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Steven Hansen
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Steven Hansen is an international business and industrial consultant specializing in turning around troubled business units; consults to governments to optimize process flows; and provides economic indicator analysis based on unadjusted data and process limitations.
My company:
Econintersect LLC
My blog:
Global Economic Intersect
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  • New Home Building Sector Remains Surprisingly Weak Considering Families Need To Live Somewhere

    I get that it is currently difficult to accumulate enough wealth for someone to buy their first home - but they need to live somewhere, even if it is a rental home. New home construction is doing OK, but after almost 10 soft years you would expect a little more recovery.

    Residential building data remains soft. The rolling averages are the best metric to view this series - and the rolling averages are decelerating. This data was below expectations.

    • The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is 7.6% this month.
    • Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) show that construction completions are lower than permits this month for a change.
    3 month Rolling Average for Year-over-Year Growth Unadjusted Data
     Building PermitsConstruction Completions
    Current Movementdeceleratingdecelerating
    Unadjusted 3 Month Rolling Average of Year-over-Year Growth - Building Permit (blue line) and Construction Completions (red line)

    (click to enlarge)

    Econintersect Analysis:

    • Building permits growth decelerated 2.2% month-over-month, and is up 7.6% year-over-year.
    • Single family building permits declined 3.1% year-over-year.
    • Construction completions decelerated 5.3% month-over-month, down 6.8% year-over-year.

    US Census Headlines:

    • building permits down 5.7% month-over-month, up 2.9% year-over-year
    • construction completions down 3.9% month-over-month, down 5.8% year-over-year.
    • the market expected:
    Annual RatesConsensus RangeConsensusActual
    Housing Starts0.950 M to 1.120 M1.048 M0.926M
    Housing Permits1.040 M to 1.150 M1.085 M1.039 M

    Note that Econintersect analysis herein is based on UNADJUSTED data - not the headline seasonally adjusted data.

    When more building permits are issued than residences completed - the industry is expanding - and this expansion was underway for three years (except for last month). In the graph below, any value above zero shows more permits are being issued than completions.

    Difference Between New Home Building Permits and Construction Completions (unadjusted)

    Construction completions trend is now noticeably downward.

    Unadjusted Year-over-Year Change New Homes -Permits (blue line) and Construction Completions (red line)

    Other points to take away from the data:

    • Before we start thinking all is well, the residential home industry is about half of the pre-2005 peak.
    Seasonally Adjusted Residential Building Permits

    • Apartment permits (structures with 5 or more units) grew 5.0% year-over-year. Apartments accounted for 34.9% of all building permits, and 25.4% of construction completions.
    Unadjusted Ratio Apartment Permits (structures with 5 or more units) to Total Permits - higher number means more Apartments

    What i would expect is that multiple family units (meant for rentals) would have been stronger. Because new construction is so slow, It looks to me that there is a shortage of rental properties coming on line which will drive rents upward.

    Other Economic News this Week:

    The Econintersect Economic Index for April 2015 is indicating growth will be sluggish. Most tracked sectors of the economy are expanding - but now there is contraction in some data sets. The negative effects of the recently solved West Coast Port slowdown (a labor dispute which had been going on for months) and bad weather continues to be seen in much of the raw data - and it will be an economic drag on 1Q2015 GDP and into 2Q2015. It is difficult to differentiate these transient issues (weather and labor) from cyclic economic conditions - but one could argue that transient issues are a cause of economic cycles.

    The ECRI WLI growth index remains slightly in negative territory which implies the economy will have little growth 6 months from today.

    Current ECRI WLI Growth Index

    The market was expecting the weekly initial unemployment claims at 275,000 to 290,000 (consensus 280,000) vs the 294,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 285,500 (reported last week as 282,250) to 282,750. The rolling averages have been equal to or under 300,000 for most of the last 6 months.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line), 2015 (violet line)

    (click to enlarge)

    Bankruptcies this Week: Brazil-based OAS (fka OAS Engenharia e Participacoes), Energy Future Holdings, Australia-based NewSat Limited

    Please [visit our landing page] for all the news and analysis for this past week.

