We have previously1 used the CPI data available since 1913 to create annualized inflation data aligned with the federal fiscal years from 1914 to 2022. In this post, we use the timeline-matched data to examine leads or lags that may exist between the two variables – government spending and inflation.
Credit: Photo by Ann H from Pexels
Short Range Forecast Discussion
NWS Weather Prediction Center College Park MD
400 PM EDT Sun Mar 12 2023Valid 00Z Mon Mar 13 2023 – 00Z Wed Mar 15 2023
…A potent storm system is expected to bring a moderate risk of flash
flooding and heavy mountain snow over parts of California……A wavy front is forecast to bring some severe thunderstorms across the
Southeast through tonight before intensifying rapidly into a potent
nor’easter off the New England coast on Tuesday with heavy wet snow inland
and high winds with rain/snow near the coast…
Short Range Forecast Discussion
NWS Weather Prediction Center College Park MD
252 PM EST Sat Mar 11 2023Valid 00Z Sun Mar 12 2023 – 00Z Tue Mar 14 2023
…Heavy snow and difficult travel conditions over the Northern Plains and
Upper Midwest tonight……Severe weather possible in the Ozarks tonight and into the Southeast on
Sunday……Additional rain and mountain snow for the West Coast into Monday…
*Stock data, cryptocurrency, and commodity prices at the market closing.
Total nonfarm payroll employment rose by 311,000 in February 2023, and the unemployment rate edged up from 3.4% to 3.6% (over the last year unemployment has ranged between 3.4% to 3.8%). Notable job gains occurred in leisure and hospitality, retail trade, government, and health care. Employment declined in information and in transportation and warehousing. The household survey shows employment grew 177,000 vs the establishment’s 311,000. Since employment continues to grow at a reasonable rate, the Federal Reserve is free to continue to increase its federal funds rate to fight inflation.
Yesterday, I attributed the market’s down day to Fed Chair Powell’s hawkish comments and the anticipation that today’s job report would be good. Whilst true, there was another event weighing on the market – Silicon Valley Bank announced that it sold off $21B worth of holdings at a $1.8B loss. Silicon Valley Bank is a major player for technology start-ups being considered the backbone of the US venture capital industry. Today, Silicon Valley Bank collapsed after a stunning 48 hours in which its capital crisis set off fears of a meltdown across the banking industry. Its failure marks the largest shutdown of a US bank since 2008. The bank is now in the hands of the Federal Deposit Insurance Corporation. The FDIC is acting as a receiver, which typically means it will liquidate the bank’s assets to pay back its customers, including depositors and creditors. This is not good news and potentially this is the straw that broke the camel’s back. This is affecting most bank stocks and trading has been halted for First Republic, PacWest Bancorp, and Signature Bank.
A summary of headlines we are reading today:
Click on the “Read More” below to access these, other headlines, and the associated news summaries moving the markets today.
On the second Thursday of every month, NOAA issues its analysis of the status of ENSO. This includes determining the Alert System Status. NOAA describes their Report as “ENSO Alert System Status: Final La Niña Advisory”
If you read the fine print you can see that we are still in the transition. We have left La Niña but are not fully into ENSO Neutral. The rules seem to be that when you no longer meet the criteria for La Nina or El Nino, you are in ENSO Neutral even if the atmosphere has not fully transitioned to ENSO Neutral. This makes a lot of sense since in general, the atmosphere reacts to the ocean conditions rather than the ocean reacting to the atmosphere but it is not as clear cut as what I have just stated. But typically the reaction of the atmosphere lags the change in the ocean condition and the change in the atmosphere confirms that the change in the ocean will impact weather patterns.
Some of the models suggest a rapid change to El Nino during or after the Summer. It seems likely that the ENSO Neutral Phase will at the very least have an El Nino bias.
We have published a shorter version of our usual article since there is little disagreement that we are transitioning away from La Nina. It is also a bit too early to be confident that we will have an El Nino next winter. We need to get past the Spring Prediction Barrier (SPB) to be confident about having an El Nino soon.
The article includes a very interesting post from the ENSO Blog. It is worth reading. Among other things, it discusses the situation off of Peru which might increase the chances for an El Nino but it also is a warning as to some potentially problematic weather conditions for Peru.
Short Range Forecast Discussion
NWS Weather Prediction Center College Park MD
159 PM EST Fri Mar 10 2023Valid 00Z Sat Mar 11 2023 – 00Z Mon Mar 13 2023
…A heightened risk of excessive rainfall continues for Southern
California Friday night and renews across Central and Northern California
Saturday night into Sunday……Winter Storm/Blizzard Potential for the Northern Plains from Friday
evening through this weekend……There is a Slight Risk of severe thunderstorms over parts of the
Southern Plains and Lower Mississippi Valley on Saturday……An elevated risk of excessive rainfall exists in and near the Mid-South
Saturday into Saturday night…
In the shortest month of the year, U.S.-based employers announced 77,770 job cuts in February, down 24% from the 102,943 cuts announced in January. However, it is 410% higher than the 15,245 cuts announced in the same month last year. February’s total is the highest for the month since 2009 when 186,350 cuts were recorded. So far this year, employers announced plans to cut 180,713 jobs, up 427% from the 34,309 cuts announced in the first two months of 2022. It is the highest January-February total since 2009 when a total of 428,099 job cuts were announced in January and February.
In the week ending March 4, the 4-week moving average for initial unemployment insurance claims was 197,000, an increase of 4,000 from the previous week’s unrevised average of 193,000.
The quarterly CoreLogic Homeowner Equity Insights report for 4Q2022 shows U.S. homeowners with mortgages (roughly 63% of all properties*) have seen their equity increase by a total of $1 trillion since the fourth quarter of 2021, a gain of 7.3% year over year. On the other hand, the total number of mortgaged residential properties with negative equity increased by 6% from the third quarter of 2022 to 1.2 million homes or 2.1% of all mortgaged properties.
Forty-seven percent (seasonally adjusted) of small business owners reported job openings they could not fill in the current period, according to NFIB’s monthly jobs report. NFIB Chief Economist Bill Dunkelberg stated:
The small business labor demand remained strong in February. Small business owners are working to maintain competitive compensation and are raising compensation in the hopes of filling their open critical positions.
A summary of headlines we are reading today:
Click on the “Read More” below to access these, other headlines, and the associated news summaries moving the markets today.
Short Range Forecast Discussion
NWS Weather Prediction Center College Park MD
306 PM EST Thu Mar 09 2023Valid 00Z Fri Mar 10 2023 – 00Z Sun Mar 12 2023
…Threat of heavy rain, flooding, and heavy high-elevation snow for the
West as an Atmospheric River impacts the region……Moderate to locally heavy snowfall accumulations will spread from the
Northern/Central Plains into the Great Lakes and Appalachians
Thursday-Friday……Shower and thunderstorm chances with locally heavy rainfall continue
for the Southern Plains and Lower Mississippi Valley Thursday;
precipitation chances increase for the East Coast Friday…
*Stock data, cryptocurrency, and commodity prices at the market closing.
ADP’s February 2023 National Employment Report shows Private sector employment increased by 242,000 jobs and annual pay was up 7.2% year-over-year. Gotta wonder if Friday’s BLS employment report will also show strong gains which are inflationary. Nela Richardson, ADP’s chief economist stated:
There is a tradeoff in the labor market right now. We’re seeing robust hiring, which is good for the economy and workers, but pay growth is still quite elevated. The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near-term.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis reported that the goods and services deficit increased by 1.6% – with exports up 3.4% and imports up 3.0%. This is a good litmus test for the economy – increases in imports generally show the US economy is growing and increases in exports generally show the global economy is growing.
The number of job openings decreased to 10.8 million on the last business day of January. Over the month, the number of hires and total separations changed little at 6.4 million and 5.9 million, respectively. Within separations, quits (3.9 million) decreased, while layoffs and discharges (1.7 million) increased. Even with the decrease in job openings this month – the number of job openings is very large and is enough to continue to fuel high employment gains.
The Federal Reserve’s Beige Book shows overall economic activity increased slightly in early 2023. Six Districts reported little or no change in economic activity since the last report, while six indicated economic activity expanded at a modest pace. On balance, supply chain disruptions continued to ease. Consumer spending generally held steady, though a few Districts reported moderate to strong growth in retail sales during what is typically a slow period. Auto sales were little changed, on balance, though inventory levels continued to improve. Several Districts indicated that high inflation and higher interest rates continued to reduce consumers’ discretionary income and purchasing power, and some concern was expressed about rising credit card debt. Travel and tourism activity remained fairly strong in most Districts. Manufacturing activity stabilized following a period of contraction. While housing markets remained subdued, restrained by exceptionally low inventory, an unexpected uptick in activity beyond the seasonal norm was seen in some Districts along the eastern seaboard. Commercial real estate activity was steady, with some growth in the industrial market but ongoing weakness in the office market. Demand for nonfinancial services was steady overall but picked up in a few Districts. On balance, loan demand declined, credit standards tightened, and delinquency rates edged up. Energy activity was flat to down slightly, and agricultural conditions were mixed. Amid heightened uncertainty, contacts did not expect economic conditions to improve much in the months ahead.
A summary of headlines we are reading today:
Click on the “Read More” below to access these, other headlines, and the associated news summaries moving the markets today.
I used to believe “America is an ideal.” But now I believe “America a lie.”
When an ideal is too remote, it becomes a lie (e.g., communism). But America is far worse than that: America is a lie, foundationally! Two main reasons:
