1Q2013 Gross Domestic Product: Second (Preliminary) Estimate

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The Bureau of Economic Analysis (BEA) estimated 1Q2013 growth in real U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate of +2.4 percent, 0.1 percentage point lower than the previous (advance) 1Q estimate (and MarketWatch’s expectations). This growth rate was 2.0 percentage points higher than the 4Q2012 estimate. Personal consumption expenditures (PCE) and private domestic investment (PDI) added to 1Q growth, in that order; government consumption expenditures (GCE) and net exports (NetX) dragged on growth. 

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"When looked at as a whole, the U.S. economy continues to meander along a path of slow and uneven growth," said Richard Moody, chief economist of Regions Financial Corp. “If one wants to pick a single reason for decline of GDP between the advance and second estimate,” Global Economic Intersection’s Steven Hansen added, “it is [the] lower inventory buildup.”

Normally among the first to cast aspersions on the GDP report, the analysts at Consumer Metrics Institute (CMI) were unusually upbeat. “[O]n the surface a 2.38 percent annualized growth rate at nearly full four years into a recovery is good news,” CMI wrote, “and a growth rate that many other global economies would currently be pleased to be reporting.” They pointed out several reasons for optimism:

• Consumer spending was sustained in spite of tax increases (although ZeroHedge -- legitimately, in our opinion -- opined that “perhaps it is about time to ask the question of how consumption in the ‘sequester’ and tax-hike quarter was the highest since 4Q2010”).
• Fixed investments continued to grow (although at a slower pace than in the prior quarter).
• Exports were still growing (slightly) after the prior quarter's of contraction.

Nonetheless, CMI observed one overriding issue suggesting reason for caution:

“Real per capita disposable incomes took a major hit, and it would appear that consumers had to dip into savings to sustain spending levels in the face of the January increase in FICA taxes. The astonishing annualized contraction of real per capita disposable income bears repeating: -9.03 percent -- 1½ percent worse than the -7.52 percent contraction rate recorded in 1Q2009 (the worst quarterly contraction recorded during the official duration of the "Great Recession").

“The contraction in real per capita disposable income caused the savings rate to plunge to 2.3 percent. This is the lowest savings rate since the 3Q2007. Which begs the question: Is it 2007 once again and consumers are leveraging up once more in joyous optimism (as the equity markets seem to assume)? Or, are households dipping into savings (and de facto leveraging up) out of necessity to offset the "new" FICA rate increase of 2 percent (by reducing their savings rate by -2.4 percent relative to 4Q2012)?

“Our view is that the household savings rate is a short term shock absorber for household budgets that can require a quarter or more to adjust to the realities of new taxes or falling incomes. Ultimately, however, households adjust to the new realities by tightening their spending. In this case we would be shocked if spending does not soften during the balance on 2013.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

March 2013 International Trade (Pulp, Paper & Paperboard)

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Exports of pulp, paper and paperboard increased by 123,000 tons (5.2 percent) in March. Imports also rose by 43,000 tons (5.7 percent). Exports were 153,000 tons (5.8 percent) lower than a year earlier while imports were up by 3,000 tons (0.4 percent). 

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For U.S. pulp exports, year-to-date levels are down by 6 percent compared to 2012. China continues to be the largest market for U.S. product at 58 percent, nearly nine times the size of the second largest destination (Mexico). Exports to China are off 9 percent year to date. In terms of country rankings, Belgium has jumped from 20^th place last year to 13^th this year, registering an increase of over 200 percent in receipt of U.S. pulp exports. 

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Total paper and paperboard exports are up over 9 percent. However, among the top five-ranked destinations by volume, three of the five countries are down on a comparative year-to-date basis: Mexico (rank #1), down 6.2 percent; India (rank #3), down 8.6 percent; and Japan (rank #4), down 9.2 percent. The other two countries ranked among the top five charted substantial increases in paper and paperboard exports: Canada (rank #2), up 80.8 percent; and Taiwan (rank #5), up 37.5 percent. Pakistan is registering a significant (over 1,000 percent) increase in U.S. paper and paperboard export volumes. 

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Pulp imports are up nearly 7 percent year to date. Canada is the primary source, representing nearly 65 percent of imported volume year to date, followed by Brazil at 32 percent. Canadian shipments are off over 3 percent year to date compared to prior year levels while Brazilian shipments have increased by nearly 32 percent. Indonesia, which did not register as one of the top 20 pulp importers last year through March has jumped up to 7^th place through March 2013. 

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For paper and paperboard imports, year-to-date levels are down by almost 6 percent compared to 2012. Canada represents nearly 90 percent of all paper and paperboard imports. Notable changes from prior year-to-date levels are a reduction in Sweden's export levels by nearly 44 percent and an increase in imports from Finland and Mexico by over 13 and 16 percent, respectively. Indonesian paper and paperboard exports are also up nearly 9 percent from prior year-to-date levels.

The pattern of imports and exports between the United States and China is consistent with a slowing Chinese economy. The increase in Indonesian imports of pulp, paper, and paperboard into the United States may also signal Indonesia is shifting volume here and elsewhere as China's market growth slows.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

April 2013 Consumer and Producer Price Indices (incl. Forest Products)

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The seasonally adjusted Consumer Price Index (CPI) decreased 0.4 percent in April. Over the last 12 months, the all items index increased 1.1 percent. As was the case in March, a sharp decrease in the gasoline index was the primary cause of the decline in the seasonally adjusted all items index. The fuel oil index also declined while the electricity and natural gas indexes increased; the net result was a 4.3 percent decrease in the energy index. The food index, unchanged in March, rose 0.2 percent in April.

The seasonally adjusted Producer Price Index for finished goods (PPI) decreased 0.7 percent in April. At the earlier stages of processing, prices received by manufacturers of intermediate goods declined 0.6 percent, and the crude goods index moved down 0.4 percent. On an unadjusted basis, prices for finished goods advanced 0.6 percent for the 12 months ended April 2013, the smallest 12-month rise since a 0.5-percent increase in July 2012. 

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Price changes may be fairly tame overall, but solid wood-related price indices are either at or near their highest levels since at least 2005. Softwood lumber prices, in particular, are up 33 percent in the past year. 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

May 2013 Macro Pulse -- Déjà Swoon?

For the third year in a row, the U.S. economy appears to losing momentum with the arrival of spring. “In fact,” the Washington Post observed, “the slowdowns have become so reliable, and the timing so consistent, that economists have given them a name: the ‘spring swoon.’” The overview of articles we’ve posted on our website during the past month paints a less-than-flattering picture of current conditions. Click here to read the entire April 2013 Macro Pulse recap.

The Macro Pulse blog is a commentary about recent economic developments affecting the forest products industry. The monthly Macro Pulse newsletter summarizes the previous 30 days of commentary available on this website.

April 2013 Retail Sales

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The Census Bureau reported that seasonally adjusted retail spending increased by $0.4 billion or 0.1 percent (besting expectations of a 0.6 percent drop) during April as consumers apparently used cash left in their pockets from cheaper gas to purchase other items. A downwardly revised March estimate of -0.5 percent probably helped the April estimate beat expectations.

“Lower gasoline prices and the current low-inflation environment in general are helping to offset the impact of higher taxes and encourage households to raise spending in other areas,” economist Andrew Grantham of CIBC World Markets told MarketWatch. 

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Once again, however, the majority of the rise in April’s estimate can be attributed to seasonal adjustments, as non-seasonally adjusted sales fell in every category except home-improvement stores (Building Material & Garden Equipment & Supplies Dealers). Cells with a yellow background in the figure above indicate a decline from the previous month; green indicates an increase from the previous month. In fact April’s seasonal adjustment factor was the third-largest for that month of the past decade. 

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Accounting for inflation and population growth, retail sales showed a small drop. Sales have yet to recover their November 2007 high; moreover, sales are only 1.2 percent above their January 2000 level.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

April 2013 Industrial Production, Capacity Utilization and Capacity

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Industrial production (IP) decreased 0.5 percent in April after having increased 0.3 percent in March and 0.9 percent in February. At 98.7 percent of its 2007 average, total industrial production was 1.9 percent above its year-earlier level.

Manufacturing output moved down 0.4 percent in April after a decline of 0.3 percent in March. The index for utilities decreased 3.7 percent in April, as heating demand fell back to a more typical seasonal level after having been elevated in March because of unusually cold weather. Wood Products and Paper both retreated, by 0.7 and 0.6 percent, respectively. 

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The rate of capacity utilization for total industry moved up in March to 78.5 percent, a rate 1.2 percentage points above its level of a year earlier but 1.7 percentage points below its long-run (1972-2012) average.

The rate of capacity utilization for total industry decreased 0.5 percentage point to 77.8 percent, a rate 0.1 percentage point above its level of a year earlier but 2.4 percentage points below its long-run (1972--2012) average. Capacity utilization declined for both Wood Products and Paper (-0.7 and -0.5 percent, respectively). 

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Capacity at the all-industries and manufacturing levels moved higher (0.1 and 0.2 percent, respectively). By contrast, both Wood Products and Paper fell by 0.1 percent.

The Fed’s IP report paralleled the Institute for Supply Management’s April PMI, which registered 50.7 percent, a drop of 0.6 percentage point from March's seasonally adjusted reading of 51.3 percent (50 percent is the breakpoint between contraction and expansion). I.e., manufacturing essentially stalled in April from ISM’s perspective.

The New York Fed’s Empire State Manufacturing Survey is another contemporary source that is often useful for comparison (despite the different geographic reach and time frame). The May 2013 survey showed that New York manufacturing contracted. The survey “crushed hopes for an increase from 3.05 to 4.00 in May,” ZeroHedge observed, “instead posting the first contractionary print since January, printing at -1.43. It gets worse when one digs through the data: New Orders dropped from 2.20 to -1.17; Shipments also slid into negative [territory,] from 0.75 to -0.02; Unfilled Orders deteriorated even more from -3.41 to -6.82; Inventories contracted from -4.55 to -7.95; Prices Paid and Received both contracted. But worst of all, the Average Employee Workweek dropped from 5.68 to -1.14, meaning the collapse in the average workweek persists; and even if the BLS reports a positive print for May, the report will once again mask the declining aggregate end demand for labor.”

In short, these reports appear to corroborate the view of slowing growth.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

March 2013 Personal Income and Outlays, and Consumer Debt

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Bureau of Economic Analysis (BEA) data showed that personal income increased $30.9 billion (0.2 percent) and disposable personal income (DPI) increased $20.7 billion (0.2 percent) in March. Personal consumption expenditures (PCE) increased $21.0 billion (0.2 percent). Real (inflation-adjusted) DPI increased 0.3 percent while real PCE increased 0.3 percent.

Most analysts we follow found the report unremarkable (see this and this). The increase in spending, although the smallest gain in three months, exceeded expectations of 0.1 percent. The realization that consumers were more cautious spenders in March, and income growth also softened, reinforced the impression the U.S. economy slowed as the spring began. “Consumers are struggling to cope with slow income growth and higher taxes this year even as inflation pressures have eased,” said senior economist Eugenio Aleman of Wells Fargo. Trends in personal income excluding government transfers are particularly disconcerting.

ZeroHedge noted an anomaly in the DPI and PCE data: “Spending on total goods (including durables, already known as being quite abysmal, and non-durable), dropped by $32.8 billion in nominal dollars. What was the offset? Why a massive surge in consumption expenditures on services[; spending on services] rose by $53.8 billion, which -- absent the spending aberration for September 11, 2001 (reversed the following month) -- was the biggest monthly increase on record! What drove this record services spending spree is anyone's guess.” 

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DPI growth peaked in February 2011 (we ignore December 2012 as an aberration), but PCE continued upward for another five months before it, too, rolled over. Although the rising trend in nominal personal income is apparently still in place, real per-capita income has stagnated well below the recessionary peak. 

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Total consumer debt outstanding (CDO) rose by a seasonally adjusted $8.0 billion (+3.4 percent annualized) in March; expectations were for a $15.6 billion increase. Revolving (mostly credit card) debt declined by $1.7 billion (-2.4 percent annualized) -- the biggest drop since December; however, non-revolving debt increased by $9.7 billion (+5.9 percent annualized). 

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In March, the total non-seasonally adjusted change in non-revolving debt amounted to $4.9 billion relative to February. Federal student loans grew during the month by $3.9 billion, or 79 percent of the change in that category. Relative to March 2012, federal student loans contributed 70 percent of the total growth in consumer credit outstanding.

The incredible expansion of student loan debt may be reaching its limits as default rates soar. According to the Wall Street Journal (article in the clear here), “Sallie Mae, the nation's largest non-government student lender just cancelled a $225 million debt offering as investors decided they simply were not getting paid enough for risk -- amid rising student loan defaults.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

March 2013 International Trade (Softwood Lumber)

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Softwood lumber exports rose by 12 MMBF (9.5 percent) in March while imports jumped by 220 MMBF (27.4 percent). Exports were 2 MMBF (1.2 percent) below year-earlier levels; imports were 217 MMBF (26.9 percent) higher. 

