Inflation – both the Consumer and Producer Price Indexes were higher than expected–on all fronts; that is, the core and headline inflation rates were all slightly higher than expected.

Housing – both Building Permits and Housing Starts were better than expected, but both are at such low, relative levels that it hardly matters (chart below). Sure, it’s better than them going the other direction, but it’s little to write home about. There was a 13% jump in Mortgage Applications, but that’s largely because of a continued rise in refinancing activity, not the more-important-to-housing purchase activity. Still, refinancing puts more money into consumers’ pockets, and we need that.

Regional Indicators – the Empire State Manufacturing and Philly Fed reports both now reside in the contraction zone, the one confirming the other.

General

• Initial Jobless Claims fell more than expected, but they remain stubbornly above the 400,000 mark.
• Industrial Production rose less than expected (+0.1% v. +0.2%).
• Capacity Utilization fell (to 76.7%) instead of rose (77.0%), as economists had expected.
• University of Michigan Consumer Confidence fell sharply (from 74.3 to 71.8)
• Leading Economic Indicators, however, rose by +0.8%, whereas economists had expected a drop to -0.3%.

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The current members of the Business Cycle Dating Committee are: Robert Hall, Stanford University (chair); Martin Feldstein, Harvard University; Jeffrey Frankel, Harvard University; Robert Gordon, Northwestern University; James Poterba, MIT and NBER President; James Stock, Harvard University; and Mark Watson, Princeton University. David Romer, University of California, Berkeley, is on leave from the committee and did not participate in its deliberations.

Here’s the Wordle version of the press release.

And if you want to see the whole, gorey thing, click here.

Quack, quack

The NBER managed to end a lot of bar bets by defining what a duck is.  Check out this selection from the press release.

In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.

The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.

The first paragraph, in a nutshell, describes the business cycle.  The second paragraph, technically speaking, ends all double-dip bets, since the NBER decreed that the recession is over and that the next one will be its very own.  In short, there can now be no double dip since a double dip technically occurs before a recession ends.

It doesn’t matter what one calls it, though, if we dip back into decline in the next several quarters it may not fit the letter of the law, but it certainly will the spirit of it.

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Monetary policy can not fix what is wrong with the economy.

The problem, intead, is regulatory uncertainty.

The result, he said, is that, as a consequence, businesses are afraid to do anything . . . like hire.

He proposed that put a moratorium on new regulations for three years, because “businesses can’t play the game when they don’t know the rules.  It’s like not knowing whether you’re playing poker or bridge.”

When asked by the reporter if the economy is in a liquidity trap, where, at a certain point, lower rates don’t do anything.

His response was, “we’re not in a liquidity trap; we’re in a regulatory trap.”

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This week’s biggest report

ABC

190K Jobs Lost as Unemployment Rate Rises to 10.2 Percent, Highest Since April 1983 [8:35 a.m. ET]

The U.S. unemployment rate rose by more than expected in October to 10.2%, its highest level in more than 26 years, and employers cut more jobs than forecast. Nonfarm payrolls fell by 190,000 last month, with the largest job losses in construction, manufacturing, and retail trade. Economists had expected a 175,000 decrease.

Not surprisingly, the newsies did miss a few bits of critical information in their soundbytes, including at least one good bit. 

To be sure, it was a largely terrible report.

• Economists expected a loss of (-)175,000; actual loss was (-)190,000; both were an improvement over September’s figures
• Manufacturing payrolls fell by (-)61,000; economists expected -42,000; previous release was -51,000
• Average workweek was unchanged at 33.0 hours; economists expected 33.1
• Hourly earnings, however, rose by 0.3% in October; economists expected +0.1%; previous release was +0.1%
• Unemployment rate rose to 10.2%

But in the spirit of a Friday, I thought I’d feature some happy news on payrolls.  In September, it was announced that (-)263,000 jobs were lost.  In October, the September figure was revised–as bossman Gary says–”to the good” by 44,000.  So 44,000 of the jobs thought lost in September turn out to be not lost.  (Expect the White House to up its tally of saved jobs by that amount.)  That revision is the best we’ve seen since the economy began–gotta use the most overused term here–hemorraging jobs.  The chart below illustrates this.

The dashed line is the actual release, while the solid blue line is the revised figure, both of which are measured on the left scale.  Notice that the two figures are the same for October, since there has been no revision, yet; that’ll come next month.  The vertical yellow bars show the size of the revision.  Notice that the September revision was the largest of those that have come after the 14 straight months of downward revisions (red box).  Note, too, how the downward revisions scattered over the last few years put chinks in the armor of the economy.

The takeaway from this chart is that revisions are going the right direction.  Jobs are still dropping like flies, but they’re dropping at a slower pace.

Finally, note that while there were upward revisions in 2005-2007, they occured in the context of a downward trend, a trend of lower highs.  In contrast, the upward revisions that have occured this year have been in the context of higher lows.

Oh, and did I not already say this? (lifted directly from a WSJ blog):

Others market watchers wonder about the potential impact of “a 10.2% headline in every newspaper across America. That’s going to impact consumer sentiment, even though we all knew it was going over 10%,” wrote Marc Pado, U.S. market strategist for Cantor Fitzgerald.

 Why, yes I did, just last week.

In September the unemployment rate was 9.8%. It’s estimated to be 9.9% in October. Ask yourself, which does more for you a 10,000 Dow Jones Industrial Average or a 10.000% unemployment rate. While folks likely yawned–as they should have–over an arbitrary index of faulty construction that covers 30 companies–I suspect a double-digit handle on the unemployment rate could rip the chest hairs off of consumer confidence.

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Kindly note the current level of unemployment using that measure:  20+%, or 1 in 5.  If I’m not mistaken, reported unemployment, at one time in the ’30s reached 3 in 10, while the most commonly reported Great Depression unemployment rate was–envelope, please–20%.

This data came from John Williams’ excellent Shadow Government Statistics–thus, the “SGS” in the legend–website.  Available here or from the Blogroll on the home page.  Fantastic, if not depressing, stuff.

Chart courtesy of ShadowStats.com

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