget deficit in August, slightly smaller than a year ago due largely to calendar shifts and matching a record period of 11 straight monthly deficits, the Treasury Department said on Friday.
The August budget gap was well below the forecasts of analysts polled by Reuters, who predicted a $152.0 billion deficit for the month. The year-ago deficit was $111.91 billion.
Marketwatch details:
Consumer sentiment improved sharply in early September, according to media reports on Friday of the Reuters/University of Michigan index. The consumer sentiment index rose to 70.2 from 65.7 in August. This is the first gain in the past three months.
The increase was above the consensus forecast of Wall Street economists who had expected sentiment to improve to 68.0. Economists expected sentiment to improve because of rising stock prices and a sense that the recession may be ending.
The WSJ reports:
U.S. import prices rebounded last month on the back of higher energy prices, following a brief dip in July.
Import prices climbed 2% in August from the month before, the Labor Department said Friday. That followed an unrevised 0.7% decline in July, the first drop of the year. Economists surveyed by Dow Jones Newswires had expected a 1.2% gain. Still, import prices remained down 15% compared with August 2008, following a 19.2% annual decline the month before that was the biggest drop since the index was first published in 1982.
Petroleum import prices jumped 10.5% in August from July -- the sixth gain in seven months -- but were down 38.1% on the year.
Excluding petroleum, import prices were 0.4% higher from July, though remained down 6.5% from August 2008.
The Census released (hat tip Calculated Risk) data for 2008 Household Income and it was a doozy...
The U.S. Census Bureau announced today that real median household income in the United States fell 3.6 percent between 2007 and 2008, from $52,163 to $50,303. This breaks a string of three years of annual income increases and coincides with the recession that started in December 2007.
The Good (via The Washington Post)
A rebound in the American labor market has yet to take hold, but first-time claims for jobless benefits did fall more than expected last week.
Companies are laying off fewer workers as the U.S economy shows consistent signs that the recession is over. The Federal Reserve said Wednesday that 11 of its 12 regional banks reported the economy is stabilizing.
If you thought we could rely on continued improvement in the trade balance for the economic rebound in the U.S., think again. The WSJ reports:
The U.S. trade deficit registered its biggest increase in over 10 years in July, as surging purchases of oil caused an unprecedented jump in imports.
The U.S. deficit in international trade of goods and services widened by 16.3%, its largest percentage increase since February 1999, to $31.96 billion, the Commerce Department said Thursday. That's up from $27.49 billion in June, which was revised from an initial estimate of $27.01 billion.
The July deficit was much higher than Wall Street expectations for a $27.5 billion shortfall.
I'm a proponent of universal health care in the U.S. (reasons described in the comments section here). You can sum up my reasons as 'we live in the wealthiest (overall) country in the world and I do believe that health care IS a right of someone in a country with this much "wealth"'. However, there are obvious problems with any proposal at this time (one being the financial costs, but the other being politics). Rolfe Winkler details:
America’s obligations over the next 75 years now surpass $62 trillion, up 8 percent since last year. And a new report released today by the Peterson Foundation suggests that total will go even higher if the House’s health care legislation is passed.
With today’s pliant bond market, it’s easy to pretend we can have things that can’t be paid for. But that’s the kind of attitude that led California into the fiscal abyss. We have to get serious about bringing our expenses in line with our income. Now.
Unfortunately Republicans and Democrats alike are more concerned with winning elections than passing good public policy. Republicans told us “deficits don’t matter,” signed a prescription drug benefit for Medicare that created a bigger fiscal hole than Social Security, waged two very expensive wars financed with debt, and borrowed to bail out banks.
For their part, Democrats complain about the deficit they “inherited,” then proceed to expand the bailouts, pass hundreds of billions worth of “stimulus,” and try to increase our health care liabilities over and above already unsustainable levels.
In response to my post on lost jobs in manufacturing, I was asked to provide manufacturing output as a percent of US GDP.
What we see is a manufacturing sector that has been on the decline, relative to the broader economy, going on 60+ years. This in itself this doesn't mean much. All it means is the manufacturing sector has not grown as fast as the broader economy. In theory (ignoring everything else for the time being), this is logical. At a certain point, we should not be consuming goods (durable and non-durable) at a level that grows as fast as the broader economy. 20 years from now, do we really need to consume twice as much as we currently do? (Unless it means those not fortunate enough finally have the necessities that most of us take for granted, then no... we don't. )
But, our past few generations HAVE consumed that much more than previous generations (in fact consumption has grown substantially faster than the broader economy reaching more than 70% of GDP). To put this in perspective, one recent study showed that the average number of cars owned in the United States is now 765 vehicles per 1000 people (including every man, woman, and child), or about 5x more than the global average. So... the consumption was there. The manufacturing just happened to be done outside of the United States.
