Morning Report: Small Business Sentiment near a 45 year high 6/12/18

Vital Statistics:

Last Change
S&P futures 2789 2.25
Eurostoxx index 387.87 -0.07
Oil (WTI) 66.04 -0.06
10 Year Government Bond Yield 2.98%
30 Year fixed rate mortgage 4.59%

Stocks are higher this morning on reports of an agreement with North Korea. Bonds and MBS are down.

The FOMC meeting begins today. The Fed Funds futures are handicapping a 91% chance of a rate hike tomorrow.

Trump and Kim signed an agreement to denuclearize the Korean Peninsula. There is no timetable, but not much in the way of concrete agreements, however Trump did pledge to end military exercises with South Korea.

Inflation at the consumer level remains under control, as the Consumer Price Index rose 0.2% MOM / 2.8% YOY. The core rate rose 0.2% MOM / 2.2% YOY. These numbers were all in line with street estimates. Aside from energy, healthcare costs (hospital, Rx) drove the increase.

Small business optimism remains strong, as the NFIB index hit its second highest level in its 45 year history. Compensation increases hit a 45 year high as a net 35% of small businesses increased wages. 58% of employers reported openings, but half couldn’t find qualified applicants. I will say this again, I suspect the biggest culprit in the “labor shortage” is the plethora of application tracking systems which pre-screen job applications. They may have been a help during the days of high unemployment when finding the right employee was like finding a needle in a haystack. Nowadays, they the computer systems are probably screening out potential fits before anyone gets to see the resume. There are all sorts of articles about how these systems have to be gamed, and most people probably don’t.

The strong economy and good home price appreciation are contributing to a drop in delinquencies, according to CoreLogic. 30 day DQs dropped by 10 basis points to 4.3% in March. The foreclosure rate fell from 0.8% to 0.6%. In the first quarter, the typical homeowner saw a $16,300 increase in home equity.

Declining margins has lenders bearish, according to the latest Fannie Mae lender sentiment survey. “Lenders remain bearish this quarter as they continue to face headwinds from rising mortgage rates, tight supply, and strong home price appreciation, which have drastically reduced refinance activity and restrained home purchase affordability,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “These factors have combined to squeeze mortgage origination volumes and have increased competitive pressures. Increased competitiveness will likely persist as a top driver of lenders’ mortgage business strategy. We expect this will prompt businesses to turn to cost-cutting as a means of managing their bottom lines, with payroll reduction likely to assume a more prominent role in future belt-tightening efforts.”

15 Responses

  1. Heh. Alito dispatches with one of the Wise Latina’s typically politicized opinions with brutal efficiency.

    JUSTICE SOTOMAYOR’s dissent says nothing about what is relevant in this case.

    Click to access 16-980_f2q3.pdf


    • Haven’t read the opinions, but I had read the briefs months ago and looked at the relevant statutes. I recall thinking this was the epitome of the close case. Statutes could be read to support either decision, and there was no real constitutional issue, just one of statutory interpretation. One of those cases Scalia and Stevens would have piled on all the law school rules of construction.

      The Libertarian Party of Ohio had a unique and interesting take in supporting the more open voting view that lost. Its amicus brief suggested that most of the time the two parties didn’t deserve a vote, so registered voters shouldn’t be punished for exercising their right not to vote.

      5-4 not a surprise here. And not, IMHO, a big deal had it been decided in either direction, because these rather confusing statutes are going to change again, predictably, and would have no matter what the judgment in this case. Meanwhile, both major parties will conduct more frequent voter registration drives.


      • Mark:

        Statutes could be read to support either decision…

        I don’t see how. Even if we expand the meaning of the relevant clause beyond the plain meaning of the words (as the dissenters did), one is still required to read inconsistency into the law in order to agree with the dissenters. That is, the dissenters read one clause to prohibit what was explicitly allowed in a different clause. My understanding is that standard canons of statutory construction hold that if a statute can be understood in a way so as to be internally consistent, that is the construction that must be given to it. The dissenters simply chose not to do so.

        5-4 not a surprise here.

        Given that there are 4 judges on the court that rule based on their politics rather than the law, and they all share the same politics, I don’t find 5-4 decisions ever surprising in cases that involve politically contentious issues like voting rights.

        …because these rather confusing statutes…

        I genuinely do not understand what is confusing about the statutes. It seems pretty straight forward. It 1) requires states to make efforts to keep registered voter rolls up to date, 2) prohibits states from purging voters from the rolls based “solely” on a failure to vote, and 3) requires states to send notice/change of address cards to anyone who might be purged. If the voter both fails to return the card and fails to vote at any point in the next 2 years, the statute allows the state to purge the voter.

