U.S. stocks were higher mid-session on Thursday, as economic data was deemed better than expected. My interpretation differs from the Wall Street conventional wisdom.
- Initial Jobless Claims remain elevated at 414,000 and well above the recessionary threshold of 350,000. Fact - The National Bureau of Economic Research time-stamped the start of recession as December 2007 when the Unemployment rate was 4.6%. The NBER time-stamped the end of recession in June 2009 when the Unemployment rate was 9.5%.
- Housing Starts rose by 3.5% to 560,000 in May, but this release was should be trumped by yesterday's report that the National Association off Home Builders Housing Market Index slumped three points in June to an extremely depressed reading of 13 on a scale of zero to 100. Yesterday's NAHB HMI was based upon June data so builders adding slightly to inventories in May but potential buyers did now show up in June.
- The manufacturing sector took another hit in June with the Philly Fed Index declining to -7.7 when a positive reading of 5.0 was expected.
NAHB Housing Market Index became even more depressed in June declining to 13 from 16. The National Association of Home Builders Housing Market Index has not budged much over the past six months because of: distressed home sales, lack of construction and development financing from community banks, inaccurate home appraisals, the reduction of government support for the overall housing market and that prospective buyers cannot get credit or sell their existing home.
This index peaked at 72 in June 2005, which is when I predicted a peak the share prices for the home builders. The index has been below 50 since May 2006 and home prices peaked in June/July of 2005. The NAHB HMI has been below 20 since September 2007 just three months before the Great Recession began. The low for the index was 8 in January 2009.
The NAHB has added to their list of woes by citing that they are being squeezed by the continued weakness in existing home prices, which continue to slide. Also, because of commodity speculation from Wall Street the NAHB cites rising material costs that makes it difficult to build a home profitably.