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Thursday, June 24, 2010

At Best A Hmmm

They're trying to make the headlines look chipper, but the four-week moving average (MA) for initial claims is hanging in at the same level. This week's official is 462,750, which is proudly proclaimed to be a drop from last week's. But that is a drop from last week's upwardly revised average; last week's initial claims were revised up to a daunting 476,000. This week's SA initial claims are 457,000.

The really bad part is that we dropped one high week and the moving average didn't budge. May 15th was 474,000, but we just swapped that for 476,000.

There are multiple factors at work. The drop in new home sales is going to have an employment effect, no question. The Gulf oil spill has to be putting some out of work, although it is also employing some in clean up efforts. But I doubt the balance is positive!

And then there is something of an auto slowdown. Looking at advance durable goods for May (pdf full report)...

... a couple of things pop out.

New machinery orders, although always volatile, are still good. They had risen 11% Feb-Mar, then dropped 5.5%, and rose 5.6% in May. So we are hanging in at the elevated level.

However primary metals and fabricated metals orders are slowing. Computers and electronic products had been one of the stronger categories, but now appears to be slowing in new orders. Shipments were down generally in this category in May also. Manufacturing with unfilled orders (a group category) new orders dropped 1.4% in May. The headline number was new orders down 1.1%, new orders ex-defense were down 1.1%, and new orders ex-transportation were up 0.9%.

There was a huge bulge in ex-defense aircraft and parts orders in April, so take all of this with a grain of salt. Defense aircraft and parts shipments and new orders have been down several months running.

It's not awful by any means, but the inventory cycle for consumer goods has clearly run its course, and now the capital goods/ production machinery is going to have to pick up the slack. So expect growth to be much slower.

There is still too much debt in the system.
if you have cash you are in a wait and see
mode. Very little hiring in this situation.
The only way to spur employment is to make
employees cheaper. Reduce payroll taxes and
substitute a gas tax and tariffs.

Sporkfed - Cutting payroll taxes for a year wouldn't hurt, honestly.

We have thrown so much money away on hopeless stimulus efforts, but we don't seem to even try the stuff that might work.

It's down to this - the average person has no lobby in Congress any more.

We can't afford a gas tax, though. It would not help. It taxes rural people and subsidizes urbanites.
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