US: Bad, but Better.

Housing Market

First the worst news of the day, which is that the housing market is collapsing - as you would expect.  Housing starts fell 22.3% in March, the 4th largest monthly decline on record since 1959. Permits fell -6.8%. Starts and permits are highly volatile, but I think the plunge in starts is probably indicative of the situation, especially when you look at what homebuilders are saying. The National Association of Home Builders survey, which signals contraction below 50, took a dizzying tumble from a very optimistic 72 to a dismal 30; the -42 point decline handily beat the previous record of -10. There are three components of the survey, all of which fell record amounts, but the one which is the most eye-catching is the “Traffic of Perspective Buyers” (foot traffic) which fell from 56 to an outright morbid 13.  Nobody is looking at homes and that can only spell disaster in the coming months.  In addition, despite low rates, mortgages are now much more difficult to get as banks have tightened their lending standards.

Empire State (NY) & Philadelphia Manufacturing Survey

We don’t normally look at the Federal Reserves’ regional manufacturing reports since they can be rather volatile and often in disagreement. But there’s no disagreement this week between the Fed’s Empire State (NY) survey and the Philadelphia Fed survey – they’re both shocking, although shocking is the new norm, so they’re not unexpected either. The Empire State survey fell a record amount to a record low -78.2, and the Philly Fed survey fell by the second largest amount ever, to the lowest in almost 40 years.

But wait, there is truly good news in the surveys. The respondents still feel positive about the future! In both surveys, expectations for general conditions and for new orders are both positive – not hugely so, but still positive. Manufacturers are seeing through the currently disastrous conditions and appear to be expecting that same U-shaped recovery we are.

Jobless Claims

Weekly jobless claims came out this morning and again showed that a sky-high 5,245,000 Americans filed for unemployment benefits last week. That brings the total to 22,034,000 over the past four weeks. In theory that could drive the unemployment rate as high as 17% right now, but as more jobless claims come in over the next few weeks, the unemployment rate will rise even higher.

But, as we search for good news, we find… it’s the lowest number in three weeks. And it’s -20.7% less than last week.  It’s no guarantee that claims will decline again next week, but expectations are rising that new claims may have peaked.  It is a bit like saying “I’m driving 1,000 mph, which is way over the 60 mph speed limit, but it’s way less than the 1,200 mph I was doing last week.” It’s still way too fast, but it is slowing. Let’s take it as the silver lining while we can.

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