Morning Report: Number of job openings equals number of unemployed 5/9/18

Vital Statistics:

Last Change
S&P futures 2680 9.75
Eurostoxx index 390.81 0.81
Oil (WTI) 70.9 1.84
10 Year Government Bond Yield 3.00%
30 Year fixed rate mortgage 4.63%

Stocks are higher this morning after the US pulled out of the Iran deal. Bonds and MBS are down, with the 10 year trading over 3% again.

The Iran deal was never ratified by the Senate, so it never reached the level of “treaty.” It was basically a deal with the Obama Admin and Iran.

Oil had a volatile day yesterday and is rallying again. China is the biggest customer of Iranian oil, so in theory it shouldn’t affect the US all that much, but WTI will follow Brent on the relative value trade. Note that a sustained oil price over $70 is estimated to be about a 0.7% drag on GDP growth.

Inflation at the wholesale level moderated last month, with the producer price index rising 0.1% MOM and 2.6% YOY. Ex-food and energy, the index rose 0.1% / 2.3% and the core rate rose 0.1% / 2.5%.

Job openings hit 6.6 million last month, which is a new record for the index, which goes back to early 2000. The quits rate increased to 2.3%. The quits rate has been stuck in a 2.2% – 2.3% range for what seems like forever. Fun fact: The number of job openings has hit the number of unemployed for the first time.

The labor shortage is particularly acute in construction, which is part of the reason why housing starts have been short of demand. This shortage has extended to home remodeling as well.

While everyone seems to focus on the CPI / PPI / PCE inflation measures and imagines that a single point estimate accurately reflects the cost of living, it doesn’t. First the relative weights of different goods and services differ. For example, PCE and CPI will weight healthcare differently, as well as owner-equivalent rent. The St. Louis Fed notes that the differences in inflation between regions of the US can be substantial as well.

Mortgage Applications fell 0.4% last week as purchases fell 0.2% and refis fell 1%. Tough times for the smaller originators.

Despite the slim pickings out there, mortgage credit has contracted a bit this year. Overall, it was a mixed bag, as government credit contracted on less streamlines while conventional increased as jumbos rose. Government credit has been tightening since early 2017, when the government began to crack down on serial VA IRRRL shops.

How have things changed at the CFPB or the (BCFP) under Mick Mulvaney? Despite the ululating in the press, not that much. One of the panelists warned industry lawyers not to advise their clients that the CFPB is relaxing its enforcement activities. So far, the biggest change we have seen is that the name has been changed back to the Bureau of Consumer Financial Protection, which was the way it was written into Dodd-Frank.

Fair Housing groups are suing HUD over Ben Carson’s delay of the Obama-era re-interpretation of AFFH – affirmatively furthering fair housing. Their complaint is that HUD didn’t provide advance notice before suspending the rule,. which would have required communities to “examine and address barriers to racial integration and to draft plans to desegregate their communities.” HUD delayed the compliance deadline until 2024. In practice, this means that HUD wants communities to change or eliminate their zoning ordinances to include more multi-family housing in wealthier neighborhoods.

45 Responses

  1. Interesting:

    “When banks abandoned American Samoa, the islands found a solution nobody had used in a century
    by Andrew Van Dam May 9 at 7:00 AM

    The vast majority of public-bank campaigns have yet to yield results, but public banking remains one of the few practical options for chartering a bank outside the watchful eye of the FDIC.”

    https://www.washingtonpost.com/news/wonk/wp/2018/05/09/when-banks-abandoned-american-samoa-the-islands-found-a-century-old-solution-that-could-be-the-future-of-finance/

    Like

  2. FYI Brent:

    “California Is Set to Require Solar Power for New Homes

    By IVAN PENN

    The state mandate, to take effect in 2020, would be the first in the country and is expected to add $8,000 to $12,000 to the cost of a house.”

    Like

    • Someone pointed out that if you remove the word “white” the statement goes from racist to misogynist.

      Like

      • I suspect the hierarchy of victimhood may ultimately be self defeating as those at the pinnacle manage to alienate everyone below them.

        Like

        • She keeps talking about “brown and black women” vs “WW”. How long until black women start whining about how tough they have it relative to brown women? (In fact I’ll wager it is already happening somewhere, we just aren’t allowed to hear about it as white people.)

