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U.S. Existing Home Sales Rise in November to a 10-Month High
Existing home sales rose 1.9% m/m (-2.0% y/y) to 6.460 million units (SAAR) in November after unrevised rises of 0.8% to 6.340 million in October and 7.0% to 6.290 million in September, according to the National Association of Realtors (NAR). November existing home sales were at the highest level since January, up 11.8% from a May low. The Action Economics Forecast Survey expected a rise in sales to 6.53 million units in November. These data are compiled when existing home sales close.
Existing single-family home sales rose 1.6% (-2.2% y/y) to 5.750 million units in November after a 1.3% increase to 5.660 million in October. That was the third successive m/m rise to the highest level since January. Sales of condos and co-ops rebounded 4.4% (0.0% y/y) to 710,000, the highest level since July, after a 2.9% decline to 680,000.
Sales patterns mostly improved last month. Sales in the South a
dvanced 2.9% (1.1% y/y) to 2.850 million in November after holding steady at 2.770 million in October. Sales in the West rose 2.3% (-3.6% y/y) to 1.330 million, the highest level since February, following a 0.8% decline to 1.300 million. Sales in the Midwest grew 0.7% (-0.7% y/y) to 1.520 million, a 10-month high, on top of a 4.9% gain to 1.510 million. However, sales in the Northeast were unchanged (-11.6% y/y) at 760,000 in November after a 1.3% October drop.
The median price of an existing home increased 0.3% (13.9% y/y) to $353,900 in November, a three-month high, after a 0.4% rebound to $352,700 in October. Prices in the South rose 1.7% (18.4% y/y) to $318,900, a record high, after having recovered 2.7% to $313,600. In the Midwest, prices were up 0.2% (9.0% y/y) to $260,100 following four consecutive m/m drops. In contrast, prices in the Northeast fell 1.7% (+4.7% y/y) to $372,500 after a 2.1% drop to $379,100, registering the fifth straight m/m fall to the lowest level since March. In the West, prices held steady (+8.4% y/y) at $507,200 after a 0.2% October rise. The price data are not seasonally adjusted.
The number of existing homes on the market dropped 9.8% (NSA) in November to 1.110 million units (-13.3% y/y), the lowest level since March, after a 2.4% decline to 1.230 million in October. The supply of homes on the market fell to 2.1 months in November, an eight-month low, from 2.3 months in October. That was well below the high of 4.6 months in May 2020 but above the all-time low of 1.9 months reached last December. These figures date back to January 1999.
U.S. Consumer Confidence Improved in Early December A monthly survey found that consumers’ concerns about inflation declined as did concerns about Covid-19.
Surging Inflation Has Workers Demanding Bigger Raises Higher prices, a worker shortage and a revitalized labor movement are bringing about the return of pay increases tied to inflation, known as cost-of-living adjustments, or COLAs.
(…) “While understandable from the point of view of workers, the danger of widespread use of COLAs is they institutionalize inflation and contribute to a wage-price spiral,” said Michael Walden, professor emeritus at North Carolina State University.
Such a wage-price spiral emerged in the 1970s and was broken only by tighter monetary policy, Mr. Walden said. A wage-price spiral could reoccur if the Federal Reserve doesn’t raise interest rates significantly more than it has signaled, he said.
Some economists see less reason to worry. COLA clauses were only a small contributor to higher inflation in the 1970s and 1980s, which was propelled by other factors including oil crises, said Mr. Katz, the Cornell economist.
Further, a much smaller share of workers are in a union today, and COLAs are rarer, reducing the likelihood of a wage-price spiral, Mr. Katz said. Roughly 6.3% of private sector workers belonged to a union last year, down from 16.8% in 1983, according to the Labor Department.
Last month, members of the United Auto Workers at Deere & Co. ended a five-week strike by ratifying a contract that, among other pay and benefit increases, would adjust wages every three months to match inflation.
Tuesday’s five-year contract between Kellogg and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union gives employees pay raises and quarterly cost-of-living adjustments. (…)
Union members aren’t the only workers getting pay increases tied to inflation.
Minimum-wage workers will see pay increases reflecting the higher cost of living in several states including Arizona, Colorado, Maine, Minnesota, Montana, Ohio, Washington and South Dakota, according to an analysis by the National Conference of State Legislatures.
