The US trade deficit widened a bit from an unexpectedly low July deficit to $-38.8 billion in August.
The PMI Manufacturing Index Flash fell -1.7 points to 51.1 in October.
Initial jobless claims fell 8,000 last week, to 350,000. The 4-week moving average rose 11,750 to 348,250, Continuing claims rose 35,000 to 2.847 million.
The Bloomberg Consumer Comfort Index fell -2 points to -36.1 last week.
The Fed’s balance sheet rose $25.4 billion last week, with total assets of $3.839 trillion. Reserve Bank credit increased $20.4 billion.
The Fed reports that M2 Money Supply increased by $28.8 billion last week.
The MBA reports that mortgage applications fell -0.6% last week, with purchases up 1.0% and refinancings down -1.0%.
Import and export prices both rose in September, by 0.2% and 0.3%, respectively. Both were down on a year-over year basis, with import prices down -1.0% and export prices down -1.6%.
The FHFA House Price Index rose 0.3% in August, putting it up 8.5% year-over-year.
The shutdown-delayed Employment Situation for September was another bad one. The notional unemployment rate fell a notional -0.1% to a notional 7.2%. That’s all faeries and unicorns. In actuality, only 148,000 net new jobs were created. Average Earnings rose 0.1%, and the average workweek was unchanged at 34.5 hours. An additional 136,000 people left the labor force during the month, helping the labor force participation rate to stay unchanged at a historical low of 63.2%. One slightly more positive note is that the civilian labor force grew by 73,000 persons, while 133,000 more persons were reported as employed in September as compared to August. When the numbers all shake out, nothing much has changed, as my estimate of the real rate of unemployment is 11.45% in September, compared to 11.46% in August.
ICSC-Goldman is reporting some retail sales improvement, with weekly sales growth at 1.4%, and year-over-year growth of 3.2%. Redbook, conversely, is reporting a weaker 2.9% year-over-year growth rate.
Foreign demand for US securities is again showing softness, with the 6th net outflow in 7 months of $-8.9 billion for August. Who is it that finances our deficits by buying US securities again? Oh, right. Foreigners.
Construction spending rose 0.6% in August, with a year-on-year increase of 7.1%. Gains were led by residential outlays, with both multi- and single-family sectors showing strength.
The Richmond Fed Manufacturing Index rose from 0 to 1 in October, as district activity remained flat.
The Housing Starts and Industrial Production reports were delayed due to the government shutdown.
Initial jobless claims fell 16,000 to 358,000. The 4-week average 11,500 to 336,500. Continuing claims fell 43,000 to 2.859 million.
The Bloomberg Consumer Comfort Index fell to a nearly seven-month low of -34.1 last week.
The general business conditions index of the Philadelphia Fed’s Business Outlook Survey fell 2.5 points to 19.8 in October.
The Fed reports that M2 Money Supply increased by $25.7billion last week.
The Fed’s balance sheet rose $54.9 billion last week, with total assets of $3.814 trillion. Reserve Bank credit increased $51.1 billion.
The Consumer Price Index and Treasury International Capital reports were delayed by the government shutdown.
The MBA reports that mortgage applications rose 0.3% last week, with purchases down -5.0% and refinancings up 3.0%.
The Housing Market Index fell 3 points to 55 in October.
The Fed’s Beige Book is still pointing at a slow recovery with economic growth continuing at a "modest to moderate" pace.
So, I got this email from the TEA Party Express people. It starts:
We are saddened to see today that the political establishment in Washington DC continues to do the only thing they seem to know – kick the proverbial can down the road. Instead of repealing, defunding or at least delaying the atrocious Obamacare, the political elites are content to let the "train wreck" happen at the expense of the American people.
Now, look, I’m really sympathetic to the goals of the TEA Party. If it was up to me, the executive departments of the Federal Government would consist of State, Defense, Treasury, Justice, and Interior. We’d have a balanced budget amendment. There would be no federal-level entitlements. Basically, the federal government’s primary responsibility would be sound money and talking to or killing foreigners as required.
