September 2, 2015

ADP August Private-Sector Payrolls: +190K, Trailing Expectations

Filed under: Economy,Taxes & Government — Tom @ 9:01 am

From the National ADP Employment Report:

Private-sector employment increased by 190,000 from July to August, on a seasonally adjusted basis.

Expectations were +220K per and +201K per the “markets.” Revisions to the two previous months were minor.

From the press release:

“The job growth numbers for August improved slightly from July,” said Carlos Rodriguez, president and chief executive officer of ADP. “The employment gains for the month are in line with the year to date average.”

Mark Zandi, chief economist of Moody’s Analytics, said, “Recent global financial market turmoil has not slowed the U.S. job market, at least not yet. Job growth remains strong and broad-based, except in the energy industry, which continues to shed jobs. Large companies also remain more cautious in their hiring than smaller ones.”

Gee, Mark, the past two months look more than a little bit slower in this graph:


Additionally, the data was collected before the “market turmoil.” ADP admits it in its full description of its methodology:

By combining the pay date and the frequency of pay, Moody’s Analytics matches the BLS pay period concept as closely as possible.

In the most straightforward case, the derived pay period includes the 12th of the month.

The Dow didn’t start dropping significantly until August 19, following the first day of a horrid multi-day dive at the Shanghai exchange.

In other words, Mark Zandi is dissembling. The past two months’ mediocre numbers pre-date the “market turmoil,” and we don’t yet have information relaing to its effect on employment.

To be clear, we also won’t have that information on Friday when the government reports its numbers, because that report also pegs from the 12th of the month — but we can expect that most in the establishment press, regardless of the results, won’t see it that way.

September 1, 2015

August ISM Manufacturing Index: 51.1 Percent vs. 52.5 Expectations, Down From 52.7 in July (Update: Construction Spending Comes in Strong)

Filed under: Economy,Taxes & Government — Tom @ 10:24 am

From the Institute for Supply Management (bolds are mine; some paragraph breaks added by me):

Economic activity in the manufacturing sector expanded in August for the 32nd consecutive month, and the overall economy grew for the 75th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The August PMI® registered 51.1 percent, a decrease of 1.6 percentage points from the July reading of 52.7 percent.

The New Orders Index registered 51.7 percent, a decrease of 4.8 percentage points from the reading of 56.5 percent in July. The Production Index registered 53.6 percent, 2.4 percentage points below the July reading of 56 percent.

The Employment Index registered 51.2 percent, 1.5 percentage points below the July reading of 52.7 percent. Inventories of raw materials registered 48.5 percent, a decrease of 1 percentage point from the July reading of 49.5 percent. The Prices Index registered 39 percent, down 5 percentage points from the July reading of 44 percent, indicating lower raw materials prices for the 10th consecutive month. The New Export Orders Index registered 46.5 percent, down 1.5 percentage points from the July reading of 48 percent.

Comments from the panel reflect a mix of modest to strong growth depending upon the specific industry, the positive impact of lower raw materials prices, but also a continuing concern over export growth.

Of the 18 manufacturing industries, 10 are reporting growth in August …

Six of the remaining eight industries were in contraction.

Expectations as seen at Yahoo’s Business Calendar averaged 52.5 percent.

51.1 percent, while still expansion (any reading above 50 percent represents expansion), is certainly not strongly so.

Of the three primary GDP drivers, the New Orders and Production declines are certainly significant, and Backlog of Order remained in contraction, while less seriously so (46.5 percent in August vs. 42.5 percent in July).

The problem for some time has been that this index has portrayed a rosier picture than we have seen in the related government data, which has mostly been in a year-over-year hard-data decline during 2015 thus far. So today’s news doesn’t bode well for third quarter GDP, which by many estimates is due to come in at an annualized 2.0 percent or below — perhaps far below.

I believe that ISM, although not intentionally so, is cherry-picking manufacturing facilities which are doing well and not adequately considering those which either aren’t doing well or have closed. I would suggest that since ISM’s index isn’t positive by all that much, the manufacturing sector as a whole is likely in at least a mild contraction.


UPDATE: Better news came from the Census Bureau’s July Construction Spending report:

&The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2015 was estimated at a seasonally adjusted annual rate of $1,083.4 billion, 0.7 percent (±1.5%)* above the revised June estimate of $1,075.9 billion. The July figure is 13.7 percent (±2.0%) above the July 2014 estimate of $952.5 billion.

