ISM manufacturing confirms regional Feds’ reports: prices up, production improves slightly, employment contracting

 

 - by New Deal democrat



The ISM manufacturing and services reports assume heightened importance this month in view of the continuing federal government shutdown. These two, along with the regional Feds’ manufacturing and services reports, are our best sketch of the economy until the more thorough federal reports resume (hopefully?)

We already have the regional Feds’ reports, which as I concluded last week, showed a little rebound in manufacturing activity, but contraction in services. Prices paid increased at the most widespread clip since the major inflation of 2021-22. Prices received also increased, but not as much, meaning that only part (1/2 is a reasonable guess) of increased prices were passed on to consumers, which is a problem in and of itself. Finally, employment was essentially flat, neither growing nor contracting meaningfully.

With that in mind, let’s turn to today’s ISM manufacturing report. The ISM manufacturing report has been a recognized leading indicator for the past 60+ years, although of diminished importance since the turn of the Millennium and China’s accession to regular trading status. While any number below 50 indicates contraction, the ISM itself indicates that the number must be under 42.8 to signal recession. 

Because of the report’s diminished importance, for forecasting purposes, I use an economically weighted three month average of the manufacturing and non-manufacturing indexes, with a 25% and 75% weighting, respectively. That briefly justified a “recession watch” during the summer, before the strong August rebound mainly in the services sector.

Today’s report continued this year’s string of contractionary readings, declining slightly to 48.7. The more significant news is that the more leading new orders subindex, which had rebounded to 51.4 in August, and then sank back into contraction at 48.9, gained slightly to 49.4. Here is a look at both the total index (blue) and new orders subindex (gray) for the past three years (via Tradingeconomics.com):

Note that both remain slightly better than their low points in 2022-23, which is noteworthy because there was no recession then.

Hare the last six months of both the headline (left column) and new orders (right) numbers:

MAY 48.5. 47.6

JUN. 49.0. 46.4

JUL 48.0.  47.1

AUG 48.7. 51.4

SEP. 49.1. 48.9

OCT  48.7. 49.4 

The current three month average for the total index is 48.8, while new orders improved to 49.9. As has been the case for awhile, this is in accord with the recent regional Fed reports, which as indicated above have shown some mild improvement in the manufacturing production picture.

As I indicated above, for the economy as a whole the weighted index of manufacturing (25%) and non-manufacturing (75%) indexes is more important. In the non-manufacturing report, the average of the last two months for the headline and new orders numbers has been 52.5 and 53.2, respectively. Pending the ISM report on services on Wednesday, the economically weighted headline number is 51.1, and the new orders average is 52.2. These are weakly expansionary. 

Normally in the past I have not reported on prices paid or employment in these ISM indexes, but these are more important now. 

Prices paid (the ISM does not report on prices received downstream) decelerated from 61.9 last month to 58.0 this month, suggesting as with the regional Fed indexes that there is still widespread pricing pressure, but it is getting integrated into companies’ models. Here are both manufacturing (blue) and services (gray) prices from the ISM:

But the low point, as it has been all year in this index, is employment, which did improve, but from 45.3 to 46.0. Here is employment from both the manufacturing (blue) and services (gray) indexes:

In short, the ISM manufacturing report for October largely confirms what we saw with the averages of the regional Fed manufacturing reports: diffuse price increases, improving new orders, very slight improvement in production, and flat to moderately diffuse contracting employment.

The ISM services report was particularly strong in August. That won’t go out of the three month average for another month. But if the services report on Wednesday is contractionary, that would warrant at least a yellow flag caution that a recession may be close. Unfortunately all we have with this data, relatively speaking, is shadows on the wall, so I am reluctant to draw any stronger conclusion. 

Weekly Indicators for October 27 - 31 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

With the dearth of monthly federal economic data, the privately sourced data that forms the backbone of the high frequency indicators is even more important.

This week, unsurprisingly, the biggest move was in the yield curve, in response to the Federal Reserve cutting interest rates. But underneath, several coincident series, including the Weekly Economic Index and Federal Tax Withholding, softened to the very threshold of turning neutral from positive.

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me with a penny or two for my efforts collecting and organizing it for you.