In Arizona, for example, minimum-wage workers will see their hourly pay rise 5.3% to $12.80 at the start of next year from the current $12.15. The minimum wage rose 1.3% at the beginning of this year, reflecting lower inflation at the onset of the pandemic. (…)
A number of major union contracts expire next year, including between West Coast dockworkers and the companies that operate marine terminals. (…)
So far, nonunion workers have seen their wages rise faster than union workers whose pay increases tend to be set in multiyear contracts. In the third quarter, nonunion wages for private-sector workers rose 4.7% from the same quarter a year ago, compared with 3.5% for union wages, according to the Labor Department.
“If history is any guide, I expect we’ll see significant wage pressure in the union part,” said Gad Levanon, chief economist at the Conference Board.
Larry Summers Gets His ‘Told You So’ Moment on Inflation Summers Sees Risk of Recession Soon, ‘Secular Stagnation’ Later
(…) I did what I thought was a straightforward analysis of the situation. I looked at how short incomes were of trend. And I saw that they were about $25 billion or $30 billion short of trend each month. And that that number was declining. And then I saw that the proposed transfer payments and other stimulus represented close to $200 billion a month.
And so I thought if you were filling a $30 billion hole with $200 billion of spending, there was likely to be some overflow and that overflow would translate into inflation. I did the same calculation essentially, looking at GDP, and I saw a 2% or 3% GDP gap, met with about 15% of stimulus.
(…) people had not seen inflation in 40 years. So they assumed it was something you didn’t need to worry about, but that if you just did a straightforward analysis, demand was gonna run ahead of supply. And I have to say, I think that’s pretty much what we’ve seen.
I don’t think that the analyses suggesting that this is all bottlenecks are right, 90% of CPI components show inflation above 3%, more than 50% above the Fed’s target. If I look at what’s happening in the labor market, it looks to me like we’ve got substantial labor shortages that push wages up, but only with a lag because wages aren’t reset constantly. We’ve got substantial pressures in the housing market that have not manifested themselves at all, really, in the official price indices yet. So I think we’ve got a fairly serious inflationary situation that’s been growing for quite some time. (…)
I’m much more influenced by the experience of my own talking to businesses and even more people like those Bloomberg employees who spend their lives talking to companies, and they all say more or less the same thing. “We’re gonna have to push up wages because of labor shortages. And when we do, we have plenty of pricing power.”
And I guess I trust those anecdotes more than I trust econometric relationships estimated over periods when there’s been very little variation. We did have some months in 2019 with low unemployment and not extremely rapid wage pressure, but that’s one several-month experience in 20 years. I don’t think there’s any support in the data for the view the Fed took that the economy can enjoy 3.5% unemployment for multiple years with significantly declining inflation.
Indeed, the Fed’s forecasts call for unemployment below its estimates of the normal level, interest rates never reaching in the next few years its concept of the normal level and, nonetheless, continuous deceleration of inflation. That might happen. But it doesn’t seem to me that it is the most intuitive reading of our macroeconomic history. (…)
If I thought we could sustainably run the economy in a red-hot way, that would be a wonderful thing. But the consequence, and this is the excruciating lesson we learned in the 1970s, the consequence of an overheating economy is not merely elevated inflation, but constantly rising inflation. And that’s why my fear is that we are already reaching a point where it will be challenging to reduce inflation without giving rise to recession.
Should we do all kinds of things? Should we raise the minimum wage? Absolutely. Should we empower unions? Yes. But this kind of policy—there are no examples of successful inflationary policy that has worked out to the benefit of workers. And there are dozens of examples from the Labor Party in Britain in the 1970s to multiple Latin American experiences to our own experience in the ‘60s and ‘70s where it backfired with respect to the very people it was trying to help. (…)
I’m surprised by how low long-term interest rates are. That’s something I didn’t get right. I would have forecast larger increases in interest rates, given conditions. I think part of it is that markets are foreseeing that we will do what’s necessary to contain inflation and that process will be quite contractionary. And that’s part of what I think is being factored into the level of markets.