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North America (i.e., Canada and Mexico) reclaimed the “top spot” for U.S. softwood lumber exports in March; Canada was also the largest single-country destination. Meanwhile, Canada is far-and-away the largest source of softwood lumber imports into the United States. Imports from Romania and Estonia have increased markedly on both year-over-year and year-to-date change bases. 

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Over half of U.S. softwood lumber exports left the country through West Coast (primarily Seattle, WA) customs districts in March. At the same time, however, Great Lakes customs districts (especially Duluth, MN) handled most of the softwood lumber imports coming into the United States. 

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Douglas-fir made up just under one-quarter of all softwood lumber exports in March, followed by southern yellow pine.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment. 

March 2013 International Trade (General)

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March exports of $184.3 billion and imports of $223.1 billion resulted in a goods and services deficit of $38.8 billion, down from $43.6 billion in February, revised. March exports were $1.7 billion less than February exports of $186.0 billion. March imports were $6.5 billion less than February imports of $229.6 billion.

As ZeroHedge put it, the March trade deficit was “far below the expected number of $42.3 billion. This was driven, however, not by a jump in exports or economic strength…, but due to a plunge in imports (typically confirming economic weakness) mostly of consumer and capital goods as the U.S. economy slowed substantially in March.”

Broken down by geographic sector, the biggest drop from February occurred with Chinese imports, where the deficit plunged from $23.4 billion to $17.9 billion. Net imports from the EU rose modestly from $8.8 billion to $9.9 billion. 

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On a global scale, data compiled by the Netherlands Bureau for Economic Policy Analysis showed that world trade volume decreased by 0.7 percent in February while prices rose by 0.1 percent.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

March 2013 Manufacturers’ Shipments, Inventories and New & Unfilled Orders

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According to the U.S. Census Bureau, the value of manufactured-goods shipments decreased $5.0 billion or 1.0 percent to $481.8 billion in March.

Shipments of manufactured durable goods increased $1.1 billion or 0.5 percent to $230.4 billion, led by transportation equipment. Nondurable goods shipments decreased $6.1 billion or 2.4 percent to $251.3 billion, led by petroleum and coal products. Forest products shipments retreated by 0.6 (Wood) and 0.3 (Paper) percent. 

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Data from the Association of American Railroads (AAR) and the American Trucking Associations’ (ATA) advance seasonally adjusted For-Hire Truck Tonnage Index help round out the picture on goods shipments. AAR reported a 0.8 percent decrease in not-seasonally adjusted rail shipments in April (relative to March), and a 0.4 percent drop from a year earlier; on a trend-line basis, total shipments were off 2.6 percent from a year earlier. Excluding coal carloads, year-over-year shipments were down 0.2 percent. Seasonal adjustments accentuated the 0.8 percent March-to-April decrease, expanding it to a 1.2 percent decrease. Rail shipments of forest-related products were lower in April than a year earlier, thanks largely to a 52.5 percent drop in lumber and wood products shipments. The ATA’s advance index showed a 0.9 percent expansion in March. 

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Inventories increased $0.2 billion to $620.2 billion, the highest level since the series was first published on a NAICS basis. The inventories-to-shipments ratio was 1.29, up from 1.27 in February.

Inventories of durable goods decreased $0.4 billion or 0.1 percent to $376.2 billion, led by primary metals. Nondurable goods inventories increased $0.6 billion or 0.2 percent to $244.0 billion; chemical products drove the decrease. Wood inventories rose by 1.6 percent but paper fell 0.1 percent. 

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New orders for manufactured goods decreased $19.5 billion or 4.0 percent to $467.3 billion. Excluding transportation, however, new orders new orders decreased 2.0 percent.

New orders for durable goods decreased $13.4 billion or 5.8 percent to $216.0 billion, led by transportation equipment; it was the largest drop since August 2012, and well in excess of expectations for a 3.2 percent decline. Nondurable goods orders decreased $6.1 billion or 2.4 percent to $251.3 billion.

“There’s clearly rising near-term caution in capital spending plans by businesses as fiscal tightening hits and global growth slows,” economist Ted Wieseman of Morgan Stanley wrote in a research note.

Converting new orders to real, inflation-adjusted terms reveals an even more-discouraging story. On that basis, new orders have recouped only about one-half of the loss incurred since December 2007 and are still roughly 8 percent below January 2000 levels. 

