July 27, 2010

In ‘Context’: Two June Housing Stats Are Worst For Any June Since Such Records Have Been Kept

HousingDownThanks to Shirley Sherrod, Andrew Breitbart, and the NAACP, political journalists have supposedly discovered the importance of “context” (though they strangely seem to lost interest once fuller context items like this and this became known). It would be helpful if such an interest in full context would legitimately and consistently spread to business reporting.

Full context would include looking at the raw business and economic data before it gets seasonally adjusted and reporting it when it is significant. Given the information the press would then have to report in the current economy, I’m not holding my breath waiting for journalists to even look at it, let alone report it.

Take the housing market, particularly housing starts and new single-family home sales. During the past week, the Census Bureau released statistics on each of these important metrics. Let’s look at an excerpt from reports about each.

First, housing starts, in an unbylined July 20 AP report:

Housing Starts Drop 5 Percent In June; Permits Up

Home construction plunged last month to the lowest level since October as the economy remained weak and demand for housing plummeted.

Construction of new homes and apartments in June fell 5 percent from a month earlier to a seasonally adjusted annual rate of 549,000, the Commerce Department said Tuesday. May’s figure was revised downward to 578,000.

Now, here’s an item about new single-family home sales via Reuters:

New Home Sales Surge in June, Inventory at 42-Year Low

The Commerce Department said on Monday sales jumped 23.6 percent to a 330,000 unit annual rate from a downwardly revised 267,000 units in May. The sales pace last month was still the second lowest since records started in 1963.

… June’s rebound to a seasonally adjusted annual rate of 330,000 homes surprised analysts on the upside.

In each case, it’s not fair to say that the content of the reports covered up the bad news (though the deception in the Reuters headline is painfully obvious).

But it is fair to say that each report, and every other report I perused before putting up this post –at least a half-dozen articles about each metric — missed the fact that the raw data for June was the worst for any June on record (Census Bureau sources, both 11-page PDFs: Housing Starts; Single-Family Home Sales; also see the Update in the next paragraph):

June2010HousingStartsAndSFHsales

In the case of housing starts, on a population adjusted basis, the 54,200 housing starts that reportedly occurred in June is the lowest figure for any June in the 50-plus years such records have been kept — by over 50%. As to new single-family homes, June is supposed to be one of the busiest sales months of the year. If that ends up being the case in 2010, it’s going to be a very rough rest of the year. (Update, August 19: The June figure was revised downward in July’s release to 53,400.)

Of course, each June 2010 result is also worse than June 2009. It wouldn’t have been at all difficult to communicate those one-year comparisons to readers, if any reporter had cared to. But that might have made the whole idea that a real economic recovery is taking place seem silly. Apparently, we can’t have that.

The above graphic provides context. It’s not pretty, and it makes a mockery of the Obama administration’s so-called “Recovery Summer” propaganda campaign.

There’s nothing inherently wrong with seasonal conversions, but treating them as the be-all and end-all, or even as if they are the real actuals, which is all too typical, is fundamentally incorrect. Unfortunately, this error constantly occurs, and it occurred frequently in the reports I saw on the two metrics that were the subjects of this post.

Cross-posted at NewsBusters.org.

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UPDATE: Full context  – An NB commenter points out that current stats are in a ridiculously low interest-rate environment. Previous periods when housing activity was low, especially 1979-1982, featured rates that were extraordinarily high.

Lucid Links (072710, Morning)

Filed under: Lucid Links — Tom @ 11:02 am

Life-supporting point of the day:

Defense of life is not a religious issue, maintains family leader

An expert on family issues reminded Mexicans last week that the defense of life is not a religious issue and that it is based on the scientific certainty that life begins at conception.

As noted, the science on when life begins is settled; the best a skeptic can do is quibble over matters involving mere seconds as to the precise moment conception occurs. President Obama, who incredibly claimed that determining when life begins is “above my pay grade” in August of 2008, is smart enough to know that.

But Obama and other advocates of snuffing out human lives after conception won’t publicly admit to when life begins, because they would then have to admit that they are okay with snuffing out those lives. That doesn’t change the fact that the really are okay with snuffing out those lives.

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Mark Levin pointed out on his show Monday evening that those who released the 92,000 Wiki-leaked documents about the Afghanistan War could not have done so without knowing that they are endangering American soldiers’ lives. Any U.S. citizens involved in this are presumptively guilty of endangering national security. The hacker who turned in Bradley Manning earlier this month (Manning is also suspected of having gathered the docs in the latest released) understands that:

Lamo has contributed funds to Wikileaks in the past, and says he agonized over the decision to expose Manning — he says he’s frequently contacted by hackers who want to talk about their adventures, and he has never considered reporting anyone before. The supposed diplomatic cable leak, however, made him believe Manning’s actions were genuinely dangerous to U.S. national security.

