Economic data

Dec Housing Starts totaled 657k annualized vs 685k in Nov and was 23k less than expected but the breakdown was mixed. Single family starts rose by 20k to the most since April ’10 but multi family starts fell by 48k to a 4 month low, reversing the recent solid trend in this area. Building Permits overall were in line with estimates as single family permits rose by 8k while multi family permits fell by 9k. Multi family permits are still solid and will be the area of growth in home construction as they are just off their best level going back to Oct ’08. With respect to construction jobs, the amount of homes completed again is below the amount of new starts thus providing opportunities or at least stabilization in this battered part of the labor market.

Dec CPI was flat m/o/m headline and up .1% ex food and energy vs expectations of up .1% for both. The y/o/y gain is 3.0% headline and 2.2% core. The headline gain is now above 3% for 9 straight months and remains still above the entire US Treasury yield curve. The core rate y/o/y gain matches the highest since Oct ’08. A main influence on CPI, Owners Equivalent Rent, was up .2% and actual rents of one’s primary residence was up .3% as vacancy rates fall and landlords continue to gain pricing power. Apparel prices fell .1% after the .6% gain in Nov. Vehicle prices fell led by a decline in used car and truck prices. Commodity prices overall were down .3%. Bottom line, the Fed will continue to think inflation is benign to give them license to continue their extraordinary policies but the CPI index rose 3% in 2011 and that is almost double the amount that average hourly earnings rose (1.6% gain). Thus, the standard of living of the average American went down.

Initial Jobless Claims totaled 352k, down 50k from last week and well below expectations of 384k BUT the Labor Dept is saying that “volatility is fairly common this time of year” due to the MLK holiday where many states had to estimate their claims figures for the Labor Dept. The 4 week average which will smooth out the strange seasonal adjustments fell to 379k from 383k. Continuing Claims, delayed by a week, also fell a sharp 215k. Extended Benefits, delayed by two weeks, rose by 105k however. Bottom line, as stated, given seasonal adjustment difficulties this time of the year today’s figure must be taken with a grain of salt.

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