May 22, 2015

Hostess’s Revival: What Can Happen When You’re Allowed to Start Fresh

Given how much wailing and gnashing of teeth there was in the press when the old Hostess liquidated in 2012, a mid-April story at Forbes on the company’s revival has gotten surprisingly little attention. Well, maybe it’s not that much of a surprise, for reasons which will be indentified here.

Readers may recall that the final straw in that drama occurred late that year when the the AFL-CIO-affiliated Bakery, Confectionery, Tobacco Workers union called a strike after rejecting management clearly communicated final offer. The company, already in bankruptcy, was through negotiating, and chose to liquidate. The press moaned about how all of this meant the end of an era. Steven Bertoni’s Forbes writeup shows how wrong they were, and what a business can accomplish when it’s not saddled with legacy costs and constraints.


Quip of the Day

Filed under: Economy,Quotes, Etc. of the Day,Taxes & Government — Tom @ 9:03 am

From today Consumer Price Index April release at the Bureay of Labor Statistics:

The medical care index rose 0.7 percent, its largest increase since January 2007. The index for medical care services rose 0.9 percent with the hospital services index rising 1.9 percent.

All in just one month.

Zero Hedge’s reaction: “Thanks Obamacare.”

May 21, 2015

Initial Unemployment Claims (052115): 274K SA; Raw Claims 16 Percent Below Same Week Last Year

Filed under: Economy,Taxes & Government — Tom @ 8:27 am

Predictions at Yahoo’s Business Calendar: 265,000 seasonally adjusted claims at; 270,000 for the “markets.”

The report will be here at 8:30 a.m.


In the week ending May 16, the advance figure for seasonally adjusted initial claims was 274,000, an increase of 10,000 from the previous week’s unrevised level of 264,000. The 4-week moving average was 266,250, a decrease of 5,500 from the previous week’s unrevised average of 271,750. This is the lowest level for this average since April 15, 2000 when it was 266,250.


The advance number of actual initial claims under state programs, unadjusted, totaled 242,794 in the week ending May 16, a decrease of 88 (less than -0.1 percent) from the previous week. The seasonal factors had expected a decrease of 8,722 (or -3.6 percent) from the previous week. There were 287,398 initial claims in the comparable week in 2014.

The seasonal adjustment factors were virtually identical for last week and the same week last year.

Though its larger meaning is debatable, the report itself is another strong result.

May 20, 2015

Attention Ohio Media: Governors Whose States Lost a Combined Million-Plus Jobs Set to Rally Party Faithful in Late June

The former Democratic governors of Michigan and Ohio are on tap to be in the same place at the same time on June 27 in the Buckeye State capital of Columbus.

This is a made-for-the-media event for the record books. I certainly can’t recall a time when two former governors who oversaw a combined total of over 1 million peak-to-trough job losses during their terms in office have been at the same place at the same time — to celebrate. Yes, I said celebrate.


May 19, 2015

April Housing Starts and Building Permits Jump; Please Hold the Flippin’ Champagne

While improvement beats lack of it, the apparent euphoria over today’s news on housing starts and building permits needs some context.

Here is the context.

April’s actual total for housing starts of 103,700, while the best April since 2007, is only higher than four other Aprils since 1959, when the government began keeping such records: 1991, 1982, 1980 and 1975. The first and last of those years represented the first month after an officially declared recession ended. The middle two occurred during officially declared recessions.

The number of U.S. households was obviously much smaller during each of thse previous years. Adjusted for population, today’s result is still lower than every other year from 1959-2007 — even 1982′s 84,700.

As noted, while upward movements in economic activity are good news, celebrating a housing market which is still operating at historially recessionary levels is unseemly.

May 18, 2015

At WashPost, Philip Bump’s Anti-GOP Amtrak Harangue Is Chock Full of Falsehoods

It’s bad enough, as Bryan Ballas at NewsBusters noted on May 16, that the Washington Post’s Philip Bump dishonestly used last week’s Amtrak tragedy to rip Republican members of Congress for somehow being responsible for the (theoretically) for-profit entity’s “constant struggle” for funding.