          Like

    • McWing:

      Was this not already known by everybody?

      Man, I am going to have fun back in the UK reading the Guardian every day.

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  3. Fun fact: The number of job openings has hit the number of unemployed for the first time.

    And with this news, Bernie Sanders proposes make-work for all who want, funded by taxpayers or by deficits and managed by the federal government.

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  4. The Mormons will no longer bankroll the Boy Scouts

    https://www.cnn.com/2018/05/09/us/mormon-church-boy-scouts-cut-ties/index.html

    I’ll bet the left’s MO the entire time was to cripple the organization. Mission Accomplished.

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  5. Juicebox.

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  6. The Resistance has jumped the shark

    https://resistancehole.clickhole.com/

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  7. Dude’s channelin me.

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    • My solution was always to give him a legitimate trial, and if he’s acquitted, he’s returned to where he was picked up, and given a 30 second head start (to be sporting) before the drone strike.

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      • I get the sentiment but it’s a lie. If the goal is KSM’s death under all circumstances then any trial is a show trial if an acquittal is merely a minor impediment to the desired outcome. It deligitimizes our justice system more than just putting a bullet in the back of their head.

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  8. Assume you are Putin and that you want to see the EU, NATO, and the relationship of the USA and western Europe in disarray. I think you are drinking a toast to DJT for pulling out of the Iran accord.

    I think it is the outsized influence of Kushner and his Orthodox Jewish supporters of Netenyahu’s Israeli view of Iran that drives DJT’s decision to walk out of a seven party deal, although it might just be DJT’s notion that the deal ties America’s hands in some way; who knows. I don’t think DJT did this so that Putin could gloat, in any case. But I’ll bet Putin is lovin’ it.

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    • Mark:

      DJT’s decision to walk out of a seven party deal…

      The US was never a party to this deal.

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    • Don’t forget Saudi influence. But it’s beyond that. It’s the neo-cons pushing back against the actual principles for the deal from Obama.

      This is worth a reread, especially this section:

      “The idea that there was a new reality in Iran was politically useful to the Obama administration. By obtaining broad public currency for the thought that there was a significant split in the regime, and that the administration was reaching out to moderate-minded Iranians who wanted peaceful relations with their neighbors and with America, Obama was able to evade what might have otherwise been a divisive but clarifying debate over the actual policy choices that his administration was making. By eliminating the fuss about Iran’s nuclear program, the administration hoped to eliminate a source of structural tension between the two countries, which would create the space for America to disentangle itself from its established system of alliances with countries like Saudi Arabia, Egypt, Israel and Turkey. With one bold move, the administration would effectively begin the process of a large-scale disengagement from the Middle East.”

      https://www.nytimes.com/2016/05/08/magazine/the-aspiring-novelist-who-became-obamas-foreign-policy-guru.html

      Also this is probably one of the better arguments for withdrawing that I’ve seen:

      https://www.vox.com/world/2018/5/8/17326650/iran-nuclear-deal-withdraw-trump-speech-goldberg-interview

      On balance, I still think it was a mistake to withdraw at this point absent a new provocation from Iran because the Europeans and the rest aren’t going to side with the US and Iran has already received most of the benefits up front, but I also don’t ascribe it to Trump acting in a fit of pique. It’s John Bolton, et.al. and their long standing policy views in ascendance.

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      • I think it was necessary to withdraw so as not to legitimize the unconstitutional manner in which the agreement was foisted on the nation. The president simply does not have the authority to enact treaties without Congressional ratification, and foreign powers should not be allowed to think that this reality can be readily ignored simply through the creative use of language, calling a treaty something other than what it is.

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        • i’;m with Scott on this one.
          the idea what you can cut a deal with a foreign government on NUCLEAR WEAPONS and have it not be a treaty is just ridiculous. and that the Senate might not pass it isn’t a good answer for ignoring the obligation.

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        • True, but the better way politically to do that would have been for Trump to submit it for ratification and have it voted down.

          I think George W. Bush should have done the same thing with Kyoto.

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        • jnc:

          True, but the better way politically to do that would have been for Trump to submit it for ratification and have it voted down.