During the first 7 months of this year, construction spending amounted to $583.2 billion, 9.3 percent (±1.5%) above the $533.7 billion for the same period in 2014.

June’s increase was revised up from +0.1 percent to 0.7 percent.

August 31, 2015

Why Is the Press So Quiet About Illinois Lottery Winners Not Getting Paid?

Silly me. I really thought that every state’s lottery operation was walled off from the rest of its finances. They collect bets, pay out winnings and administrative costs, and turn over the profits to general fund. End of discussion. No muss, no fuss. Right?

In Illinois, based on recent developments, we know that’s obviously not the case — leading me to wonder how many other states potentially have the same problem the Land of Lincoln currently has. You see, the state is about to move into the third month of a budget standoff between Republican Governor Bruce Rauner and its Democrat-controlled state legislature. As a result, because the lottery’s operations are at least in a legal sense commingled with the rest of the state’s finances, its comptroller has been forced to cancel payouts of lottery winnings greater than $25,000. It appears that very few media outlets outside of Illinois are interested in covering this obviously important story. Why?


August 28, 2015

U of M, AP Falsely Blame Consumer Sentiment Drop on Stock Market Plunge

At the Associated Press today, Christopher Rugaber appears to have played along with a game of make-believe in his coverage of the August release of the University of Michigan’s Survey of Consumers.

The index (dowloadable PDF is at link) dropped for the second straight month, this time from 93.1 to 91.9, a point below August’s prelimnary reading of 92.9. That trailed expectations that it would come in at 93.0. The survey’s director, Richard Curtin, claimed that the drop occurred “mainly due to the recent volatility in stock prices.” Whatever his reason for making that claim, it doesn’t pass the smell test, and Rugaber had all the information needed to figure that out (which he may have) and report it (which he didn’t).


Financial Times: Hey, Let’s Abolish Cash — Or Charge People For the Privilege of Using It and Having It

Filed under: Economy,Taxes & Government — Tom @ 9:03 am

Since this link requires registration, I’ve posted most of it below.

The Financial Times — in a house editorial, not somebody’s op-ed piece —  is advocating the elimination of cash. The subheadline might make readers think that they are be wondering aloud if it’s a good idea, but the content tells us that they’ve made up their minds (HT Zero Hedge; bolds are mine):

The case for retiring another ‘barbarous relic’
Could a world without cash make for a much-improved economy?

The fact that people treat cash as the go-to safe asset when banks are teetering is heavy with historical irony. Paper money was once the symbol of monetary irresponsibility. (When was that? I must have missed it. — Ed.) But even as individuals have taken recent crises as reasons to stock up on banknotes, authorities would do well to consider the arguments for phasing out their use as another “barbarous relic”, the moniker Keynes gave to gold.

Already, by far the largest amount of money exists and is transacted in electronic form — as bank deposits and central bank reserves. But even a little physical currency can cause a lot of distortion to the economic system.

The existence of cash — a bearer instrument with a zero interest rate — limits central banks’ ability to stimulate a depressed economy. The worry is that people will change their deposits for cash if a central bank moves rates into negative territory. The Swiss, Danish and Swedish central banks have pushed rates lower than many thought possible; but most policymakers still believe in an “effective” lower band not far below zero.

Heaven forbid we put any kind of “limits” on all-knowing central banks. Their “stimulus” efforts have been soooo effective, haven’t they?

So let’s give them the ability to “moves rates into negative territory” (i.e., steal from depositors) and give people no choice but to watch the fruits of the labor disappear — like in Cyprus not too long ago.

Continuing, picking up a bit later in the editorial:

The anonymity that cash uniquely affords is, however, an argument for keeping it as well as for abolishing it. It is not only criminals and money launderers who prefer cash. Especially in the post-Snowden era, many ordinary citizens legitimately want the option of not leaving digital footprints.

But the FT really doesn’t like the “anonymity” excuse, and if they can’t abolish it, wants people to pay for the privilege of being anonymous:

Fortunately some benefits of electronic money can be reaped without banning all cash outright. Cash could remain accessible but at a cost, so that its users pay for the privilege of anonymity — and remain affected by monetary policy. Dated banknotes could see their value as legal tender gradually fall over time; banks could be charged for swapping electronic reserves for physical cash and vice versa. The benefits of cash are significant — but they need not be offered for free.

