Initial claims last week ex-California computer glitch ~327,000

- by New Deal democrat

Computer issues in California continue to bedevil the weekly initial jobless claims reports. We can make a good estimate of what the "real" initial jobless claims have been, however, by excluding California, comparing the unadjusted average for the other 49 states this year vs. last year in the same week, and projecting this year's "real" number by assuming that the percentage of claims in the other 49 states are the same percentage of the total this year as they were last year. I used this technique last autumn in the wake of Superstorm Sandy to show that "real" initial jobless claims were actually declining slightly -- a trend that proved correct once the distortions disappeared from the data in a few weeks.

Keep in mind that the week I am adjusting in this post is last week's report, since there is a one week delay in the Department of Labor's posting of state by state numbers. So the "real" number I have estimated is comparable to last week's 310,000, not this week's 305,000.

Last year this same week total unadjusted jobless claims were 330,454 vs. 272,918 this year. Of last year's total, 61,421 were California claims vs. 40,657 this year. This gives us a 49 state comparison of 269,033 last year vs. 232,261 this year. That makes this year's 49 state number 86.3% of last year's 49 state number.

Last year, after seasonal adjustment, the report for September 15 was 379,000. Multiplying that by 0.863 gives us just over 327,000.

Last week I estimated that the "real" initial claims number for the week of September 7 was ~318,000 vs. 294,000 as reported. This means that the "real" 4 week moving average of initial claims this week is 325,250 vs. the reported 314,500.

This is still the best 4 week average in 6 years, since October 13, 2007, and it indicates that, even after we adjust for the computer glitches, the trend in initial jobless claims is still improving.

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What Happened to the Perp Walk?

It used to be that prosecutors were dead set on making someone take the "perp walk."  This occurred when an individual was arrested by the authorities and taken outside to a giant crowd of reporters, all of whom snapped pictures and shouted questions.  The prosecutors would then issue press releases about the trial's progress, eventually leading to a criminal sentence where somebody important would end up going to jail.

Now we learn that BP has paid a $4.5 billion dollar fine as part of the Gulf of Mexico oil fire and that JP Morgan is in talks to settle all its outstanding issues for $11 billion.  This is in addition to JPM's $5.3 billion in fines already paid.  The size of these fines means there's a ton of provable fraud going on. 

Here's the problem: paying a fine -- while high -- is now becoming a simple cost of doing business.  Until important people start going to jail for meaningful amounts of time, we will continue to see criminal behavior.

It's time for the US attorneys office to grow a pair and start sending important people to jail.

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UK Economy Continues To Look Promising

From the minutes of the latest Central Bank Meeting:

The estimate of GDP growth in the second quarter had been revised up a little to 0.7% in the second release. The initial estimates of the expenditure breakdown had suggested that growth had been fairly broadly based, with investment and export growth both a little stronger than the Committee had anticipated. Such initial estimates for the expenditure components were, however, highly uncertain. There were other reasons for caution. For instance, the strength of exports was concentrated in a couple of subsectors and appeared erratically strong by comparison with the growth of world trade volumes during Q2; and the large positive contribution to growth from stockbuilding would probably prove transient, especially if it were simply a bounceback from the temporary de-stocking observed in the first quarter.

Nevertheless, that modestly promising data release had been augmented by the continuing strengthening of the indicators of consumer spending in 2013 Q3 and further strong business surveys in August. The Markit/CIPS services activity index was broadly unchanged in August, after having increased sharply in July, and the manufacturing and construction indices had strengthened further. Consequently, the composite PMI was at its highest level since 1997. The CBI service sector survey had also strengthened in August. Overall, Bank staff estimated that the initial estimate of output growth in the third quarter would be around 0.7%, compared with the 0.5% expected at the time of the August Inflation Report. Moreover, the early indicators for activity in Q4 tentatively suggested further strengthening towards the end of the year. Overall, these data provided further evidence in support of the pickup in growth assumed at the time of the August Inflation Report and, if anything, posed an upside risk to that path.

Since the spring, and after several years of stasis, activity in the housing market had been picking up and, on the basis of recent indicators, gaining momentum. Although still well below pre-crisis norms, monthly mortgage approvals had increased by almost a third over the past year. And, according to the average of the main lenders’ indices, nominal house prices in July stood around 4% higher than a year earlier and so had begun rising in real terms for the first time since mid-2010. In a confidential preview of the survey, the RICS current house price balance had risen to a level last seen at the end of 2009. There had also been signs of an easing in conditions in the commercial property market.

