Morning Report – Productivity Falls 5/6/15

Stocks are higher this morning after yesterday’s bloodbath. Bonds and MBS are flat

The ADP Employment Change index is forecasting a weak employment report this Friday. They report shows 169,000 jobs were created in April, which was lower than the 200,000 estimate. The Street is forecasting an increase of 230,000 for Friday. This is the weakest report in over a year, and you can see the marked slowdown beginning this year. If the early weakness was just weather-related, then you should see some sort of rebound. You aren’t.

Some more disappointing data this morning – productivity fell 1.9% in the first quarter after falling 2.1% in the fourth quarter. Output fell .2% while compensation increased 6.2%. Unit Labor Costs rose 5%. Lower productivity has been driven by a combination of a stronger labor market and weak GDP growth, so it isn’t necessarily a bad thing, at least in the short term. It means that we could still see improvement in the labor market despite weak economic growth.

Mortgage Applications fell 4.6% last week as purchases rose .8% and refis fell 8.3%. Bonds got slammed last week, so that isn’t a surprise. The 30 year fixed rate mortgage rate rose to 3.93% from 3.85%. Refis as a percentage of loans fell to 52.5%.

Foreclosures fell to 2.22%, according to the MBA. Delinquencies fell to 5.54%.

As the rhetoric between Greek Prime Minister Alexis Tsipras and the EU gets more and more heated, the ECB is wrestling with how much of a haircut to demand on Greek collateral. The machinations between the Greeks and the EU are driving Euro yields, which are driving US yields. “The fundamentals have not changed, but bond markets have,” said Christoph Rieger, the Frankfurt-based head of fixed income strategy at Commerzbank AG. “The European bond markets are broken, hampered by low yields, high regulation and central bank intervention. Markets will have to get used to these erratic swings.” The European situation is why so many bond strategists got it so wrong in the US over the past year and explains why bonds are selling off in the US despite some weaker economic data.

Home Prices rose 5.9% annually, according to CoreLogic. A combination of tight inventory, low mortgage rates, and improving confidence is the culprit. Of course we need wage growth to make this actually sustainable, and it looks like we could be seeing the start of wage growth, at least according to the Employment Cost Index.

35 Responses

  1. Heh. Frist

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  2. OT: Bernie Sanders isn’t all bad.

    “Bernie Sanders, Gun Nut
    He supported the most reprehensible pro-gun legislation in recent memory.
    By Mark Joseph Stern ”

    http://www.slate.com/articles/news_and_politics/jurisprudence/2015/05/bernie_sanders_on_guns_vermont_independent_voted_against_gun_control_for.html

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  3. Churn em out.

    “Lucasfilm: New ‘Indiana Jones’ Film in the Works
    “We haven’t started working on a script yet, but we are talking about it,” Lucasfilm president Kathleen Kennedy reveals

    By Daniel Kreps May 6, 2015″

    http://www.rollingstone.com/movies/news/lucasfilm-new-indiana-jones-film-in-the-works-20150506

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  4. I think Ezra Klein accidentally makes the conservative case for the decline of marriage and family values as a cause of poverty in this piece:

    http://www.vox.com/2015/5/6/8558835/baltimore-social-mobility-race

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    • This is a hilarious example of confusion and doublespeak…Smith College to admit transgender “women” (scare quotes mine).

      http://www.cnn.com/2015/05/04/living/smith-college-transgender-women-feat/

      In yet another sign of evolving attitudes toward gender identity, venerable Smith College will begin admitting transgender women.

      Or, in other words, it will be admitting men.

      Its board of trustees voted Saturday to clarify Smith’s admission policy, said college President Kathleen McCartney in an announcement on Smith’s website. The new policy will pertain to students applying in fall 2015 and thereafter who identify as women, even if they were born male.

      “The board’s decision affirms Smith’s unwavering mission and identity as a women’s college, our commitment to representing the diversity of women’s lived experiences, and the college’s exceptional role in the advancement of women worldwide,” said the announcement by McCartney and board of trustees chair Elizabeth Mugar Eveillard.

