June 1, 2017

The GM Bailout Utterly Failed to Impose Financial Discipline on The Company

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 3:42 pm

We’re told today in its monthly sales release (found in the “Deliveries” PDF at the link, which only downloads) that General Motors had over 936,000 vehicles sitting in dealer inventories at the end of May.

The company says that represents 101 days of sales, miles above the industry standard of 60-70 days. GM sold 3.04 million U.S. vehicle in 2016, and is running behind that level so far this year.

Zero Hedge reports that GM’s dealer inventories are the highest since November 2007, before the recession.

In 2007, based on this press release on worldwide sales, GM sold 3.87 million vehicles in the U.S. (9.37 million worldwide minus 5.50 million non-US).

So annual sales are below 78.6 percent of what they were a decade ago (somewhere below last year’s 3.04 mil divided by 3.87 mil), and inventories at the company’s far fewer dealers are basically unchanged. 40 percent of dealers were cut out post-bankruptcy, and very few new ones have been started up since. This means that the dealers which remain are sitting on acres and acres of unsold vehicles. If there are still 3,600 dealers (6,000 in 2009 trimmed by 40 percent, that’s a whopping 260 vehicles per dealer.

This seems very unlikely to work out well.

But hey, at least they kept the production lines humming while Chief Bailout Officer Barack Obama was president, which I believe was a key unspoken strategy.

April Construction Spending Declines Sharply, But …

Filed under: Economy,Taxes & Government — Tom @ 12:17 pm

… what is it with these huge upward revisions to prior months?

Here’s the Census Bureau’s announcement today:

Total Construction

Construction spending during April 2017 was estimated at a seasonally adjusted annual rate of $1,218.5 billion, 1.4 percent (±1.0 percent) below the revised March estimate of $1,235.5 billion. The April figure is 6.7 percent (±1.5 percent) above the April 2016 estimate of $1,142.5 billion. During the first 4 months of this year, construction spending amounted to $359.5 billion, 5.8 percent (±1.3 percent) above the $339.7 billion for the same period in 2016.

Here are the original and currently revised values for January through March:

  • January, originally $1,180.3 billion, now $1,198.8 billion, an upward revision of 1.6 percent.
  • February, originally $1,192.8 billion, now $1,221.7 billion, an upward revision of 2.4 percent.
  • March, originally $1,218.3 billion, now $1,235.5 billion, an upward revision of 1.4 percent.


First-quarter construction spending (seasonally adjusted) actually increased by 3.9 percent. Annualize that, and you’re over 16 percent. People who have only looked at the initial reports would think it’s down by about 0.4 percent.

So April came in at -1.4 percent, before revisions.

Recent history would seem to predict that most if not all of that decrease will disappear.

The big question is why these big revisions, all in the same direction, are occurring.

Are the people at the Census Bureau really not getting the information they need on a timely basis (with a one-month reporting lag, that seems doubtful)? Or are they deliberately low-balling their original reporting to make sure negative or weak first-release news about the Trump economy continually hogs the headlines?

Manufacturing Indices: Mixed Bag, But Expanding

Filed under: Economy — Tom @ 11:54 am

The Institute for Supply Management’s Manufacturing Index rose slightly in May to 54.9 percent from 54.8 percent. (Any value above 50 percent means expansion.)

Production and New Orders remained in the high-50s. Backlog of Orders came in at 55.0 percent, down 2 points from April, but still well above what was typically seen during the past decade. 15 of 18 industries were in expansion.

Meanwhile, the “Manufacturing PMI” from IHS Markit Economics fell to 52.7 percent, its lowest level in eight months only 0.1 points below April, as “Weaker new business growth and softer job creation helped to offset a marginally stronger upturn in production volumes.” Further:

Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“Manufacturing growth momentum continued to ebb in May, down to its weakest since just before the presidential election.

“Manufacturing output, order books and employment all grew at only modest rates as sluggish sales prompted firms to scale back hiring. Exports sales remained especially lackluster, hampered in part by the relatively strong dollar. The survey also brought signs of companies becoming more cautious about holding inventory.

“Factories’ raw material prices meanwhile rose at a sharply reduced rate, which should at least help take pressure off profit margins and also feed through to weaker pressure on consumer price inflation.”

