Epain Homes

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is on the rise.

In fact, household participation has been climbing so steadily that it has far surpassed the last peak set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that, on a year-over-year basis, household participation has increased a whopping 25.25% while individual participation, as a ratio of the overall population, has increased 22.83%.

The August results confirm that participation is continuing to climb dramatically, likely as a result of the recent jump in total unemployment, driving the nominal benefit costs up an astounding 62.61% on a year-over-year basis to $4,853,114,719 for the month.

Looking at the last chart that plots the total unemployment rate (unemployment rate of all traditionally unemployed workers plus all marginally attached and part time workers) and the population adjusted individual program participation rate normalized since 2005, one can plainly see that program participation would be expected to continue its surge.

The following charts provide a simple comparison between the big stock bounce that occurred in the wake of the DOW crash of 1929 and the bounce we are seeing today in the S&P 500 index.

The method of alignment was simple… take the first definitive up trading day off the bottom of the preceding bear market low and set that as the start of the series… then simply re-base both series to a value of 100 so that they can be compared side-by-side.

The lower bar chart plots the cumulative percentage change since the start of each bounce.

The S&P 500 is up over 44% in a little over 160 trading days… an historically aggressive run with an obvious note of mania to it… and wholly comparable to… even far stronger than… the price movement seen in the 1930s-era DOW rally.

At this point for the 30s-era DOW, the bull-run was over as the bear trend resumed in earnest… today though the Bull is seriously on the move… how long will this boom last?

Only time will tell… But for now, let’s continue to keep a watchful eye…

Yesterday, CNBC’s Steve Liesman reported what he termed a potentially “calculus changing” event for the Friday’s employment situation report.

The latest ISM manufacturing employment index breached 50 indicating expansion in manufacturing employment and, as Steve noted, there have been very few instances where total nonfarm payrolls have declined (on either a month-to-moth or year-over-year comparison basis) during periods where the ISM manufacturing employment index is at or over 50.

This would appear to imply that Friday’s number could come in much stronger than anticipated.

Looking at the following chart, you can see quite clearly that Steve is right in his assertion.

The green vertical bars show instances where the ISM index is over 50 but the nonfarm payroll number declined on a year-over-year basis while the purple vertical bars highlight month-to-month instances.

One thing to note from the chart above though is that since 1985 the ISM’s manufacturing employment index has rarely been above 50 so the overall significance of an “ISM vs Employment Situation” mashup may be minimal… but still… the employment index appears to be indicating pretty strongly that manufacturing employment is expanding.

Again though, given the circumstances, it is more likely that manufacturing swung into expansion as a result of the cash for clunker “autos and homes” programs and resultant dynamics and not organic economic expansion.

The “extra-seasonal” housing price rally brought on by the governments tremendously expensive and poorly targeted housing tax credit gimmick is now thoroughly and completely over.

How many “homebuyers” have jumped at that $8000 carrot only to now find that Uncle Sam was dangling it over an abyss of deflation?

I suppose someone had to buy all those homes but to use a “credit” as the bait… too cruel! … You actually got credit (a nice government-issued pat on the wallet) for making a poor financial decision.

Only in America!

I can’t stress enough the importance of following the housing price data published by Radar Logic.

Not only did the RPX series very clearly capture this season’s exceptional bounce across the majority of metro markets, it captured the top and now, the turn-down.

Better yet, the data is published daily for all of you (and me!) housing junkies that need that continuous flow of new information.

So, looking at the 25-MSA composite’s 28 day aggregate series (click on the Blytic chart below) it’s clear that prices “bottomed-out” between March and April and then climbed about 6.5% to top in mid August.

No small feat…

But since then prices have come down by 1%… ever so slight… but as you can see from a selection of other regional price charts below, they ain’t a comin’ back this season!

Las Vegas, Phoenix and Miami are obviously trending down.

Boston and Cleveland too…

Detroit is setting new series lows backing home prices down to likely somewhere not seen since the early 1990s.

Even Washington DC is turning lower while the New York area appears likely topped out from its snappy late season bounce.

San Francisco, Seattle, Denver, Chicago, Sacramento… everywhere you look, residential real estate is under serious pricing pressure.

Today, CNBC’s Steve Liesman nearly had a coronary while announcing the latest ISM manufacturing data, suggesting that the employment index breaching 50 could “change the calculus” for Friday’s employment situation report… the markets reacted with a customary frenzy ebullient bullish buying.

But… the employment index appears more than likely to be simply “juiced” by the government’s historic stimulus efforts.

Looking at the following Blytic chart (click for fullscreen player) you can see that in the past several recessions, the manufacturing employment index did not signal expansion until well into the post-recession period with a minimum of 5 months of down trending unemployment.

Given the circumstances, it is more likely that manufacturing swung into expansion as a result of the cash for clunker “autos and homes” programs and resultant dynamics and not organic economic expansion.