        What is confusing?


        • The short take:

          The NVRA specifies that registrants may not be
          removed from the list of eligible voters except in five specific circumstances:

          when they have requested to be removed,
          been convicted of a crime,
          become mentally incapacitated,
          or moved out of the jurisdiction.

          § 20507(a)(3)-(4).

          The Randolph argument is then simply that by removing people for failing to vote and
          failing to respond to a notice, Ohio’s Supplemental Process ignores this restriction.

          There is more, but once you read it this way you can see the other side of the argument.


        • Mark:

          The Randolph argument is then simply that by removing people for failing to vote and
          failing to respond to a notice, Ohio’s Supplemental Process ignores this restriction.

          But the NVRA explicitly allows for a name to be removed for exactly those two (combined) reasons.

          (1) A State shall not remove the name of a registrant from the official list of eligible voters in elections for Federal office on the ground that the registrant has changed residence unless the registrant–

          (A) confirms in writing that the registrant has changed residence to a place outside the registrar’s jurisdiction in which the registrant is registered; or
          (B)(i) has failed to respond to a notice described in paragraph (2); and
          (ii) has not voted or appeared to vote (and, if necessary, correct the registrar’s record of the registrant’s address) in an election during the period beginning on the date of the notice and ending on the day after the date of the second general election for Federal office that occurs after the date of the notice.

          To read the Failure-to-Vote clause as prohibiting that which is explicitly allowed is to render the act to be nonsensical.


        • I agree and would have voted the same way. Comes down then to the sufficiency of the notice and whether not failure to vote in one election is a proper trigger. I think it is a proper trigger, but one Randolph argument was that it was a prohibited trigger. The Sixth Circuit focused on the sufficiency of the notice.

          I see now that while the case was pending the notice was changed in format. Originally confirmation notices sent to voters pursuant to both the NCOA Process and Supplemental Process required that voters provide their name, current Ohio address, date of birth, and either their Ohio driver’s license number, their Social Security number, or a copy of a document verifying their identity and address. The notices required that voters provide such information regardless of whether they had changed address or were merely confirming that they still lived at the same address. Moreover, the notices did not adequately inform voters of the consequences of failing to respond to the notice; rather, the form indicated that the recipient’s registration “may” be canceled if he or she did not respond, re-register, or vote in the next four years. Finally, the form failed to inform voters who had moved outside of Ohio on how they could remain eligible to vote in their new state.

          So back when I was reading the briefs the posture was a quite a bit more favorable to the Randolph side.

          If I had read the Supreme Court case, rather than the briefs as they were submitted to the 6th Circuit, I would have been uninclined to call it a close case.


        • I thought that’s what this safe harbor provision was for and also what Ohio complied with.

          Item #35.


      • jnc:

        This was a good take:



      • A good example of how Breyer plays word games in order to reach conclusions he likes. After detailing what the statute actually says, he then re-states it in his own words:

        In sum, §8 tells States the following…

        • Do not target registered voters for removal from the registration roll because they have failed to vote. However, “using the procedures described in subsections (c) and (d) to remove an individual” from the federal voter roll is permissible and does not violate the Failure-to-Vote prohibition.

        But in fact the statute says literally nothing whatsoever about “targeting” registered voters for removal from the registration roll because they have failed to vote. It simply prohibits states from using a failure to vote as the sole reason for actually removing them from the roll.

        Breyer’s dishonesty really bugs the shit out of me.


  2. “If the U.S. doesn’t get the 2026 World Cup, blame Trump
    Could the rest of the world seek revenge on the United States?
    by Ken Bensinger
    June 12 at 6:00 AM”

    Because Americans care so much about soccer.


    • I think just about every one of these world events turns out to be a money loser for the host nation / city…


      • brent:

        I think just about every one of these world events turns out to be a money loser for the host nation / city…

        That is definitely true for the Olympics. I wonder if it is the same for the World Cup, though. The Olympics generally requires a huge amount of infrastructure spending prior to holding the event, as usually a single city has to build all kinds of event venues and participant accommodations. But the World Cup is different, being held in many cities that basically already have suitable stadium venues, and participants just stay at existing hotels. So I imagine that the economics are quite different. It would be interesting to see if the economics of the World Cup make any more sense than those of the Olympics.


Be kind, show respect, and all will be right with the world.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: