To finally play catch up, here we are. This was once again somewhat of a mixed week for economic data, though with a downward bias to be sure. It seems to be somewhat of a theme lately and one that indicates a sudden slowing of economic growth. As I discussed in another post, I don't think this signifies a double-dip, but it has come on unexpectedly fast for something that has no apparent proximate cause.
June Non-farm Payrolls
Most of the financial press called this a "mixed report", but I disagree. It was a deeply disappointing report. Of course, beneath the headline of -125,000 jobs (entirely due to Census layoffs) was the somewhat increased private sector hiring compared to May, though at less than 100,000 it was weak. I guess it's better than the job loss recovery (yes, I used job loss rather than jobless) from the 2001 recession, but that was so much shallower of a recession than what we went through. As some have indicated this is a typical recovery path from a financial panic induced recession.
More worrisome to me was that aggregate weekly hours turned down as did aggregate payrolls with declines in both hours worked and hourly incomes. Much more of this sort of performance would get me truly concerned. One little nugget in the report was that those unemployed 27-weeks or more turned down while the numbers increased down the scale a little bit. That was an interesting development and might bear watching to see if it is repeated. Down the scale makes sense from laid off Census workers, but those out 27-weeks or more should be continuing to increase. It might have just been a statistical burp.
June ISM and Chicago PMI Surveys
Neither report was what I would call "weak" in the sense that they indicate contraction. The Chicago PMI, at 59.1, is firmly in expansion territory, indicating continued solid growth in industrial production. Granted, there is some slowing in new orders, but production actually hit new highs. In fact, the overall rate of growth was barely off from May at all.
The national ISM figures showed modest slowing, but still a broad based expansion in manufacturing activity. All major indexes are north of 55, which indicates the likelihood of average to slightly above average conditions in the manufacturing sector in the near term. Next week watch for the regional Fed surveys to get a better sense of what July might look like. If the slowing trend rapidly accelerates into a real downdraft, there is real cause for concern.
April Case Shiller House Price Index
I think that this will probably mark the high point for house prices for the next several months. The support provided by the tax credits now exhausted, high inventories and low underlying demand will sap sales prices for some time. I am not sure that we will retest the lows of early 2009, but that is a possibility. The lack of momentum in April even with artificially high demand is telling.
May Personal Income and Spending
This was a decent report with a 0.4% increase in incomes and 0.2% in consumption. Incomes are finally beginning to grow due to wage and salary growth rather than transfer payments. If that continues or not remains to be seen. June will probably prove a setback in this regard if the employment report was any indication, but we shall see.
And the rest...
Jobless claims ticked up again to 472,000, once more proving to be the ultimate seesaw indicator, though at this point volatility around current levels suggests ongoing weakness in the job market.
Construction spending proved weak in the private sector though somewhat more robust when looking at public outlays. Residential construction for the next several months will probably be meager at best and non-residential is unlikely to be any better. In fact, it is far more likely to fall much further than stabilize.
Motor vehicle sales in June were sluggish and that is disappointing because they seem to be settling in at a very depressed rate of just over 11 million. Three years ago, 16-17 million was a more normal figure and that did not represent an out of control boom either, but rather just middling sales. I suspect sales will trend up as the year progresses, but there is little evidence of momentum at the moment.
Weekly retail sales were fairly strong and indicate some good momentum going into July, but June may have been a weak month after a disappointing May. If July shows no improvement, growth estimates will have to come down further. As I have indicated previously, the data looked much better six weeks ago than they do now.
Finally, MBA mortgage purchase applications were soft, but refinancings were up. This is to be expected given current rates. The good news is that the low rates will help consumers reduce their debt service burdens which may boost future consumption.