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Notes to myself, possibly of interest to others.
-- Bill Northlich

Friday, June 22, 2012

Rosenberg - Recession and Deflation (brown?) Shoots

While everyone seems to he lured into this view that the housing market is in some hrg recovery (ahem we just saw mortgage purchase applications dive 8.5% in the week of June 15th, keep in mind that it now represents a mere 2.3% of GDP. It barely spins the dial. [On the other hand] Companies are scaling back on capex plans as the data and the surveys attest, and this is a much larger (10.4%) of the economy. This includes commercral constructron which contracted according to the latest sub-50 reading on the Architectural Brllings Index.

The JOLTS survey of employment (lob Openmgs and Labor Turnover) confirmed the weakness seen in the recent nonfarm payroll repons, Jolt is apropos in this context.

First, job opennng plunged 325k in April to its lowest level since last Novemher (3.416 million). This is the steepest decline since the Lehman collapse in September 2008 and only three other times in the past decade have we seen such a plunge in any given month. All major categories saw openings dwindle: Construction down two of the past three months); Manufacturing (~62k. the first decline since last October and the largest since November 2008 and the fourth largest on record); Trade and transportation (48k): Professional and business (-108k, the largest decline since December 2010); Education and health servicœ (~17k. frrst decline in four months); Leisure down two of the past three months).

Second, new hires also decreased two straight months - by 160k (or 3.7% MoM) in April to the lowest level slnce last July. This came on the heels of a 109k slide in new hirings in March - the tirst hack-to-­back declines since the summer of 2010. Practically [all] of this decline was in the private sector. So the story now extends beyond government retrenchment towards the private sector freezing up amidst worries about the fiscal cliff and the impact from the spreading and deepening recession in Europe. As in the case of job openings, all categories showed a decline in new hiring except for trade and transportation with a meagre 2k gain: Construction (-5k. down three months in a row); Manufacturing (-8k. the first drop in three months); Professional and business services (-34k, after -85k in March); Education and health services (-35k, down two months in a row); Leisure (-62k, the largest decline since last April).

Third, layoffs jumped 68k in April or 4.1% MoM - the sharpest increase since the dog days of last August. Again. all of the runup in pink slips was in the private sector, where firings have risen in three of the past four months. This adds validity to the latest jobless claims data. In fact. what would catch the markets eye, we are sure. would he a retest of 400k on johless claims, which has not happened since last October but currently are just 14k away from that threshold.

Finally, the number of voluntary quits fell 152k (this is a beuwetner measure of worker confrdence/securrty). the largest decline since October 2010 - just ahead of QE2 if memory serves me correctly...

Lookmg at the broad components of the economy, some recessionary thumbprints are becoming more noticeable. More than 70% of the data are coming in below consensus in June. Revisions are squarely to the downside. Industrial productron looks to have peaked in April. Real retail sales seem to have hit their peak in March. The index of aggregate hours worked peaked in February. And real personal rncome peaked In lanuary. All of thls rlght around the time that the stock market peaked too.
---Rosie on 6/18

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