The chart below shows just that. Net export of goods (ignores services) as a percent of GDP, went from a small positive figure until the 1970's (i.e. we manufactured for the world), to a large negative figure since (i.e. we consume for the world).
So the answer to the question of decreased jobs in the manufacturing sector was likely three-fold:
Here's some additional perspective. The manufacturing sector now adds less to our broader economy then... wait for it... the government itself.
Bloomberg details:
The euro rose toward a nine-month high against the dollar before a government report forecast to show French industrial production increased for a third month in July, boosting demand for higher-yielding assets.
Europe’s single currency advanced against 13 of its 16 major counterparts on expectations Federal Reserve officials will today signal they plan to refrain from raising interest rates. The yen dropped to the lowest level in almost two weeks against the euro before a report this week forecast to show Japanese consumer confidence rose for an eighth month, paring demand for the currency as a refuge.
“Risk appetite is coming back on the table, supporting the euro,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, the investment banking unit of Credit Agricole SA. “The euro is also benefiting from uncertainty about the U.S. economy. The euro-zone is likely to see a hike in interest rates before the U.S. does.”
The euro traded at $1.4497 at 11:13 a.m. in Tokyo from $1.4478 in New York yesterday, when it reached $1.4535, the highest level since Dec. 18. The dollar was at 92.37 yen from 92.32 yen. The yen fell to 133.90 per euro from 133.67, after earlier reaching 134.17, the lowest level since Aug. 28.
“Global growth indicators remain supportive for risk takers,” analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, wrote in a research note yesterday. “The dollar will remain under selling pressure.”
The WSJ details:
Americans reduced their borrowing a sixth consecutive time during July in a bad omen for any easy economic turnaround.
The chart below shows the change in the composition of those entities holding the outstanding stock of consumer debt. The largest (to no surprise) reductions have come from financial companies and securitized pools (i.e. your pension fund). The only "substantial" increase has come from... you guessed it... the federal government.Consumer credit outstanding tumbled a seasonally adjusted annual rate of 10.4% to $2.472 trillion, the Federal Reserve said Tuesday. The $21.6-billion drop in borrowing was a record.
Wall Street projected a $3.5 billion decline in consumer credit during July. Borrowing in June fell $15.5 billion, revised down from $10.3 billion. The last time credit fell six straight times was in the second half of 1991.
The consumer credit report is an indicator of spending by Americans. Consumer spending makes up 70% of gross domestic product, which is the broad measure of U.S. economic activity. People, afraid of unemployment and stuck under high household debt, aren't spending briskly, a restraint that held the economy in a slump and is seen preventing a quick recovery. Analysts expect more deleveraging by U.S. households.
The USA Today reports:
Women held 49.83% of the nation's 132 million jobs in June and they're gaining the vast majority of jobs in the few sectors of the economy that are growing, according to the most recent numbers available from the Bureau of Labor Statistics.While I can't find that data (the data I find from the BLS shows 56% of workers are male), the trend is indeed heading in that direction. The numbers of female workers as a percent of the workforce has been on the rise for 60+ years now (as far back as the data goes, but likely 70+ years starting at the beginning of WWI). The chart below shows the number of male to female workers over that 60 year time frame, from almost 2.5 per, down to just 1.1 now.
Men always do more poorly in downturns, in part because they tend to work in more cyclical industries. In this downturn, they’ve been in industries that got hit especially hard: construction, manufacturing and financial services.As the chart shows, while men do more poorly in downturns, this downturn has been especially harsh to males. The ratio of male to female workers over the past 12 months has seen the fastest decline in almost 30 years.
The Big Picture details:
Speaking with Marketwatch’s Rex Nutting, I learned yet another incredible datapoint: Over the past decade, the U.S. private-sector has lost 203,000 jobs.No surprise to EconomPic readers, as I reported this same stat back in May. But, in looking at the details behind this tremendous job stall, it is apparent where the majority of the jobs lost have come from... manufacturing.
That’s right: Zero job growth for 10 years.
