December’s housing construction numbers are a mixed bag. On the one hand, US housing starts are down -1.36% from November to December, but down -21,8% since December 2021 (YoY).
The good news? 1-unit (single family detatched) rose 11.26% from November to December (MoM). But 5+ (multifamily) starts are down -18.91% MoM.
But 5+ unit PERMITS are up 7.14%. Perhaps Hunter Biden can now rent an apartment rather than pay his father $50,000 a month in rent for Joe’s Wilmington Delaware house.
KB Homes experienced a 68% cancellation rate in Q4 2022.
This version of The Scream is one of four made by Edvard Munch, and the only one outside Norway. It is coming up for auction at Sotheby’s in New York.
Mortgage applications increased 27.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 13, 2023. But mortgage applications are 60% lower than the same week last year.
The Refinance Index increased 34 percent from the previous week and was 81 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 25 percent from one week earlier. The unadjusted Purchase Index increased 32 percent compared with the previous week and was 35 percent lower than the same week one year ago.
Here are the stats.
One lender in particular, Wells Fargo, smells blood in the economic waters, and has cut back mortgage originations.
Just remember, mortgage applications generally rise in the first part of the year until May, then start slowing until the last week of the year. This is called seasonality. But despite the fast growth this year, purchase applications are still down -35% compared to last year at this time.
We got trouble in Potomac City! No, I’m not talking about the numerous Top Secret documents that Biden carelessly left in his garage in Delaware and the UPenn Biden Center. And they found more over the weekend. I’m talking about the US Treasury 10Y-2Y yield curve being inverted for 135 straight days. And thanks to inflation, REAL wage growth has been negative for 21 straight months.
All this is happening while M2 Money growth (green line) stalls to 0% YoY.
Swaps 5Y are rising as The Fed withdraws monetary stimulus.
The 2020 Covid outbreak and the resulting government shutdowns and school closures begat a Washington DC spending spree and Federal Reserve monetary stimulus barrage unlike anything other time in history. Congress and Administrations love to spend other people’s money, but as Rahm Emanuel once said “You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before” And wow, did they ever binge spend and expand the M2 Money supply. I call it “The Great Dislocation” of the economy and we never recovered from it.
But after the massive spending splurges and Fed monetary stimultypto, The Fed finally started withdrawing “the punch bowl” to combat inflation. M2 Money growth year-over-year (YoY) is now 0%. And with inflation, US average weekly earnings growth YoY turned negativc and has been negative for 21 straight months.
After the spending explosion under Pelosi/Schumer and Powell’s monetary, M2 Money velocity (GDP/M2 Money) crashed to it lowest level in history. So now we have depressed money velocity and no M2 money growth. And the US still has 21 straight months of negative weekly earnings growth.
But former Fed Chair and current Secretary of Treasury Janet Yellen is pleased that inflation is FINALLY slowing which Yellen attributes to relaxing supply chains. Or is it declining M2 Money growth, Janet?
Now that the Federal government’s spending spree and The Fed’s monetary stimulypto dislocated the US economy, we are headed for a recession with no ammunition left in The Fed’s arsenal.
After all. The Federal Reserve has been destroying consumer purchasing power since 1913. And we may be at the end of The Fed’s monetary rope.
Even worse, we have Joe Biden as President, who curiously has been found to have classified documents in his possession from when he was Vice President, at least, at two locations (his Wilmington DL home that his son Hunter had access to and the now infamous Penn Biden Center in Washington DC). Even worse, Biden seems to be talking to dead world leaders like Germany’s Schmidt and France’s Mitterand.
Knowing Biden’s penchant for blatant lying and carelessness, I wouldn’t be surprised if this is a stack of classified documents on the table during his meeting with Treasury Secretary Janet Yellen.
Let’s hope Biden isn’t saying that he is talking to late Robert Kennedy, the former US Attorney General.
I don’t think this is a record that Biden can run on for re-election: 21 straight months of NEGATIVE REAL WAGE GRWOTH. Fortunately for Fed Chair Jay Powell, he is not an elected official.
The December inflation report still shows elevated inflation in the US, but only -0.1% since November (MoM), but still high compared to last year (6.5% YoY). That is still over 3x The Fed’s target inflation rate of 2%.
While headline inflation fell to 0.1% MoM, CORE inflation (removing food and energy) rose again 0.3% MoM and 5.7% YoY.
What exactly went up in price in December? Food and energy were all over 10% YoY growth.
At 6.50% YoY headline inflation, the Taylor Rule suggests a Fed Funds Target rate of … 13.13%. Well, I guess that Powell will say there is more rate hikes to be done.
US headline inflation began to soar as soon as Joe Biden became President. A combination of massive stimulus spending related to the Covid economic shutdown and his war on fossil fuels, driving up gasoline and diesel fuel prices. In other words, headline inflation rose from 1.4% Year-over-year (YoY) at the end of December 2020 to 9.1% YoY in June 2021. It has now simmered down to 7.1% YoY as The Fed continues to remove monetary stimulus.
