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Thursday, April 19, 2012

Sulking Unhappily In My Corner

This week's initial claims are not too good. It may be seasonal adjustments but it may not be. The prior week's original number of claims (380K) was revised up to 388K, yielding a spurious drop to this week's headline of 386K. Easter/Passover was early this year, which boosted retail sales for March, but can make the initial claims series look worse for a few weeks.

But I am still rather unhappy about this, in part because we got the covered employment number this week. It increased from 126,579,970 to 127,048,587, which takes us back to April 2005 levels. I was expecting somewhat more of an increase. This is very close to the previous quarterly gain, and it indicates that the economy was a little worse in the first quarter than I had believed.

The covered employment series is very reliable, but a lagging indicator. It does track very well with the employment level as reported by the Household survey in the monthly employment report, although it lags. Here's a comparison between the two (only updated through March):

The covered employment series tracks accounts at state employment offices. They are held open longer, so during periods of a lot of employment transition you will have more covered employment than shows up in the household survey, which picks up job losses the quickest of the three main surveys (covered, household, establishment).

March payroll taxes were good, which made me expect a better result on the covered employment. The implications of the covered employment number are that the household survey March number of employed was pretty darned real, and since that showed a drop of 31K - I don't like it!

I woke up this morning in a good mood, ready to take the good covered employment number integrated with the March payroll taxes to post happily that things were a little brighter than the headlines would indicate, but as so often happens, an uncooperative universe peed in my morning coffee. This also lends weight to the drop in temporary employment shown in the March Establishment survey.

The total covered employment increase for the year (April 2011 to April 2012) is now 125,572,661 > 127,048,587, or 1.48 million. That's a 1.2% gain in total jobs. On its own, this doesn't fund a huge expansion, so we are really dependent on wage gains to sustain expansion. Through February, there was little evidence in payroll taxes or real-dollar disposable personal income estimates by BEA that we were getting enough of that. March payroll taxes implied a better result, but if employment gains are fading a bit, that may not hold for long.

So this morning I feel despondent and deflated and sort of harassed by reality.

I also had some somewhat optimistic trucking-related headlines, but they are not hugely supported by anything else. I do believe that we have a bit of forward momentum, but not a whole lot. Manufacturing surveys show a lower impetus.

Anyway, I have to lick my psychic wounds a bit over this one. Last year's Japanese disaster will make Q2 this year look better on a YoY comparison basis, but that doesn't necessarily translate to real growth.

Anecdotes from Dallas, TX.

Talked to my neighbor who is a Pest Control salesman, as it is termite swarming season here. I asked him if business was better than last year. He said the demand is there, that the customer's have definite termite issues, but the people are choosing not to have it treated because "no one has any money".

I don't know how California can be growing because all of their cars are here. It used to be a real anomoly to see a CA license plate here. Now they are everywhere; I will see 2 or 3 on a 5 mile trip. Also from MI, NY, IN.

It will also only get worse in that we should break the debt ceiling again in September, which will bring the issue to prominence again just before the election, which was a real downer last time.

But come 1/1/13, you have the Bush Tax Cuts expiring, the 2% FICA discount expiring, and an automatic $130 Bil fiscal cut (supercommittee failed so we have $1.3T cut over 10 years), and the minor problem of a $1.5T deficit annually. The ultimate Catch-22.

Thanks again for your blog. You have some keen insight. Learner2
Hmm. Dallas is one of the bright spots.

As for CA - it hasn't done that well this year. BLS Data.

It legged up a bit and then seemed to stall, and home sales in the west are lagging also.

The yawning fiscal abyss of 2013 scares us all!

We really need to raise payroll taxes back, but we probably ought to combine that with a tax credit for lower earners (below 20K).

It doesn't seem like we'll get anywhere near the growth the Fed is predicting this year. In a lot of ways it's better if we don't - if we can just hobble through this year, we could get through 2013. But strong growth this year probably dooms 2013.

We've picked all the low-hanging fruit by now.
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