August 28, 2014

2Q14 GDP, 1st Revision (082814): An Annualized 4.2%, Up From 4.0%

Filed under: Economy,Taxes & Government — Tom @ 7:05 am

Predictions: They’re barely exist. As of 6:30, I couldn’t find one that was specific. Early Monday, in a rundown on the upcoming week’s reports, I found a Bloomberg prediction of 3.9 percent, down only slight from the initial 4.0 percent. An article this morning at Bloomberg containing mentions of upcoming reports doesn’t even mention GDP. This AP dispatch, which will be revised when the data comes out, carries no prediction. UPDATE: Business Insider has 3.9%.

Things have been awfully quiet since that 4.0 percent initial report in late July. That could either be because nothing has happened which would cause one to expect a revision, or that there are expected downward revisions that haven’t been disclosed. It probably doesn’t indicate any realistic chance of a significant write-up.

We’ll see here at 8:30.

HERE IT IS: It went up, but not significantly —

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 4.2 percent in the second quarter of 2014, according to the “second” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 2.1 percent.

… The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

Here is how things changed from the original estimate:

2Q14GDP1stREvVsAdv.png

There was more fixed investment, the inventory increase shrunk, and net imports were less of a drag.

This beats expectations, and isn’t bad. But we need about 10 more quarters like to this to make up the $2 trillion GDP vs. historical trend gap the Obama bare-recovery has created.

Initial Unemployment Claims: 298K SA; Raw Claims 9% Below Same Week Last Year

Filed under: Economy,Taxes & Government — Tom @ 7:03 am

Prediction: Bloomberg predicts 300,000 seasonally adjusted claims, up a bit from last week’s 298,000.

Seasonal Adjustment Factors:

  • Week ended August 23, 2014 — 83.4
  • Week ended August 24, 2013 — 83.2

Raw Claims:

  • Week ended August 16, 2014 — 248,759 (before likely revision)
  • Week ended August 24, 2013 — 279,803

For today’s report to come in at 300K or below, raw claims will need to be 250K or below (250K divided by .834 is 300K, rounded. That looks like an even bet to occur.

We’ll see what happens here at 8:30. I’ll cover it after I look at the GDP report which is coming out at the same time.

HERE IT IS:

SEASONALLY ADJUSTED DATA

In the week ending August 23, the advance figure for seasonally adjusted initial claims was 298,000, a decrease of 1,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 298,000 to 299,000. The 4-week moving average was 299,750, a decrease of 1,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 300,750 to 301,000.

UNADJUSTED DATA

The advance number of actual initial claims under state programs, unadjusted, totaled 248,622 in the week ending August 23, a decrease of 841 (or -0.3 percent) from the previous week. The seasonal factors had expected no change from the previous week. There were 279,803 initial claims in the comparable week in 2013.

The result is in line with expectations. We’ll have to wait a week to see if these low claims numbers translate into a lower unemployment rate.

As CBO Reduces Its Growth Projection, AP Still Gives Cred to Obama Admin’s Absurd Forecast

In a Wednesday report on the Congressional Budget Office’s downward revision of this year’s predicted gross domestic product growth to a dismal 1.5 percent, the Associated Press’s Andrew Taylor acted as if the Obama administration’s prediction of 2.6 percent still has a realistic chance of occurring.

While one never wants to absolutely say never, the administration’s higher prediction would require annualized growth to come in at roughly 4.3 percent during the second half of this year — something virtually no one is predicting. It would also rely on the second quarter, initially reported at 4.0 percent in July’s first release, not to be revised downward significantly. The government’s second iteration of GDP growth will be released at 8:30 this morning. Excerpts from Taylor’s report follow the jump.

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August 26, 2014

Howler of the Night From Politico: Charlie Crist As a Former ‘Rock-Ribbed Conservative’

Former Florida Republican Governor Charlie won the state’s Democratic gubernatorial primary tonight.

In his writeup on Crist’s defeat of an overmatched challenger, the Politico’s James Hohmann wrote that “Only four years ago Crist was a governor who had run for office as a rock-ribbed conservative.” That wording is a bit too clever. One might argue that Hohmann is merely claiming that Crist ran as a “conservative” in 2006 on the coattails Jeb Bush’s successful and largely conservative previous eight years as Florida’s governor. But Crist certainly didn’t flaunt the label, and by mid-2007 it was obvious that he was governing as a “Schwarzenegger-style Republican moderate” — making it clear that any campaign claim to being genuinely conservative was a false front. Excerpts follow the jump (bolds are mine):

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Fantasy at AP: Housing Has Had a ‘Steady Rebound’ Since the Recession Ended

Someone must have slipped the wrong data to the Associated Press’s Josh Boak yesterday before he composed his dispatch on the Census Bureau’s latest report on new home sales.

Boak got the current month’s news right, though likely by accident (like almost everyone else in the business press, he relies on seasonally adjusted figures, and rarely goes to the unadjusted data), telling readers that “Fewer Americans bought new homes in July, evidence that the housing sector is struggling to gain traction more than five years into the economic recovery.” That’s fine, but his characterization of the longer-term history of home sales was woefully incorrect:

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August 23, 2014

AP’s Matthew Brown Gives 600-Word Story to ‘About Ten ‘Demonstrators’ at Jackson Hole Fed Meeting

The Associated Press’s Top Business News page lists the headlines and opening passages of what the wire service believes are the ten most important business stories at the moment. Its 9:16 a.m. version had a story entitled “JACKSON HOLE DEMONSTRATORS RALLY AGAINST RATE HIKE” listed fifth. Earlier in the morning it was fourth.

Surely, I thought to myself, this must be about a group of at least several hundred to merit this level of attention. Not at all. The opening sentence at Matthew Brown’s Friday afternoon story tells us it was “a group of about 10,” but that one group member somehow got to speak with Federal Reserve Chair Janet Yellen (bolds are mine):

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August 21, 2014

Initial Unemployment Claims (082114): 298K SA, Raw Claims Below 250,000 For Second Week in Past Three

Filed under: Economy,Taxes & Government — Tom @ 7:13 am

Predictions:

  • Bloomberg — “Data today will show initial claims for unemployment benefits declined last week.” Last week’s figure, pending possible adjustments today, was 311,000 seasonally adjusted claims.
  • Post-release updateBusiness Insider predicted 303K.

Seasonal Adjustment Factors:

  • Week ended August 16, 2014 — 83.4
  • Week ended August 17, 2013 — 83.3

Raw Claims:

  • Week ended August 9, 2014 — 268,637
  • Week ended August 17, 2013 — 281,164

For seasonally adjusted claims to match or decline from last week’s 311,000, raw claims will need to be 259,000 or lower (259K divided by .834 is 311K, rounded).

That seems about right. If raw claims are above last week’s figure, it will be cause for a bit of concern. If they beat last year’s same week, it will justify significant concern.

We’ll see what happens here at 8:30.

HERE IT IS (permanent link), and it’s pretty strong —

SEASONALLY ADJUSTED DATA

In the week ending August 16, the advance figure for seasonally adjusted initial claims was 298,000, a decrease of 14,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 311,000 to 312,000. The 4-week moving average was 300,750, an increase of 4,750 from the previous week’s revised average. The previous week’s average was revised up by 250 from 295,750 to 296,000.

… UNADJUSTED DATA

The advance number of actual initial claims under state programs, unadjusted, totaled 248,759 in the week ending August 16, a decrease of 20,709 (or -7.7 percent) from the previous week. The seasonal factors had expected a decrease of 9,357 (or -3.5 percent) from the previous week. There were 281,164 initial claims in the comparable week in 2013.

This is the second week in the past three where raw claims have come in below a quarter-million (pending possible adjustment to this week’s raw number).

There’s nothing troubling here. Whether this translates into a lower unemployment rate is another matter, but it’s obvious that layoffs and involuntary terminations have pulled back to roughly where you’d like to see them stay.

August 15, 2014

AP’s Coverage of July Deficit Again Ignores the Impact of the Largest Tax Increase in the Past Two Decades

The federal government reported a $94.6 blllion deficit in July, only marginally better than the $97.6 figure posted in July 2013.

As has become its habit, the Associated Press’s coverage of that result contained omissions, spin and half-truths about government tax collections, spending and the origins of the Obama administration’s first four years of consecutive trillion-dollar deficits. Particularly annoying is the wire service’s insistence on ignoring the large tax increase in two decades as a factor — in the interest, of course, of supporting the Obama administration’s call for more of the same. Veteran Martin Crutsinger was responsible for this month’s rendition. Excerpts follow the jump:

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August 14, 2014

Initial Unemployment Claims (081414): 311K SA; Raw Claims Only 5% Below Same Week Last Year

Filed under: Economy,Taxes & Government — Tom @ 8:26 am

Predictions:

Seasonal Adjustment Factors:

  • Week ended August 9, 2014 — 86.4
  • Week ended August 10, 2013 — 85.9

Raw Claims:

  • Week ended August 2, 2014 — 247,133
  • Week ended August 10, 2013 — 282,756

To achieve or beat the predictions, raw claims will need to be 255,000 or lower (255K divided by .864 is 295K, rounded).

