I actually could care less about BREXIT. I have yet to encounter any valid analysis on why the issue matters at all. What is valid is that the BREXIT theatrical show is being used to deflect scrutiny of the continuous economic reports showing that the U.S. economy is collapsing.
The Chicago Fed National Activity index released today plunged to -.51 against Wall Street’s expectation of a .11 gain. Last months data-point was revised lower to barely positive. The way that this index is calculated, it takes a lot to move the needle. A drop from a revised lower .05 to -.51 reflects heavy contraction in economic activity across a broad (85 indicators) spectrum of the economy. The 3-month moving average declined from -.25 – which was revised lower from the original .22 reported – to -.36.
New home sales reported today – for whatever the data series is worth – indicated an 11% plunge from the previously reported number for April, which of course was revised lower. May’s print was down 6% from the revision. Ironically, yesterday the National Association of Realtor’s Chief Economic Clown was extolling the virtues of new home construction and sales activity. Oops.
I suggested yesterday that existing home sales report was highly overstated by the seasonal adjustments imposed on the data collected. The Census Bureau, which prepares the new homes sales data series, has admitted in the past its estimation and adjustment models tend to overstate sales when actual sales are in a downtrend. Ergo, the incessant downward revisions of previous reports. Same with existing home sales, as the NAR uses the same statistical modelling package as the Census Bureau. The NAR’s report yesterday contained a significant downward revision for April’s report, not coincidentally.
To be sure, there are still some hot pockets of housing activity around the country. But most of the large economic areas are experiencing falling demand, falling prices and rising inventory, especially in the upper price segment of the market. The collapse of the current housing bubble will be even more spectacular than the last bubble collapse.
The U.S. economy is collapsing. In the “inside out” world of U.S. financial media Orwellian propaganda, today’s jobless claims number is being used to substantiate a “tight labor market.” That’s a complete fairy tale. The reason jobless claims are historically low right now is that the number of workers as a percentage of the workforce who qualify to apply for benefits when they get fired is at a historical low. This fact is substantiated by the historically low labor participation rate and the percentage of the workforce that is now part-time. Part-timers do no qualify for company healthcare or unemployment insurance. It’s that simple. the I would question the data if jobless claims were high.
So the entire financial world is focused on what is largely an irrelevant referendum on whether or not the UK will remain in the EU. Meanwhile, the rug is being pulled out from under the entire western economy, including and especially the U.S. economy.