But I do think there’s a real chance that there will be a return to secular stagnation. (…) I’m really not sure what’s gonna come after this current episode. I’m certainly not confident that we’re gonna have sustained excess demand for many years. I think the challenge is that we’ve pumped up aggregate demand now, and then who knows how we’re gonna work our way through back to more normal levels of demand. (…)
Biden Extends Student-Loan Payment Pause After Virus Surges The move on Wednesday takes the moratorium on payments, interest and collections through May 1. The latest extension will help 41 million people save $5 billion per month.
China Cements Rare Earths Dominance With New Global Giant China formed a rare-earths giant by merging some key producers, creating a behemoth that will strengthen its control over the global industry it has dominated for decades.
(…) China controls most of the world’s mined output of rare earths, a broad group of 17 elements that are used in everything from smartphones to fighter jets, and has a stranglehold over processing. (…)
The State-owned Assets Supervision and Administration Commission will hold a 31.21% stake in the new group, while Chinalco, China Minmetals and Ganzhou Rare Earth Group will each own 20.33%, it said. (…)
The government also controls production, granting annual quotas to the firms. This year’s volume has been set at 168,000 tons. (…)
The country’s dominance of the sector has been an increasing concern. The little-known materials were thrust into the spotlight in 2019 when China considered export controls as part of its trade war with the U.S., which relies on the country for 80% of its imports. While ultimately no restrictions were ever implemented, it highlighted the risks of being dependent on one country and spurred a raft of announcements from Western economies pledging to boost their rare-earths independence. (…)
Rare earth prices have surged this year as demand outpaced supply, while a power shortage exacerbated disruptions and a broad rally in commodity prices increased production costs. Neodymium and praseodymium — two elements used in permanent magnets — have jumped to the highest in a decade.
Omicron Update: Dec 22 (Katelyn Jetelina)
Dr. Jetelina still provides the best accounts I can find:
Well, Omicron continues to show its colors across the globe with case rates surging far beyond what we’ve seen with any previous waves, like in Denmark and the UK. Other countries, like France, the United States, and Canada have a recent explosion of cases pointing to the beginning of their Omicron wave. Places that put in country-wide restrictions, like the Netherlands and Germany, have altered their Omicron path thus far.
It’s clear that Gauteng—Omicron’s epicenter—peaked. It looks like cases in South Africa, as a whole, also peaked.
But this peak is far more interesting than some may think, as it’s a sign that we are missing a fundamental piece of the Omicron puzzle. With R(t)=3, we would expect an attack rate of 90%, so we would expect Gauteng and South Africa to peak much higher. Scientists have offered several hypotheses:
Testing. South Africa’s test positivity continues to hover around 30%, which is very odd because usually this decreases before cases decrease. So this could mean that people aren’t bothering to get tested or South Africa has reached testing capacity.
Asymptomatic spread. Somewhat relatedly, the peak could mean there are far more asymptomatic cases that just aren’t detected. So there are far more “true” cases than the epi curves portray. I think this is the most likely scenario.
Secondary attack rate. Omicron could have a shorter generation time, so positive cases infect far less people than Delta. In other words, the secondary attack rate is much smaller. Data from the UK, though, shows household transmission higher with Omicron than Delta, so I’m not convinced this is a driving factor.
Susceptibility. Omicron is only spreading among certain levels of immunity and/or susceptibility. A running hypothesis is that Omicron and Delta will co-exist with different paths: Omicron will spread through immune evasion and come and go, while Delta could persist onward.
Behaviors. Behaviors of people drastically changed due to increasing cases. While, as far as I can tell, national policies on the ground haven’t drastically changed in South Africa, people did go on summer holiday. As South African scientists warned, we need to compare the South African Omicron wave to Beta (not Delta) to account for seasonality and human behavior.
Network effects. This plays some sort of role, too (and I think the most interesting). As people see their regular contacts and these networks reassert themselves, Omicron runs out of places to go.
Nonetheless, South Africa showed us that Omicron spread incredibly quickly, and we will continue to see this rate of spread across the globe.
South Africa’s hospitalizations remain about 50% of what they were for the Delta wave. Deaths continue to increase, but also much, much lower than before. Is this because immunity is working or because Omicron is less severe? We don’t know yet.
But an important preprint was released yesterday describing Omicron hospitalizations in South Africa. There was a lot in this paper, but, to me, the following was the biggest finding: Once someone got to the hospital, the odds of disease becoming severe was the same as Delta. So if the immune system was breached, Omicron did the same damage as Delta. This is consistent with another robust analysis of hospitalizations from the UK that found Omicron is not less severe than Delta.
On the other hand, lab data is showing that there are certainly physiological differences between Omicron and Delta disease processes (go here for more great details). It will be weeks or months until data crystallizes and we have a clear picture of Omicron severity. What all this means for hospitalizations and deaths in places like the United States remains unknown.
Omicron became the dominant variant in just two short weeks and now accounts for more than 73% of cases in the United States now. By next week Omicron could easily account for 100% of cases. Will Omicron completely overtake Delta or will Delta continue its path among some groups? We should get clarity on this soon.
With more Omicron will come more cases. The Northeast has, by far, the most cases right now. Washington DC is the leader (134 cases per 100,000) in which cases have increased 440% in the past two weeks. This is followed by New York City with 121 cases per 100K and a 342% increase.
The state leader is Rhode Island (118 per 100K) followed by New York (100 per 100K) and New Hampshire (88 per 100K). Hawaii (+557%), Florida (+371%), Georgia (+139%), Louisiana (+132%), and Texas (+113%) have the fastest 14-day case growth though.
Nationwide hospitalizations are only up a modest 13% and deaths continue to remain “low” at 1,351 deaths per day. But severe disease patterns lag cases 3-4 weeks, so we will see what happens in a few weeks. While I expect an uptick, I certainly don’t think we will reach levels like we saw in the past thanks to our vaccines and adaptive immune systems. It’s noteworthy, though, that the first Omicron death was reported this week in Houston among a male aged 50-60 years old who previously recovered from COVID19. Do not rely on previous infections to get you through this Omicron wave.
Throughout the pandemic, the CDC has looked to a consortium of scientific teams across the country to model projections. Recently the teams presented their Omicron projections. One of these teams, University of Texas, made their modeling public over the weekend. Their report looked at 16 omicron scenarios that varied three variables:
How quickly Omicron spreads
How easily Omicron evades immunity, and
How quickly we’re able to roll out booster shots
The graphs below display their results for cases, hospitalizations, and deaths. The left and right graphs correspond to the low and high severity scenarios, respectively. Briefly:
Best case scenario (purple line below; scenario B): By mid-January 190,000 people catch the virus every day—about double what the case rate is today. In this scenario, Omicron would lead to 10,500 hospitalizations per day (a few thousand more than today) and 1,400 deaths (a few hundred more than today).
Worst case scenario (pink line; scenario C): By January more than 500,000 people would catch the virus every day, which is more than double the peak reached last winter. 30,000 people would be hospitalized per day and 3,900 would die every day. This scenario is the most pessimistic and, in my opinion, won’t happen for two reasons:
This model assumes that Omicron is more severe than Delta. This is not the case; in fact, there is considerable debate as to whether Omicron is less severe.
This model also assumes that there is no behavior change, which is also not realistic. People change their behaviors when cases increase, whether they realize it or not.
So, like everything in epidemiology, the “truth” lies somewhere between the best and worse case scenario in the United States.
BoostersNot nearly enough people have their boosters in the United States: 32% of eligible Americans and 55% of those 65+. Omicron has motivated people to get boosted, though. Omicron is convincing 1 in 8 unvaccinated to change their mind, too.
One thing that’s increasingly obvious is how important boosters be in our projections. While we will start seeing an uptick in cases, we will continue to see a distinct pattern between unvaccinated, vaccinated, and boosted. Massachusetts has a great graph illustrating this effect so far.
(MA DPH)
We also really need guidance for the J&J folks. A new study showed the effectiveness of boosters with vaccines distributed in the United States. While 1 mRNA booster after JJ helps, it doesn’t help as much as the 3 mRNA series. In other words, it looks JJ people need 2 mRNA shots for full neutralizing antibody protection instead of just one.
But neutralizing antibodies isn’t the only line of defense. Another study found T-cells among those who received one or two doses of the J&J only dropped with Omicron by 30%. So, people with 1 mRNA booster after JJ should largely stay out of the hospital. I’m really hoping it doesn’t take J&J, the FDA and/or the CDC too long to comment on this. We need guidance now.