As Sean Davis at the Federalist explained, Amtrak has really had no funding struggles. Bump had to make things up to create that impression, and even when caught, issued a “clarification” containing serious errors (HT Patterico, who has demanded corrections; bolds are mine):


May 17, 2015

Q. What Has Japan’s 20 Years of Keynesianism Brought It?

Filed under: Economy,Taxes & Government — Tom @ 9:22 pm

A. Misery (“This Is What Keynesian ‘Success’ Looks Like: Soaring Part-Time Jobs, Record Low Real Wages”):


We’re only at the end of Year 7 of the Keynesianism-driven POR (Pelosi-Obama-Reid) Economy.

We can’t say we haven’t been warned — and the above is probably a best-case scenario.

May 16, 2015

AP’s Crutsinger Celebrates April Budget Surplus, But Ignores Its Cause: Economy-Sapping Tax Increases

On Tuesday, Associated Press reporter Martin Crutsinger celebrated the federal government’s large April budget surplus, caused by “a flood of tax payments (which) pushed government receipts to an all-time high.” He didn’t mention that the tax payments were higher largely because of tax increases passed in 2013. It certainly didn’t occur because of an improving economy — because it’s not meaningfully improving.

Crutsinger also noted that the April 2015 result of $156.7 billion “was the largest surplus since April 2008,” without telling us that the previous surplus was achieved despite (better argument: “because of“) the Bush 43 tax cuts.


May 15, 2015

At AP, It’s ‘Heads We Report, Tails We Ignore’ For Economic Data, As Mich. Confidence Survey Dives

On May 1, the Associated Press’s Paul Wiseman was pleased to tell the wire service’s readers and subscribing outlets that “The University of Michigan’s sentiment index rose to 95.9 from 93 in March,” reaching “its second-highest level since 2007.” Among other things, the survey’s chief economist said that the result reflected “improving prospects for jobs and incomes.”

What a difference two weeks makes. Today’s preliminary U of M survey for April dropped to 88.6, completely missing expectations of 95.9. Zero Hedge notes that it’s the biggest expectations miss on record, and the largest single-month drop since December 2012. Naturally, a search at its national site indicates that the AP prepared no story on the U of M report, likely guaranteeing that there will be no mention of it at most establishment press print and broadcast outlets.


Industrial Production: Down 0.3 Percent in April; 5th Straight Month of Declines; Prior Months Revised Up by a Combined 0.2 Percent

Filed under: Economy,Taxes & Government — Tom @ 9:31 am

In March, industrial production as reported a month ago by the Federal Reserve fell by 0.6 percent.

The predictions for April are flat at and +0.1 percent for the “markets.”

Here is the report:

Industrial production decreased 0.3 percent in April for its fifth consecutive monthly loss. Manufacturing output was unchanged in April after recording an upwardly revised gain of 0.3 percent in March. In April, the index for mining moved down 0.8 percent, its fourth consecutive monthly decrease; a sharp fall in oil and gas well drilling has more than accounted for the overall decline in mining this year. The output of utilities fell 1.3 percent in April. At 105.2 percent of its 2007 average, total industrial production in April was 1.9 percent above its year-earlier level. Capacity utilization for the industrial sector decreased 0.4 percentage point in April to 78.2 percent, a rate that is 1.9 percentage points below its long-run (1972–2014) average.

March’s overall industrial production decline was revised to -0.3 percent from the original -0.6 percent. But the two previous months were revised down by a combined -0.1 percent, making the net of all prior revisions +0.2 percent:


All in all, it’s slight bit of relief which might slightly reduce the expected post-revision contraction in first-quarter GDP. But it’s absolutely awful news for the second quarter’s prospects.


Zero Hedge:

This is the 5th monthly drop in a row – the longest streak since the Great Recession. This is the 2nd weakest YoY print, at a mere +1.93%, since Feb 2010. To add to the pain, Capacity Utlization missed expectations falling to its lowest since Jan 2014 (falling the most YoY since Dec 2009) and Manufacturing production was unchanged

… And Capacity Utilization plunged to its lowest since Jan 2014… with the biggest YoY decline since Dec 2009.

A historical note: The National Bureau of Economic Research claims that the previous recession started in December 2007, and based it’s findings primarily despite many positive production and other indicators and relatively small job losses from December 2007 through May 2008 (compared to what followed during the next 18 months). Now we have the vast majority of indicators going negative, with job gains being the only positive. If this continues for another couple of months, NBER needs to take a hard look at whether another recession began in December or January.

But if we see two consecutive quarters of contraction in July’s GDP report — a possibility which cannot be ruled out at this point — I’m not going to care what NBER says or doesn’t say. It will be a recession as normal people — and voters — define it.

May 14, 2015

Business Inventories and Producer Prices: Both Bad News

Filed under: Economy,Taxes & Government — Tom @ 2:21 pm

Business Inventories and Sales

Yesterday, the Census Bureau reported that business inventories in March increased by a seasonally adjusted 0.1 percent, while sales increased by 0.4 percent. Expectations for the former were for a 0.2 percent increase.

While this news may seem relatively benign compared to results in other indicators, the first quarter’s results in this area were disastrous.

Do the math with the numbers seen here. The seasonally adjusted sales table tells us that 1Q15 sales were:

  • 1.3 percent below 1Q14
  • 3.2 percent below 2Q14
  • 4.0 percent below 3Q14
  • 3.0 percent below 4Q14

Taking a look at the final comparison: That 3.0 percent decline represents a fall of $123 billion — in one quarter. That’s the equivalent of a $492 billion fall if annualized. Since the economy barely budged during the first quarter, 4Q14 and 1Q15 GDP were both $17.7 trillion, rounded. That first quarter decline in sales, if it gets fully reflected in GDP, would by itself portend a 2.8% (annualized) one-quarter decline in GDP.

This kind of decline will be (or maybe I should say “should be”) partially but far from entirely reflected in 1Q15, because many items sold in 1Q15 were partially or fully produced in prior quarters. What his clearly indicates is that there’s less need for what has been produced, and therefore that less needs to be produced going forward, unless underlying orders for goods and final sales increase pretty dramatically. The trouble is that production seems to have continued full-bore, causing inventories to be heavily bloated (33 percent higher than in March 2010, while GDP has grown by far less than half of that). March’s smaller-than-expected inventory increase may reflect the first recognition by producers that they can’t just keep making things and just assume that they’ll sell.

Barring a resurgence in sales similar to last year’s second and third quarters, a rebound which seems increasingly unlikely, it’s reasonable to predict that the chances of seeing flat to contracting GDP for the next couple of quarters are pretty high — or that it could get worse, meaning a larger number of contracting quarters and more severe contractions in each.

Producer Prices

What happens when the demand for goods drops? Prices fall.

Even as job gains continue (insufficient, and with some hiccoughs, but still present), households are not seeing their overall incomes increase.

Median real household income, as reported by Sentier Research, has fallen during each of the past two months, and is still 4 percent below where it was in late 2007.

Basically, people don’t have much money to spend. Additionally, in many instances, they’re not spending what they might have because of pervasive economic uncertainty.

As seen in today’s Producer Price Index report (Table A), year-over-year “final demand” prices have been zero or negative during each of this year’s first four months — and the BLS itself acknowledges that falling gas prices only partially explain that. I believe that the declines represent the beginning of a period of slack demand which will last well into the rest of this year, if not longer.

This would give producers yet another reason to produce less, if they think that doing so might help them keep their prices firm and their profits acceptable. Their ability to successfully do that depends on the product and the number of direct/indirect competitors.

To the extent that producers cut back what they make in reaction to slack demand, they will of course negatively impact GDP growth.

Initial Unemployment Claims (051415): 264K SA; Raw Claims (243K) 10 Percent Below Same Week Last Year

Filed under: Economy,Taxes & Government — Tom @ 8:40 am

From the Department of Labor:


In the week ending May 9, the advance figure for seasonally adjusted initial claims was 264,000, a decrease of 1,000 from the previous week’s unrevised level of 265,000. The 4-week moving average was 271,750, a decrease of 7,750 from the previous week’s unrevised average of 279,500. This is the lowest level for this average since April 22, 2000 when it was 266,750.