Overall, manufacturing is still in reasonably strong expansion, at a level I believe is more closely reflected in Markit’s value than ISM’s.

May 2017 ADP Employment Report: 253,000 Private Sector Jobs Added

Filed under: Economy — Tom @ 10:54 am

Was under the weather today, so I missed ADP’s conference call.

Too bad, because it would have been interesting, given the pretty good news, which substantially beat expectations of 170,000 to 180,000 private-sector job additions.

Here it is:

Private-sector employment increased by 253,000 from April to May, on a seasonally adjusted basis.

From the press release:

“May proved to be a very strong month for job growth,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Professional and business services had the strongest monthly increase since 2014. This may be an indicator of broader strength in the workforce since these services are relied on by many industries.”

Mark Zandi, chief economist of Moody’s Analytics said, “Job growth is rip-roaring. The current pace of job growth is nearly three times the rate necessary to absorb growth in the labor force. Increasingly, businesses’ number one challenge will be a shortage of labor.”

The blue-collar sector also was quite positive, adding 48,000 jobs (+3K mining, +37K construction, +8K manufacturing).

Prior-month revisions:

  • April — 174K, down from 177K.
  • March — 255K, same as April and down from 263K originally.
  • February — 249K, down from 298K originally.
  • January — 268K, up from 246K originally.

The ADP results so far this year, averaging 240K per month, should make the people like Mark Zandi who believed late last year that we were on the verge of “full employment” reconsider that assumption. What I believe is happening, and what may be confirmed in tomorrow’s employment report, is that substantial numbers of people who have been on the sidelines and staying out of the workforce are getting back in — and finding work.

A look at the past 17 months tells us how significant the improvements have been:


Side item worth investigating, if time: The 2016 numbers seem far lower than the sum of the 12 originally announced job additions last year.

Thursday Off-Topic (Moderated) Open Thread (060117)

Filed under: Lucid Links — Tom @ 6:00 am

This open thread is meant for commenters to post on items either briefly noted below (if any) or otherwise not covered at this blog. Rules are here.

Positivity: Trump admin ponders new religious freedom rule for HHS mandate

Filed under: Life-Based News,Positivity — Tom @ 5:55 am

From Washington:

May 31, 2017 / 03:51 pm

A leaked draft of a federal rule that would protect religious organizations from the controversial federal contraception mandate has won the support of religious liberty advocates, who say that it is sorely needed.

“What the rule ultimately says, is that, given how widely available these products already are, there is simply no need for the government to force unwilling religious groups who serve the poor to provide them or to pay massive fines that would shut down these types of ministries,” said Mark L. Rienzi, an attorney at the Becket Fund for Religious Liberty, the legal group that represents the Little Sisters of the Poor.

“As I understand it, this rule shows the United States government finally acknowledging that people can get contraceptives without forcing nuns to provide them,” he said May 31.

Rienzi spoke to reporters in a Wednesday conference call about a 125-page draft memo of a religious liberty rule reportedly under consideration at the Department of Health and Human Services.

The rule would add to, not replace, an Obama-era HHS rule, announced in late 2011, that required employers’ health plans to include coverage of sterilization and contraception, including some drugs that can cause abortion. The initial rule’s religious exemption was so narrow it only exempted houses of worship, drawing widespread objections and lawsuits from more than 300 plaintiffs. Among those suing over the mandate is EWTN Global Catholic Network. CNA is part of the EWTN family.

Subsequent revisions allowed some changes to the mandate for some religious entities. However, groups like the Little Sisters of the Poor objected that the rule still required their complicity in providing such coverage, which violates their religious and moral standards. Refusal to comply with the rule would result in heavy – potentially crippling – fines.

The draft religious liberty rule would allow any employer to request an exemption based on moral or religious objections.

“Expanding the exemption removes religious and moral obstacles that entities and certain individuals may face who otherwise wish to participate in the healthcare market,” said the May 23 draft posted to the news site Vox.

Employers seeking an exemption would have to have a clear statement in their health plan documents that they do not cover contraception or related products. The rule would also allow health insurers to decline to cover contraception and allow individuals to object to participation in a health plan that covers birth control.

During his presidential run, Donald Trump had pledged to aid the Little Sisters of the Poor in an October letter to Catholic leaders. …

Go here for the rest of the story.