How have consumers coped with inflation caused by massive Federal spending and Biden’s anti-fossil fuel policies? In November, personal savings dropped -64.8% YoY. This marks 20 straight months of declining personal savings.
US M2 Money growth YoY is now … 0%. That is the lowest in US history.
The December jobs report is out and the top-line number is … 223k jobs were added. That is strong enough to give The Federal Reserve the green light to raise rates.
But while it was a good jobs report, it shows the inflation tax in full view. Hourly wage growth year-over-year (YoY) was 4.6% in December. Unfortunately, the inflation tax was 7.1% in November. If we assume that the inflation rate in December is the same, the REAL hourly wage growth was -2.5% YoY.
But it is likely that headline inflation cooled a bit in December as The Fed continues tightening. But unless headline inflation cooled to 4.6% YoY, the inflation tax is positive and destructive.
The average weekly hours employed fell to 34.3 while U-3 unemployment rate fell.
Here are the rest of the numbers.
The most glaring data point is Full-Time Workers -1K; Part-Time Workers +679K.
And the leading indicator for unemployment is ticking up.
And with it, ISM Manufacturing Report for December is showing weakness. New orders (orange line) is down to 45.2 (below 50 is contraction) and the prices paid is down to 39.4 (white line). All this is happening as The Fed raises its target rate (yellow line) and removes monetary stimulus (green line).
This gives us “The Devil’s Tower” looking economic spike after massive Covid-related monetary stimulus and Federal government repeated stimulus.
Speaking of Already Gone, look at the US Treasury 10Y-2Y yield curve with slowing M2 Money growth. Yield curve inversion is more about vanishing M2 Money growth than it is a forecast of recession.
Today is all quiet of the financial market front since the US stock
Today is all quiet of the financial market front since the US stock and bond markets are closed. But as the new year starts, we have to ask the following question: is the US already in a recession?
A simple measure of IMPENDING recession is the US yield curve which is currently inverted. Typically, a recession occurs within months of the yield curve inverting. But if we look at real GDP growth, the Atlanta Fed GDP tracker is at 3.7%, so no recession there (two consecutive quarters of negative GDP growth is often used as a measure of recession).
But another indicator of “all is not well” is the CBOE Put/Call Ratio. Typically, the Put/Call Ratio spikes during a recession. But on December 28, 2022, the Put/Call Ratio spiked to its highest level since 1996. Although it has calmed down to 0.84 on December 30, 2022. Suffice it to say that there is enormous uncertainty in markets.
Covid begat massive Fed monetary stimulus and an excuse for the Federal government to go on a series of spending sprees (Covid “relief”, Instrastructure, Inflation Reduction, and now the $1.7 Trillion pork-laden Omnibus bill). Now that historic big spender Nancy Pelosi (CA-D) is no longer Speaker, will her successor have such a voracious spending appetite? The US economy is still benefitting from Covid-related stimulus which also helped generate 40-year highs in inflation.
Thanks to inflation, US workers have had 20 consecutive months of negative wage growth. But as M2 Money growth slows to a halt, so will real average hourly earnings.
The traditional measures of recession (unemployment and Real GDP growth) are NOT pointing to recession, but 20 straight months of negative wage growth points to bad news for workers. Throw in an inverted yield curve and massive volatility in the CBOE Put-Call Ratio and we have a party … that I don’t want to attend.
A simple measure of IMPENDING recession is the US yield curve which is currently inverted. Typically, a recession occurs within months of the yield curve inverting. But if we look at real GDP growth, the Atlanta Fed GDP tracker is at 3.7%, so no recession there (two consecutive quarters of negative GDP growth is often used as a measure of recession).
But another indicator of “all is not well” is the CBOE Put/Call Ratio. Typically, the Put/Call Ratio spikes during a recession. But on December 28, 2022, the Put/Call Ratio spiked to its highest level since 1996. Although it has calmed down to 0.84 on December 30, 2022. Suffice it to say that there is enormous uncertainty in markets.
Covid begat massive Fed monetary stimulus and an excuse for the Federal government to go on a series of spending sprees (Covid “relief”, Instrastructure, Inflation Reduction, and now the $1.7 Trillion pork-laden Omnibus bill). Now that historic big spender Nancy Pelosi (CA-D) is no longer Speaker, will her successor have such a voracious spending appetite? The US economy is still benefitting from Covid-related stimulus which also helped generate 40-year highs in inflation.
Thanks to inflation, US workers have had 20 consecutive months of negative wage growth. But as M2 Money growth slows to a halt, so will real average hourly earnings.
The traditional measures of recession (unemployment and Real GDP growth) are NOT pointing to recession, but 20 straight months of negative wage growth points to bad news for workers. Throw in an inverted yield curve and massive volatility in the CBOE Put-Call Ratio and we have a party … that I don’t want to attend.
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