But this is just a bit tendentious. It’s not “political elites” that gave us Obamacare, or who are preventing it from being overturned. It’s Democrats. The problem isn’t that Republicans have some secret admiration for Obamacare that prevents them from getting rid of it. The problem is that Republicans control 1/2 of 1/3 of the government. They have no political way to force the repeal of the ACA. They don’t control the senate—or even have a majority in it—and they don’t control the White House. Since we don’t have government by magical pixie dust, but by actual votes in actual legislative bodies and approval by the president, what possible path to ACA repeal was on the table?
The Tea Party and conservatives got short end of the stick on today’s announced budget "compromise." Enough Republicans in the Senate and the House are ready to give the Democrats everything they wanted and rendered the principled stand led by Ted Cruz, Mike Lee, and others a futile effort.
No. It was a futile effort before it began. The principled stands of some Republicans were irrelevant, because they had no power whatsoever to translate their stands into concrete action. Nor, apparently, were the Democrats in the Senate or White House particularly worried enough about negative public opinion to yield. SO, where was this going to go? Partially shutting down the government forever? Stopping Social Security and Medicare payments? I mean, what, precisely, was the end game that got to Obamacre repeal with the current senate and president? Hey, while we’re on the subject, what was the plan that the Republicans had—or that Ted Cruz had—prior to shutting down the government? I mean, other than, you know, hope.
To put it plain and simple: we don’t have enough conservatives in Congress to stop the irresponsible spending in Washington.
Yes. Exactly. Which everyone else knew early in November of 2012, just as they knew the next chance to repeal the ACA, barring its spectacular failure, would be after 2014 at the earliest.
We have seen 5 years of the Obama Administration and no successful negotiations have taken place except the sequester, which was Obama’s idea because he never thought it would actually happen!
So, by what sophistry of reason did anyone assume Obama would negotiate over Obamacare?
This is simply unacceptable. The Republicans have had 5 years to try and make some progress in remedying the financial ills that plague our nation’s future, and have made little to no progress.
I guess that makes you wish you’d had a massive GOTV effort in 2012, huh? But that didn’t happen, and millions of Republican voters stayed home. So we got a Democrat-controlled Senate, and Barack Obama went back to the White House.
The predictable result was that Obamacare was not—and with Democrats controlling the Senate and White House, will not—be repealed in the foreseeable future.
Are there some Republicans who could be described as insufficiently conservative? Yeah. Sure. So what? They aren’t the fundamental problem here. They aren’t the ones who voted for it in the first place, either.
If you want the ACA repealed there’s a simple way to do it: Win elections. Like Cory Booker just did in New Jersey, which sent another Democrat to the Senate.
The grand compromise over the budget and debt ceiling was scuttled by the House. So, the expected Republican surrender didn’t emerge yesterday or today. And everyone was so hopeful, too. Anyway, we now move closer to at least a technical default on US Securities, and, as a result, Fitch announced today that the US rating was being put on watch for a possible downgrade.
Chicago-based Fitch, the third-largest of the major debt-rating companies behind Standard & Poor’s and Moody’s Investors Service, put U.S. Treasury bonds on Rating Watch Negative, which is sometimes but not always a first step before a downgrade. Fitch said in a statement that it still thinks the debt ceiling will be raised in time to prevent a default.
Fitch said the government would have only limited capacity to make payments on the $16.7 trillion national debt after Treasury Department’s emergency measures run out Thursday.
Speaker Boehner did come up with a plan for some sort of House bill, but he abandoned it at the end of today, apparently not having the votes to pass it.
Last-minute protests from conservatives in the House created a day of delay and confusion in Congress’s efforts to avoid a U.S. debt default, as Republican leaders failed to craft a GOP budget proposal that could muster enough votes to pass.
In an embarrassing retreat for House Speaker John Boehner (R., Ohio), House leaders had to cancel plans to bring a GOP bill to the floor for a vote Tuesday night.
At this point, under Congressional rules, I don’t see how a debt deal can be struck that can pass Congress and be signed by the president before the Treasuries emergency actions on the debt run out on the 17th.
The markets are starting to get cautious about all this. There were 3- and 6-month T-Bill auctions today. They didn’t go especially well. The rate for the 3 month jumped 10 basis points, while the 6-month yield rose 9 basis points from last week. Last month’s 4-week auction was weak, as well.
Doom approaches! Or not.
Meanwhile, the Chinese government is calling for a de-Americanized world.
“The world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites,” the commentary said. “Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated.”
