The FHFA House Price Index (HPI) gained 0.2% in June (Q2) of 2019 and 4.8% year-over-year, slightly below the consensus forecasts. The initial levels for May and the year-over-year of 0.1% and 5.0%, respectively, were both revised up by 0.1%.
The forecasts ranged from a low of 0.2% to a high of 0.4%, with the consensus coming in at 0.3%.
Like the S&P CoreLogic Case-Shiller U.S. National Home Price Index (HPI) released earlier this morning, the FHFA House Price Index (HPI) shows a slower rate of growth for prices and signals a potential leveling off.
Production Index Hits the Highest Level in Nearly a Year
The Dallas Federal Reserve Texas Manufacturing Outlook Survey picked up steam in August, with the key production index hitting the highest level in nearly a year.
Indicator
Prior
Consensus Forecast
Forecast Range
Actual
Production Index
9.3
N/A
N/A
17.9
General Activity Index
-6.3
-3.0
-3.0 to -2.0
2.7
The production index — a key measure of state manufacturing conditions — surged 9 points to 17.9, its highest reading in nearly a year.
The general business activity index — which gauges perceptions of broader business conditions — improved 9 points to 2.7 and headed into positive territory for the first time in 4 months.
The company outlook index rose to 5.0 after 3 months of negative readings. However, the index measuring uncertainty regarding companies’ outlooks rose 9 points to 18.6, a reading well above average.
The employment index remained positive but fell 11 points to 5.5, a level closer to average and suggesting slower growth in hours worked. Eighteen percent (18%) of firms reported net hiring, while 12% net layoffs.
The hours worked index ticked down to 4.0. Yet, the wages and benefits index rose 7 points to 27.3, a solid and higher than average level.
The Texas Manufacturing Outlook Survey is the second dataset on Monday to suggest a pickup in growth in the sector. While the factory industry boomed in 2018, it slowed somewhat in the beginning of 2019.
The U.S. Census Bureau reported new orders for manufactured durable goods rose $5.0 billion or 2.1% to $250.4 billion in July, beating forecasts. Durable goods orders are now up for two consecutive months after a 1.8% gain in June.
Portrait of U.S. Supreme Court Justice Ruth Bader Ginsburg in 2016. (Photo: Supreme Court of the United States)
It was widely reported U.S. Supreme Court Justice Ruth Bader Ginsburg has been receiving radiation treatment for pancreatic cancer, obviously a serious condition deserving of serious media attention. Any decent person would — of course — put aside partisan politics, and wish the eminent jurist a speedy and uncomplicated recovery.
Such sentiments from the left are in short supply. In fact, their lack of basic human decency is horrific.
Witness the appalling statement from “comedian” Bill Maher regarding the death of David Koch from prostate cancer.
“I’m glad he’s dead,” the HBO host said Friday on an episode of his show, Real Time. “I hope the end was painful.”
Yesterday David Koch, who funded climate-science deniers for decades died of prostate cancer. Mourners have been asked that in lieu of flowers to just leave their car engines running. pic.twitter.com/YvBrDf6Pui
Bill Maher’s remarks were mirrored by equalling appalling sentiments from Marty Kelley — the fittingly childishly nom de plumed, “Doktor Zoom” — in a full article at the scurrilous Wonkette blog entitled, Yr Wonkette Says Only Good Things About The Dead. David Koch Is Dead. Good.
But we are all subject to mortality at any moment and, even more so, respecting an 86-year-old battling a potentially deadly illness.
If, unfortunately, Justice Ginsburg should succumb, the thinking among some Republicans is that this would open up another seat on the U.S. Supreme Court. It would shift the balance of the High Court further to the right, for decades. Rulings would firmly favor conservatism by a 6 to 3 margin.
This is essentially correct. But there could very well be a major political price to pay for it.
There is no doubt whatsoever many Republicans — unhappy with the choice of then-candidate Donald Trump — held their nose and voted for him to secure the U.S. Supreme Court. Such statements were made verbatim by the likes of former House Speaker John Boehner, R-Ohio, and conservative commentator Hugh Hewitt, to name just a few.
Since every vote counted in a close election decided by swing states, the ideological balance of power on the U.S. Supreme Court clearly was a deciding factor in President Trump’s election.
It could reasonably be argued that the bulk of the people who voted for President Trump with closed noses did so because of the Court. They would not have the incentive to do so again if President Trump places a new conservative justice before the next election.
It is quite possible conservatives who did not vote in 2012 and unexpectedly voted in huge numbers in 2016. will not vote in 2020 if the Court was already secure at 6 to 3.
There is a way out for the GOP and especially President Trump’s re-election chances. Ironically, it’s the “Biden rule.” Should Justice Ginsburg pass before the end of the year or early in 2020, the “Biden rule” becomes the escape route.
In 1992, then-Senate Judiciary Committee Chair Joe Biden said he would block President George H.W. Bush’s Supreme Court nominee because it was an election year. He argued the “American people should have a voice in the decision.” Senator Mitch McConnell subsequently cited this “Biden rule” to justify disallowing a vote on President Barack Obama’s late-term nominee, Merrick Garland.
If Justice Ginsburg passes before the end of the year, it would behove the Trump Administration to give as many months thought to a replacement as needed to run out the clock before the first of January 2020. Afterward, the double precedent of the Biden rule can be put in place with no wiggle room for Democratic hopefuls to complain.
It’s worth noting David Axelrod has already squealed about the country being “torn apart”. But President Trump will be looking to the voice of the people to assist the appointment process through the ballot box in November of 2020, as Mr. Biden so wished in 1992.
The upside would be that the nose-holders would have to once again hold their noses for perhaps an even more vital U.S> Supreme Court appointment. The prospect of a 6 to 3 majority deciding dearly-held principles would give meaning to President Trump’s message of “vote for me and I will deliver the court.”
It would be a significant get out the vote inventive and campaign message.
Admittedly, there are downsides.
President Trump might lose his bid for re-election and Democrats would appoint the next justice. But even if they win the presidency they might not gain a majority in the U.S. Senate. There is still a decent change Justice Ginsburg’s replacement would be more a moderate member of the liberal minority.
If Justice Ginsberg passes before the election — particularly after January — the Biden rule might once again come to haunt Democrats.
Manufacturing Shows Signs of Rebound After Slowdown in Early 2019
The U.S. Census Bureau reported new orders for manufactured durable goods rose $5.0 billion or 2.1% to $250.4 billion in July, beating forecasts. Durable goods orders are now up for two consecutive months after a 1.8% gain in June.
More on New Orders
The consensus forecast was looking for a solid gain of 1.2% for the month.
Indicator
Prior
Consensus Forecast
Forecast Range
Actual
New Orders – M/M ∆
2.0%
1.2%
-1.6% to 2.5%
2.1%
Ex-transportation – M/M ∆
1.2%
0.0%
-0.9% to 1.0%
-0.4%
Core capital goods – M/M ∆
1.9%
0.0%
-0.2% to 0.1%
0.4%
Excluding transportation, new orders decreased 0.4%. Excluding defense, new orders rose 1.4%. Transportation equipment, which have also been up for two consecutive months, fueled the gain rising $5.7 billion or 7.0% to $86.3 billion.
Shipments
Shipments of manufactured durable goods are down after two straight monthly gains, falling $2.9 billion or 1.1% to $254.0 billion. That comes after a 1.0% increase in June.
Transportation equipment, which is also down after two consecutive monthly gains, led the decrease falling $1.8 billion or 2.1% to $86.4 billion.
Unfilled Orders
Unfilled orders are up after three straightly months of declines, rising $0.7 billion or 0.1% to $1,161.6 billion. This follows a 0.6% decline in June. Leading the decrease was fabricated metal products after being up for two straight months, falling $0.4 billion or 0.4% to $86.5 billion.
Inventories
Inventories have been up twelve of the last thirteen months, and gained $1.5 billion, or 0.4% to $427.3 billion in July.
That follows a 0.3% increase in June. Transportation equipment, which have also been up twelve of the last thirteen months, led the gain, rising $1.4 billion or 1.0% to $141.1 billion.
Capital Goods
Nondefense new orders for capital goods gained $3.6 billion, or 5.0% to $75.8 billion in July. Shipments fell $2.3 billion, or 3.0% to $74.4 billion, while unfilled orders rose $1.4 billion or 0.2% to $693.6 billion.
Inventories gained $1.4 billion, or 0.7% to $190.5 billion. Defense new orders for capital goods soared $1.5 billion, or 14.4% to $11.8 billion. Shipments fell $0.3 billion or 2.3% to $12.6 billion, while unfilled orders declined $0.8 billion or 0.5% to $155.9 billion. Inventories gained $0.3 billion, or 1.3% to $24.0 billion.
June Revisions
New orders were unchanged at $493.8 billion for the month of June, while shipments were revised to $505.4 billion from $506.2 billion. Unfilled orders were revised to $1,161.0 billion from $1,160.2 billion and total inventories were revised to $695.4 billion from $695.6 billion.
The U.S.-G7 Trade in Goods Balance Generally Unfavorable to U.S.
Import, Export, Logistics concept – Map global partner connection of Container Cargo freight ship for Logistic Import Export background (Photo: AdobeStock/Elements of this image furnished by NASA)
International trade has taken centerstage at the Group of Seven, or G7 Summit in Biarritz, France. President Donald Trump is using the summit to build support for an alliance against China amid concerns of a tariff-driven trade war.
President Trump’s tariff strategy generally seeks to protect U.S. industry, and narrow U.S. trade deficits by increasing domestic exports. While free trade purists note tariffs are truly a tax on U.S. consumers, there are several ways trade deficits hurt the U.S. economy.
A trade deficit is ultimately financed with debt. In theory, the lending countries could decide to ask the U.S. to repay the debt. But national discourse largely focuses on competitiveness.
Relying on trading partners for goods over extended periods of time results in “hollowing out,” or the deterioration of the manufacturing sector. Remaining producers opt instead for low-cost facilities overseas. The nation suffers a loss of expertise and needed factories to make those products.
Worst case scenario, it can become a national security issue, as it would’ve been if the U.S. had no automotive industry during World War II.
Further, goods-producing sectors generally pay higher wages to working class, skills-focused households. That’s one of the reasons wages have been rising much faster under President Trump than his predecessor, Barack Obama.
As the dependency chart illustrating the trade in goods balance between G7 nations demonstrates, the U.S. has tremendous economic bargaining power. With the exception of the United Kingdom (UK), the U.S. trade in goods balance with the remaining G7 nations is negative.
U.S.-G7 Trade in Goods
Exports
Imports
Balance
Canada
148,554.3
158,143.0
-9,588.8
France
19,432.9
29,665.5
-10,232.6
Germany
30,376.5
62,267.6
-31,891.1
Italy
11,936.7
28,140.5
-16,203.9
Japan
36,843.8
72,886.0
-36,042.2
United Kingdom
34,118.5
30,997.1
3,121.3
President Trump campaigned on withdrawing the U.S. from the Obama-era Trans-Pacific Partnership (TPP) and the renegotiation of the Bush-Clinton-era North American Free Trade Agreement (NAFTA).
He argued the U.S. could use economic leverage to obtain lower tariffs on domestic goods by negotiating bilaterally, rather than multilaterally.
Almost immediately after inauguration, President Trump withdrew the U.S. from TPP. NAFTA has been renegotiated and could be replaced by the U.S. Mexico Canada Trade Agreement (USMCTA). The new deal requires congressional approval and is being held up largely by Democrats, though some “moderate” Republicans also oppose it.
Of the G7 nations, Canada is the largest recipient of U.S. exports. Year-to-date, the U.S. has exported $148.6 billion in goods to Canada, but imported $158.1 billion.
Japan is the second largest recipient of U.S. exports behind Canada. Year-to-date, the U.S. has exported $36.8 billion to Japan, though imported $72.9 billion.
On Sunday, President Trump announced a new U.S.-Japan trade deal, which Japanese Prime Minister Shinzō Abe called a “win-win” for both nations.