“I wouldn’t have done this if lives weren’t in danger,” says Lamo, who discussed the details with Wired.com following Manning’s arrest. “He was in a war zone and basically trying to vacuum up as much classified information as he could, and just throwing it up into the air.”

To the extent that members of the establishment press may have encouraged those who did the leaking to do so and are American citizens, they are guilty of the same.

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Ford made a profit of $2.7 billion in the second quarter. Just as impressive, given the mediocre “Rebound; what Rebound?” recovery: Revenues of $31.3 billion. Ford’s $129 billion in revenues during the past four quarters. (adding the current figure to the $98 billion seen in the previous three quarters) will almost certainly be higher than GM’s during the same period (through three of those quarters, including a 10-day stub period in July 2009 before its emergence from bankruptcy, GM’s revenues are roughly $91 billion; it would have to turn in a $38 billion top line to beat Ford for the four quarters).

Though it is still second in U.S. unit sales, Ford’s top line has been bigger than GM’s since the first quarter of 2009, and probably will be again in 2Q10. Almost no one knows that. I wonder why?

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Shirley Sherrod Update: As noted last week, the Southern Rural Black Women’s Initiative (SRBWI), an advocacy group in which Ms. Sherrod has been significantly involved, issued a scathing 2007 report claiming, among other things, that “Since 1948, violations of human rights have been addressed in countries across the world, but seldom in the United States.” Its “Call to Action” also had a number of economic suggestions, including “Every person should have the right to a standard of living adequate for the health and well-being of families ….”

Well, an essential element to having such a standard of living, assuming it is not merely handed out, is having a job. As best as I can tell based on available data, the vast majority of people in Sherrod’s neck of the woods who wanted jobs had them at the time the report was written. The unemployment rate in Metro Albany, Georgia, the MSA in which Sherrod’s Baker County lies, was 5.2% in April 2006. In September 2007, the unemployment rate for Southwest Georgia rose to 5% (scroll down to October 25 at link), meaning of course that it had been lower. Though the black unemployment rate in the area was probably higher, it’s clear that the situation there on the whole was the best it had been for quite some time.

The June 2010 unemployment rate in Southwest Georgia was 10.7%.

Despite the obvious deterioration in conditions during the past three years, the SRBWI hasn’t seen fit to issue a subsequent “Status of Human Rights for Southern Rural Black Women” report. I wonder why?

It’s the Uncertainty, Stupid

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 8:39 am

ObamaFunnyMoneyBig Ben publicly acknowledges what so many of us have known for over two years.

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Note: This column went up at at Pajamas Media and was teased here at BizzyBlog on Sunday.

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In testimony before Congress on last Wednesday, Federal Reserve Chairman Ben Bernanke sounded as downbeat as someone in his position is probably allowed to be. That’s not surprising. The economy is not performing at as it should at this stage of a “recovery.”

The most visible reason why Ben is a borderline bear is because the Obama administration attempted to turn things around with an FDR-like “stimulus” instead of what has historically worked in both Democratic and Republican administrations when tried: tax cuts, tax simplification, and regulatory reform.

After tax cuts first proposed by John F. Kennedy in 1961 became law in early 1964, the economy boomed. Annual growth averaged over 6% during the next three years.

In 1984, the first year when Ronald Reagan’s tax cuts of 25% went into full effect, the economy grew by 7.2%. Growth averaged 3.7% during the rest of the decade, helped along in 1986 when the tax code was simplified down to a very few marginal rates.

In the third quarter of 2003, after George W. Bush’s relatively small tax cuts on income and investments became law, the economy grew at an annualized 6.9%. Despite being hampered by the unproductive busywork mandated by Sarbanes Oxley — a handicap still holding us back that no one seems willing to talk about — economic growth averaged 2.8% during the next dozen quarters.

But despite the steepest four-quarter contraction since the Great Depression, after which one would reasonably expect a brisk uptick, the Obama economy’s rebound, if it’s even fair to call it that, has been disappointing. The high-water mark for growth since the recession as normal people define it ended was the annualized 5.6% in the final quarter of last year. That’s not bad, but no one expects anything resembling a repeat of this performance while this administration’s current economic policies and postures remain in place. Even if growth somehow remains nominally impressive, employment is barely growing. The talk of the town both on Main Street and Wall Street is whether we’re heading into a double-dip recession. Some legitimately smart people think it has already started.

History should have told Team Obama that its statist stimulus strategy was doomed to failure. The Roosevelt administration’s continued stimulus during the 1930s failed to bring the unemployment rate below 12%. Meanwhile, Europe’s unemployment rate during that decade was actually lower. Japan tried a decade of aggressive stimulus during the 1990s. By the end of “The Lost Decade,” a former Asian powerhouse had morphed into a zombie economy.