Economic Data
Labor
Part Time Workers for Economic Reasons
Number of Hours Worked per Civilian Sees New Low
ADP Reports 298,000 Jobs Shed in August
Unemployment Jumps to 9.7%... Broader Employment to 16.8%
Job Destruction isn't the Problem
Other Domestic
Chicago PMI Poised to Show Growth in September
ISM Services (August)
Weak Back to School Sales
"We're All Socialist Now" Construction Edition
Growth in Manufacturing! Can it Continue?
Global
Regime Change in Japan
Eurozone CPI
Eurozone Stays in Recession... Producer Prices Continue Collapse
Assets
Government Fail: Autos
Government Fail: Housing
The Nikkei (in USD) vs the S&P 500 (not in USD)
Gold Exposure... Gold or Gold Miners?
Continued Volatility in AIG
Another Housing Bubble Indicator
The Cleveland Fed details:
The BLS’s Current Population Survey categorizes involuntary part-timers into those working part-time due to “slack work or business conditions” and those who “could only find a part-time job.” In other words, some workers had full-time jobs but went to part-time when their employers cut hours because business was falling off, while other workers had to start out in part-time jobs even though they were looking for full-time work, because that’s all that was available.
Below is an updated chart which shows the average number of hours worked by a civilian (calculated by taking the employment to population ratio and multiplying that by the average # of hours worked per week).
After a slight "rebound" last month, we are now at a new all-time (since 1964) low.
Want to see the relevance of hours worked per employee? Go here.
Source: BLS
ISM respondents report:
Gold has been on a tear (though nobody seems to know why... hatred of all currencies has been one answer), up $70 the past two months alone.
Which has brought the opportunity in gold miners to the front section of the paper. WSJ reports:
So gold or gold miners? Since 2006, the metal has significantly outperformed the goldmining index (GDX) by 30% and at times by more than 170% over a 12-month period (mining stocks were CRUSHED post Lehman Brothers collapse, while the metal held up).Gold companies' shares soared Wednesday amid a sharp rally in gold prices, and one analyst said the strong performance of larger companies was a reversal from earlier in the year.
Gold prices reached their highest point in nearly three months as the U.S. dollar weakened and participants bought in a flight-to-quality bid based on economic uncertainty and concerns about the stock market. Most-active December gold gained $22, or more than 2.3%, on Wednesday.
Burchell said his firm is positive on the gold sector and believes the metal has come out of its summer hibernation period. Summer months are traditionally weaker for gold prices. He added gold behaved better than expected this year, but was range-bound throughout the summer. Burchell said Wednesday's increased share prices were in part a reaction to Tuesday's weakness, adding that investors see the "specter of inflation" down the line, leading them to speculate in gold as a hedge against that inflation.
Jefferies & Co.'s Mike Dudas said gold and gold stocks can find some money in the recent weakness in financial stocks as investors look to gold for more stability. Gold prices had been quiet recently and were looking to break one way or the other and certainly did so on Wednesday, he added.
WSJ reports:
Retailers reported another month of weak same-store sales in August, as back-to-school results came in worse than expected.
Industrywide, same-store sales fell for a 12th straight month -- highlighting the woes retailers have been under as consumer spending continues to decline. But with leaner inventories, companies are hoping to avoid the markdowns of last year's holiday season as sales then were even weaker than expected.
August results were also hurt by the late Labor Day holiday, meaning some schools started sessions later than last year. Another likely impact was the strong rebound in August U.S. auto sales on the "Cash for Clunkers" program. It was seen as steering some consumers away from retailers to showrooms.
Still, the sales decline was smaller than July's, and comparisons will continue to get easier in the coming months. Weak prior-year results in part helped cushion the August decline --year-earlier same-store sales rose a scant 0.2%, according to Thomson Reuters. That was the last increase for the industry.
Missed this yesterday...
Euro GDP
NY Times reports:
The European Union statistics office Eurostat confirmed its earlier estimate that the gross domestic product of the 16 countries using the euro fell 0.1 percent quarter-on-quarter after a 2.5 percent drop in the first three months of 2009.
"The worst is over for the time being," the chairman of euro zone finance ministers, Jean-Claude Juncker, told reporters before talks in Brussels among his Eurogroup colleagues and the European Central Bank.
Second-quarter GDP was 4.7 percent lower than a year earlier, after a 4.9 percent fall in the first quarter.
"Shrinking times are over and the recovery can set in," said Carsten Brzeski, economist at ING. "The recent data inflow indicates that the euro zone as a whole should leave technical recession in the third quarter."