“The congressmen are behaving irresponsibly not only for other countries but also for” the United States’ “own creditors,” said Mei Xinyu at the Chinese Academy of International Trade and Economic Cooperation, which has ties to the Commerce Ministry. “They are gambling the U.S. future on their political-struggle interests.”
I don’t know what they’re complaining about. After all, we’re funding a great portion of their defense budget with the interest payments on the US bonds they own, so I don’t see why….oh. Wait. If we default, those interest payments stop. OK. I think I’m beginning to see what they’re so upset about. I imagine our messy democratic maneuverings are also a bit foreign and frustrating to a one-party dictatorship, too.
If only we had a dictatorial, one-party, state here, we could do these things so much more efficiently. Just like Tom Friedman always says.
I like the phrase, “political-struggle interests.” You gotta hand it to those Commies, boy. You just can’t beat ‘em for catchy political sloganeering. “The running dogs of the capitalist-imperialist forces” has always been a favorite of mine.
ICSC-Goldman reports a sharp 0.7% drop in sales for the week, and a weak 1.0% year-on-year sales rate. Redbook, conversely, is reporting a steady 2.3% year-on-year sales in crease.
Manufacturing is slowing in the New York Fed District, with the monthly manufacturing survey falling nearly 5 points to 1.52.
You tell me. Robert Samuelson:
The presumption of strong economic growth supported the spirit and organizational structures of postwar America.
Everyday life was transformed. Credit cards, home equity loans, 30-year mortgages, student loans and long-term auto loans (more than 2 years) became common. In 1955, household debt was 49 percent of Americans’ disposable income; by 2007, it was 137 percent. Government moved from the military-industrial complex to the welfare state. In 1955, defense spending was 62 percent of federal outlays, and spending on “human resources” (the welfare state) was 22 percent. By 2012, the figures were reversed; welfare was 66 percent, defense 19 percent. Medicare, Medicaid, food stamps, Pell grants and Social Security’s disability program are all postwar creations.
Slow economic growth now imperils this postwar order. Credit standards have tightened, and more Americans are leery of borrowing. Government spending — boosted by an aging population eligible for Social Security and Medicare — has outrun our willingness to be taxed. The mismatch is the basic cause of “structural” budget deficits and, by extension, today’s strife over the debt ceiling and the government “shutdown.”
You know, we keep saying this is “unsustainable”, yet we keep refusing to face the problem head on and do anything about it.
This little bit of political theater isn’t going to change that and we all know it. The last paragraph identifies the problem. What apparently isn’t understood, though, is government is not the solution. And big government simply makes the problem worse because it sucks down more and more of the GDP.
The solution is both painful and difficult. And, of course, no one wants to face that fact, certainly not any politician.
So the can gets kicked down the road – as you know it will before any of this ever begins. None of the politicians want to be “the ones” in power when all of this collapses.
For whatever reason, after WWII, we decided to change the purpose of government from “night watchman” to “Santa Claus”. Maybe it was the horror of war. Maybe it was the huge surge in post-war prosperity, but like the story of the goose that laid the golden eggs, we’re about to kill the goose.
So what does that mean?
As economist Stephen D. King writes in his book “When the Money Runs Out: The End of Western Affluence”:
“Our societies are not geared for a world of very low growth. Our attachment to the Enlightenment idea of ongoing progress — a reflection of persistent postwar economic success — has left us with little knowledge or understanding of worlds in which rising prosperity is no longer guaranteed.”
And that fact alone makes any recovery from this mess even less likely. We’ve been able to stumble along and put off the inevitable because we have managed to have “persistent postwar economic success”. But if you look at economic projections for the future, they don’t show the historical growth that America has enjoyed since the ’50s. They show European type “growth”. They show slow growth as the “new normal”. Why?
Lindsey attributes U.S. economic growth to four factors: (a) greater labor-force participation, mainly by women; (b) better-educated workers, as reflected in increased high-school and college graduation rates; (c) more invested capital per worker (that’s machines and computers); and (d) technological and organizational innovation. The trouble, he writes, is that “all growth components have fallen off simultaneously.”
As it seems now, Greece is our future. Nothing, politically, is going to be done about it, despite the current political theater. Neither the politicians nor the citizens want to face reality. And as it is shaping up, it isn’t a matter of “if”, but “when” it all folds in on itself like a wet cardboard box.