Mish's Global Economic Trend Analysis

Tremendous News: Wisconsin Senate Passes Collective Bargaining Bill with Democrats in Hiatus in IL; Significant Step Towards Abolishing Slavery Taken
Five Years of Housing Supply and 5 or 6 Trillion Dollars of Additional Pain
Ceridian Index Positive 15th Month, but Slowing, Suggesting "Tepid Growth"
Bloodstained Property Map and Trampled Rights; China's Population: 1.3 Billion; Construction Underway: 43 Billion Square Feet

Tremendous News: Wisconsin Senate Passes Collective Bargaining Bill with Democrats in Hiatus in IL; Significant Step Towards Abolishing Slavery Taken

Posted: 09 Mar 2011 06:16 PM PST

Just moments ago came excellent news from the state of Wisconsin. Republicans passed a law greatly restricting collective bargaining of public unions.

In a legislative maneuver to outflank Democrats cowardly hiding in Illinois, Republicans stripped the legislation of all budgetary items. As a result, a quorum of senate members need not be present to vote and the bill sailed through.

CNN Politics has the full story and a video in Wisconsin Senate passes union limits despite Democratic walkout

Wisconsin's Republican-led state Senate passed Gov. Scott Walker's proposed restrictions on collective bargaining for public employees Wednesday, getting around a Democratic walkout by stripping financial provisions from the bill.

"Tonight, the Senate will be passing the items in the Budget Repair Bill that we can with the 19 members who actually do show up and do their jobs," Sen. Scott Fitzgerald, the chamber's Republican majority leader, said in a statement announcing the move.

The Senate's 14 Democrats had fled to Illinois to prevent the chamber from attaining a quorum and passing the collective bargaining measures, which they have called an unnecessary attack on the rights of public employees. Republicans were able to move ahead by voting only on the non-financial aspects of Walker's proposed bill, which requires fewer members for a quorum.

"The Senate Democrats have had three weeks to debate this bill and were offered repeated opportunities to come home, which they refused," Walker said in a statement on the vote. "In order to move the state forward, I applaud the Legislature's action today to stand up to the status quo and take a step in the right direction to balance the budget and reform government."

Sen. Mark Miller, the Democratic Senate leader, said Republicans "conspired to take government away from the people."

"In thirty minutes, 18 state senators undid 50 years of civil rights in Wisconsin," Miller said in a statement condemning the vote. "Their disrespect for the people of Wisconsin and their rights is an outrage that will never be forgotten."

Major Step Taken to Abolish Union Slavery

I commend governor Walker, the Wisconsin senate, and everyone brave enough to tell public unions to "go to hell"

Indeed it takes bravery because of coercion, thuggery, vote buying, and extortion by public unions. Regardless of Walker's motivation, abolition of slavery is always and everywhere a tremendous idea.

In case you do not understand how votes for collective bargaining is a vote for slavery, please read Paul Krugman, Stephen Colbert, Bill Maher, others, Ignore Extortion, Bribery, Coercion, and Slavery; No One Should Own You!

Congratulations to Governor Walker, the state of Wisconsin, and to all the partially freed slaves for this major step in the right direction. More work remains.

Please send this link to Stephen Colbert and Bill Maher because both are hopelessly ignorant as to what this bill is really about.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Five Years of Housing Supply and 5 or 6 Trillion Dollars of Additional Pain

Posted: 09 Mar 2011 04:16 PM PST

In a Bloomberg Interview on Housing, Michael Feder, chief executive officer of Radar Logic Inc. says there may be as much as 5 years' worth of housing supply.

Feder, speaking with Matt Miller and Carol Massar on Bloomberg Television's "Street Smart," also discusses the Obama administration's efforts to prevent foreclosures and plans to overhaul Fannie Mae and Freddie Mac.

If the inline video below does not play, please clock on the above link.

Select Feder Quotes:

"We are terribly concerned with what is ultimately the pain hast to be taken. The number could approach aggregate mortgages 5 or 6 trillion dollars. The question is how much of that is overhang and how much of it has to be written off."

"NAR says based on inventory and absorption rates we have little over 8 months supply. The reality which you add up all the houses for sale, houses vacant not yet on the market, houses underwater, seriously delinquent, in foreclosure, almost in foreclosure, the number is closer to 60 months, 5 years"

"Who is going to absorb the foreclosed homes?"

I agree with Feder's analysis, and that is why I have stated that even if home prices have bottomed in some areas they are not going to shoot up anytime soon. There is no need to rush into buying a house in my opinion.

It's an excellent video. Please play it.

Addendum:

This is a dated video
The timestamp I saw was more recent. However, I still believe the analysis is correct.
Mish

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Ceridian Index Positive 15th Month, but Slowing, Suggesting "Tepid Growth"

Posted: 09 Mar 2011 10:05 AM PST

The Ceridian shipping index measures real-time trends in diesel fuel usage and correlates well "over time" with Industrial Production. Month-to-month analysis is subject to much error. For Example, Ceridian's economist was looking for a weak Christmas season following its "Recovery Time Out" report last October.

That report was negated by a December forecast suggestive of a strong recovery. In turn, the strong recovery forecast has been negated by weak January and February numbers. Today's report reflects February numbers.

Please consider February PCI Continues to Signal Slow Growth

The Ceridian-UCLA Pulse of Commerce Index™ (PCI), a real-time measure of the flow of goods to U.S. factories, retailers and consumers, fell 1.5 percent during the month of February. Coupled with the 0.3 percent loss from January, this latest data eliminates the strong gain (1.8 percent) experienced in December 2010. However, February marks the fifteenth straight month of year over year growth indicating that economic recovery, while fragile, remains underway.

"The PCI performance in the first two months of this year suggests weakness in some parts of the economy," states Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast. "Nevertheless, our outlook for 2011 is for continued economic recovery – we expect GDP to grow at the historically "normal" rate of 3 percent, accompanied by a persistent level of high unemployment."

Over time, the PCI has shown a strong correlation with the government's Industrial Production (IP) figures. For January, the PCI forecast of modest growth (.3 percent) was more positive than the Fed's initial reported estimate of negative 0.6 percent. For February 2011, the PCI estimates that IP will experience a slight decline of 0.02 percent when it is reported on March 17. Similarly, relative weakness in the PCI over the first two months of this year suggests that GDP for the first quarter will come in below consensus, near the lower end of the range of current forecasts that range between 2 percent and 5.5 percent. For the year, the index continues to suggest GDP growth sufficient to drive continued modest growth in employment but not back to the peak levels attained in late 2007.

"February's spike in diesel fuel prices to well over $3 a gallon likely did not drive the weakness in the PCI this month," explained Craig Manson, senior vice president and index expert for Ceridian. "However, if the trend persists, higher prices will likely have an impact in the coming months as consumers are robbed of spending power. As a leading indicator for the goods producing segment of the economy, the PCI is sensitive to this dynamic and should provide early indications of direction and magnitude as higher fuel prices impact the broader economy."

Seasonally Adjusted Ceridian Index

The above chart suggests an inventory replenishment overshoot culminating with a strong Christmas season. Now we are back to below trend growth for the last couple months.

Over the past two months, forecasters have been marking up their expectations for 2011 and 2012. The 51 Wall Street Journal forecasters' predictions for 2011 Q1 GDP growth range between 2% and 5.5%, with 90% of the estimates targeting growth in the first quarter at 2.9% or higher. Weakness in the PCI over the first two months of this year suggests that GDP for the first quarter will come in below consensus, near the lower end of the range of current WSJ forecasts. For the year, the index continues to suggest GDP growth to be in the "normal" historical range of about 3%, which will likely drive continued modest growth in employment but not back to the peak levels attained in late 2007.

I am entertaining and have been for some time, the idea that recent hiring may be nearing a crest. Employers, especially retailers were light on employees and ramped up in fourth quarter of 2010. At the beginning of the year they did not lay off as many as normally expected boosting seasonally adjusted hiring.