Euro-zone industrial producer prices posted their sharpest drop in annual terms for more than 27 years in July, fueled by a record fall in energy costs, data from European Union statistics agency Eurostat showed Wednesday.
Factory gate prices fell 0.8% compared with the previous month and were 8.5% lower than in July last year, the biggest annual drop since comparable records began in 1982, Eurostat said. In June, producer prices rose a revised 0.4% from the previous month and were 6.5% lower on the year.
"Over the coming months, headline PPI inflation should start to pick up, as the impact of last year's spike in oil prices drops out of the annual comparison," Colin Ellis, an economist at Daiwa Securities SMBC Europe, said in a note. "But with the recession having opened up a wide margin of spare capacity in the economy, underlying inflationary pressure is likely to remain weak for some time."
With AIG down another 6% pre-market, I thought I'd share an update regarding the volatility of AIG after the 100%+ jump we saw in August (hint... it's not letting up). First, as I detailed last month regarding the the volatility in AIG share price:
This type of volaility for AIG shouldn't be all that unexpected. After all, AIG is no ordinary stock. It is just a binary option on the continued bailing out of an entity currently too big too fail. At the end of the day, AIG should be worth $0.00 (i.e. nothing) or a high multiple of its current valuation.
The reason being it is a non-zero probability that the government will hand over billions more to equity investors via subsidized financing of their operations for years to come. How do you model that?
ADP Reports:
August’s ADP Report estimates nonfarm private employment in the service-providing sector fell by 146,000. Employment in the goods-producing sector declined 152,000, with employment in the manufacturing sector dropping 74,000, its smallest monthly decline since July of 2008. Large businesses, defined as those with 500 or more workers, saw employment decline by 60,000, while medium-size businesses with between 50 and 499 workers declined 116,000.
Employment among small-size businesses, defined as those with fewer than 50 workers, declined 122,000. Since reaching peak employment in January 2008, small-size businesses have shed nearly 2.5 million jobs. In August, construction employment dropped 73,000. This was its thirty-first consecutive monthly decline, and brings the total decline in construction jobs since the peak in January 2007 to 1,562,000. Employment in the financial services sector dropped 19,000, the twenty-first consecutive monthly decline.
Yesterday we detailed Government Fail: Housing (i.e. a $45k cost to taxpayers per marginal home sale). Today, we visit the automobile industry. Calculated Risk, backs into the cost per automobile sale that would otherwise would not have occurred:
First, for autos, if sales in August had been about the same as June (pre-tax credit), there would have been 850 thousand light vehicles sold (NSA). This is about a 9.7 million SAAR.$7200 per auto. That's some chunk of change to pay for a car that may in many occasion been in running condition, BUT it likely helped American auto manufacturers... right? Well, maybe. BUT, not NEARLY as much as it apparently helped Foreign manufacturers.
Next we add in the tax credit: Although the DOT reported close to 700 thousand car sales associated with the Cash-for-Clunkers program, probably about 550 thousand were in August. If these were all additional sales, then the total sales (NSA) for August would be about 1.4 million, or almost 16 million SAAR.
If Edmonds.com is correct, and total sales were 1.17 million (NSA) in August, then the tax credit only generated about 320 thousand extra sales. Of course some regular car buyers might have put off a purchase to avoid the rush in August, so this isn't perfect, but instead of costing taxpayers $4,170 per car (as announced by DOT), the cost to taxpayers per additional car sold was close to $7,200.
National Association of Realtors (bold mine):
Estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit.
And look at the cost of the tax credit! If NAR is close to being correct, 2 million buyers will claim the tax credt - times $8,000 - is $16 billion. But this only resulted in "approximately 350,000 additional sales".
So this tax credit cost taxpayers about $45,000 per each additional home sold. Not very effective ... especially considering most of these are lower priced homes.
Forbes details:
US construction spending unexpectedly fell by 0.2% in July to its lowest level since February 2004 as private nonresidential construction fell for the third consecutive month and public construction saw its first decline since January, the Commerce Department reported today.
Economists were expecting spending to be unchanged in the month after rising 0.3% in June, which has since been revised down to a 0.1% rise. Consistent with recent woes in the commercial real estate market, private non-residential spending fell 1.2%. Declines were seen in nearly every non-residential spending category except for religious, communication and manufacturing. Private residential spending rose 2.3% in the month, marking the largest increase for this sector since September 2008 and pushing total private construction spending up by 0.1% in July. Despite last month's gain, private residential construction spending is still down 27.8% over the last twelve months.