An appreciation of the Angry Bear blog

 

 - by New Deal democrat

Yesterday we were supposed to find out how much the economy grew (*if* it grew) during the 3rd Quarter, via the GDP report. This morning we were supposed to get the very important personal income and spending data for September as well. Neither of these were issued because of the federal government shutdown. While there are some decent substitute reports from other sources that can at least give us a back of the envelope estimate for this important data, they are no substitute for the real thing. We are flying blind, and there has been no urgency on the part of those in control of the Administration, the House, and the Senate, to do anything about it. In fact, if the economy is on the cusp of being in recession, they might prefer it that way.

It is an absolute disgrace that an alleged premier First World country has degenerated in to the governance of a Third World banana republic - and is poised to continue that way for possibly a long while more.

But today I want to pause to give a note of apprecitiaon.

For roughly the past 10 years, much of the material I have posted here has been picked up and cross-posted (with my permission) at the Angry Bear blog. For the past 5 years or so, *all* of my posts have been. Odds are that it gets more views over there than here.

The Angry Bear blog started over 20 years ago; in fact, Bill McBride a/k/a Calculated Risk started out there before he struck out on his own. For most of the time, it was hosted by Dan Crawford, until he passed away several years ago. One of his dying wishes was that the blog would continue, and he handed the reins over to another poster, whose first name in real life is Bill (not sure he would want his full last name posted publicly), who I had the pleasure of meeting over some gourmet pizza last year in Phoenix AZ.

For among other things health reasons Bill has also needed to step back. As a result, as of this weekend Angry Bear goes dark.

Angry Bear is only one of three economic sources I correspond with which have initiated plans to wrap up in the next year, mainly due to retirement. Sad, but as George Harrison sang, All Things Must Pass.

For my part, I am not a spring chicken either, but I have always figured there is another recession (not caused by the Giant Flaming Meteor of Death) out there, and another recovery. And I’ve also figured that, health permitting, I would like to keep at it until I forecast those cycle turns.

But I wanted to take this opportunity to express my appreciation to Bill, his late predecessor Dan Crawford, and everybody else associated with Angry Bear for their efforts. Thank you all.

Weighing Regional Fed Services Surveys, the sketch emerges of an economy on the cusp of stagflationary recession

 

 - by New Deal democrat

As I’ve reiterated several times this month, the two items of information I am paying the most attention to in the absence of official federal economic data are the Regional Fed Banks and the ISM, for both of their manufacturing and services reports. I should add that earlier this week ADP said that it would make its valuable weekly employment reports available to the public with a two week delay for the duration of the shutdown.

Yesterday I wrote about the Regional Fed manufacturing reports. Today I am following up with the service sector reports. The below chart includes, in order, NY, Philadelphia, Richmond, Kansas City, and Texas. Month over month changes are in parentheses, showing momentum (the 2nd derivative), with the absolute diffusion values for October following. The final number is the average change and absolute number for all 5 together.

Regional Fed:     NY.           PHL.           RVA.       KC.      TX.       Avg

Headline:  (-4.2) -19.4; (-9.9) -22.2; (6) -1; (4) -5; (-3.8) -9.4; (1.6) -11.4     

Cap Ex   (-8.1) -6.7; (9.5) 17.5; (4) 1; (7) 14; (-1.5) 5.8; (5.5) 6.3

Prices Paid  (3.2) 66.4; (-3.0) 35.8; (0.6) 5.5; (-3) 35; (-1.4) 23.0; (0.7) 33.2

Prices Rec’d (-5.8) 26.4; (-8.9) 12.9; (0.1) 3.8; (5) 21; (-1.5) 5.8; (-1.6) 13.7  

Wages (-2.3) 25.9; (9.6) 38.3; (0) 17; (11) 21; (-1.2) 10.7; (3.4) 22.6 

Employment (-2.3) -5.2; (-5.5) -0.5; (0) 0; (8) -4; (-2.2) -5.8; (-0.4) -3.2

Most of the trends are the same:

 1. like New Orders in the manufacturing series, Cap Ex is increasing at a reasonable clip.

 2. Inflation in the form of both prices paid for materials, and prices passed on to consumers, is a serious issue, with only some of the increased costs being passed on.

3. While wages continue to increase at a significant clip, employment is dead in the water - actually declining slightly.

4. The one big difference is in the headline business conditions number, which continues to be in significant contraction.

While the forward looking New Orders and Capital Expenditures categories for both manufacturing and services sectors are expansionary, the economically weighted (i.e., 25% manufacturing and 75% services) headline numbers, at -7.8, are negative, as is the employment category, at -2.2.

With the huge caveat that these are diffusion indexes (i.e., number of companies expanding minus contracting for each datapoint), and are much more variable than the much larger official surveys that we are missing, what emerges is a sketch - exmphasizing *sketch* - of an economy that is on the cusp of a stagflationary recession.

October Regional Feds’ summary of the goods producing economy: growth, but with strong inflation and almost nonexistent job growth

 

 - by New Deal democrat

With the shutdown of almost all economic statistics from the federal government, one of the most important remaining sources is the Fed and its regional banks. All 5 of them that publish manufacturing and services reports have now done so. Which means that we have a decent placeholder proxy for important trends in order, production, prices, and employment.

Today I am going to focus on the manufacturing reports. The below chart includes, in order, NY, Philadelphia, Richmond, Kansas City, and Texas. Month over month changes are in parentheses, with the absolute values for October following. The final number is the average change and absolute number for all 5 together.

Regional Fed:     NY.           PHL.           RVA.       KC.    TX.    Avg

Headline:     (19.4) 10.7; (-36.0) -12.8; (13) -4; (2) 6; (0) 5.2; (14) 3.5          

New Orders (23.3) 3.7; (5.8) 18.2; (9) -6; (-1) 1; (0.9) -1.7; (7.6) 3.0 

Prices Paid  (6.3) 52.4; (2.4) 49.2; (-1.4) 5.8; (1) 41; (-10.0) 33.4; (-0.3) 29.0 

Prices Rec’d (5.6) 27.2; (8.0) 26.8; (-1.0) 3.0; (6) 19; (-4.0) 7.7; (2.9) 16.7

Wages* (n/a) n/a; (n/a) n/a; (2) 15; (n/a) n/a; (-1.7) 14.2); (0.2) 14.6

Employment  (7.4) 6.2; (-1.0) 4.6; (5) -10; (-6) 1; (5.4) 2.0; (2.2) 0.8

____

* only 2 of the banks report this information

While the chart is somewhat messy, below are the 3 main trends:

 1. Production and to a lesser extent new orders showed significant upward momentum in October, while prices, wages, and employment showed little change.

 2. But if upward momentum (2nd derivative) has abated, prices both received by the manufacturers, and even more impressively prices paid by them for raw materials increased sharply, indicating continued effects from tariffs and trade issues, some of which, but only some of which, are being passed on to retailers and consumers.

 3. Wages show continued strong growth, but employment is virtually dead in the water, neither expanding nor contraction.

Importantly, remember that the goods producing sector is only roughly 1/4 of the entire US economy. The remaining 3/4’s is picked up by the services surveys.

But because production and orders are significantly positive, this means the goods producing sector of the economy was growing this month, while inflation is an increasingly important issue (which *should* greatly complicate matters for the Fed), and employment is almost not picking up at all.

Repeat home sales show continued deflation (Case Shiller) vs. stabilization (FHFA) (update with current graphs)

 

 - by New Deal democrat

Despite the government shutdown, the FHFA did publish its repeat home sales index this morning. And since the S&P Case Shiller index is from a private entity, that was published as well. Between those two and the NAR’s existing home sales report, we still have pretty good visibility into that 90% of the housing market, although we have to infer what it means for new home sales and construction.