Now it remains to be seen how long that recent hiring lasts. Bear in mind it takes about 125,000 jobs a month just to keep the unemployment rate flat, all things being equal. Yet all things are not equal, the participation rate had been falling like a rock. Without millions dropping out of the labor force, the unemployment rate would be close to 12%, not the reported 8.9%.

I expect to see the unemployment rate rise if discouraged workers start seeking jobs and perhaps even if they don't.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Bloodstained Property Map and Trampled Rights; China's Population: 1.3 Billion; Construction Underway: 43 Billion Square Feet

Posted: 08 Mar 2011 11:52 PM PST

The Financial Times published an interesting article a couple days ago on the concept of growing democracy in China.

Despite a few anecdotes in the article, the idea of a large or growing democracy in China is unfounded given Chinese central authority trampling of human rights and property rights, on top of having the world's largest central planning scheme.

However, what most caught my eyes was the sheer amount of real estate malinvestment, given wages are grossly out of alignment with the costs to purchase the units now under construction.

Please consider China: A democracy is built.

In many ways, property is the focus of the story of modern China. The double-digit economic growth of the past decade has been driven in part by the real estate explosion in more than 100 cities that has accompanied the process of industrialisation. It is also at the root of an apparent "super-cycle" of rising commodity prices that has lasted several years. Some observers see property as the country's main economic vulnerability because of the potential for the growth of a bubble – "a treadmill to hell", as Jim Chanos, the American investor, has put it.

In the past couple of years, there has been an epidemic of violent confrontations over forced demolitions as the urbanisation drive that has accelerated in the past decade has spread away from the coast, boosted by the massive stimulus programme that began in late 2008. The demolitions are behind as many as 65 per cent of large protests in rural areas, according to research by the Chinese Academy of Social Sciences.

In January, a 38-year-old woman was killed by a digger in Henan province, north-central China, as she protested against a construction project. In November, a man in the north-east set himself on fire during a stand-off with a demolition crew. One citizen has set up a website called Bloodstained Property Map to chart the incidents. It uses Google maps to mark violent evictions, and provides background information and media links. So far, there are nearly 200 incidents on the map, with regular additions.

"When I say that new housing is being built right now on land covered in blood, people know what I mean," the site's founder, who prefers to remain nameless, told Chinese media last year. "Media coverage can gradually fade out, so we need a new way to constrain the problem.

The danger posed by urban development is not only the creation of a property bubble but also of widespread political conflict.

"This is a very distorted model of urbanisation that cannot go on for ever," says Prof Tao.

Unsustainable Math

Except for a few anecdotes of "victory" the article is brutally mistitled. However, it is well written and researched. It is worth a closer look to see what it took in terms of the trampling of lives needed to create China's boom.

Also note that second graph. China is approaching 4,000 million square meters of construction, most of it residential. That is approximately 43 billion square feet of ongoing construction, for a population of 1.3 billion people of which only a very tiny percentage can afford to buy that construction.

Is it any wonder China has so many vacant homes, offices, malls, and even cities.

In case you missed it, please consider Amazing Satellite Images Of The Ghost Cities Of China on the Business Insider.

"There's city after city full of empty streets and vast government buildings, some in the most inhospitable locations. It is the modern equivalent of building pyramids. With 20 new cities being built every year, we hope to be able to expand our list going forward."

More Vacant City and Reckless Credit Expansion Stories

Timing the China Property Crash

Speculation, Investment Scandals, Fraud, and China's Hard Landing; Miracle of Chinese High-Speed Rail will be Reduced to Dust; Peak Oil Doomsday Clock

Chinese Bank Lending Spree Continues; $75 Billion New Loans First Week in January Alone; Inflation Gone Amuck

Implosion of the China "Fabric City" Frenzy

10 Signs of Speculative Mania in China

Email from a Chinese on China's Real Estate Bubble

China bulls insist this is sustainable. The construction numbers alone vs. the overall population shows otherwise, even if the Chinese could afford to buy those units.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Wednesday, March 9, 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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