This is (very) thinly veiled totalitarian thinking on display here. The fact that it’s coming from an allegedly responsible financial publication demonstrates how deeply the idea has made its way into the establishment’s thinking.

As a commenter at the link wrote:

The state controlled, centrally planned economy complete with economic subjugation to and surveillance by the “authorities” that FT is effectively advocating here, is the “barbarous relic.”

August 27, 2015

Back to the ‘New Normal’

Filed under: Economy,Taxes & Government — Tom @ 1:19 pm

The U.S. markets have receovered much of the losses duirng the week or so which ended Tuesday, even though:

  • China’s stock market only rose on Thursday because of government share purchases.
  • China has been selling much of its U.S. Treasury holdings. IAnd we’re sure there are other buyers who won’t force China to take lossses? And who is going to buy the new issuance at current near-zero rates?)

I don’t have a crystal ball, but this is no time to be breathing easy.

2Q15 GDP, Second Take: An Annualized 3.7 Percent, Up From 2.3 Percent

Filed under: Economy,Taxes & Government — Tom @ 8:44 am

From the Bureau of Economic Analysis (full release with tables here):

Real gross domestic product — the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes — increased at an annual rate of 3.7 percent in the second quarter of 2015, according to the “second” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.6 percent.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 2.3 percent. With the second estimate for the second quarter, nonresidential fixed investment and private inventory investment increased. With the advance estimate, both of these components were estimated to have slightly decreased (see “Revisions” on page 2).

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

The acceleration in real GDP in the second quarter reflected an upturn in exports, an acceleration in PCE, a deceleration in imports, an upturn in state and local government spending, and an acceleration in nonresidential fixed investment that were partly offset by decelerations in private inventory investment, in federal government spending, and in residential fixed investment.

Real gross domestic income (GDI) — the value of the costs incurred and the incomes earned in the production of goods and services in the nation’s economy — increased 0.6 percent in the second quarter, compared with an increase of 0.4 percent (revised) in the first. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.1 percent in the second quarter, compared with an increase of 0.5 percent in the first quarter.

This was better than the 3.1 percent expected.

Of course, no one can really explain how so many underlying indiactors of “the value of the goods and services produced by the nation’s economy” were lower in the second quarter of this year than during the second quarter of last year.

I’ll have a comparison chart shortly.

UPDATE: Here it is –


Primarily, we saw fairly significant upward revisions to fixed nonresidential investment, inventories (from a decline to an increase), and in government purchases, accompanied by a small increase in consumption.

The upward revision is good news.

There is a widespread belief that the third quarter will be relatively weak because the inventory buildups we’ve seen are going to go into reverse. Given the year-over-year declines in sales I’ve seen, that would seem to make sense. But so much about GDP — which again, is supposed to reflect “the value of the goods and services produced by the nation’s economy” — isn’t reflected in underlying hard data, it’s hard say that with a lot of conviction.


UPDATE: The Atlanta Fed’s GDP Now model, which has NOT incorporated today’s GDP report into its reckoning, is projecting annualized growth of 1.4 percent in the third quarter. Today’s inventory rise would seem to argue for a lower estimate once they reanalyze.

Initial Unemployment Claims (082715); 271K SA; Raw Claims (227K) Down 9 Percent from Same Week Last Year

Filed under: Economy,Taxes & Government — Tom @ 8:34 am

From the Department of Labor:


In the week ending August 22, the advance figure for seasonally adjusted initial claims was 271,000, a decrease of 6,000 from the previous week’s unrevised level of 277,000. The 4-week moving average was 272,500, an increase of 1,000 from the previous week’s unrevised average of 271,500.


The advance number of actual initial claims under state programs, unadjusted, totaled 226,855 in the week ending August 22, a decrease of 2,396 (or -1.0 percent) from the previous week. The seasonal factors had expected an increase of 2,769 (or 1.2 percent) from the previous week. There were 249,006 initial claims in the comparable week in 2014.

The seasonal adjustment factor (83.8) was identical for this year and the same week last year.

These reports, especially the raw claims numbers, continue to come in strong.

August 26, 2015

AP Drags Bush 43 Into Coverage of IG’s Report on Solyndra

Almost four years ago, solar energy manufacturer Solyndra filed for bankruptcy, leaving the federal government with a loan guarantee-related loss of up to $535 million.