The last several months showed absolute *de*flation in home prices. The message was mixed for this morning’s reports through August, in which the Case Shiller National Index (gray in the graphs below) declined another -0.3% (non-seasonally; on a seasonally adjusted basis they rose 0.2%), but the FHFA purchase only index (blue) rose 0.4% (note: FRED hasn’t updated either series yet, so the below graphs are through last month. When they update, so will I) (now updated with current Case-Shiller information):

On a YoY basis, price gains in the Case Shiller index continued to decelerate, at 1.5%, while the YoY change in the FHFA Index remained at 2.3%. These remain the lowest YoY% increases since 2012 for both indexes excluding 5 months in 2023 for the Case Shiller index:

With the gain this month, the actual *de*flation in the house price indexes from peak has been reduced to -0.1% for the FHFA Index, while the Case Shiller Index is down -0.9%. The peak for the FHFA index (blue in the graphs below) was in March, while that the Case-Shiller Index (gray) was in February:

Because house prices lead the shelter component of the CPI by 12 - 18 months, this also suggests that they will continue to decelerate, at least slowly, over that period. Here is the same graph as above (/2.5 for scale) plus Owners’ Equivalent Rent from the CPI YoY (red):

The last time the Case-Shiller and FHFA Indexes were in this range, excluding the Great Recession, was in the 1990s, during which time Owners Equivalent rent was in the 2.5%-3.5% range (vs. 3.8% as of the most recent CPI report, which was also the lowest reading of that number since autumn of 2021).

When available, I’ve been comparing these numbers to the latest “National Rent Report” from Apartment List, but that has not been released yet for September. On the other hand, via Nick Gerli, a similar metric from RealPage also shows an actual decline in rents in Q3 of this year, and are also negative YoY, likely (he says) driven by a slowdown in job growth and a decline (or outright reversal?) in immigration:

 

For the last two months, my conclusion has been that all phases of the housing market are either at or near their low points (sales, permits, starts), or declining (prices, construction, employment, and new spec units for sale). For over a decade I have said that sales lead prices, and the available information this month indicates that it is still the case, with the housing market is still flat on its back, with stagnant - but not necessarily declining - sales, and continuing declines in prices at least. 

Tabulated state initial and continuing claims continue neutral trend indicating weak expansion

 

 - by New Deal democrat



As I have done since the beginning of the government shutdown, the number of initial and continuing claims can be calculated notwithstanding, because it is based on reporting by the States, plus DC, Puerto Rico, and the Virgin Islands. Then by applying the same adjustment as was used for the same week last year, the seasonally adjusted number can also be estimated closely.

Further, since my forecasting method relies on the YoY% changes, it is almost never an affected by that seasonality. 

So tabulated, for the week ending October 18, unadjusted initial claims totaled 205,375 vs. 203,482 in 2024, an increase of 0.9%.  

Last year this week the seasonal multiplier was *1.1205. Applying it gives us an estimated seasonally adjusted number of 230,000.

We can similarly calculate the four week moving average, since the last four weeks of claims were 224,000, 228,000, 224,000, as well as this week’s 230,000. That gives us an average of 226,500, which is -12,000, or -5.0% lower than the number of 238,500 one year ago, which was the peak week for affects by the hurricanes which struck the Southeast, particularly Florida and North Carolina last autumn.

Using the same methodology, unadjusted continuing claims for the week ending October 11 totaled 1,669,530 vs. 1,627,757 last year, an increase of 2.6%.

The seasonal adjustment for the applicable week last year was *1.15742. Applying it gives us an estimate of 1.932 million continuing claims, or -3,000 lower than one week ago.

To give you a graphic idea of how this data shakes out, here are initial claims (blue), the four week average (red), and continuing claims (gold) all normed to 0 as of this week’s tabulation, compared with their readings in the past two years before the shutdown:

As with the past several weeks, absent hurricane distortions this continues the general neutral trend of initial and continuing claims, higher than one year ago but much less than 10% higher, forecasting a weakly expanding economy for the next several months.

Weekly Indicators for October 20 - 24 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

This is a good time for a reminder that very little of the high frequency data has been affected by the federal government shutdown, because almost all of it comes from the Fed or regional Feds, States, and private sources.

That data continues to paint a picture of continued expansion fueled by consumer spending, likely largely coming from stock market gains. At the same time, there are important signs that actual goods producing and transporting sectors are flagging, if not quite negative.

As usual, clicking over and reading will bring you as up to date as to the economy as possible, while rewarding me a little bit for my efforts.

September consumer inflation: re-accelerating trend more established, with shelter (!) being the only silver lining

 

 - by New Deal democrat

Wow, some actual new economic data on which to report - how refreshing!