    Apr 18 7:17 AM | Link | 2 Comments
  • There Are Strange Data Points For Our Forward Looking Markets

    I always want to start this kind of post stating I do not see anything currently that I consider a recessionary flag for the economy. But two data points are of continuing concern which are contracting year-over-year - rail movements and wholesale sales. Both of these sectors are canaries for the retail sector months from now.

    I have recently highlighted rail (which has been a concern for most of 2015) in previous posts. And this week the data for wholesale sales shows it contracted year-over-year for the second month in a row.

    The headlines said wholesale sales contracted year-over-year and inventories grew to levels associated with recessions. This data series is very noisy, and this month included significant annual revision. Because of this noise, the best way to look at this series may be the unadjusted data three month rolling averages which decelerated for the seventh month in a row. This was a soft report.

    Note that Econintersect analysis is year-over-year - the analysis is based on the change from one year ago. Econintersect Analysis:

    • unadjusted sales rate of growth accelerated 1.5% month-over-month (last month was a revised -7.7%)
    • unadjusted sales year-over-year growth is down 1.8% year-over-year
    • unadjusted sales (but inflation adjusted) down 3.5% year-over-year
    • the 3 month rolling average of unadjusted sales decelerated 0.6% month-over-month, and up -0.3% year-over-year .
    Year-over-Year Sales - Unadjusted (blue line), Unadjusted but Inflation Adjusted (red line), 3 month Rolling Averages (yellow line)

    (click to enlarge)

    z%20wholesale1.PNG

    • unadjusted inventories up 6.0% year-over-year (decelerated 0.3% month-over-month), inventory-to-sales ratio is 1.45 which is historically is well above non-recessionary periods for Februarys.

    US Census Headlines based on seasonally adjusted data:

    • sales down 0.2% month-over-month, down 1.5% (last month was reported down 1.0%) year-over-year
    • inventories up 0.3% month-over-month, inventory-to-sales ratios were 1.20 one year ago - and are now 1.29.
    • the market expected inventory month-over-month change between 0.0% to +0.6% (consensus 0.2%) versus the 0.3% reported.

    We will continue to monitor.

    Other Economic News this Week:

    The Econintersect Economic Index for April 2015 is indicating growth will be sluggish. Most tracked sectors of the economy are expanding - but now there is contraction in some data sets. The negative effects of the recently solved West Coast Port slowdown (a labor dispute which had been going on for months) and bad weather continues to be seen in much of the raw data - and it will be an economic drag on 1Q2015 GDP and into 2Q2015. It is difficult to differentiate these transient issues (weather and labor) from cyclic economic conditions - but one could argue that transient issues are the cause of economic cycles.

    The ECRI WLI growth index remains slightly in negative territory which implies the economy will have little growth 6 months from today.

    Current ECRI WLI Growth Index

    The market was expecting the weekly initial unemployment claims at 275,000 to 325,000 (consensus 285,000) vs the 281,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 285,250 (reported last week as 285,500) to 282,2500. The rolling averages have been equal to or under 300,000 for most of the last 6 months.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line), 2015 (violet line)

    (click to enlarge)

    Bankruptcies this Week: Xinergy (fka Greenwich Global Capital), EveryWare Global

    For all of our analysis and opinion this week - [click here]

    Apr 11 7:42 AM | Link | 3 Comments
  • Reading Into The Jobs Situation

    Although this weeks had many important data releases, the most surprising was Friday's Employment Situation from the BLS. As a student of economic dynamics, there is nothing in the economy (sans low oil prices) which could have triggered this event.

    Jobs are a lagging indicator. We are forecasting a weakening jobs dynamic - but it begins in April and continues to weaken for the next 6 months (with no end in sight). To me, the surprising component of the jobs report was the downward backward revision for January and February.

