The Empire State Manufacturing Survey: April 2012

The Empire State Manufacturing Survey consists of a series of diffusion indices distilled from a monthly survey of New York regional manufacturing executives and seeks to identify trends across 22 different current and future manufacturing related activities.

Today’s report showed a notable deceleration of current assessments of manufacturing activity and a continued decline to future assessments with the current activity index falling to 6.56 while future activity declined to 43.12.

Current prices paid declined to 45.78 while current new orders weakened to 6.48 and assessments of future new orders improved to 45.78.

Conspicuous Correlation: Retail Sales March 2012

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing an increase of 0.8% from February and an increase of 6.5% on a year-over-year basis on an aggregate of all items including food, fuel and healthcare services.

Nominal "discretionary" retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales increased 1.61% from February and increased 5.91% above the level seen in March 2011 while, adjusting for inflation, “real” discretionary retail sales increased 3.23% over the same period.

On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

University of Michigan Survey of Consumers April 2012 (Early)

Today's early release of the Reuters/University of Michigan Survey of Consumers for April indicated a decline in consumer sentiment from the prior month with a reading of 75.7 but improvement on an annual basis with the level increasing 8.45% above a year ago while one year inflation expectations eased to 3.4%.

The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) climbed to 72.5, and the Current Economic Conditions Index declined to 80.6.

It's important to recognize that consumer sentiment has seriously eroded over the past few months with the current results remaining near levels not seen since 1980, a major indication that consumers are in the process of tightening even further on spending.

Reading Rates: MBA Application Survey – April 11 2012

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) declined 4 basis points to 3.98% since last week while the purchase application volume declined 0.5% and the refinance application slumped 3.1% over the same period.

With rates jumping in recent weeks and housing activity remaining largely weak, it will be interesting to see if concern over housing leads the doves on the FOMC to further promote QE3 in an effort to keep long rates at historically low levels. 

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

Radar Watching: February 2012

As I have noted in the past, since the home price index data provided by Radar Logic is more timely, unadjusted and un-smoothed it is particularly useful for gaining deeper visibility over our housing markets.

As for the latest trends, it’s important to note that the 25-MSA Composite is continuing to show significant year-over-year declines with prices breaking to new lows with each passing day.

The latest data shows that as of early-February, prices have declined 4.43% below the level seen in February 2011 continuing the slump through the winter months in a similar manner to past years while likely just reaching the lows of the season.

Look for future reports to indicate flat pricing as the data moves into the more active spring months leading to a new seasonal upswing as we approach early summer.

Envisioning Employment: Employment Situation March 2012

Today’s Employment Situation Report indicated that in March, net nonfarm payrolls increased with private nonfarm payrolls adding 120,000 jobs and the unemployment rate going flat at 8.2% over the same period.

Net private sector jobs increased 0.11% since last month climbing 1.93% above the level seen a year ago but but remained a whopping 4.14% below the peak level of employment seen in December 2007.

Full Time Workers Fully Under Pressure: March 2012

Today’s employment situation report showed that in March the full time unemployment rate declined to 8.6% of the civilian workforce but remains near the highest rate seen in 41 years.

The Bureau of Labor Statistics considers full time workers to be those “who have expressed a desire to work full time (35 hours or more per week) or are on layoff from full-time jobs”.

Full time jobless workers currently account for roughly 88.5% of all unemployed workers.

Recovery-less Recovery: Unemployment Duration March 2012

Be sure to bookmark the "Scary Unemployment Dashboard"... it's live.

Today's employment situation report showed that conditions for the long term unemployed improved in March but remained epically distressed by historic standards.

Workers unemployed 27 weeks or more declined to 5.308 million or 42.5% of all unemployed workers while the median number of weeks unemployed declined to 19.9 weeks and the average stay on unemployment declined to 39.4 weeks, the highest level ever recorded.

Looking at the charts below (click for super interactive versions) you can see that today’s sorry situation far exceeds even the conditions seen during the double-dip recessionary period of the early 1980s, long considered by economists to be the worst period of unemployment since the Great Depression.

On The Margin: Total Unemployment March 2012

Today’s Employment Situation report showed that in March “total unemployment” including all marginally attached workers declined to 14.5% from the prior month's level of 14.9% while the traditionally reported unemployment rate went flat at 8.2%.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit definition of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims April 05 2012

Today’s jobless claims report showed that both initial and continued unemployment claims declined while seasonally adjusted initial claims continued to trend well below the closely watched 400K level.

Seasonally adjusted “initial” declined to 357,000 claims from last week’s revised 363,000 claims while seasonally adjusted “continued” claims declined by 16,000 resulting in an “insured” unemployment rate of 2.6%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 3.25 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.69 million people that are currently counted as receiving traditional continued unemployment benefits, there are 6.95 million people on state and federal unemployment rolls.

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On The Pulse: Ceridian-UCLA Pulse of Commerce Index March 2012

The latest release of the Ceridian-UCLA Pulse of Commerce Index™ (PCI) suggests that economic activity improved in March with the seasonally adjusted index climbing 0.34% from February but falling 2.17% below the level seen in March 2011.

The three month moving average of the PCI increased slightly from October indicating that the March Industrial Production data will likely show a similar trend.

ADP National Employment Report: March 2012

Today, private staffing and business services firm ADP released the latest installment of their National Employment Report indicating that the situation for private employment in the U.S. improved in March as private employers added 209,000 jobs in the month bringing the total employment level 1.75% above the level seen in March 2011.

Perusing the rest of the data in the ADP dataset you can see the the economy is currently showing the most growth for small to mid-sized service providing jobs with goods-producing jobs remaining near trough levels.

Look for Friday’s BLS Employment Situation Report to likely show somewhat similar trends.

Today, the Institute for Supply Management released their latest Non-Manufacturing Report on Business indicating that service related business activity declined notably in March with the business activity component dropping while the overall non-manufacturing index declined to 56.0 from 57.3 in February.

At 58.9 the business activity index declined 5.91% since February but remained 0.51% above the level seen a year earlier.

This month, service industry respondents are sounding very positive and optimistic for economic activity in 2012:

"2012 continues ahead of forecasted pace through March." (Wholesale Trade)

"February was a great month for auto sales — much better than expected. Forecasted sales volumes for the year are being revised upward." (Retail Trade)

"Positive year-over-year growth is finally being seen as customers' discretionary spend is up, and overall traffic is increasing as well. Increased investments in marketing promotions and advertising during the past few months have helped improve customer loyalty, evidenced by longer stays and increased frequency of visits." (Arts, Entertainment & Recreation)

"Companies are seeking professional services to continue efficiencies while positioning for growth, when the top line comes back." (Professional, Scientific & Technical Services)

"We are starting to see the private sector building again; the money is starting to flow into construction." (Construction)

"Increasing demand for healthcare services while engaging in a more intense effort to reduce costs universally. [We are doing this] prior to implementation of healthcare reform, which is expected to dramatically reduce revenue by approximately 25 percent." (Health Care & Social Assistance)

Reading Rates: MBA Application Survey – April 04 2012

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) declined 7 basis points to 4.03% since last week while the purchase application volume increased 7.2% and the refinance application climbed 4.0% over the same period.

With rates jumping in recent weeks and housing activity remaining largely weak, it will be interesting to see if concern over housing leads the doves on the FOMC to further promote QE3 in an effort to keep long rates at historically low levels. 

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

On The Stamp: Food Stamp Participation January 2012

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is continuing to rise.

In fact, household participation has been climbing so steadily that it has far surpassed the last peak (which looks like a minor blip by comparison) set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that in January, 64,307 recipients were removed from the food stamps program with the current total still increasing 5.22% on a year-over-year basis while household participation increased 6.94%.

Individual participation as a ratio of the overall civilian non-institutional population has increased 4.36% over the same period.

Participation continues to swell with nominal benefit costs climbing a lofty 4.84% on a year-over-year basis to $6.15 billion for the month.

Constuction Spending: February 2012

Today, the U.S. Census Bureau released their latest read of construction spending showing a flattening from last month at near-cycle low levels of spending in February for residential construction while indicating a notable pullback for total non-residential spending.

On a month-to-month basis, total residential spending increased a slight 0.03% from January and rose 5.59% above the level seen in February 2011 while remaining a whopping 63.56% below the peak level seen in 2006.

Single family construction spending declined 1.51% since January but rose 4.21% since February 2011 and remained a whopping 76.29% below it's peak in 2006.

Non-residential construction spending declined 1.57% since January but climbed a whopping 14.49% above the level seen in February 2011 but remained a whopping 34.12% below the peak level reached in October 2008.

The following charts (click for larger dynamic versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year, month-to-month and peak percent change to each since 1994 and 2000 – 2005.