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Unfilled orders for durable goods decreased $7.1 billion or 0.7 percent to $990.1 billion, led by transportation equipment. Real (i.e., inflation adjusted) unfilled orders, a good litmus test for sector growth, are still in a long-term downward trend.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

April 2013 ISM Reports

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As foretold by the Chicago Business Barometer, growth in the most-closely followed nationwide manufacturing diffusion index nearly stalled in April. The Institute for Supply Management’s (ISM) PMI registered 50.7 percent, a decrease of 0.6 percentage point from March's seasonally adjusted reading of 51.3 percent (50 percent is the breakpoint between contraction and expansion). April’s PMI actually exceeded expectations (of 50.6), however. The greatest disappointment came from the 50.2 percent reading in the Employment index, down 4.0 percentage points on the month. It represented the lowest reading since November, tied with the biggest sequential drop since 2008 in absolute terms, and the biggest drop in percentage terms since the Great Financial Crisis. Without the increase in new orders and production, the PMI likely would have fallen into contraction.

Respondent quotes were mixed, with one Wood Products contributor saying, "Market has slowed this month -- weather in some parts of the country, also customers built inventory in anticipation of building increase, but the economy is still slow to pick up this spring." 

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“Production [in manufacturing] was up but inventories were way lower,” Mish Shedlock observed. “The drop in inventories, in conjunction with a big slowdown in employment, is likely a leading indicator of future production.”

“The positive surprise that does not fit into the above assessment is that new orders grew at a faster rate,” Shedlock continued. “Next month may be telling. I expect the new order divergence to resolve to the downside as the global economy and the U.S. economy are both slowing.”

The pace of growth in the service sector paralleled that in the manufacturing sector. The non-manufacturing index (now known simply as the “NMI”) registered 53.1 percent, 1.3 percentage points lower than March’s 54.4 percent (expectations were for a 53.7 percent reading). The business activity, new orders, employment and prices indexes all dropped during the month. “Respondents' comments remain mostly positive about business conditions,” said Anthony Nieves, chair of ISM’s Non-manufacturing Business Survey Committee. However, “cost management and revenue pressures are areas of concern for many of the respective companies.” Our “take” on respondents’ comments is more pessimistic than Nieves’. E.g., one Ag & Forestry respondent observed a weakening trend in demand. 

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Wood Products reported a slowdown in activity; a pickup in new export orders was perhaps the only good news for that sector. By contrast, Paper Products experienced a solid, broad-based expansion. The service sectors we track all reported growth, although underlying support was especially spotty for Ag & Forestry.

Input price increases greatly outweighed decreases. Roughly 15 commodities were up in price, compared to just five commodities whose prices declined. Relevant commodities up in price included caustic soda, corrugated boxes, lumber, and natural gas. Diesel fuel was listed as both up and down in price. Gasoline was down in price. No relevant commodities were in short supply.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

April 2013 Employment Report

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According to the Bureau of Labor Statistics’s (BLS) establishment survey, non-farm payroll employment rose by 165,000 in April (exceeding the 135,000 forecast of economists polled by MarketWatch). The unemployment rate (based upon the BLS’s household survey) edged down by 0.1 percentage point to 7.5 percent. Most private supersectors reported at least some job growth. Government employment contracted at all levels. The change in total non-farm payroll employment for February was revised from +268,000 to +332,000, and the change for March was revised from +88,000 to +138,000. 

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As seems to have been the case for longer than we’d like to recall, the underlying details in the report at least partially belied the relatively upbeat headline number. For example: 

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·   The ratio of employed persons to the entire population remained mired in the range seen since late 2009.

·   The number of people not in the labor force retreated from March’s record high, but the drop was a marginal 31,000 (to 89.9 million). I.e., 90 million people who could otherwise make a positive contribution to the economy have given up looking for employment. 

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·         The civilian labor force participation rate (the share of the entire U.S. population 16 years and older working or seeking work) remained unchanged at 63.3 percent -- the lowest since 1979.

·   Although average hourly earnings of production and non-supervisory employees rose by $0.04 relative to March, the year-over-year percentage increase fell back to 1.7 percent. With the price index for urban consumers rising at an annualized pace of 1.5 percent in March, wage increases are just keeping up with current, official estimates of price inflation. To put things into perspective, however, average wages would need to be in the neighborhood of $130 per hour to have kept up with inflation since 1970.