But the pseudo-smarties at Team Obama thought they could defy history. They couldn’t. The administration can trot out its other-worldly “Recovery Summer” and “jobs created or saved” rhetoric all it wants, but the fact that their stimulus strategy has failed to adequately revive the economy is no longer arguable.

The seasonally adjusted unemployment rate has been over 9% for fourteen consecutive months, and seems certain to break the record for the longest such strong (18) since the government began reporting monthly results in 1948. On a population-adjusted basis, the actual number of housing starts in June (i.e., before seasonal adjustment) was the lowest on record for any June since such records have been kept — by over 50%. Foreclosures are on track to break another annual record. Factory output fell in June. Retail sales went negative during May and June. Federal tax collections are still plummeting; only remittances from the Fed are keeping year-over-year receipts from diving further. Do I really need to go on?

Getting back to Ben Bernanke, it’s important to remember that the Fed chairman has extensively studied the Great Depression and understands its monetary lessons. He agrees with the late Milton Friedman that serious Fed policy blunders added to its depth, telling the Nobel laureate in 2002: “You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

But there’s only so much Ben and the Fed can do. In Congressional testimony, Bernanke essentially admitted that he has done virtually all he can:

Even as the Federal Reserve continues prudent planning for the ultimate withdrawal of extraordinary monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain.

That, friends, is a de facto admission of impotence.

Ben really can’t do anything about our atmosphere of “unusual uncertainty,” because he didn’t create it. Nancy Pelosi, Barack Obama, and Harry Reid did that just over two years ago by establishing what I have been calling the POR (Pelosi-Obama-Reid) economy ever since. It was in June of 2008 that these three demonstrated that they would act as ruthless redistributionist statists if they achieved monopoly power over the presidency and Congress. Their energy-starving environmental proposals, their near giddiness over the prospect of massive tax increases, and their fundamental hostility towards capitalism, free markets, wealth creation, and even the rule of law became all too apparent to those not wearing Beltway blinders. Entrepreneurs, investors, and businesspeople began pulling to the sidelines. Their expansion and hiring plans began to go on hold. They began stripping ongoing operations down to bare essentials.

The pullback by the productive accelerated two months later. The frauds by design known as Fannie Mae and Freddie Mac imploded, while Congress got stampeded into setting up the $750 billion slush fund we now know as TARP. Obama’s funny money-aided election convinced all but the snookered (I’m talking to you, Mort Zuckerman) that unacceptable uncertainty was about to become a permanent part of the economic landscape.

If you think the uncertainty is bad now, look at what’s coming. How many yet to be discovered daggers to personal and economic freedom lie in the thousands of pages of signed but largely unread legislation? How much more damage will be done when unelected, job security-conscious technocrats add tens of thousands of pages of regulations into the mix?

I don’t see how the uncertain business environment can improve as long as the current bunch is in charge. Ben Bernanke can’t make things better. Only voters can — maybe.

Positivity: Celebration to honor first Roman Catholics of Nova Scotia

Filed under: Positivity — Tom @ 8:29 am

From Halifax, Nova Scotia:

Jul 26, 2010 / 05:08 pm

The 400th anniversary celebration of a Nova Scotian chief’s baptism will be held next week. His baptism, along with others from the Mi’kmaq people represent the first conversions to the Roman Catholic Church in the area.

The celebration commemorating 400 years since the baptism of Grand Chief Henri Membertou of the Mi’kmaq People will take place on Chapel Island, Nova Scotia this coming Aug. 1.

A letter released by the Holy See’s Press Office on Saturday announced that newly appointed prefect of the Congregation for bishops, Cardinal Marc Ouellet, will be attending on the Pope’s behalf.

Bishop of Antigonish, Brian Joseph Dunn, explained the significance of the occasion in a pastoral letter earlier this month. Congratulating the Mi’kmaq people on their faith since the leader converted to Christianity four centuries ago, Bishop Dunn recalled why this anniversary is “such a momentous occasion for all in this diocese.”

Grand Chief Henri Membertou was baptized by French explorers, thus becoming the first indigenous leader to become Christian, being joined in baptism that day in 1610 by the rest of his family. Bishop Dunn said that he took on his responsibilities as a committed Christian, also urging Jesuit missionaries to preach in the Mi’kmaq language.

Following his lead, the Christian faith became a part of the people’s culture, he wrote, and has continued up to today, “to such an extent that virtually each Mi’kmaq person continues the tradition of being baptized.

“The Mi’kmaq people are truly the first Roman Catholics in this land and their descendants practiced the Christian faith even before the arrival of any permanent European settlement.”

Bishop Dunn said that the Great Chief’s baptism has served to “bridge the gap between the native and non-native cultures” and ensured that the legacy of the faith was passed down through the ages, in spite of great difficulties. …

Go here for the rest of the story.