To be clear, the only reason this was reported is that it was necessary for the calculation of the annual cost of living increases to Social Security checks. Had these been frozen there would have been a “million walker/cane/Medicare scooter march” on Washington.

But let us not be curmudgeonly about it, and dig right in, because there are some significant trends in the data. 

First, both the monthly and annualized data show that inflation bottomed almost exactly on “Liberation Day” when massive tariff increases were announced this past spring; and that renewed inflation is percolatiing through the economy, as shown in the monthly (red, right scale) and YoY (blue, left scale) comparisons:

YoY inflation in September was the highest since January, and before that, June of 2024.

That April of this year marked the low for inflation is shown in even more relief with the changes for headline inflation (blue), core inflation (red), and inflation ex-shelter (gold) since the beginning of 2023:

Not only has headline inflation reversed, but there has been a smaller reversal in core inflation. But the biggest change of trend is that inflation ex-shelter, at 2.7%, was at its highest level since April 2023.

And recall that shelter is a lagging component of inflation. Which means that, paradoxically, although it is still elevated, it is the one important component of inflation that is still decelerating. To begin with, as per usual, the below graph compares the YoY% changes in the repeat home sales indexes, which lead by about 12-18 months (/2.5 for scale), to CPI for shelter (red). YoY home price increases are near or at multi-year lows, and shelter inflation has followed. In September, shelter CPI increased 0.2%, the lowest monthly increase in the past 4 years except for this past June. On a YoY basis it is up slightly less than 3.6%, its lowest level since October of 2021. The below graph includes several years before Covid to show that this is actually at the very top end of its 3.2%-3.6% range during the latter part of the last expansion:

On a monthly basis, actual rent increased 0.2% (the lowest since March 2021), while fictitious owners’ rent increased 0.1%, the lowest such increase since November 2020:

On an YoY basis they advanced 3.4% and 3.8% respectively, the lowest YoY% increases since the end of 2021:

This is the one big silver lining in this month’s report, because we can expect shelter inflation to continue to decelerate for an ongoing number of months.

Let’s take a look at a few other areas of interest.

First, new car prices continue to be largely unchanged, up 0.2% for the month and up only 0.8% YoY. Meanwhile in a reversal from recent months, used car prices declined -0.4%, and their YoY increase decelerated from 6.0% to 5.1%. On an absolute basis, new cars have been up almost exactly 20% from their pre-pandemic range for the past 3 years, while used cars have been up about 30% for the past 20 months:

I suspect that used car prices increased more since the pandemic because car loan interest rates may be causing a bigger percent of purchasers to go to lower cost used vehicles.

Next, transportation services (mainly car repairs and insurance) lag the prices of new and used cars. Inflation here returned to below 4.0% YoY this year, and was up 2.7% YoY in September. While insurance costs have increased only 3.1% in the past year (not shown in the graph below), maintenance and repairs have accelerated in recent months and are up 7.7% YoY:

I suspect this is a direct result of the impact of tariffs.

Next, recently price increases in medical care services have also re-accelerated, and again this month increased 0.3% for a 3.9% YoY increase:

Finally, gas for utilities and electricity costs have also turned up sharply this year. But in September both declined, the former by -1.2% and the latter by -0.5%. Nevertheless, on a YoY basis, they are up 11.7% and 5.1%, respectively:

At least some of this is probably due to a sharp increase in demand caused by the enormous use of electricity in data-mining plants used for AI, much of which is passed on to ordinary residential customers.

In the past few months, I wrote that consumer inflation was in a transitionary period. September’s report, with its definitive re-acceleration only counterbalanced by the important and continuing declaration of shelter inflation, shows that we are further along that path.

home sales, prices, inventory all rangebound

 

 - by New Deal democrat

With the continuing desert of official data, the NAR’s existing home sales report - which normally is of secondary importance - temporarily becomes our best look at the housing market. 

To repeat what I’ve mentioned an number of times in the past, after the Fed began hiking rates in 2022, mortgage rates also rapidly rose from 3% to the 6%-7% range, where they have remained ever since. Since sales follow mortgage interest rates, existing home sales rapidly declined to 4.0 million annualized, and have remained in that range, generally +/-0.20 million for the past 3.5+ years - and they did so again this month:

In September, sales came in at 4.06 Million annualized (blue, right scale), a mere 6,000 annualized above August’s rate. As of our last look one month ago, new home sales (gray, left scale) similarly declined and have similarly stabilized in the 625,000-725,000 annualized range. 

