Thursday, January 24, 2013
Starting with initial claims:
Once again the seasonal adjustment is a bit puzzling to me. Raw claims last week were well above the previous year's claims, as I noted then, but mysteriously the seasonal adjustment turned that higher number into a much lower number than the prior year's comparable week.
This week raw claims are once again well above the prior year's claims, at 436K this year versus 2012's 416K. Seasonally adjusted claims last year were 372K, but this week with a higher number of raw claims, seasonal adjustment has transformed 436K into 330K. It is entirely normal to have high levels of initial claims in January. It is far rarer to have differing directions of movement between raw claims and SA claims.
Another way to assess this is that in the first three weeks of January last year raw claims totaled about 1,588K. This year raw claims over the first three weeks have totaled 1,551K, so there has been little real improvement over the comparable period of 2012.
The good news is that raw continuing claims are not piling up. They continue to run well below last year's 4,069K at 3,690K.Further, the covered base of insured employment was updated from the previous quarter's 128,066,082 to 128,613,913. This improved at a faster pace than it did from ending 2011 to beginning 2012, which supports the relatively benign indicator of continuing claims.
US Markit PMI flash manufacturing shows a very optimistic headline of 56.1. This is in sharp contrast to the Philly and Empire State surveys. I much prefer this number. Generally Markit PMI has reacted a little more quickly to conditions over the last year. New orders were way up at 57.7. Inventories remained just in contraction at 49.6, which is a good sign for February's numbers. Backlogs of work contracted at 49.5 versus last month's 50.3, which is a less favorable sign. Input prices were rising.
The market this week for shorter-term T-bills was exceedingly strong. The three and six month auctions had stable sizes and showed very strong demand.
I have been meandering my way through the various credit and banking reports, and it is clear that there are allocation changes among financial companies. In particular, rising nonfinancial commercial paper often flags an upshift in production, but that is not what I am seeing on the longer trend, although in January we rebounded off the low:
Financial paper has zoomed up:
I never like to see this type of a vertical spike in Commercial and Industrial Loans. It suggests companies suddenly drawing on credit lines and a degree of stress:
Deposits at US banks are dropping, which suggests that this money may be going abroad or into commodity markets?
However what was really unusual was the spike in deposits in the last few months. The above is other deposits at large domestic commercials. Here are large time deposits for the same:
"Hot money" - large short-term time deposits at large banks are often a product of company money movements. In this case it may be financial companies. Certainly the commercial paper spike is not showing up in bank deposits. The FDIC enhanced insurance program for transaction accounts (covering corporate accounts) did recently end, but it has not shown up in small bank deposits as a negative:
What has shown up for small banks is that Commercial and Industrial loans are pretty darned hot:
This, too, makes me slightly uneasy. First, the environment has not been kind to small banks. Relatively, this is a higher concentration than before the Late Unpleasantness. It is entirely understandable - what else are you going to lend on? But still... Second, deposits at small banks do seem to match C&I loans, which is the normal pattern. However I also wonder if we aren't approaching our natural limit. I always like to feel that there is room to run on credit to keep an expansion going.
This is all just stuff I am watching.