      Students who were born female but who now identify as male are not eligible for admission, the college said.

      So, then, apparently that “commitment” isn’t as “unwavering” as advertised.

      Smith had faced criticism in 2013 when the college refused to consider an application from trans student Calliope Wong because she was not legally recognized as female in her home state of Connecticut.

      After a petition gathered 4,000 signatures supporting Wong’s application, Smith appointed a panel to review its admission policy. Wong, who has been outspoken in urging Smith to change its admissions policy, is now a student at the University of Connecticut.

      McCartney said she is establishing a working group to help transgender and other students address campus matters such as rooming and participation in sports to ensure “a healthy, welcoming environment for all.”

      And by “a healthy, welcoming environment for all” what Smith really means is “an environment in which neither mentally healthy men nor mentally confused women are welcome”.

      Smith’s new policy was hailed by lesbian, gay, bisexual and transgender advocates.

      “No person should be denied an education simply because of who they are,” said GLAAD President and CEO Sarah Kate Ellis.

      Don’t single sex schools by definition “deny” an education to whole classes of people simply because of who they are?

      “By opening its doors to transgender women, Smith College has joined a growing number of educational institutions that respect and afford equal opportunity to all women.”

      And by “all women” they mean some women. And some men, naturally.

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      • I think the board at Smith should wrestle with the dilemma of whether to admit high school dropouts who self-identify as geniuses.

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      • What do these TG’s look like? If they have reconstructed female anatomy then there should be no problem. If they are going both ways then a big problem.

        Or can we assume that 18YOs haven’t yet had the required and expensive surgery to be anatomically correct?

        Perhaps Smith could endow gender transition surgery for its so inclined admittees.

        Inquiring Minds Want to Know.

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        • Mark:

          What do these TG’s look like? If they have reconstructed female anatomy then there should be no problem. If they are going both ways then a big problem.

          They have not been surgically altered to look like women. From the story about the man whose rejected application to Smith on the grounds that he was not legally recognized as a women precipitated a protest and the eventual change in Smith policy:

          While Wong told the Keystone Student Voice that she has identified as female throughout her adolescence, her FAFSA (Free Application for Federal Student Aid) identifies Wong as male. To be recognized as female in Connecticut, Wong would have to undergo sexual confirmation surgery, a costly and complicated procedure for a teenager.

          http://www.advocate.com/society/education/2013/03/20/womens-college-returns-transgender-students-application

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    • jnc:

      I think Ezra Klein accidentally makes the conservative case for the decline of marriage and family values as a cause of poverty in this piece:

      That is an interesting take. But I thought this was curious:

      At the same time, due to their income composition, demographics, location, and so on, black neighborhoods had a lot more crime than white neighborhoods. And so, even putting aside any issues of racially biased policing, they were policed more intensely.

      If he is comparing neighborhoods with different income composition and demographics (I wonder what that means), then he needs to control for that, which he doesn’t seem to have done.

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  5. I think they’re called “journalists.”

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  6. Brent, isn’t it true that productivity per worker tends to decline as employment rises and tends to increase as it contracts?

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  7. I don’t see what your issue is with Smith admitting transgender women (but not transgender men), Scott.

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    • Mich:

      I don’t see what your issue is with Smith admitting transgender women (but not transgender men), Scott.

      I sincerely don’t care what Smith does or who it admits. Really. I just find their politically correct linguistic attempts to defy reality to be amusing.

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      • Does Smith have a policy for transethnic applicants? Would it apply its (surely existing) affirmative action policies to a white women who identifies as black?

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  8. Do you just have to say you’re a chick or is there more involved? Like, do you have to be emotional and moody and stuff?

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  9. “Brent, isn’t it true that productivity per worker tends to decline as employment rises and tends to increase as it contracts?”

    Mark, that is generally true, however I would add that business capital expenditures play a big role too. You saw big productivity increases in the mid / late 90s as the PC went from being a glorified typewriter to an indispensable business tool on everyone’s desk. Employment grew big during that time as well, obviously.

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  10. I could see some straight dude claiming he is transgender to get into Smith and then cleaning up on all the lonely women there.

