Free Markets, Free People

Dale Franks

Dale Franks’ QandO posts

Economic Statistics for 5 Jul 12

The following statistics were released today on the state of the US economy:

Initial claims for unemployment fell 14,000 in the June 30 week to 374,000, much better than expected. The 4-week moving average fell slightly to 385,750. Continuing claims in rose 4,000 to 3.306 million with the 4-week average falling 3,000 to 3.304 million. The unemployment rate for insured workers is 2.6%, which is unchanged since March.

ADP’s private payroll count shows a better-than-expected rise of 176,000, hopefully pointing to strength for tomorrow’s employment situation.

Unlike the ISM manufacturing index, the ISM Non-Manufacturing Index stayed positive at 52.1, though that’s still slower than last month.

Chain Store Sales had a disappointing June, with many retailers lowering guidance, reporting lower rates of year-on-year growth than in May.

MBA Purchase Applications fell -6.7% last week, with purchases up 1.0%, but refinance applications down -8.0%.

The Challenger Job-Cut Report’s layoff count for June is 37,511, down from 61,887 in May and down from 41,432 in June last year.

The Bloomberg Consumer Comfort Index dropped from last week’s 2-month high to -37.5.

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Dale Franks
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Economic Statistics for 3 Jul 12

The following statistics were released today on the state of the US economy:

Auto sales will be released throughout the day today. First reports are from Chrysler, whose sales rose 20% to 144,811 vehicles. Nissan posted a 28% sales gain, to 92,237 new vehicles. More figures will be released later today.

In retail sales, ICSC-Goldman reports bad weather reduced same-store retail sales to a year-on-year 1.4% increase, though sales rose 0.2% on a weekly basis. Redbook reports weak 2.2% sales growth both on a weekly basis, as well as in the 4-week moving average. Both Redbook and ICSC-Goldman sales results are the worst in a year.

US factory orders rose a better-than-expected 0.7% in May. Ex-transportation, orders were up by 0.4%, reversing 2 months of decline.

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Dale Franks
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Economic Statistics for 2 Jul 12

Here are today’s statistics on the state of the economy:

The ISM manufacturing index shows a contacting manufacturing sector for the first time since July 2009, falling to 49.7 in June. New orders, at 47.8, show contraction for the first time since April 2009, and point to the possibility of a slower July, as well. Inventories and prices also fell.

Markit Economics’ PMI for the US slowed to 52.5 in May, vice 54 for April.

Construction spending rose a better-than-expected 0.9% in May, following a 0.6% rise in April. On a year-over-year basis, spending was up 7.0%.

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Dale Franks
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Economic Statistics for 29 Jun 12

The following statistics were released today on the state of the US economy:

Personal income rose 0.2% in May, while personal spending was unchanged. The PCE price index fell -0.2% for the month, though the core rate rose 0.1%. On a year-over-year basis the index rose 1.5% overall, while the core rate rose 1.8%.

The consumer sentiment index fell to 73.2, which puts the index down to a new low for the year.

The Chicago Purchasing Managers Index rose slightly to 52.9, but the new orders component is the weakest since September 2009, pointing to slowing conditions this summer for Chocago businesses.

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Dale Franks
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Obamacare: A System Designed to Fail

OK, we now have Obamacare. Absent a November election of Mitt Romney and Republican congressional majorities, we’ll simply have to live with it. Except, of course, we won’t, because Obamacare simply will not work. Its design practically ensures that it will meet none of the goals its proponents claim it will meet. The end result will inevitably be more people uninsured, higher costs, greater government spending, and higher debt.

If you want to see how a policy will work, then ignore all the claims made by it’s proponents—and opponents.  All that is necessary is to look closely at the incentive structures the law creates. Those incentives will tell you how people will respond to the policy.

So, let’s take a brief look at just a few of the incentives Obamacare creates.

  • First, health plans are more highly regulated. They must cover a wide range of preventative procedures, like pediatric or maternity care. This means that stand-alone catastrophic coverage will essentially be a thing of the past. This increases the cost of premiums across the board, and eliminates an entire class of individual insurance coverage.
  • At the same time, insurers are forced to cover pre-existing conditions, with premiums limited to 2.5x that of the lower-risk groups. People with chronic conditions, such as diabetes, generally incur costs far in advance of 2.5x that of healthy people—as I well know, being diabetic—and the care for the seriously ill, such as cancer patients, is far higher still. This will, again, raise the costs of premiums overall to recoup the extra costs of insuring the chronically or seriously ill.
  • Individuals who do not have have health coverage will be forced to pay what we learned this morning was a tax to the IRS instead. Rational people, then will choose not to buy insurance until their health costs + the penalty is greater than the cost of a health plan.
  • Lower income people, with a family income of less than 400% of the poverty level ($88,000 for a family of four) receive a subsidy of varying value, declining with income increases until the 400% of poverty level, at which point it drops to $5,000. At 401% of the poverty level, the subsidy ends. So at that $88,000 level, any increase of income results in the loss of $$5,000. At that point, it is uneconomic to accept any increase in income to less than $93,000, as it will result in a net loss of income, or the family will have to forego medical insurance. This will trap low-wage workers.
  • Companies with less than 50 employees that currently provide health coverage to their workers will face a broad range of new costs, mandates, regulations and coverage mandates. They will have to either require more costs to be paid by employees, or simply drop health coverage altogether and simply pay a nominal tax penalty. I suspect many companies will choose the latter, thereby forcing employees to pay for higher-cost individual plans, or forego coverage. Even worse, companies that employ fewer than 50 people have a huge incentive to ensure they never have more than 50 people on the payroll, lest they then be required to provide health insurance, and subject themselves to a much higher administrative burden.

These perverse incentives will result in higher health insurance costs, and an increase in the number of uninsured people. Additionally, the macroeconomic incentives will result in less income growth and lower employment. We will then be told that the "free market" has failed yet again, and be forced to submit to a fully government-run health care system.

Ultimately, Obamacare is nothing more than the latest in "a long train of abuses and usurpations" about which we have done nothing, and will do nothing. I mean, let’s face it, no one is going to call for a new constitutional convention, much less get together with a lusty, gusty group of fellows and head off into the hills with rifles.

But, there’s always a silver lining to every cloud. In this case, it’s that when we default on or monetize our debt and destroy the currency and economy, Obamacare will be irrelevant, as there will barely be enough money for food and shelter, much less expansive health coverage programs.

So, we got that going for us.

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Dale Franks
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Economic Statistics for 28 Jun 12

The following statistics were released today on the state of the US economy:

The Commerce Department’s final estimate of first quarter GDP was unchanged at 1.9% annualized.

Initial claims for unemployment were a higher-than-expected 386,000. The 4-week moving average dropped 750 lower to 386,750.

The Bloomberg Consumer Comfort Index rose to -36.1, the highest level in two months.

The Kansas City Fed manufacturing index rebounded 6 points to a reading of 9 in May.

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Dale Franks
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Economic Statistics for 27 Jun 12

The following statistics were released today on the state of the US economy:

Durable goods orders came in much better than expected, with an overall 1.1% increase in May. On a year-over-year basis, orders rose 4.6%. The increase was mainly the result of a big increase in aircraft orders. Ex-Transportation, orders rose 0.4% for the month, and 3.8% on a year-over-year basis.

The Mortgage Bankers’ Association reports mortgage applications fell -7.1%, with purchases down -1.0% and re-finance apps down -8.0%.

The National Association of Realtors reports that the Pending Home Sales Index rose 5.9 points to 101.1.

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Dale Franks
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Economic Statistics for 26 Jun 12

The following statistics were released today on the state of the US economy:

Consumer confidence fell 2.4 points in June to 62.0, the lowest reading of the year. Consumers are pessimistic about business conditions over the next 6 months, as well as about job availability and their incomes.

The S&P Case-Shiller home price index rose by 0.7% for June, on a seasonally adjusted basis. On a year-over-year basis, prices are still down -1.9%.

The State Street Investor Confidence Index rose 7.0 points to 93.5. Readings below 100 indicate a demand for safety.

The Richmond Fed Manufacturing Index fell to -3 in June from readings of 4 in May and 14 in April, indicating a steady decline in manufacturing.

In retail sales, Redbook’s same-store sales index shows only 2.3% year-on-year growth in the June 23 week. Meanwhile, ICSC-Goldman Store Sales rose by a sharp 2.0% for the week, but year-on-year growth fell to 2.7%, the lowest rate in 3 months.

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Dale Franks
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Economics Statistics for 25 Jun 12

The following statistics were released today on the state of the US economy:

New home sales came in at an annual rate of 369,000 in May, the best rate in more than 2 years, and well above analysts’ expectations.

The Chicago Fed national activity index fell to -0.45 in May from a revised 0.08 in April. Most production-related components declined, as did housing.

The Dallas Fed general business activity index rebounded to 5.8 in June from -5.1 in May, showing some rebound in manufacturing.

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