If things are moving along swimmingly, that’s what we’ll get.

We’ll see here at 8:30.

HERE IT IS (permanent link): Well, well, a little trouble in paradise —

SEASONALLY ADJUSTED DATA

In the week ending August 9, the advance figure for seasonally adjusted initial claims was 311,000, an increase of 21,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 289,000 to 290,000. The 4-week moving average was 295,750, an increase of 2,000 from the previous week’s revised average. The previous week’s average was revised up by 250 from 293,500 to 293,750.

UNADJUSTED DATA

The advance number of actual initial claims under state programs, unadjusted, totaled 268,837 in the week ending August 9, an increase of 20,960 (or 8.5 percent) from the previous week. The seasonal factors had expected an increase of 2,317 (or 0.9 percent) from the previous week. There were 282,756 initial claims in the comparable week in 2013.

That’s a bit of a surprise, but last week seemed artificially low, so maybe this week averaged out last week.

A lot was made of how supposedly wonderful the JOLTS report a day or two ago was in showing so many open jobs, which are at a 13-year high. The logical question would be, “Why aren’t they being filled?”

Today’s news puts a bit of a damper on that.

August 13, 2014

Retail Sales Flatlined in July; AP Deadpans That Americans With No Money ‘Are Hesitant to Spend’

This morning, the Census Bureau, in its advance report on retail sales, revealed that seasonally adjusted July sales were “virtually unchanged” from June. Expectations were for a 0.2 percent gain, supposedly with “solid upside” potential. Oops. June’s result stayed at its previously reported 0.2 percent increase.

Reuters did the “U-word” honors this time out: “U.S. retail sales unexpectedly stalled in July, pointing to some loss of momentum in the economy early in the third quarter.” Someone needs to tell the wire service’s Lucia Mutikani that no increase means no momentum. Over at the Associated Press, Josh Boak tried the deadpan approach.

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August 8, 2014

It Begins: The First Reason Why 2Q14 GDP’s Will Likely Be Revised Down

Filed under: Economy — Tom @ 10:22 am

From Zero Hedge (link is in original):

Against expectations of a further rise in inventory build of 0.7%, wholesale inventories rose only 0.3% in June (the same pace as in May) missing by the most since February 2013With GDP now basically an exercise in inventory expansion and contraction (Q2 inventory estimate amounte to 40% of GDP), this ‘miss’ offers little hope for the initial Q2 rebound to hold its exuberance. In addition, wholesale sales also missed (up only 0.2% against expectations of a 0.7% rise) with growth slowing for the 3rd month in a row.

The government’s wholesale inventories report is here.

The true (i.e., unadjusted, raw, actual) change in June inventories was -1.1%.

That initial 4.0% annualized figure for 2Q14 just got tenuous.

Updating the Reagan v. Obama Economic Rout

Filed under: Economy,Taxes & Government — Tom @ 6:59 am

Comparing economic legacies.

_________________________

The column went up at PJ Media and was teased here at BizzyBlog on Wednesday.

_________________________

The Hill reported last week that President Obama wants to “pivot to his economic legacy.”

Specifically, “the White House hopes to ride the wave of an economic recovery to improve Obama’s approval numbers over the final two years of his presidency, setting up a possible Democratic successor at the White House.” If The Hill’s Amie Parnes and Peter Schroeder had submitted their writeup to The Onion, they would have gladly run it.

Unfortunately for the President, one good quarter — assuming it even survives subsequent revisions, and especially following a quarter of contraction which was originally reported as positive before the heavy-duty erasers came out — does not a positive legacy make. Nor will another two years of the 2.4 percent economic growth seen during the past four quarters, again before revisions to the most current quarter.

By the three key measures of economic, job and income growth, Barack Obama’s economy, also known to yours truly as the POR (Pelosi-Obama-Reid) economy to identify the three parties most responsible for the both the depth of the Great Recession and the historically awful “recovery” which has followed it, has been historically horrid.

Obama’s economic policy, with the help of a pliant Federal Reserve, has been built on the notion that massive deficit spending and easy money would bring the economy roaring back and “stimulate” job growth. The former strategy was tried during the 1930s. It only succeeded in lengthening the Great Depression, as the nation’s unemployment rate never fell below 12 percent. The fact that Team Obama insisted on making the same mistakes, while at the same time unleashing the federal government’s regulatory apparatus to harass the economy’s productive participants, is enough to make reasonable people question whether this president and his administration have ever truly wanted to see a genuine recovery occur.

On the other hand, five years of strong, solid and uninterrupted economic performance following a serious recession is how you create a positive economic legacy. Ronald Reagan’s post-recession economy — an economy which faced arguably greater challenges when he took office, particularly double-digit inflation and a prime interest rate of 20 percent — did just that.

Reagan’s economic policy, conducted in the face of necessarily painful anti-inflationary Federal Reserve monetary policy, was premised on supply-side tax cuts and regulatory restraint. A third element, getting federal spending under control, didn’t occur because (surprise) Democrats reneged on promises to cut spending made during budget negotiations. Today, Obama’s crew anticipates annual budget deficits which will never fall below $450 billion and will balloon back to $1 trillion within a decade.

First, let’s compare post-recession economic growth, as seen in increases in real (inflation-adjusted) Gross Domestic Product:

ReaganVsObamaGDPthru20quarters

Five years after the early-1980s recession ended, the U.S. economy was almost 26 percent larger. The Obama economy, in the worst five-year recovery since World War II by miles, hasn’t achieved even half of that.

The difference is, well, graphic:

ReaganVsObamaCumulGDPthru20quarters

Now, let’s look at job growth.

As seen below, even before considering the fact that the U.S. had 32 percent fewer people working at the end of the 1980s recession than it did in mid-2009, the Reagan economy added almost 6 million more jobs in its first five post-recession years than the Obama economy:

ReaganVsObamaCumulJobsTblThru0714

Team Obama has taken to bragging about private-sector job growth. But even there, before adjusting for workforce size, the Reagan economy beat out Obama’s by almost 3.9 million jobs.

In an apples-to-apples comparison showing employment growth in percentage terms, it’s an utterly embarrassing rout:

ReaganVsObamaCumulJobsThru0714

As seen in the graph, one important element in the Obama economy’s lackluster employment growth was its failure to stop job losses until eight months after the recession ended. That’s exactly what the President’s and the Democrat-dominated Congress’s stimulus plan said it would prevent. They also said it would bring the unemployment rate down to 5.3 percent by the end of the his first term. It utterly failed on both counts.

Beyond that, the Obama economy, five years into its “recovery,” has unprecedentedly failed to bring full-time employment to its pre-recession peak, standing at 3.4 million jobs short as of July. Millions who want to work full-time are stuck in part-time positions. Millions of others are discouraged and on the sidelines. (And we’re supposed to believe that Obamacare has absolutely nothing to do with any of this.) Reagan’s economy took only 12 months after that era’s recession ended to restore full-time employment to its prerecession peak. By the end of 1987, over 10 million more Americans were working full-time.

Finally, let’s look at household income growth — I’m sorry, I meant income growth during the Reagan era and income declines during Obama’s reign:

MedianHHincomePostRecs

Median household income increased by over 9 percent during the five years after the early 1980s recession ended. In the first three years after the most recent recession’s official end, it has declined by over 4 percent. Monthly median household income estimates compiled by Sentier Research indicate that there has been a very slight rise since then.

Even with the expected heavy dose of help from the establishment press, a Democratic Party presidential nominee try to run on Obama’s supposedly tremendous economic “legacy” of weak economic growth, chronic underemployment, and middle class-damaging income declines will likely be making a grave mistake. That’s because, as the Associated Press had to admit last week, despite the press’ current best efforts, the American people “don’t feel it.” Two years of marginal improvement, which is the best anyone can realistically hope for, won’t meaningfully change that.

August 7, 2014

Initial Unemployment Claims (080714): 289K SA (8-1/2 Year Low); Raw Claims Below 250K

Filed under: Economy,Taxes & Government — Tom @ 8:09 am

Predictions:

Seasonal adjustment factors:

  • Week ended August 2, 2014 — 85.6
  • Week ended August 3, 2013 — 86.1

Raw claims:

  • Week ended July 26, 2014 — 257,210
  • Week ended August 3, 2013 — 288,861

To meet or beat Bloomberg’s lower prediction, raw claims will need to be 260,000 or lower (260K divided by .856 is 304K, rounded).