    Couldn’t he say in his heart of hearts he is a lesbian? That oughta fly, right?

    I know someone who was the only straight guy at Fashion Institute of Technology. He did extraordinarily well.

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  11. New York Times Editorial page can go fuck itself.

    http://www.nytimes.com/2015/05/07/opinion/free-speech-vs-hate-speech.html

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    • jnc:

      New York Times Editorial page can go fuck itself.

      Perfectly stated. A disgusting excuse of a newspaper.

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  12. It’s coming J, anything goes speech is over, if it ever really existed.

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  13. Couldn’t he say in his heart of hearts he is a lesbian?

    I’ve known a couple of men who have been using this strategy for over 20 years. 🙂

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  14. I can recall being as depressed about a political situation than over the reaction to the Garland shooting. To cast aside one of our fundamental principles over fear or a misplaced desire to appease those who don’t even value free speech or any other of our rights is just awful.

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    • A very interesting argument that religious institutions are tax exempt not by the grace of legislative privilege, but rather by constitutional right.

      The argument we must make is rather simple. Take the Religion Clauses of the First Amendment: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof,” and then take this passage from McCullough v. Maryland: “All subjects over which the sovereign power of a State extends are objects of taxation, but those over which it does not extend are, upon the soundest principles, exempt from taxation. This proposition may almost be pronounced self-evident.”

      That government may make no law establishing religion or prohibiting the free exercise thereof is a clear statement that the power of government does not extend over the subject of religion. Therefore, religious institutions are exempt from taxation, not by tax code, but by self-evident, sound principles. That’s the simple summary. In the details, the argument gets more complicated. I will introduce a few of the major issues and provide a basic explainer about how we got here.

      http://thefederalist.com/2015/05/07/religious-nonprofits-plan-now-for-tax-exemption-battles/

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    • nova:

      To cast aside one of our fundamental principles over fear or a misplaced desire to appease those who don’t even value free speech or any other of our rights is just awful.

      I don’t think that the casting aside of principles by the NYT (and others on the left) over Garland should be all that surprising. We have seen over and over, on subject after subject, that the left really and truly does not accept or believe in fundamental principles. As an ideology it is entirely preference and results oriented. The constitution is not viewed by the left as embodying discernable principles to be applied on an objective basis to all situations. It is instead merely a tool to be used when convenient, and ignored when it stands as an impediment to their desires. Any professions of fealty to the constitution are nothing more than window dressing.

      The left has been indicating for years that it really and sincerely does not care about the constitution or the principles it embodies. Its legal community has explicitly adopted a legal philosophy that unmoors the constitution from any solid foundation in objective meaning. On occasion there have even been those who have come right out and said it should be scrapped.

      Isn’t it time we actually started to accept what the left has been telling us, both subtly and not so subtly, for nearly a century?

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  15. The key point for them is that the terrorists are the real victims.

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    • jnc:

      The key point for them is that the terrorists are the real victims.

      Yes, but the mystery to me is why they view them as victims.

      When Christians are offended by a New York museum showing Andres Serrano’s Piss Christ or Chris Ofili’s dung and pornography adorned The Virgin Mary, the NYT doesn’t view them as victims. Had a group of enraged Christians tried to shoot Serrano or Ofili, it is absurd to think the NYT would have written a similar op-ed qualifying their objection to the violence with a “but” condemnation of the artist. Who believes that the NYT would take the producers of The Book of Mormon to task should an offended Mormon show up at the Eugene O’Neill Theater with an assault rifle ready to take out the cast? The NYT is so concerned with the sensibilities of Catholics that they actually advocate to have the government force Catholics to do that which offends them.

      So what makes offended Muslims “victims” where offended Catholics or Mormons are not?

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  16. Is it that or is it just pure kneejerkism to whatever the Right advocates?

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  17. it’s probably both. i can’t agree with those idiots ever and this is our fault. and it’s bullshit.

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  18. If they’re Republicans.

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  19. race and class. mostly class. even though if you can’t walk around the high end Tyson’s Galleria without tripping over a burka.

    Like

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