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Friday, May 08, 2015

Quickie Update

Altogether this seems improved. The employment report is good, with substantial agreement between the household survey and the establishment survey, which surely should seem to reinforce the good news. Household comes in at +192K this onh. The establishment survey for March was revised down, so it is now closer to the household number, although still higher. 

The two month household is 236 thousand. The monthly average for establishment is much higher, so I expect downward establishment revisions later. But still, not bad. 

CMI for April was released with very substantial upward revisions for Feb/March. It is still on a declining pattern but now out of the into-the-wall version we saw last month. It is weaker YoY, but VERY IMPORTANTLY, now shows an uptick in credit granted for April.

The economy is weak and we won't see a great second quarter, but it's not flatlining. 

The major weakness in the economy can be seen in the establishment survey, giving average hourly wages YoY having increased by 53 cents an hour. Doesn't buy you much! So there's tightness on the consumption end. However the employee-population ratio increased from 58.9 to 59.3 over the year, although it has been static for the last few months.

I see further ominous Drudge headlines about all the people not working. Well, we are going to see the retirees in our overall numbers, because all the people born through 1950 are either 65 or going to turn 65 this year. They are going to retire sooner or later. Get used to it. The household survey shows that the number of people working grew by 2.8 million YoY. That's not bad.

So far this quarter, rail is sticking to its pancake flat YoY pattern.  But the economy could be picking up steam (and probably is) relative to the first quarter - we're just not going to turn in a nice large growth quarter in Q2 2015, whereas we did in 2014.

GDP in Q1 was mildly negative, which will show up later in revisions. So far it looks like this quarter will be mildly positive. Motor vehicle sales were a touch disappointing in April. 

So right now, most the reports are pretty consistent with Employment - manufacturing slow or flat, services somewhat better, construction disappointing, and all things waiting on autos. As long as autos hold up ...

The establishment survey is forecasting better construction numbers coming up due to a hefty increase in employment. 32K of the 48K shown is in the Birth/Death adjustment, which doesn't mean that it didn't happen. Still, construction employment increased which is a good sign for May.

I think May will be better on most fronts. CMI is showing weakness, but not gathering storm clouds. A cautionary note is sounded by wholesale inventory/sales ratios, but while the overall number looks worrisome, when one digs into the details it's less disturbing because a decent amount of the seeming overage is in petroleum.I am a little concerned about grocery sales in this report - that's the line I am watching. They shouldn't have been that low in March. Maybe it will be revised up. 

I expect fracking work to start picking up this summer. That should help us. 

Autos - eh, I don't know. They are beginning to look a little topped out, but maybe we'll get our second wind this summer. Construction always generates truck sales, and there is probably some incentive room.


What's your take on the labor productivity numbers? The -5% (annualized) seemed excessive to me.

It did to me also, but I don't place any reliance on those numbers, so I don't think about them.

They're more a measure of GDP than anything else. If output drops then productivity drops.

I think they are just another form of GDP, but not a very good or reliable one.
The era of a healthy middle class is over for good. There will be a flourishing upper middle class. They will be educated and in the right industries at the right time. Prices will continue to go higher as the process of concentrating economic and political power continues. Wages will continue to stagnate as immigration, off-shoring, H1B visas, and automation increase. More and different forms of welfare will be devised with the middle class being the target of these. It is good business for the ownership class. Why do you think there are so many millionaires and billionaires that support Hillary Clinton. Tax the ownership class, give subsidies to the middle class to keep prices high, and the money flows back to the ownership class.
M_O_M, why do you think that fracking is going to pick up, given that the Sauds are doing all they can to hold oil prices down to hurt their enemies? Won't the fracklog continue to build as producers wait for better prices?
WSJ - because as prices pick up, it gets more and more profitable to restart new production.

I bet the costs of leasing the equipment have dropped!!! And there are a bunch of prepped prospects that just need a very little work to make them productive. As soon as that starts paying, there is neither a whole lot of time involved nor a whole lot of additional investment involved to start producing.

I think the longer term cost of oil is therefore $55-65 a barrel. At prices above $62-63, people are going to start planning additional production.
Joseph - It's hard to see how destroying the ability of labor to earn enough even to stay current with living costs can lead to anything but a long economic decline.

The living standards of most established family units in the US are still dropping year by year.
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