Let's look at the major macro-level data to elaborate on the above.

GDP annual growth rate appeared to be stalling 1-3 quarters ago, printing at the 0$ and .1% level.  But the latest reading has the annual growth rate at 1.5%.

The inflation rate has been consistently printing in the 2.5%-2.8% range for the last year.

Like the US, the UK has had a stubbornly high unemployment rate, coming in at 7.7%+ for the last year.

While there current account gap is negative, the UK prints their own currency, making this a problem the country can deal with.

The government budget deficit has been decreasing as well.

Let's see how this is translating in the relevant market action.

The pound has been rallying since the beginning of July, finally rising about the 200 day EMA in early September.  The shorter EMAs are now above the 200 day EMA as well.

The UK ETF broke through resistance in the lower 19 area in early September as well.  Prices have fallen back a bit since then, but that's to be expected after a strong move higher.

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Gas price trend nears its best in a decade

- by New Deal democrat

The secular rise in the price of gasoline from a low of $0.80 in 1999 to $4.25 in 2008, and its continual high price over $3.20 for the last 2 1/2 years is one of the big overlooked stories of the great recession and its aftermath.

At the moment, with concerns about the middle east receding somewhat, the price of gas has declined almost 10% from one year ago at this time. Here's the graph of the YoY trend since the secular price increase started:



We've only had this kind of price retreat towards the end of both of the last recessions, and also during the weakness of late 2006. This respite is possibly goiong to give us consumer price inflatioin of less than 1% YoY for September. That would be the lowest outside of the great recession, and a temporary help to consumers.

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In case you were wondering . . .

- by New Deal democrat

As you can see, the blog looks a wee bit different. Here's what happened.

In the course of shutting down comments for a few days to deal with the spammer, one of us -- or possibly both of us simultaneously! --- accidentally nuked the old format. Apparently it's a legacy format that is no longer available for new blogs. So once it was nuked, it was gone forever.

I played around for awhile yesterday trying to replace the boring "classic" format with something that was at least similar to the one we lost, and what you see is the closest I was able to come up with. I was shooting for "Close Encounters of the Third Kind" script, but I seem to have wound up with something closer to "Miami Vice."

Anyway, we both kind of like the new format, but don't be surprised if there are some further changes by next week. I'd tell you to leave comments, but those are still temporarily shut off. Once they're turned back on, feel free to tell us what you like and what you hate.

From Bonddad:

I'm wondering who's Crocket and who's Tubbs....

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Employment Burns While Washington Fiddles

Over the next few weeks/months, we'll be witnessing another round of incredible budget stupidity from Washington.  As we see that, let's also remember that an issue they should be dealing with  -- the terrible unemployment situation in the US - has not been talked about or dealt with in any way over the last several years.

The good news on employment is the leading indicators of employment are strong.

The four week moving average of initial unemployment claims has been dropping consistently since spiking at the end of the recession, and is now printing below 320,000.

Temporary help is rising at strong rates.

However, that is where most of the good news ends.  First, there is little confidence in the employment situation as evidenced by the following.

People are quitting at low rates.  If employees thought there was a high prospect of a job around the corner, we'd see this number at higher levels.  But people aren't quitting their jobs, which tells us they are concerned that if they quit, they won't be able to find another job.

At the same time, hiring plans surged in the latest NFIB report.  However, this is one month of data, and this data point is at odds with other data points in the small business survey report.

And employers are being very cautious in their hiring.

Total non-farm employment has been increasing over the last few years.  But it's still 2,000,000 below the highest level of the latest expansion.

The above data is from the JOLTs survey.  Job openings (in blue) cratered during the recession, but has since bounced back.  However, hires have stalled for the last year and a half at levels below the lowest level of the previous recession.

And finally there is this:

The US labor force is being horribly underutilized right now. 

Here's the bottom line.  For the last three years, the budget bullshit has taken precedence in Washington.  No one is talking about dealing with unemployment on either side of the aisle.  And that is the real crime.

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Corporate Bond Market Selling Off With Treasury Market

Above is a chart of the short (SHY, VCSH), intermediate (VCIT, IEF) and long term (VCLT, TLT) bond ETFs for both the corporate and treasury market.  As the treasury market has sold off, the corresponding corporate bond ETF has sold off as well.


Above is a chart of the short, intermediate and long term corporate bond market yield from the FRED system, which shows the same situation.

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