The advance number of actual initial claims under state programs, unadjusted, totaled 242,640 in the week ending May 9, an increase of 6,219 (or 2.6 percent) from the previous week. The seasonal factors had expected an increase of 7,430 (or 3.1 percent) from the previous week. There were 270,738 initial claims in the comparable week in 2014.

The seasonal adjustment factor this year (91.9) was virtually the same as for the same week last year (91.6).

Though it may reflect stickiness in the labor market (employers don’t want to let people go because of the cost of replacing them with someone as competent, and employees don’t want to venture elsewhere in an uncertain economic environment), this is still a strong result.

May 13, 2015

April Retail Sales (With Possible March Revision): April Flat, March Revised Up to +1.1 Percent From +0.9 Percent; April Year-Over-Year Increase Only 0.9 Percent

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

Predictions at Yahoo’s Economic Calendar are for minus 0.2 percent at and a positive 0.2 percent for the “Market.” That’s a pretty significant divergence.

March’s original reading was +0.9 percent. Could it get better, or did the first take overstate the uptick?

The April report will come out at 8>30. The home page for the report is here.

HERE IT IS (direct link):

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for April, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $436.8 billion, virtually unchanged (±0.5%)* from the previous month, but 0.9 percent (±0.9%)* above April 2014. Total sales for the February 2015 through April 2015 period were up 1.5 percent (±0.7%) from the same period a year ago. The February 2015 to March 2015 percent change was revised from +0.9 percent (±0.5%) to +1.1 percent (±0.2%).

So March was better than originally expected, which might provide a tiny bit of relief for a still negative first-quarter GDP. But April went nowhere, despite the winter weather problems going away, and was less than 1 percent higher (before considering inflation) than a year ago. This is not good for second-quarter GDP at all.

April 2015 not seasonally adjusted (i.e., estimated) actual retail sales were only 0.7 percent higher than April 2014.

Zero Hedge says the 0.9 percent seasonally adjusted year-over-year April growth is the smallest such percentage since November 2009.

The report’s detailed percentage page shows breakeven or negative for ten categories and positives in six: Building Materials and Garden Supplies; Health and Personal Care Stores; Clothing and Accessories Stores; Sporting Goods, Hobby, Book and Music Stores; Nonstore Retailers; and Food and Drinking Places.


UPDATE: Moody’s has officially gone negative on 1Q15 GDP, predicting a contraction of 0.7 percent.

UPDATE 2, 9 P.M.: The Atlanta Federal Reserve is estimating an annualized 0.7 percent for 2Q15 GDP growth.

May 11, 2015

Elijah Cummings: Baltimore Schools Stink; Others Will Have to Pay to Fix Them

With Camden Yards set to hold its first fan-attended Baltimore Orioles game in over two weeks tonight, it’s a good time to go back to a May 2 item by Meredith Shiner at Yahoo Politics.

Readers may remember the Duke-”educated” Shiner as the person who was flabbergasted that GOP presidential candidate Ted Cruz cited “God-given rights” when he announced his candidacy on March 23, tweeting in part: “Bizarre to talk about how rights are God-made and not man-made … When Constitution was man-made?” Few will be surprised that Shiner’s interview of Democratic Congressman Elijah Cummings is an income inequality-obsessed de facto puff piece which lets Cummings completely off the hook for worsening conditions in the district he has represented since 1996.


May 10, 2015

WashPost Columnist: People Who Give Flowers ‘Are Terrible For Mother Earth’

Filed under: Activism,Economy,Environment,Taxes & Government — Tom @ 7:37 pm

On Thursday, Jennifer Grayson, who fancies herself as an “environmental journalist,” exposed herself as a truly annoying scold.

Grayson wrote in a Washington Post column that those of us who show our appreciation for others by giving them flowers as part of our overall enjoyment of life are really showing that we are either ignorant of or don’t “care about Mother Earth.” Grayson concocts her case by demonstrating that basic math must not be a prerequisite for becoming an “environmental journalist.”