This past week’s monthly data releases were dominated by yesterday’s nonfarm payrolls report, which read like a bad April fool’s joke delayed by 5 days. The commentary a month ago was how there were no weak spots in the report and the economy was hitting on all cylinders. Four weeks later and it reads like the engine has seized. Auto sales were great, but slightly below February. Factory orders, ISM manufacturing, and ISM services all improved. Residential construction spending held up, but nonresidential spending declined.
The high frequency weekly indicators do not give any hint of oncoming weakness. Let’s start with the employment related data, to compare with the monthly report:
The Department of labour reported Initial jobless claims of 357,000 last week, a new post-recession low in the revised series. The four week average declined by 3250 to 361,750, also the lowest revised number in 4 years. There will be one more week where the new seasonal revisions will increase the number compared with the former adjustments before turning lower.
The American Staffing Association Index held steady at 89. It is well above last year’s level and almost equal to its 2007 level.
The Daily Treasury Statement shows that for the 20 day period ending 5 days into April, $151.8 B has been collected in withholding taxes vs. $144.2 B a year ago, for an increase of $7.6 B or +5.3% YoY.
In summary, none of the weekly employment indicators show any sign of weakness, and to the contrary, show more strength.
Sales also remained positive.
The ICSC reported that same store sales for the week ending March 31 rose +3.8% for the week and also rose +4.2% YoY. Johnson Redbook reported a 4.6% YoY gain. The 14 day average of Gallup daily consumer spending at $76 remains near the highest spring reading since the recession, and is also up about 20% YoY.
The energy choke collar remains engaged:
Gasoline prices are about 7% higher than one year ago while usage continues to be much lower: Oil was steady at $103.31. Gas at the pump rose another $.02 to $3.94. Gasoline in particular is significantly above the point where it can be expected to exert a constricting influence on the economy. Gasoline usage, at 8572 M gallons vs. 8906 M a year ago, was off -3.8% YoY. The 4 week moving average was down only -0.8% YoY. The decline in gas usage began one year ago, so the YoY comparisons are getting easier. Still, these usage numbers do not show any increase in stress.
Turning to housing, the Mortgage Bankers’ Association reported that the seasonally adjusted Purchase Index increased +7.2% from the prior week, and was more than 2% higher YoY. The Refinance Index decreased another -1.4% from the previous week, reflecting higher rates and a pause before the new government refinancing assistance program starts.
YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were up +4.1% from a year ago. Asking prices in this index have now been up YoY for 4 straight months. This week another asking price index, Trulia, premiered, adjusting prices for the mix of properties on the market. This index is seasonally adjusted, and it also bottomed in December and has risen even since. As to sale prices, CoreLogic reported that YoY declines in non-foreclosures had slowed to -0.8%. Foreclosures were significantly worse. This raises the interesting possibility of a bifurcated market in house prices depending on foreclosure status.
Real estate loans from the FRB’s H8 report, turned outright positive YoY for the first time since the recession in the week of March 31. On a monthly basis, they were flat YoY. These were identified by Prof. Geoffrey Moore, the founder of ECRI, as a leading indicator for this market.
Rail traffic remained negative but with the same explanation.
The American Association of Railroads reported mixed weekly rail traffic for the week ending March 31, 2012, with U.S. railroads originating 286,962 carloads, down 6.2 per cent compared with the same week last year. Intermodal volume for the week totaled 242,772 trailers and containers, up 3.6 per cent compared with the same week last year. The entire decline in carloads is still due to coal shipments which were off -18.2%. Railfax’s graph of YoY traffic by types remains in a positive trend on a YoY basis.
Bond prices and credit spreads both rose :
Weekly BAA commercial bond rates fell +.09% t0 5.25%. Yields on 10 year treasury bonds fell .10% to 2.22%. The credit spread between the two, which had a 52 week maximum difference of 3.34% in October, rose by .01% to 3.03%.
Money supply, however, was flat to negative on a weekly and monthly basis:
M1 rose +0.7% last week, but was lower by -0.2% month over month. On a YoY basis it rose +16.8%, so Real M1 is up 14.1%. YoY. M2 rose +0.4% for the week, and also +0.2% month over month. Its YoY advance fell to +9.4%, so Real M2 was up 6.1%. The YoY comparisons are becoming tighter (although still historically high), and have generally stalled on a weekly and monthly basis for the last couple of months, which is becoming noteworthy.
Turning now to high frequency indicators for the global economy:
The TED spread fell back .01 to 0.40. This index remians slightly below its 2010 peak, generally steady for the last two months, and has declined from its 3 year peak of 3 months ago. The one month LIBOR remained at 0.241. It is well below its 12 month peak set 3 months ago, remains below its 2010 peak, and has returned to its typical background reading of the last 3 years.
The Baltic Dry Index fell 2 to 928. It has risen 278 from its 52 week low, but is still well off its October 52 week high of 2173. The Harpex Shipping Index also fell 1 to 395 in the last week, up 20 from its 52 week low.
Finally, the JoC ECRI industrial commodities index rose slightly for the week to 124.26. This indicator probably forecasts the global economy much better than it does the US economy.
With the sole exception of the decline in rail traffic, due to utilities needing less coal for energy generation in turn due to the unusual weather, none of the high frequency indicators are giving any warning of any imminent turn in the economy. The Oil choke collar remains engaged, but generally the data suggests smooth sailing ahead. More than anything else, the comparatively poor jobs report strongly indicates something is going on with retail stores. Is everybody becoming Amazon’s showroom?
Have a nice weekend.
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