The Energy Department’s inspector general released a report on the debacle today. At the Associated Press, reporter Kevin Freking made sure readers knew that the loan guarantee program began under President George W. Bush, but somehow “forgot” to note, as the Weekly Standard did at the time, that the Energy Department under Bush made a “unanimous decision to shelve Solyndra’s application two weeks before Obama took office.”


Press Seems Determined Not to Blame Venezuela’s Chavista Government For Social and Economic Calamity

Filed under: Economy,Taxes & Government — Tom @ 11:36 am

As Venezuela’s Chavista economy under Nicolas Maduro continues to crumble, the Associated Press and others in the media continue to describe its problems as if they came out of nowhere instead of originating with its statist, oppressive government.

Examples follow the jump.


August 25, 2015

Apple Gets Kid-Glove Treatment After CEO Emails CNBC’s Jim Cramer About Its China Business

It doesn’t seem likely that an oil company CEO would get the benefit of the doubt Apple CEO Tim Cook received from the press yesterday after he emailed well-known financial commentator and investment adviser Jim Cramer about his company’s performance in China.

In an email read over the air on CNBC, Cook reported that “we have continued to experience strong growth for our business in China through July and August.” The question is whether, by providing this private disclosure, Cook violated U.S. “fair disclosure” regulations requiring that “materal information” be disclosed to the public.


Here We Go Again … (Turnaround Tuesday Fizzles, Goes Red Again)

Filed under: Economy,Taxes & Government — Tom @ 8:15 am

4:05 p.m.: Just when you think the storm had passed, markets, which were way ahead, went south again and closed significantly down:


In the context of recent days, is it a good day when the Dow and S&P “only” go down by about 1.3 percent?

7:15 a.m.: Shanghai closed down 7.64 percent (2,964.967).

(original post at about 12:15 a.m.)Shanghai is down another 5.45 percent (Update: Down 4.33 percent at the mid-day break):


The “good” news is that it’s at least off of its opening low, which was down from yesterday by well over 6 percent.

August 24, 2015

O … M … G

Filed under: Economy,MSM Biz/Other Ignorance,Taxes & Government — Tom @ 12:27 am

(link to NASDAQ home page for latest indices quotes)

4:10 p.m.: Dow ends up down 588 points. Indices down 3.5% – 4.0%.

3:10 p.m.: Lord have mercy. Just when you think things might have settled down, I now see that the Dow is down over 500 points and that all the indices are down 3% or or more.

10:50 a.m.: More bounceback — Indices have regained about two-thirds of what was initially lost. But Dow is still down over 300 points.

9:40 a.m.: Some bounceback — Indices have regained about 40% of what was initially lost.

9:32 a.m.: Dow down almost 1,000. NASDAQ down 8 percent:


8:32 A.M.: At Drudge:


7:15 A.M. Update: The index recovered about 60 percent of its losses during the afternoon session, only to give it all back and close at 3209.905, a loss for the day of 8.49 percent which apparently would have been worse without the 10 percent daily loss limits described below.

12:30 A.M. (original post time): The Shanghai stock market lost 8.45 percent in 2-1/2 two hours before it took its scheduled mid-day break:


It would apparently be even worse but for the fact that the Shanghai “market” has a daily individual stock loss limit of 10 percent — which 2,000 stocks have hit.

It doesn’t take a math genius to figure out that if the most any individual stock can drop is 10 percent, and the overall loss is 8.45 percent, most stocks, and perhaps darned near all of them, have taken serious hits.

Good thing the AP and establishment press apparatchiks say this shouldn’t affect us. (/sarc)

August 21, 2015

After Stock Market’s Disastrous Day, AP Makes Several Wishful, Fact-Challenged Assertions

Filed under: Economy,Taxes & Government — Tom @ 11:05 pm

Tonight’s report at the Associated Press in the wake of Wall Street’s disastrous day isn’t quite an Animal House moment — “Remain Calm! All Is Well!” — but it’s more than fair to say that the wire service’s Matthew Craft and Bernard Condon allowed quite a bit of wishful thinking into their writeup.

In late June, I noted that the AP’s Ken Sweet asked a very important question about China (“IS THERE A POINT WHERE I SHOULD GET WORRIED?”), and failed to answer it. He also claimed that “The biggest concern is whether the drop in China’s stock market will cause the country’s economy to slow.” The headline and opening sentence in tonight’s AP dispatch attempted to maintain that false appearance (bolds are mine):


Chickens … Coming Home to Roost?

Filed under: Economy — Tom @ 3:25 pm


UPDATE: At the close —