JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

FLASH UPDATE

March 29, 2009

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Broad Money Growth Still Slowing

March Employment Conditions Deteriorated Sharply

March Jobs Number Open to Positive Massaging

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PLEASE NOTE: Due to unexpected travel needs, the full newsletter has been pushed back until next week. The general outlook is unchanged and any needed intervening communications will be in the form of Flash Updates (one is scheduled for Friday, April 3rd, following the release of the March employment report) or an Alert. Also planned in April is an updated and expanded Hyperinflation Special Report. Details will follow with the newsletter. 

– Best wishes to all, John Williams

Annual M3 Growth Still Slowing. With M3 components that are reported on a weekly basis (M2, institutional money funds and partial large time deposits) updated through March 16/18, annual growth in the SGS-Ongoing M3 measure appears set for some further slowing, likely to ease from February’s 9.9% pace of year-to-year growth. Impact from the Fed’s recently announced increase in debt monetization, however, has not impacted these numbers, yet.

In terms of bank reserves and the monetary base for the two weeks ended March 25th, though, the pace of annual growth has picked up again. Year-to-year change in the St. Louis Fed’s Adjusted Monetary Base (seasonally adjusted) rose to 99.5% from 82.6% in the two-week period ended March 11th. Consisting primarily of currency in circulation and bank reserves, the monetary base is the Fed’s primary tool for attempting to control growth in the money supply. The current annual growth upturn was due to higher growth in excess reserves, while growth in required reserves (related to some depository accounts) slowed.

The Fed’s efforts at debasing the U.S. dollar (creating inflation) eventually will meet with success, and it will be reflected early on in a weakening of the exchange rate for the U.S. currency, along with rising prices for oil and other dollar-denominated commodities.

Week Ahead: Employment/Unemployment: The March employment report is due for release on Friday (April 3rd), with a Flash Update following. Consensus expectations (Briefing.com) are running around a 656,000 decline for March nonfarm payrolls (February declined 651,000), with unemployment expected to rise to 8.5% from 8.1% in January. While the unemployment expectations are not unreasonable, the jobs loss should top 750,000, barring massaged results. 

Given recent financial-market turmoil and the Administration’s political needs, a reported jobs loss smaller than February’s 651,000 probably would be preferred on both fronts. There has been a growing trend in recent economic reporting of suspect positive surprises in month-to-month change against consensus expectations. Irrespective of such a possibility in the upcoming employment report, the annual contraction in employment should continue to deepen.

Other factors have indicated that March’s employment environment deteriorated versus February. Consider that each of the following series is a leading indicator to upcoming March and April employment/unemployment reporting:

- February newspaper help-wanted advertising (Conference Board) held at its historic low level for a third month, with year-to-year change on a three-month moving average basis down by a record 44.6%. The deepening annual fall-off in online help-wanted advertising (Conference Board) also continued, down 36.0% year-to-year in March, versus an annual decline of 34.3% in February. 

- New claims for unemployment insurance have continued to surge, with the 17-week moving average up by 71.1% as of March 21st (the highest since the 1975 recession), versus 64.7% as of February 21st.

- Employment readings continued in the deepest recession territories for the February manufacturing and non-manufacturing purchasing managers surveys. 

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