We’ll see what happens here at 8:30.

HERE IT IS (permanent link):

SEASONALLY ADJUSTED DATA

In the week ending August 2, the advance figure for seasonally adjusted initial claims was 289,000, a decrease of 14,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 302,000 to 303,000. The 4-week moving average was 293,500, a decrease of 4,000 from the previous week’s revised average. This is the lowest level for this average since February 25, 2006 when it was 290,750. The previous week’s average was revised up by 250 from 297,250 to 297,500.

UNADJUSTED DATA

The advance number of actual initial claims under state programs, unadjusted, totaled 247,133 in the week ending August 2, a decrease of 10,492 (or -4.1 percent) from the previous week. The seasonal factors had expected an increase of 1,514 (or 0.6 percent) from the previous week. There were 288,861 initial claims in the comparable week in 2013.

Those are undeniably strong results, perhaps influenced by the auto industry’s move away from long summer shutdowns which the seasonal factors aren’t picking up, but undeniably strong nonetheless.

So we’re left to wonder how we can have 6.2 percent unemployment (and millions on the sidelines) with a quarter-million unemployment claims per week, compared to a much lower 4.8 percent unemployment rate the last time seasonally adjusted claims were so low in 2006.

The guess here is tha much of it has to do the more part-time and temporary nature of the workforce.

The FT/PT breakdown in the U.S. labor force in February 2006 was 118.7 million/24.7 million, with 2.63 million temporary employees.

The FT/PT breakdown in July 2014 was 118.5 million/28.1 million, with 2.88 million temps. That’s 200K fewer FT, 3.4 million more PT, and 250K more temps than 8-1/2 years earlier.

People who collect unemployment benefits are overwhelmingly full-timers who aren’t temps.

Thus, the number of people who would be motivated to file for and collect unemployment benefits if laid off or terminated is probably smaller than it was in 2006. The theory here is that people who work a part-time job with low pay may be eligible for benefits, but if they’re let go, they’re more apt to quickly find other part-time work and not to bother filing an unemployment claim. Some may also determine that their calculated benefit isn’t worth the paperwork hassle, especially if they already have another part-time job — a far from unusual circumstance these days.

In other words, though the claims numbers are pleasantly low, they’re not automatically cause for “Eureka! We’ve arrived” celebrations.

August 6, 2014

Latest PJ Media Column (‘Updating the Reagan v. Obama Economic Rout’) Is Up

Filed under: Economy,Taxes & Government — Tom @ 10:08 am

It’s here — and it is a rout.

It will go up here at BizzyBlog on Friday morning (link won’t work until then) after the blackout expires.

August 5, 2014

ISM Non-Manufacturing Hits Highest Reading Since 2008 Inception: 58.7%, Up from 56.0% in June

Filed under: Economy — Tom @ 2:53 pm

From the Institute for Supply Management (most paragraph breaks added by me):

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in July for the 54th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The NMI® registered 58.7 percent in July, 2.7 percentage points higher than the June reading of 56 percent. This represents continued growth in the Non-Manufacturing sector. This month’s NMI® is the highest reading for the index since its inception in January 2008.

The Non-Manufacturing Business Activity Index increased to 62.4 percent, which is 4.9 percentage points higher than the June reading of 57.5 percent, reflecting growth for the 60th consecutive month at a faster rate. This is the highest reading for the index since February 2011 when the index registered 63.3 percent.

The New Orders Index registered 64.9 percent, 3.7 percentage points higher than the reading of 61.2 percent registered in June. This represents the highest reading for the New Orders Index since August 2005 when it registered 65.3 percent.

The Employment Index increased 1.6 percentage points to 56 percent from the June reading of 54.4 percent and indicates growth for the fifth consecutive month. The Prices Index decreased 0.3 percentage point from the June reading of 61.2 percent to 60.9 percent, indicating prices increased at a slightly slower rate in July when compared to June.

According to the NMI®, 16 non-manufacturing industries reported growth in July. …

The reference to points in time before the NMI refer to the old “services index”; ISM apparently sees such comparisons as valid.

Including the old services index, according to Zero Hedge, July’s reading is the highest in 9 years.

This is very good news. It would be nice if it were more obvious that this sentiment index correlates with hard-number reality on the ground. But it really isn’t.