ISM details:
Not that we need more proof that there was a housing bubble, but I found this interesting.
In the Census' latest release of housing starts, they detail the number of multi-unit buildings that were started, broken out by rentals vs. ownership (i.e. for simplicity lets call them apartments vs. condos). Not surprising, more units were built as condos than in recent years (heck, in a number of areas it became easier to own than rent). But in hindsight, the level of increase was awfully telling.
More than 50% of all multi-unit buildings built in Q2 2005 were for ownership, up from the 20% level that had been the norm from 1993-2003. Hate to say it, but these owners are back to what they probably should have been all along... renting.
Source: Census
Finance Markets reports:
Eurostat has revealed that the CPI in the euro zone declined in August by an annual rate of 0.2% and followed the record 0.7% fall in July.
Analysts were encouraged by the slower rate of decline in consumer prices and Nick Kounis of Fortis commented: “We think that the negative impact of energy prices is starting to unwind. This process has much further to go and it is likely to push inflation back into positive territory in the final months of this year.”
“The report supports the ECB in its view that the recent period of negative annual inflation rates will prove to be a short-lived phenomenon that has no implications for monetary policy,” added Mr Kounis.
Lower energy and food prices have driven inflation down but a risk of deflation is highly unlikely according to many analysts.
Marketwatch details:
Manufacturing activity improved for the third straight month in the Chicago region in August. The Chicago purchasing managers index rose to 50% in August from 43.4 in July, according to a survey of corporate purchasing managers released Monday. This is just on the threshold of growth and the highest reading since last summer. Readings over 50% indicate overall business expansion.
The Chicago PMI is considered a leading indicator to the national Institute for Supply Management manufacturers' survey to be released on Tuesday. The median forecast for ISM manufacturing composite is for an increase to 50.5 from a July reading of 48.9. The ISM index has not been above 50 since January 2008 at the beginning of the recession.
There is a chart floating around the blogosphere (Zerohedge, Infectious Greed, Felix Salmon, Henry Blodget, to name a few) from Bloomberg, which shows why the 'S&P 500 May Surge 40% in Duplication of Japan'. Before we dive in, lets first take a look at a chart of the Nikkei since 1984, and the S&P 500 since 1994 (i.e. the 10 years delayed aspect we'll detail later).
Nothing special. No fit, thus no way (yet) to claim the S&P 500 is ready to jump another 40%. So how do we convert this into a chart showing a 40% rally is on the way. Felix Salmon details:
If the intention was to strip out the local currency, then why did they convert the Nikkei to dollars, rather than the same basket of currencies they converted the S&P 500 to? Probably because the relationship would have been non-existent. But doing so makes for the chart seen here:So it seems that the BofA analysts who came up with this chart first converted the Nikkei to dollars, only to then convert the S&P 500, which was in dollars all along, out of dollars. Hm.
The Nikkei doubled between October 1998 and April 2000 in dollar terms, as the chart illustrates. The S&P 500 has risen 34 percent since March when the Dollar Index, a measure of the dollar against currencies in six major U.S. trading partners, is factored in.The analysts claim (via Henry Blodget) that:
A “melt-up” rally in the U.S. may be triggered by central bankers keeping interest rates near record lows, an economic recovery or an undervalued dollar, Bank of America strategists wrote in an Aug. 26 report.
The consensus is usually wrong and that it is always smart to consider the alternatives. And this is certainly one of them.Good point. Alternatives should be considered, but those alternatives should be fully understood. But, in analyzing why the relationship between the Nikkei (in USD) following the Asian crisis / during the Internet Bubble TO the S&P 500 (in a broad currency basket) following the subprime / financial / systemic crisis is strong, these same analysts made the following statement:
We do not know precisely why this relationship has worked.Which is fine if "precisely" didn't mean "at all". But, what hasn't been mentioned regarding the Nikkei within five years (in both USD or Yen) of this supposed 40% rally... new lows.
Andy Harless (hat tip Credit Writedowns) with details of the latest BLS Employment Dynamics Summary:
Overall (at least during the first four quarters of the recession, up through the end of 2008, for which we have the relevant data), there weren’t an unusually large number of total jobs being destroyed.As can be seen below, job contraction and closings are both at levels seen throughout the 1990's, but openings and expansion are both substantially below levels of that same time period.