The trade deal would require Japan lowering tariffs on the U.S. to levels agreed upon in TPP, minus the very unpopular provisions and principles.
What Is the G7?
The Group of Seven (G7) is an international intergovernmental economic organization consisting of the seven largest advanced economies in the world, as defined by the International Monetary Fund (IMF).
The economic organization first met in 1975, and it holds an annual summit to discuss economic policies. Since 1987, the G7 Finance Ministers have met at least semi-annually, though up to four times a year.
Who’s In the G7?
It includes — in alphabetical order — Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. For one year before Canada joined in 1976, it was known as the Group of Six (G6).
From 1997 to 2014, the group was known as the Group of Eight (G8) and included the Russian Federation. The G7 condemned Russia for violating “the sovereignty and territorial integrity of Ukraine” on March 2, 2014. Later that month, the G7 member nations expelled Russia after the annexation of Crimea.
U.S.-Japan Trade Deal Includes Lowering Tariffs on U.S. to TPP Levels
Japanese Prime Minister Shinzo Abe shakes hands with U.S. President Donald Trump during the bilateral meeting at the G20 leaders summit in Hamburg, Germany July 8, 2017. (Photo: Reuters)
President Donald Trump announced what Japanese Prime Minister Shinzō Abe called a “win-win” U.S.-Japan trade deal at the G7 in Biarritz, France.
The deal includes Japan lowering tariffs on the U.S. to levels agreed upon in the Trans-Pacific Partnership (TPP), a very unpopular trade deal negotiated under Barack Obama.
President Trump campaigned on withdrawing the U.S. from the TPP, which he did almost immediately after inauguration. He promised to renegotiate trade deals and lower tariffs on the U.S. bilaterally, rather than multilaterally.
“We’ve been working on a deal with Japan for a very long time,” President Trump said at the G7. “It involves agricultural and it involves eCommerce. It’s billions and billions of dollars.”
“It’s a very big agreement and we’ve agreed in principle. Now we’re just papering it.”
Trade has taken centerstage at the G7 this year in France, which is hosted by French President Emmanuel Macron.
Separately, President Trump met with Canadian Prime Minister Justin Trudeau about the deal negotiated to replace the North American Free Trade Agreement (NAFTA). Approval of the deal is currently being held up by Democrats in the U.S. Congress.
Another key takeaway from the U.S.-Japan trade deal is that President Trump is building allies against China in the region. On Friday, China announced a new round of tariffs on U.S. goods.
Negotiations broke down just before a deal was reached amid Chinese hopes Joe Biden will defeat President Trump in 2020.
Of the G7 nations, Japan is the largest recipient of U.S. exports behind Canada. Year-to-date, the U.S. has exported $148.6 billion to Canada and $36.8 billion to Japan.
Year-Over-Year Still 4.3% Higher for New Residential Sales
The new residential sales report for July found new home sales in June were revised to a new expansion high of 728,000. Plainly, this is the largest gain for the volatile report since the Great Recession.
New home sales came in at a seasonally adjusted annual rate of 635,000 in July, or 12.8% (±16.2%) below June. The consensus forecast was looking for 645,000.
However, the new residential sales report is subject to frequent and often large revisions. The rate for June was initially reported at 646,000.
The rate for the month of July is still 4.3% (±14.0%) higher year-over-year, meaning above the July 2018 estimate of 609,000.
Sales Prices
The median sales price for new home sold in July was $312,800 and the average sales price was $388,000.
For Sale Inventory and Months’ Supply
The seasonally‐adjusted estimate of new homes for sale for July was 337,000. At the current sales rate, this represents a supply of 6.4 months.
Trend in Federal Arrests for Non-U.S. Citizens and U.S. Citizens Shifted Dramatically Over Two Decades
A graphic concept of barbed-wire, chain-linked fencing at the U.S. southern border with a sign reading, “Stop Illegal Immigration.” (Photo: AdobeStock/Thea Photography)
The Justice Department (DOJ) Bureau of Justice Statistics (BJS) reported nearly two-thirds of all federal arrests in 2018 were of non-U.S. citizens. The new crime statistics are a complete reversal from twenty years ago.
In 1998, 63% of all federal arrests were of U.S. citizens. Two decades later, 64% of all federal arrests were of non-U.S. citizens, despite allegedly representing only 7% of the total U.S. population.
From 1998 to 2018, country of origin of persons arrested by federal law enforcement shifted significantly. Mexican citizens’ share of federal arrests rose from 28% to 40%. The share of arrests for Central American countries rose from 1% to 20% during the same period, while U.S. citizens’ share of federal arrests fell from 63% to 36%.
The jump from 1,171 in 1998 to 39,858 in 2018 for Central Americans represents a 30-fold gain over two decades. Federal arrests of Mexican citizens (78,062) now exceeds the number for U.S. citizens (70,542).
By gender, 90% of suspects arrested for federal immigration crimes were male, while just 10% were female.
Federal arrests of non-U.S. citizens rose 234% from 1998 to 2018 juxtaposed to a gain of just 10% for U.S. citizens over the same period. The BJS said 95% of the increase in federal arrests was due to immigration crimes.
However, that by no means paints a clear picture.
The top five crimes for non-U.S. citizens were illegal reentry (72%), drugs (13%), fraud (4.5%), alien smuggling (4%), and misuse of visas (2%). The top five crimes for U.S. citizens were drugs (38%), weapons (21%), fraud (12%), public order (12%), and alien smuggling (6%).
Labor Market Continues to Defy Forecasts, Recession Fears
Initial jobless claims fell by 12,000 to a seasonally adjusted 209,000 for the week ending August 17, the Labor Department (DOL) reported. The labor market continues to defy the forecasts amid media-driven recession fears.
The consensus forecast was looking for a less sharp decline to just 216,000.
Prior
Revised
Consensus Forecast
Forecast Range
Actual
Initial Jobless Claims
220 K
221 K
216 K
205 K to 220 K
209 K
4-week Moving Average
213.75 K
214.00 K
NA
NA
214.50 K
Initial Jobless Claims – ∆
9 K
NA
NA
NA
-12 K
The 4-week moving average was 214,500, an increase of 500 from the previous week’s revised average. The previous week’s average was revised up by 250 from 213,750 to 214,000.
The advance seasonally adjusted insured unemployment rate remained unchanged at a very low 1.2% for the week ending August 10.
No state was triggered “on” the Extended Benefits program during the week ending August 3, a Labor Department analyst said.
The highest insured unemployment rates in the week ending August 3 were in New Jersey (2.4), Puerto Rico (2.4), Connecticut (2.1), Pennsylvania (2.0), California (1.9), Rhode Island (1.8), Alaska (1.6), Illinois (1.6), Massachusetts (1.6), New York (1.4), and the Virgin Islands (1.4).
The largest increases in initial claims for the week ending August 10 were in California (+5,363), New York (+608), Kentucky (+423), Pennsylvania (+411), and Connecticut (+401), while the largest decreases were in South Carolina (-374), Illinois (-337), Tennessee (-285), Alabama (-230), and North Carolina (-213).
The National Association of Realtors (NAR) said existing home sales gained 2.5% in July to a seasonally adjusted annual rate of 5.42 million, beating the consensus forecast. The forecasts ranged from 5.25 million to 5.5 million, with the consensus coming in at 5.385 million.
“Falling mortgage rates are improving housing affordability and nudging buyers into the market,” said Lawrence Yun, NAR’s chief economist. However, he added that the supply of affordable housing is severely low. “The shortage of lower-priced homes have markedly pushed up home prices.”
The median existing-home price for all housing types came in at $280,800 in July, a gain of 4.3% from July 2018 ($269,300). That price increase marks the 89th straight month of year-over-year gains.
Total housing inventory fell to 1.89 million in July from 1.92 million in June. Inventory is down 1.6% from 1.92 million one year ago. Unsold inventory is at a 4.2-month supply at the current sales pace, down from the 4.4 month-supply recorded last month and from the 4.3-month supply in July of 2018.
Properties typically remained on the market for 29 days, up from 27 days in June and from 27 days in July 2018. Fifty-one percent (51%) of homes sold were on the market for less than a month.
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