          I can imagine some potential political benefits to such a move, but I can also imagine political disadvantages. For one, the media and the disingenuous left would forever have portrayed such a move as Trump’s endorsement of the deal.

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        • Also from the piece:

          “Yet Rhodes bridled at the suggestion that there has been anything deceptive about the way that the agreement itself was sold. “Look, with Iran, in a weird way, these are state-to-state issues. They’re agreements between governments. Yes, I would prefer that it turns out that Rouhani and Zarif” — Mohammad Javad Zarif, Iran’s foreign minister — “are real reformers who are going to be steering this country into the direction that I believe it can go in, because their public is educated and, in some respects, pro-American. But we are not betting on that.””

          But in the end, it wasn’t a state-to-state agreement. That’s a treaty. It was an agreement from the Obama administration.

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        • “have portrayed such a move as Trump’s endorsement of the deal.”

          I’m pretty sure he could make it clear where he stood via Twitter.

          And the benefits of Trump demonstrating by actions more respect for the Constitution and separation of powers than the constitutional lawyer who was his predecessor would have been worth it.

          The sheer amount of cognitive dissonance on display from the pundits would be a joy to watch.

          The other benefit is it doesn’t let the Senate get away with failing to stop the vote to disapprove BS that they did. Obama wasn’t the only one ignoring the ratification requirements. The Senate was in on it too.

          https://www.npr.org/sections/itsallpolitics/2015/09/02/436647276/minority-rules-capitol-hill-vote-tactics-displayed-in-iran-deal

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        • And the benefits of Trump demonstrating by actions more respect for the Constitution and separation of powers than the constitutional lawyer who was his predecessor would have been worth it.

          Exactly my point, but better and more completely stated.

          Like

        • jnc:

          The other benefit is it doesn’t let the Senate get away with failing to stop the vote to disapprove BS that they did. Obama wasn’t the only one ignoring the ratification requirements.

          That is a good point.

          Like

  9. There is no doubt that it was for American law purposes a Sole Executive Agreement and not binding on a subsequent Administration, or perhaps even on the Admin that agreed in the first instance. And these are all suspect, of course, but they are not new.

    Congress tried to curtail them but failed when Ike said he needed the authority. The VN accord was signed without a treaty or even a congressional vote. I think they happen, and until either the Supremes or Congress act to curtail them they will continue to happen.

    Presidents all claim inherent power from being in charge of FP and the military, of course.

    So I only agree that Scott has a good inferential point, not that it is conclusive.

    And I think everything JNC alluded to is germane, as well. I don’t agree that Iran had to be a Treaty because it was about nukes, SOFAs are often about nukes too. But I agree that because it was not a Treaty it could be walked away from by the President.

    I think that a good path politically for DJT would have been to take America’s participation in the Iran Agreement to the Senate with a recommendation to vote it down. It never would have gained a 2/3 approval vote. Then DJT would have cover on his decision that showed respect for the process at least as much as his unilateral action, but it would also provide domestic political cover.

    I have no problem with the mechanics or procedure of the move. I simply think it does more to harm the western alliance than it does to harm Iran, and that Putin must love it.

    Like

    • Why is Putin’s love or hate of an American policy relavent?

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      • Putin’s joy would be relevant as a marker of failed American policy in most instances, as he perceives his interests and Russian interests to be at odds with American interests.

        Most, but not all.

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    • Mark:

      And these are all suspect, of course, but they are not new.

      This is why even minor and innocuous abuses of power need to be opposed and repudiated at all costs, even if they seem necessary at the time. Such minor abuses will inevitably be cited as precedent in order to wave away much more significant corruption of the Constitution as just par for the course, nothing new to see here, even when the ante has been upped considerably.

      I imagine that if/when Trump pushes the envelope, attitudes won’t be quite so sanguine as they seem to be when Obama does so.

      The VN accord was signed without a treaty or even a congressional vote.

      Certainly it is within the war powers of the President to sign a ceasefire agreement, or to agree to withdraw forces from a particular war zone, without Congressional approval. But what else did Nixon commit the US to in those accords? Did he agree to cease enforcing economic sanctions duly imposed by Congressional statue?

      Like

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