    The BLS jobs report headlines from the establishment survey was weak and well below expectations. The unadjusted data shows relatively weak jobs growth. The real story this month is the ALL the establishment survey jobs growth for 2015 was re-estimated lower. This is such a soft jobs report that the Federal Reserve will be reluctant to raise their interest rates.

    • The rate of growth for employment moderately decelerated this month (red line on graph below).
    Unadjusted Non-Farm Private Employment - Year-over-Year Change (blue bars - left axis) and Year-over-Year Growth Acceleration / Deceleration (red line - right axis)

    (click to enlarge)

    • The unadjusted jobs added month-over-month was weak.
    • economic intuitive sectors of employment were mixed.
    • This month's report internals (comparing household to establishment data sets)were "relatively" consistent with the household survey showing seasonally adjusted employment growing 34,000 vs the headline establishment number of growing 126,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).
    • The household survey removed 96,000 people from the workforce - and still the unemployment rate did not fall.
    • The monthly comment from the National Federation of Independent Business (NFIB) on jobs growth is below.

    A summary of the employment situation:

    • BLS reported: 126K (non-farm) and 129K (non-farm private). Unemployment unchanged at 5.5%.
    • ADP reported: 189K (non-farm private)
    • In Econintersect's March 2015 economic forecast released in late February, we estimated non-farm payroll growth at 200,000 (unadjusted based on economic potential) and 270,000 (fudged based on current overrun of economic potential).
    • The market expected:
    Seasonally Adjusted DataConsensus RangeConsensusActual
    Nonfarm Payrolls - M/M change200,000 to 271,000247,000126,000
    Unemployment Rate - Level5.4 % to 5.6 %5.5 %5.5 %
    Private Payrolls - M/M change207,000 to 260,000240,000129,000
    Average Hourly Earnings - M/M change0.2 % to 0.3 %0.2 %+0.3 %
    Av Workweek - All Employees34.6 hrs to 34.6 hrs34.6 hrs34.5 hrs

    The BLS reports seasonally adjusted data - manipulated with multiple seasonal adjustment factors, and Econintersect believes the unadjusted data gives a clearer picture of the jobs situation.

    Non-seasonally adjusted non-farm payrolls improved 720,000 - the worst job growth since 2010.

    Historical Unadjusted Private Non-Farm Jobs Growth Between Februarys and Marchs (Table B-1, data in thousands) - unadjusted (blue line) vs seasonally adjusted (red line)

    All employment numbers in 2015 were revised downward.

    Change in Seasonally Adjusted Non-Farm Payrolls Between Originally Reported (blue bars) and Current Estimates (red bars)

    (click to enlarge)

    Please continue reading the analysis [here].

    Other Economic News this Week:

    The Econintersect Economic Index for April 2015 is indicating growth will be sluggish. Most tracked sectors of the economy are expanding - but now there is contraction in some data sets. The negative effects of the recently solved West Coast Port slowdown (a labor dispute which had been going on for months) and bad weather continues to be seen in much of the raw data - and it will be an economic drag on 1Q2015 GDP and into 2Q2015. It is difficult to differentiate these transient issues (weather and labor) from cyclic economic conditions - but one could argue that transient issues are the cause of economic cycles.

    The ECRI WLI growth index remains slightly in negative territory which implies the economy will have little growth 6 months from today.

    Current ECRI WLI Growth Index

    The market was expecting the weekly initial unemployment claims at 275,000 to 295,000 (consensus 285,000) vs the 268,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 300,250 (reported last week as 297,000) to 285,500. The rolling averages have been equal to or under 300,000 for most of the last 6 months. Note that this week's release reflects the annual revision to the weekly unemployment claims seasonal adjustment factors. The seasonal adjustment factors used for the UI Weekly Claims data from 2010 forward, along with the resulting seasonally adjusted values for initial claims and continuing claims, have been revised.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line), 2015 (violet line)

    (click to enlarge)

    /images/z unemployment.PNG

    Bankruptcies this Week: Altegrity

    All of last weeks analysis can be [seen here].

    Apr 04 8:08 AM | Link | 4 Comments
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