But...but...but...haven’t we been hearing about large numbers of job losses month after month since the recession began? Sort of. We’ve been hearing about large numbers of net job losses. That is, the number of jobs that have been lost has been a lot more than the number that have been created. And a lot of job losers have ended up collecting unemployment insurance for a long time, sending the figures for continuing claims up to records, instead of getting new jobs. But the gross number of jobs being destroyed has not been unusually large. In fact, relative to the overall level of employment, job destruction was happening at a faster rate during the boom of the late 1990s than it was during the last quarter of 2008.
If you lost a job in 1999, you weren’t actually all that atypical, but it wasn’t a big problem, because typically, you could find a new job fairly easily. If you lost a job in 2008, you were (typically) out of luck.Source: BLS
Bloomberg details the massive victory of the Democratic Party of Japan:
Hatoyama, 62, led the DPJ to win 308 seats yesterday in the 480-seat lower house, public broadcaster NHK said, ousting the party that ruled Japan for all but 10 months since 1955. The DPJ gained control of the upper house two years ago.And the reason for the change:
Voters have given Hatoyama a mandate to switch priorities from aiding the companies that built Japan’s $4.9 trillion economy to helping families cope in a society where almost a quarter of the population will be over 65 by 2014. To encourage people to have children, the DPJ says it will increase child support and lower education costs, paying for this by slashing outlays on roads, bridges and public works.While that may indeed have positive economic implications in the long run, I'm not sure how this will transform the Japanese economy in the short-run. An economy that according to this morning's sales report shows that wholesale sales dropped 30% year over year in July (greater than June's 28.7% year over year change).
“The whole idea of people rather than concrete, and, ‘Let’s be nicer to the Japanese population,’ could be immensely positive in the long term,” said Philip Whittome, who manages Japanese stocks at Investec Asset Management in London. “The election might lead to some changes in how Japan is run in ways that are underappreciated by the foreign investment community.”
Economic reports indicate the expansion that began last quarter may already be in danger: the jobless rate rose to a record 5.7 percent in July, factory output growth slowed and household spending dropped the most in five months. That leaves Japan “more dependent on exports that it’s ever been,” said Hugh Patrick, a professor at Columbia University in New York.Source: METI
Vix and More fans that have been directed here... check out the latest EconomPics of the Week (i.e. not last weeks news) here:
Economic Data
Domestic (US)
Where's the Investment?
Another Jobless Recovery, Even with a Deficit Spike
Home Prices Continue Rebound
North Dakota or Bust
The Wage Freefall
Michigan Consumer Confidence Stalls
New Home Sales in Perspective
It's Good to Work for the Government
The Futures So Bright...
European New Orders Above Forecast
Durable Goods Jumps
Q2 GDP Remains at 1%... Breakdown Shifts
Global
Japan Struggling
The German GDP Recovery
Banks
Almost 1/3 of Banks Rated F
The Mass Layoff Non-Seasonal Disconnect
Assets
Top Holders of Commercial Real Estate Loans
Since the Market Bottomed...
Other
D.C. Hates Cash for Clunkers Tarantino Scores Big
Marginal Thoughts (a Chicago Fed based blog by Cindy Ivanac-Lillig) explains:
The CFNAI is a weighted average of 85 indicators of national economic activity. The CFNAI measures how far above, or how far below, our historical long-term growth rate we are performing. It has an impressive track record of correlating to quarterly real GDP growth (which makes it something of a coincident indicator-- an indicator that shows the current temperature of the economy).Indeed. The chart below shows the three month rolling average of the Chicago Fed National Activity Index vs. the QoQ change in GDP.
The Chicago Fed targets a level of 0.20 in the three-month average to suggest a recession is over.a much lower figure than 0.20 appears necessary to show "growth" on a quarter over quarter basis (what the chart indicates it that the average quarter over quarter growth over the past 40'ish years is 1% quarter over quarter or ~4% annually).
Tom Lindmark commented (in response to my post on private and government wages):
I thought the chart on total compensation was even more interesting.
This appears to be some kind of nominal number, rather than real wages. There's no way that real wages gained that much per year in the 1970s. And the annual gain since 1980 reflects decreasing inflation.And he is absolutely correct (and I should have made that more clear). We have seen real declines of similar magnitude during the 1970's, but never in nominal terms. Below is a chart real wages over that same time frame.
Nonetheless, the recent plummet is alarming, especially relative to an indebted consumer.
