“Soul-warming, trusted soup that brings a smile with every spoonful.”
Campbell Soup Company
Oh, the weather outside is frightful. But the fire is so delightful! I admit it, I’m all for letting it snow. This summer’s market weather is running thin leaving me hankering for some comfort food. In studying the history of the ultimate healing dish – chicken soup – I learned something. Did you know that 10,000 years ago, fowl was not domesticated? “Wild chickens” roamed freely. The minute Southeast Asians built the first coop, chicken soup came to be. The Ancient Greeks’ version was touted specifically as a tonic. The boiled chicken bones that make the broth just so. The carrots and celery. The rich noodles. Are you with me? On that last count, we have Campbell Soup Company to thank as they brokered the holy matrimony between the soup and the noodle. Though it doesn’t roll off the tongue as it was originally named in 1934 – “Noodle with Chicken,” the company that celebrates its 130th birthday next year got lucky when a radio announcer misread an advertisement for the soup, calling it instead what we all grew up with – “Chicken Noodle Soup.”
As for what’s not “M’m, M’m, Good,” that would be the increasingly questionable integrity of our nation’s statisticians. Revisions have become so commonplace that federal agencies’ data make their counterparts crunching the numbers in the Middle Kingdom blush. Whether it was the $1.1 trillion not saved in the last six years or second quarter consumption that was so off, the National Inquirer of financial media – Zerohedge – noted the revision was a nine-sigma miss.
While stocks’ sigh of relief yesterday was audible, as the yield on the 10-year finally traded on fundamentals, we wouldn’t be too sanguine about calling the ‘all clear’ on the risk-off trade. Across the board, the data were awful. On Wednesday, the AEI Housing Center reported month-over-month home prices had fallen for the first time since January. This was followed yesterday by fresh Redfin data: “Record-high monthly mortgage payments are motivating sellers to drop asking prices to attract buyers, who are unwilling to pay a dollar more than necessary for their new home.
Roughly one in 15 (6.5%) U.S. homes for sale had a price drop during the four weeks ending September 24, on average, up from 5.8% a month earlier–a sharp monthly increase compared to the same period in years past.”
To this, add August Pending Home Sales, which fell so hard, they took out the lows they’d put in after the last housing bubble burst, which culminated in the Great Financial Crisis (GFC, yellow line). As Charles Schwab’s Liz Ann Sonders pointed out, they are 44% off their peak, which again is worse than the GFC. Note that the Mortgage Bankers Association Purchase Index is also lower than it was back then (blue line). Lawrence Yun, chief economist at the nation’s largest lobbyist, the National Association of Realtors, put a brave face on the data: “Some would-be home buyers are taking a pause and readjusting their expectations.”
And then there’s the job market. Lightcast’s weekly tally of Leisure & Hospitality Job Openings registered -16.2% vis-à-vis January 2020, the second-lowest print since the economy reopened (green line). It stands to reason that hotel room rate growth has slumped south of 3% year-over-year, a third of its pace six months ago (red line). We knew this was coming when the IRS pulled the plug on the Employee Retention Credit, the last form of stimulus being injected into the U.S. economy via direct deposit into household bank accounts.
The fabulously “strong” weekly initial jobless claims also put in their worst post-pandemic showing. The number of states with rising claims jumped to 44 – 86% of the 51 states including Washington D.C. (lilac bars). If you prefer, that encompasses 88% of the country’s population (light blue bars). We would remind you that this does not reflect the effect of the 38 plants in 20 states that were the target of the United Auto Workers strike.
What Americans spend was also revised down for an embarrassing sixth straight quarter. Adjusted for inflation, at 0.8%, Personal Consumption Expenditures are growing at their lowest quarter-over-quarter (QoQ) pace since 2022’s first quarter, when GDP contracted (orange line). As for the income that fuels that spending, Real Personal Income Less Government Transfers fell to 2.3% QoQ from 4.4% in this year’s first three months (purple line). We’ll be attentive to further drags on fiscal spending in today’s Personal Income data. Recall that incomes were hit to the tune of $1.4 billion in July stemming from shrinking ranks of Medicaid-eligible households.
Between the punk housing data as it double dips to fresh lows, lower spending and higher inventory investment, our favorite modelers at S&P Global took their third quarter forecast down to 3.6% from 4%. Yes, that’s a robust number. But we’ve lost count of conflicting indicators that are recessionary in the case of credit markets, or post-recessionary, to contextualize nonfarm payrolls’ seven straight downward revisions. We can add to that growing list the following from Goldman Sachs: “After bottoming in September 2021, credit card losses have risen for the past 24 months. While the initial increases were likely reversals from stimulus, since the first quarter of 2022, outside of the GFC, losses are rising at their fastest pace in almost 30 years.” Why no, that is also not comforting.