Reclaiming Common Sense

The Devil is in the Seasonal Adjustments


This week we saw the release of a few important reports regarding the economic environment. The data was mostly ignored due to the events that have been happening in and around Washington, D.C. The horrific assassination attempt on a group of Republican Congressmen preparing for an annual charity baseball game garnered a huge amount of attention, as it should have. The problem is that the media who often claims that they believe that Congress cannot multi-task proved that they can only function by focusing on one story at a time. A deadly London  fire. Check. The acquisition of Whole Foods by Amazon. Check. The assassination attempt on multiple Congressmen. Check. Check. and Check. Meanwhile we received a strong May Retail report that was reported as being weak, we received a fairly solid Consumer Price Index Report, excellent unemployment claims data, and improving new construction  data - the best since 2008. Did you hear about any of it? Oh, there was a JOLTS (Job Opening and Labor Turnover Survey) report and a Treasury Debt/Deficit report, too.


(June 15) One of the reports released this week, prior to hearing about the assassination attempts on members of Congress, was the May Retail (MARTS) report. This column has written numerous articles regarding the Retail Report - some sectors have recovered from the recession - some sectors have not recovered. There are a number of ways to examine the data - the non-seasonally adjusted data. One can look at how the data improves from month to month or from the same month twelve months ago. You can look at "rolling year" data - how much has been sold during the past 12 months. You can also examine the data in the cumulative - how much money did we spend across all sectors. "Best May Retail Report EVER" examined the non-seasonally adjusted data and found that we are on-track for our best Retail year ever. Retail Ice Age? No. Weakness at the malls, yes.


(June 15) Some of the data that is released during the course of any given week or month needs extra attention. The Jobs Report is more than just one number or two ("Jobs Created" and Unemployment.) The CPI (Consumer Price Index Report) is more than just the overall rate of inflation. Every item in the CPI shopping basket has its own seasonal factor. Every item has its own rate of inflation.  What is an "appropriate rate of inflation?"We had inflation "going off the chart" during January and February of this year. Inflation is the Bogeyman of the Federal Reserve. Someone is still "messing" with the Medical Cost numbers and Shelter is still surging.The article "Shelter Inflation and Reweighting CPI Reality " Goes into detail.This report was also released at 8:30 AM on the day of the assassination attempt.


(June 15) Thursday we saw the release of the Weekly Unemployment Claims data and Weekly Unemployment Claims report. We are at an unadjusted First Time Unemployment Claims Level for the first week of June lower than anything we have seen since June of 2000. We have roughly the same level of first time claims as we had during the final week of May....1972.... when we had 86 million fewer potential claimants.....let hat sink in....or read the article "Remarkable Weekly Unemployment Claims Data." A similar story is found in the continuing claims data.


(June 16) Real estate is one of the engines that propels the high flying US economic "airplane." Retail sales is another engine. Jobs are the fuel that keep the engines running.  Home sales spawn retail sales.There are two main segments to the real estate industry: Residential New Home Sales and Residential Existing Home Sales. The new home sales data is based upon new home construction data - If you build it then they can buy it. The new construction data has many components - the starts data, the under construction data, and the completions data are just three components. New Home starts were reported higher than May 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, and 2016. The same can be said for the number of units under construction and the number of new homes completed. Remember that the peak number of units sold, pre-recession, peaked during 2005 with new home sales prices peaking during 2006. The article "May New Construction Data: Recovery Continues" details how new construction is rebounding. It also clearly points out that there is a longer way to go before we return to the pre-recession levels of construction, and sales, and how we may not want that high a level of units available. The question that also needs to be answered is will excess new construction inventory relieve some pressure from the exiting home market where we are seeing a shortage of homes for sale?


Data is data. This column addresses the seasonally adjusted data and reports on the non-seasonally adjusted data. The press tends to have its narrative written prior to the release of the reports and the accompanying data.This column takes time to analyze the data. Data is king. The inflation data was good. The adjustments, not so much. The retail sales data was good. The revisions to the March and April data were solidly upward. We may be on track for our best retail sales year EVER. The unemployment claims data - either nearly the best or seriously incredible first-time and continuing claims data when you consider the number of people involved now as compared to the early 1970s. Best new construction starts, under construction, and completions data for the month of May since 2007, beating all three levels recorded during May 2008-2016. Are we tired of winning already? We live in reality - not a world seen through "gloom" coated lenses.


It's the economy.