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Wednesday, November 28, 2012

My G_d

New Home sales came in crushingly low. It's not just this month's figure - it's the prior month's revisions, which now make a three month SA trend between 366-368, far below the 380s trend that everyone thought we had going.  
Since May, then, we have gone from 369 to 368 seasonally adjusted, with a low of 360 (June) and a high of 369 (May, Sept). In other words, no raw growth EDGE at all. 

Obviously mortgage rates aren't going to be providing additional momentum in 2013. 

Hey - If you want to be conspiratorial and all, one might question just what the h_ll happened here and if there was any political bias this summer.

In the US economy, if you've lost the growth edge on autos and the growth edge on housing, you've lost your growth edge. Nothing is holding us up now but the season of Bling, and that is followed by the season of Ding quite inevitably.

This doesn't surprise me, honestly. I was favorably surprised by the better figures we thought we had. Next year mortgage regulation is unfavorable to risk, so there's a bad wind a'blowing. All this talk about the fiscal cliff is bravely ignoring our current situation.

PS: I was honestly and truly going to do the MMT thing today (late), but now I am sitting and staring in shock. 

One simple change fixes everything.

nonfarm payrolls -> nonding payrolls


Next year mortgage regulation is unfavorable to risk

I keep surprising people when I say a) I think Congress will avoid the fiscal cliff and b) it doesn't matter--it's the regulatory cliff that will do us in, anyway.

Neil - I think it is the regulations as well. I think the economy could withstand a bit of tax increases (esp if spread around) better than the regulatory debacle.
Household formation and price say this is the new normal. New house prices are just not able to be competitive with the tens of millions of houses out there (not) selling for far below replacement cost.

I just had a thought--the regulatory avalanche will pretty obviously cause a recession, even if there's no fiscal cliff. Given that a recession is inevitable, wouldn't it behoove the administration to make sure that the fiscal cliff stays in place, so he can blame Republicans for the recession?

I suppose it's a test case for whether the administration understands the economic effects of their policies--if they scuttle the negotiations, then perhaps they do understand the "regulatory cliff".

Neil - my view is that administration perceives that as long as it can plausibly blame the GOP for the fiscal cliff, there is absolutely no benefit from engaging in any meaningful negotiations.

First, it appears that we are already in a recession, and the administration wants to blame the GOP for it. Second, the structure of the fiscal cliff is such that any near-term adjustments in spending large enough to make a meaningful difference will reinforce the current economic blahs (we're not in a serious downturn yet). Third, what the Fed wants is for entitlements (read Medicare, Medicaid, SS, SSI & Obamacare) in the future to be cut to achieve an apparent change in the debt trajectory, because the Fed is looking at this economy and going "OMG". But this is precisely what the administration knows its constituents want not to do, and the Congress Critters have to face reelection even if Obama doesn't.

So the administration is trying to hand the ball to the GOP, and congressional Dems have a huge incentive to follow that strategy.

I suppose you're right. I've been assuming that they'd avoid the "cliff", but given their media strategy this week it looks like the Democrats have decided to crash the negotiations and let the blame fall on the Republicans. At which they will succeed.

There is no "cliff." It is $600b over the calendar year mostly end loaded in spending and entirely end loaded in taxation.
I love watching the Democrat hissy-fits. Maybe if we're lucky they'll hold their breath until everybody else gives in to their demands. Nothing like blaming someone else for your suicide.
>My estimate for Obama care is the loss of 1.2 million full-time jobs equivalent.

Housing bounce is over in most of the country. Not all, but most.

The tax hikes are the final nail. We're 5 years into a 10 year cycle.

People think the spread between rich and poor is wide now. The difference in 4 years will blow peoples minds.
no reason to expect new single family housing starts to rise given the lack of move up buyers,millions of underwater homeowners and a lack of new high paying jobs. Not to mention the days of converting AG property far from work centers into urban blocks of housing is a distant memory and will remain that way. The only new housing in the Bay Area is expensive fill in projects with prices well over a million dollars and multi family housing fighting arcane zoning to find a spot to build.
Hard to write that MMT column when every other word is four letters. ;-)
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