In the past several years I have been looking for the new and existing homes markets to rebalance. Existing home inventory has been removed from the market for over 10 years (likely due in part to absentee rental owners buying increasing chunks of inventory), and really accelerated during the pandemic. This caused an acute shortage of houses for sale, which in turn led to bidding wars among buyers and a spike in prices.

A rebalancing of the market more than anything would require an increase in inventory at least to pre-COVID levels, and a deceleration of price increases, or even outright decreases. Which means that the level of sales themselves was far less important than what the median price for an existing home and inventory are telling us about the ongoing rebalancing of the housing market.

The secular decline in inventory reached a nadir in 2022. This series is not seasonally adjusted, so it must be looked at YoY. In September inventory crept up by 5,000 to 1.550 million, exceeding its 2020 level for the same month by 9,000:

Inventory was typically in the 1.7 million to 1.9 million range before the pandemic, which means that the chronic shortage still exists.

But even more important is what happened, and has continued to happen, with prices. As shown in the below graph, the average price of a new home (gray, left scale, not seasonally adjusted) rose almost 40% between June 2019 and June 2022 before slowly declining about -7% through June 2025. Meanwhile, the average price of an existing home (blue, right scale, not seasonally adjusted) rose about 45% between July 2019 and July 2022 and another 5% through July of this year, as was reported last Monet:

With seasonal adjustments are not made, my rule of thumb is that a peak (or trough) occurs when the YoY% change is less than half of its maximum change in the past 12 months. Here are the comparisons in the past 12 months:

September 2.9%

October 4.0%

November 4.7%

December 6.0%

January 4.8%

February 3.6%

March 2.7%

April 1.8%

May 1.3%

June 2.0%

July 0.2%

August 2.2%

September 2.1%

While YoY price increases have crept up since July, they remain well below their past 12 month peak of 6.0%, so it is fair to conclude that, if we could seasonally adjust, house prices are softer than they were last winter and spring.

With softened prices and increasing inventory on a YoY and even 5 years basis, the rebalancing of the housing market appears well underway. Still, with prices of existing homes up about 50% from their pre-pandemic levels, there is still some distance to go.

Redbook, Philly Fed: a whiff of consumer weakening?

 

 - by New Deal democrat

The government shutdown is continuing. The only significant national economic news will be the NAR’s existing home sales report on Thursday. Additionally, the remaining regional Fed surveys will come at the end of this week or next week.

And, as I am still on vacation, don’t be surprised if I play hooky until then.

In the meantime, there are a couple of nuggets with a whiff of a suggestion that the consumer services sector is weakening.

First, the Philadelphia Fed’s nonmanufacturing report was very week. Here’s a graph of employment (blue), new orders (red), and prices paid (gold):

Services inflation has accelerated this year, while employment has been flat, and shrank a little this month, while the new orders component came in at one of the lowest readings in the survey’s entire 15 year history.

Additionally (via Renaissance Macro), the general outlook and diffusion indexes in the survey also came in at among the lowest readings outside of the pandemic lockdowns and the Tariff backlash earlier this year:

Finally, after a strong September, Redbook’s national retail spending survey came in at a weak +5.1% YoY this week:

Well within the range of weekly readings in the past 18 months for this survey, so of course it could very well just be noise.

But without national economic numbers, this is the best information we have. Once more regional Fed’s report, we’ll have a more reliable average.

Initial claims lower than one year ago, an important positive point for the economy

 

 - by New Deal democrat

As per my introduction the past several weeks, despite the government shutdown we can recreate the initial and continuing claims data, because it is based on reporting by the States, plus DC, Puerto Rico, and the Virgin Islands.

Since my forecasting method relies on the YoY% changes, it is almost never an affected by seasonality. Further, by using the same seasonal adjustment for the equivalent week one year ago, we can arrive at a good estimate of what the weekly changes would be.

Tabulating the 53 jurisdications’ reports, for the week ending October 11, unadjusted initial claims totaled 210,639 vs. 225,245 in 2024, which is -6.5% less. 

Last year this week the seasonal multiplier was *1.0655:

Applying it gives us an estimated seasonally adjusted number of 224,000, a decline of -4,000 from one week ago. 

Similarly, adding it to the three previous weeks of data we arrive at a four week moving average of 222,000, which is -14,750, or -6.2% lower than the number of 236,750 one year ago.

As with last year, there is an important caveat about last year in that these were affected by hurricane related layoffs, particularly in Florida and North Carolina. 

Using the same methodology, unadjusted continuing claims for the week ending September 27, totaled 1,654,456 vs. 1,598,184 last year, or 3.5% higher.

The seasonal adjustment for the applicable week last year was *1.16945. Applying it gives us an estimate of 1.935 million continuing claims, or -3,000 lower than one week ago.

As with one week ago, absent hurricane distortions, this continues the general neutral trend of initial and continuing claims, forecasting a weak but not contracting economy in the next several months.

To give you a graphic idea of how this data shakes out, here are initial claims (blue), the four week average (red), and continuing claims (gold) all normed to 0, compared with their readings in the past two years before the shutdown:

 I will continue to estimate this data for the duration of the shutdown

Weekly Indicators for October 13 - 17 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

About 90% of the high frequency data comes from non-Federal government sources and so is unaffected by the shutdown. It continues to signal no particular stress. But there is no denying that the loss of the monthly official data series (for things like housing, productioin, and employment) means that to a great extent we are “flying blind.” 

But clicking over and reading will bring you about as close as possible as being up to the virtual moment on the state of the economy, and will reward me ever so slightly for organizing the data for you.

DOGE layoffs hit, but still no significant change in initial or continuing jobless claims

 

 - by New Deal democrat

We continue our exercise in flying blind (into terrain?) as the government shutdown prevented the release of housing permits, starts, and construction this morning; and the Fed did not have the data necessary to update industrial production and capacity utilization. The only current information we have on the housing sector is that mortgage applications declined for the third straight week (but are still 20% higher than one year ago), and prospective buyer traffic remains paltry.

The States did report their initial and continuing jobless claims, and these were updated by FRED this morning. I’ll have a complete report on Monday, but here are two preliminary comments.

First, claims from the DOGE layoffs in the Federal government are now showing up. Here’s the non-seasonally adjusted number of initial claims from DC, Virginia, and Maryland in the past year:

These have increased about 3,000 in the past several weeks to a new 12 month high in Virginia, and close to those highs in DC and Maryland.

Next, here are the YoY% changes in initial and continuing claims for the 4 biggest States: CA, FL, TX, and NY, which together make up about 1/3rd of the total:

Initial claims are higher by 1.1%, and continuing claims (with the typical one week delay) are higher by 0.6%.

As a preliminary matter, the bottom line is that there has been no significant increase in jobless claims in the past few weeks - a neutral reading suggesting a slow, but still expanding, economy.

Significant positive news in the goods producing sector

 

 - by New Deal democrat

Under normal circumstances, this would be the morning I would slice and dice the first important consumer data for the month: retail sales. With the government shutdown continuing with no end in sight, all we have are several dart-throws. The Chicago Fed’s final Advanced Retail Trade report for September indicated +0.5% nominal growth, and +0.2% in real terms. Meanwhile Morgan Stanley, apparently relying on credit card data, wrote that there was no growth at all.

There is a little more reliable evidence in the goods-producing sector, as both the NY and Philadelphia Feds have issued their monthly manufacturing surveys. In addition, the Department of Transportation did update their Freight Services Index earlier this week.

And the news was modestly good.

Let’s start with the headline numbers. The NY Index (dark blue) came in at +10.7, while the Philadelphia Index (light blue) slid to -12.8. But the averages for the past few months are clearly, if slightly, positive. Meanwhile the Freight Services Index (red, right scale) declined a slight -0.1% for the month, but remains at one of the five highest readings in the past 5 years:

This is significantly positive for the sector.

Additionally, new orders for both regional Fed indexes remained positive, suggesting the good news will continue a couple more months:

And the average of employment for the two Fed regions was also positive, among its best readings of the past 2.5 years:

The big fly in the ointment likely can be directly tied to tariffs, as the prices paid components on both regions continues at levels equivalent to the beginning of 2023. Note that the big surge in cost coincided exactly with the beginning of tariff-palooza:

All of this is no substitute for the more comprehensive data we deserve, but the data is reliable enough to indicate - surprisingly - modest positive momentum in the goods producing sector.

More on stock market indexes’ advance-decline lines: the healthy and the sick

 

 - by New Deal democrat

I am currently on vacation, and as the shutdown continues with no end in sight, the only sources of economic data are from the Fed and its regional banks, the States (unemployment claims and sporadic updates on tax withholding), and private sources. 

In other words, I might play hooky several days a week, so don’t be surprised.

There is one thing worth following up on today. That’s the health of the stock markets. Aside from the fact that the stock market is a short leading indicator, it is particularly important at the moment because of the “wealth effect” on consumers who have watched their paper portfolios increase sharply in value over the past 6 months.

Last week I pointed out that one bellwether for the health of the markets was the advance-decline line; that is, the number of companies in the indexes that are participating in an advance or decline. In particular, I pointed out that the advance-decline line had warned of unhealthy markets in advance of both the 2000-01 dotcom bubble collapse and the Great Recession. 

Well, we’ve had some interesting action over the past week, with the return of China Tariff-palooza and its almost immediate walk back (but not before one or more people with apparent inside information made a killing). And this morning I read that several over-levered players adjacent to the auto industry went bankrupt last month.

So let’s take a look at several different indexes, updated through yesterday.

Last week I showed the S&P 500 advance-decline line. As of yesterday, it continued to be generally neutral, with almost no advance compared with 3 months ago, but no downtrend, and indeed several new highs earlier this month:

But the NYSE a-d line has not nearly been so healthy:

It is no better at present than it was almost 3 months ago, and has been in a clear downtrend since early September.

Even worse is the small cap Russel 2000 a-d line:

It peaked at the end of last year, and although it rebounded after April, it has had a rrenewed decline since a secondary peak in August.

On the other hand, the Nasdaq a-d line continues to be positive:

Like the S&P 500 a-d line,  it made new highs earlier this month, and even the pullback in the last few days did not take it down it its August or September lows.

This confirms my general view of the economy. In the broadest terms, it is pretty unhealthy. But in the specific areas where there has been a Boom (or, maybe, Bubble), it has not cracked at all. I’ll continue to watch to see if that happens; and if it does, my suspicion is, “look out below!”

Tabulations of state level reports indicates 228,000 initial claims, 1.938 million continuing claims last week

 

 - by New Deal democrat

Among the economic data that is not being reported due to the federal government shutdown are initial and continuing jobless claims. Which, as I pointed out last week, is interesting because they were reported during the lengthy 2013 shutdown and for at least part of the 2018-19 shutdown.

But both sets of claims are simply tabulations of all the claims made at the State levels (plus DC, Puerto Rico, and the Virgin Islands), to which a seasonal adjustment is made. This means that we can reconstruct the YoY% changes in the data from the various jurisdictions’ reports; as well as provide a reasonable estimate of what the seasonably adjusted numbers would be.

Tabulating the 53 jurisdications’ reports, for the week ending October 4, unadjusted initial claims totaled 207,794 vs. 236,179 in 2024, which is -12.0% less. 

Last year this week the seasonal multiplier was *1.0966:

Applying it gives us an estimated seasonally adjusted number of 228,000, a 4,000 increase from one week ago. 

Adding it to the three previous weeks of data we arrive at a four week moving average of 225,500, which is 6,750 less than one year ago, or -3.1% lower. 

There is an important caveat about last year in that these were affected by hurricane related layoffs, particularly in Florida and North Carolina. 

Next, continuing claims with the typical one week delay, i.e., for the week ending September 27, totaled 1,683,327 vs. 1,614,324 last year, or 4.3% higher.

The seasonal adjustment for the applicable week last year was *1.510:

Applying it gives us an estimate of 1.938 million continuing claims, or +19,000 higher than one week ago.

Absent hurricane distortions, this continues the general neutral trend of initial and continuing claims, forecasting a weak but not contracting economy in the next several months. I will continue to estimate this data for the duration of the shutdown.