As expected, Omicron is taking hold in the United States and case rates will start skyrocketing across the country. What this means for our hospital systems is yet to be seen. As with everything in public health, we prepare for the worst and hope for the best.
Three Sinovac Doses Fail to Protect Against Omicron in Study
Two doses and a booster of the Covid-19 vaccine made by China’s Sinovac Biotech Ltd., one of the most widely used in the world, didn’t produce sufficient levels of neutralizing antibodies to protect against the omicron variant, a laboratory study found.
The research suggests that people who’ve received Sinovac’s shot, known as CoronaVac, should seek out a different vaccine for their booster: Getting Germany’s BioNTech SE’s messenger RNA as a third dose saw those previously fully vaccinated with CoronaVac significantly improve in protective levels of antibodies against omicron, according to the study from the University of Hong Kong and The Chinese University of Hong Kong.
Two doses of the BioNTech shot, known as Comirnaty, was also insufficient, though adding a booster of the same type raised protection to adequate levels, the researchers said in a statement.
While much is still unknown about how Sinovac’s shot holds up to omicron — including how T cells, the immune system’s weapon against virus-infected cells, will respond — the initial results are a blow to those who have received CoronaVac. There have been more than 2.3 billion doses of the shot produced and shipped out, mostly in China and the developing world. (…)
Last week, Sinovac released lab studies saying 94% of people getting three doses generated neutralizing antibodies, though it didn’t say what level. The Hong Kong researchers set a threshold for what they considered a sufficient level of antibodies for protection based on earlier studies published in the journal Nature Medicine. (…)
- China Locks Down City of 13 Million in Protracted Covid War China locked down the western city of Xi’an on Thursday to stamp out a persistent Covid outbreak, its biggest such move since the pandemic started in Wuhan, underscoring how the country’s zero-tolerance approach hasn’t allowed it to move on since the virus emerged nearly two years ago.
(…) While local authorities have in the past used targeted lockdowns to slow outbreaks in smaller places in China, no major city has been put under mass restrictions since Wuhan in early 2020. It has a similar population size as Xi’an.
Officials in Beijing on Thursday acknowledged that there will inevitably be Covid infections at the winter Olympic Games, which are set to begin in early February. They urged all participants to get booster shots to better protect against the virus, especially those caused by the immunity-evading omicron variant. (…)
Meanwhile, China has found four omicron infections from people returning from overseas. It hasn’t yet seen the far more infectious strain spread in the local community. Authorities have vowed to tighten restrictions at borders and ports as they see a mounting risk of infection seeping in from overseas.
Intel Apologizes to China Customers Over Xinjiang Stance
Intel Corp. apologized after its opposition to Xinjiang labor sparked a backlash against the U.S. chipmaker in China, highlighting how multinational companies are increasingly getting caught up in a geopolitical spat between two global powers over issues such as human rights.
The chipmaker sent a letter asking suppliers not to use any labor or products sourced from Xinjiang “in order to ensure compliance with U.S. legal requirements,” it said in a WeChat statement Thursday. The company had no other intention and did not mean to express a position on the matter, according to the statement. (…)
Intel’s apology comes after social media users this week seized on the issue to criticize the U.S. firm. The lead singer of TFBoys — one of China’s most popular boy bands — Wang Junkai said it will terminate all partnerships with the U.S. company immediately, according to a statement by his studio Wednesday. The studio said it had repeatedly asked Intel to “express a correct stance,” but the chipmaker had yet to respond.
“National interests trump everything!” the studio wrote in its post. (…)
Intel’s continuing access to the Chinese market is crucial to its growth as it struggles with increasing competition. China is the largest consumer of semiconductors in general and the biggest market place for personal computers, the main destination for Intel’s microprocessors. The chipmaker derived more than a quarter of its 2020 revenue from the country. (…)
The Communist Party’s Global Times cited unnamed analysts as warning that while no official measures had been taken by China, the severing of ties by the pop idol “serves as a fresh warning siren” to Intel and other foreign companies that wanted to profit from the Chinese market, but were at the same time seeking to undermine the country’s core interests.