·   Another problem was the drop in average weekly hours for all employees (not just those in production and non-supervisory positions), which posted a surprising and disappointing decline from 34.4 to 34.6 on expectations of an unchanged number. This amounts to a 12 minute shorter workweek on average for the entire U.S. labor force. ZeroHedge (and Karl Denninger) expounded on this aspect of the report (emphases in the original):

It is when one considers that there were 135,474,000 full time Establishment Survey employees in April (rising by the much trumpeted 165,000), all of which worked on average 34.4 hours (down from 34.6 in March) according to the BLS. Multiply these together and one gets 4,660,305,600 total hours worked in April, a drop of 21,385,800 million hours from the 4,681,691,400 total hours worked in March.

Then apply the average hourly wages of $23.83 in March and $23.87 in April, and the total wages paid out in March ($111.565 billion) compared to April ($111.231 billion) amounted to a drop of $323.2 million.

Had the average weekly hours stayed flat as expected, this number should have been an increase of $323.5 million or a $646.8 million swing!

In other words, the US economy added 165,000 jobs and yet US businesses paid $323.2 million less in total wage compensation: only the second time there was a decline in the gross total monthly wages paid in 2013.

What does this mean for the bottom line?

Well, had the BLS reported flat average weekly hours worked at 34.6 as Wall Street had expected, while companies were paying out the same amount of hourly wages in April, the result would have been that instead of the BLS reporting a 165,000 increase in jobs, it would have had to report a drop of, drumroll, 618 thousand workers, or total April workers of 134,690,913: a 783 thousand negative worker swing, more than wiping out not only all the gains of April, but all prior upward monthly revisions as well. 

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·   One of our criticisms of the headline jobs number (and the overall report in general) is its failure to differentiate among job quality. A part-time position at a fast-food restaurant is given the same “weight” as a brain surgeon. Hence, we are disappointed to see that part-time employment rose by nearly twice the rate of full-time employment (278,000 versus 150,000, respectively).

·   Another issue is composition of job growth by age. “[J]ust like in prior months,” ZeroHedge observed, “a key part of the growth was attributable to those aged in the 55-and-over group, which added 79K workers, although a surprising change was the massive addition of some 187K workers in the lowest paid, 20-24 age group -- the biggest monthly jump in this category since September. Was this due to students entering the workforce early? The reason is unclear. What is clear is that the prime working demographic, those aged 25-54 saw yet another decline, as 16K workers exited the ranks of the employed.” 

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Withholding taxes fell dramatically in April, relative to March; this turn of events is unsurprising in light of April not being the end of a quarter. 

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Employment is converging with the previous peak at a slower pace than all prior recessions going back to 1973; circles in the chart above indicate when previous recoveries reached their corresponding pre-recessionary employment highs. The economy still has 2.58 million fewer jobs than at the January 2008 peak. 

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The figure above presents a variety of forecasts related to when employment might return to the January 2008 peak (dashed line) or converge with the number of jobs that likely would exist had the recession not occurred (gray line). At April’s rate of job gains, it will take until August 2014 to recapture January 2008’s employment level (i.e., without adjusting for population growth).

Bottom line: This jobs report is positive on the surface, but underlying details are less positive. Even Econintersect’s Steven Hansen -- who diligently attempts to present a balanced view in all of his posts -- ultimately was forced to appeal to a statement by Bill Dunkelberg, chief economist at the National Federation of Independent Business, to eke out a reasonably positive conclusion about the employment situation.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

April 2013 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil continued lower in April, retreating by $0.98 (1.1 percent) to $92.07 per barrel. That drop occurred concurrently with a slightly weaker dollar, the lagged impacts of virtually unchanged consumption levels -- at 18.6 million barrels per day (BPD) in February, and a continued build-up in crude stocks.

The monthly average price spread between Brent crude (the predominant grade used in Europe) and WTI shrank in March by over 25 percent, to $15.42 per barrel -- the smallest differential since July 2012. Brent and WTI prices had been essentially identical until the end of 2010. 

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Not only have crude inventories apparently risen to a new, all-time high (exceeding the record set back in July 1990), but growth in fuel demand has either stalled or actually contracted (see this and this). Much like many economists consider electricity consumption data the preferred barometer of Chinese economic activity, we suspect fuel usage may be a better indicator of the true state of the U.S. economy than the heavily massaged GDP figures. If so, the U.S. economy may be in far worse shape than most official estimates suggest. 

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In any event, futures traders apparently don’t see demand increasing during the next couple of years. Futures prices are in backwardation (i.e., subsequent contract dates are priced lower than their predecessors), and prices for each contract ended below the average for the data collection period.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.