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By New_Deal_democrat July 4, 2015 11:42 am
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Weekly Indicators: hiring leads firing, and hiring has weakened edition

Monthly data for June started out with another solid jobs report, but wage growth remains stagnant. The ISM manufacturing report was positive, and motor vehicles once again reached the annualized 17 million plateau. Consumer confidence increased.  On the other hand, the Chicago PMI showed slight contraction.  May construction spending increased, but factory orders decreased.


My usual note: I look at the high frequency weekly indicators because while they can be very noisy, they provide a good Now-cast of the economy.  The indicators will confirm a trend or indicate a switch in trend well before monthly and quarterly reports.


Let's start with the US$  again:


Trade weighted US$:

  • Up +0.41 to 115.42

The US$ appreciated about 20% against the Euro in particular late last year.  While it has retreated a little, it remains near the top of that range.

 Interest rates and credit spreads

  • 5.26% BAA corporate bonds up +0.06%
  • 2.43% 10 year treasury bonds up +0.03%
  • 2.83% credit spread between corporates and treasuries up +0.03%
30 year conventional mortgage rate:
  • 4.13%, down -0.07% w/w (low was 3.35% in December 2012; 52 week high was 4.26%)


Interest rates for BAA corporate bonds made a 50+ year low in January. This was not confirmed by AAA corporate bonds.  After a possible once-in-a-lifetime low of 1.47% in July 2012, Treasuries rose to over 3% in late 2013, then fell through 2014 and into 2015, where they had hovered at or below 2% before yields broke out to the upside.  Spreads widened in recent months, a warning of near-term weakness, and have recently broken decisively negative.

Mortgage rates have risen to close to the top of their 12 month range, and have not made a new low in 2 1/2 years. 


Consumer spending

Both the Goldman Sachs and Johnson Redbook Indexes weakened after last Christmas, and weakened further YoY in May.  With the exception of 3 weeks in April, the Gallup report has been negative since the beginning of this year.  This week it turned negative again after two positive weeks.



Railroad transport from the AAR

  • carloads down -8.9% YoY 
  • intermodal units up +4.1% YoY
  • total loads down -2.8% YoY

Shipping transport

Rail traffic fell off a cliff in mid-February. Intermodal traffic quickly turned positive again, but domestic carloads, led by coal (for export) have remained negative.  After declining sharply for several months, making a 3 year low in mid-February, the BDI surged higher until it made its most recent 4 year high two weeks ago. Meanwhile, Harpex (container shipping)  turned up sharply for 3 months, making almost continual new 4 year highs, peaking at 646 two weeks ago.  In the longer term, shipping rates bottomed about 3 years ago and have been in a slow and variable uptrend since, although the Baltic index did break that to the downside in the recent skid.

Steel production 

  • Up +0.4% w/w
  • Down -8.3% YoY

Commodity prices


  • Down -0.59 to 100.19 w/w
  • Down -22.78 YoY
BBG Industrial metals ETF
  • 112.27 down -0.08 w/w  (made a new 5 year low on Tuesday)
Commodity prices as measured by ECRI remain close to their recent new low.  This is still probably due to international weakness, and mainly about oil.  Industrial metals generally declined in the last 3 years, and during this week made a fresh multi-year low.



Mortgage applications

  • +4% w/w Purchase
  • +14 YoY Purchase
  • -5% w/w Refinance

Real estate loans had been awful for several years, before turning up early this year in response to very low rates.  With rates rising again, there has been some rush to lock in rates for purchase mortgages, fearing even higher rates soon, while refinancing has declined to a trickle.

Money supply


  • +1.0% w/w
  • +1.0% m/m
  • +7.1% YoY Real M1
  • +0.3% w/w
  • +0.3% m/m
  • +5.8% YoY Real M2

Between actual deflation and possibly a mild European flight to safety, real YoY money supply is firmly positive.  At the time of the last flight to safety (from Europe) in January 2012, YoY Real M1 made a high of about 20%, and YoY Real M2 made a high of about 10.5%.  Growth in both then decelerated.  Real M2 made a new 2 year low at the beginning of 2014.  Both Real M1 and Real M2 improved substantially since.


Employment metrics

 Initial jobless claims

  • 281,000 up +10,000 
  • 4 week average 281,000 up +7,250

Initial claims remain well within the range of a normal economic expansion, as does the 4 week average, despite weakness in the Oil patch states.


The American Staffing Association Index 

  • Unchanged at 96.
  • Down -2.45 YoY

The YoY comparison had generally been positive to strongly positive since last spring. Two months ago, the YoY comparisons deteriorated, turned neutral, and in the last month plus have turned negative.


Tax Withholding

  • $180.0 B for the month of June vs. $170.7 B one year ago, up +$9.3 B or +5.4%
  • $166.3 B for the last 20 reporting days ending Thursday vs. $159.2 B one year ago, up +$7.1 B or +4.5%


Beginning with the last half of 2014, virtually all readings have been positive.


Oil prices and usage

  • Oil down -$4.13 to $55.52 w/w
  • Gas down -$.01 to  $2.80 w/w 
  • Usage 4 week average up +6.4% YoY

The price of gas and oil bottomed at the end of January.  The 2010-2013 Oil choke collar has been broken.  The interesting issue now is when and at what price we get the seasonal peak, as gas prices rose $0.82 since then, before backing off in the two weeks.  If they follow past seasonal patterns, their summer peak will be roughly $1 above their winter low, but we may have already seen the peak.


Bank lending rates

LIBOR has risen sharply from its post-recession low set in one year ago, and the TED spread has been in an uptrend since the last the middle of 2014, rising off its November 2013 low.  LIBOR is also in an uptrend.




There were no significant changes from last week.


Among long leading indicators, interest rates for corporate bonds, treasuries and mortgage applications are all neutral.  Refinancing is bouncing along its multi-year bottom.  Money supply and real estate loans remain positive. 


The short leading indicators remain extremely mixed.  The interest rate spread between corporates and treasuries widened again, further indicating short term weakness.  On the other hand, initial jobless claims remain very positive.  Temporary staffing was negative for the seventh week in a row, is in a real downtrend, and is becoming a real concern.  Oil and gas prices may have reached their seasonal high for the year.  Both remain positives, as is gas usage.  Industrial metal prices intra-week, made a new multi-year low..


The coincident indicators were mixed, which is an improvement from recent weeks.  The disturbing uptrend in the TED spread and LIBOR is intact.  Steel production and rail transport are still negative.  The positive side included tax withholding and shipping. Intermodal rail traffic remained a positive. Gallup spending turned negative again, while Johnson Redbook and Goldman Sachs consumer spending are still in the low end of YoY comparisons.


Hiring leads firing, both on the way up and the way down. Thus the further downturn in temporary staffing are again the most noteworthy items this week, and accords with a jobs report that was comparatively much weaker than jobless claims.  Generally, we still have a generally good economy, but with a shallow industrial recession, due primarily to the strong US$ with an assist from the Oil patch.   I believe the expansion will continue through the next year - a forecast that received added confirmation from the May housing reports - although interest rates are of concern beyond that. I would watch the JOLTS report this week for a confirmation of weak hiring vs. job openings.


Have a nice weekend!

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