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Another Month Closer To Global Recession

We always have to keep in mind that the major economic accounts perform poorly during inflections. Europe in early 2018, for example, was supposed to have…

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We always have to keep in mind that the major economic accounts perform poorly during inflections. Europe in early 2018, for example, was supposed to have been just booming only to have run right into the brick wall that was Euro$ #4. Statistics like Real GDP picked up the downshift, but didn’t quite nail the degree to which the European economy had stumbled.

Initially, Eurostat calculated the quarterly increase for Q1 2018 real GDP to have been +0.282% (annual rate of 1.13%), substantially less than the 0.779% (3.15% annual rate) previously in Q4 2017. It took a couple years for the European bean counters to eventually realize there was basically no increase in output those crucial three months.

And while Q2 GDP was revised higher than originally, Q3 like Q1 was also reduced down to practically nothing. The new figures didn’t put Europe into a “technical recession” (there really isn’t any such thing), yet for all practical purposes the entire economic year of 2018 came to be figured as it truly had been for everyone living through it: a complete bust.


Eurostat would have as much if not more trouble the following year, eventually downgraded real GDP numbers in Q3 and Q4 2019 to reflect how its full economy had gone into recession (pre-COVID) maybe even as early as August or September (as global bond markets, and currencies, had contemporaneously priced).

The problem is usually the trend-cycle component subjectively added to smooth out higher frequency variations. Other data, such as PMIs like S&P Global’s (formerly IHS Markit), or Germany’s ZEW, had caught on to the economic inflection from its outset in real time. Given the limitations of GDP accounting and survey methodology, it would only be a matter of time before the latter caught up to the former.

In 2022, the European economy is again grappling with the serious prospects for recession. Real GDP is already weak and has been over the prior two quarters before the current one. With PMIs having already turned downward some time ago, what might the next (few) benchmark revisions further reveal about where output (GDP) actually could already be?



It’s not so much the level of these sentiment surveys as it is the plain direction and how that direction is following along the path surmised in advance by the global marketplace – including, for once, stocks. S&P Global reported earlier today that its May 2022 manufacturing PMI for Europe dropped to 54.4 from April’s 55.5.

While that’s sounds relatively decent, a level that is often characterized as “robust”, it’s the lowest since September 2020. Furthermore, both markets and the PMI internals point to more erosion and declines ahead; the forward-looking new orders category just dropped under 50 for the first time since June 2020.

At the same time, S&P Global’s Services PMI for Europe was stuck around the 55 level in May for the fourth consecutive month. So much hype and what should have been a true reopening bounce after the European omicron panic, this limited upside only adds more to further downside potential ahead once the bounce fades.

Quite simply, not looking all the great in Europe. Therefore, euro.


But the dollar being up against the European currency, like the dollar’s value higher against any currency, doesn’t indicate better conditions or prospects here in the US. On the contrary, rising dollar means bad everywhere for everyone; the only variances are degree and timing.

As it pertains to timing, the data suggests there may not be as much difference this time (Euro$ #5) compared to last time (Euro$ #4). Whereas in 2018 Europe fell down immediately and it took America almost a year to blunder, too, there does appear to be more synchroneity in 2022.

According to S&P Global’s just-released PMIs for the United States, manufacturing is somewhat better than Europe but still heading in the wrong direction – the manufacturing index at 57.5 in May, down from 59.2 in April though still higher (but suspiciously not much) than omicron-affected January’s 55.5.

And there’s a growing catalog of data which puts this S&P number as an outlier among the goods economy outlier. The ISM’s manufacturing, for instance, much lower already in April. Then there is the recent rash of Fed regional manufacturing surveys that have, to put it mildly, crashed. The Empire and Philly surveys already this month, and today Richmond.


The last of those was down sharply, its headline now -9 from +14 last month, lowest since May 2020 (a recurring theme here). More important, New Orders in Richmond -16 from +6.

Services here in America aren’t faring nearly as well regardless, no surprise in these sentiment figures with GDP or PCE consistently pointing to lack of recovery and ongoing weakness there. The US service sector was wrecked by the combination of coronavirus overreaction as well as the lingering liquidity leftovers from GFC2.

S&P Global put its services index at just 53.5, a seriously low number, therefore the composite not much more at 53.8.



The whole range of global data indicates exactly what markets have been pricing the entire year, since the beginning of Euro$ #5. The more time passes, the more most everything continues in this – not the inflationary – direction.

That direction is firmly toward recession, the very high probability already priced in (inversions). And if the 2-year UST, of all singular measures, really is breaking down as it sure seems to be (see: today’s trading) the whole world might be a lot closer to one still.



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Economics

The One Housing Chart That Shows A ‘Buyer’s Market’ Has Returned

The One Housing Chart That Shows A ‘Buyer’s Market’ Has Returned

The red hot pandemic-era housing market is cooling as historically tight…

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The One Housing Chart That Shows A 'Buyer's Market' Has Returned

The red hot pandemic-era housing market is cooling as historically tight available inventory shows signs of reversing. 

An affordability crisis has removed millions of new home buyers as the number of active US listings soared 18.7% in June from a year earlier, the most significant increase in Realtor.com's data going back to 2017, according to Bloomberg. The days of insane bidding wars, waiving home inspections, and putting in an offer 20% or more over the list price appear to be over. In other words, a buyer's market could be emerging. 

"While we anticipate that more inventory will eventually cool the feverish pace of competition, the typical buyer has yet to see meaningful relief from quick-selling homes and record-high asking prices," said Danielle Hale, chief economist for Realtor.com. 

Austin, Texas; Phoenix, Arizona; and Raleigh, North Carolina saw active listings more than double from a year ago. Nashville, Tennessee, active listings jumped 86%, and 72% in the Riverside, California. 

The Federal Reserve's most aggressive tightening campaign sent the 30-year fixed-loan mortgage rate from 3% to over 6% this year (back in March, we warned coming rate explosion would trigger a housing affordability crisis), removing millions of new home buyers who can't afford the cost of homeownership as the median existing-home sales price was around $407k in May. 

Even though inventory is historically tight, supply is expected to increase in markets across the country as demand for loan applications among prospective buyers slumps. Fewer buyers equal more inventory. 

The takeaway is that inventory is rising as homes stay on the market longer because demand evaporated thanks to the housing affordability crisis -- this could mean a housing top is nearing. 

Tyler Durden Thu, 06/30/2022 - 18:50

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Economics

States Need To Avoid ‘Cures’ That Can Make Inflation Worse

States Need To Avoid ‘Cures’ That Can Make Inflation Worse

Authored by Regina M. Egea and Danielle Zanzalari via RealClearPolicy.com,

Across…

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States Need To Avoid 'Cures' That Can Make Inflation Worse

Authored by Regina M. Egea and Danielle Zanzalari via RealClearPolicy.com,

Across the United States, state governments are awash in cash. In a sharp contrast, American taxpayers are enduring a rate of inflation unseen in four decades, with the costs of everything from food to gasoline at record highs.

In our home state of New Jersey, Trenton is looking at an unprecedented surplus of $8 billion through a combination of increased tax revenue, federal pandemic aid and borrowing.

A natural impulse among residents and policymakers is to offer residents “relief” in the form of rebate checks.

The reality is that relying exclusively on rebates or direct cash transfers to individuals will only lead to more inflation as this puts more money in consumers’ hands exacerbating the same problem as today - too many dollars chasing too few goods.

Rather, it is prudent that states focus on long-term investment and responsible budgeting to ensure economic growth now and in the future. This is especially important in high tax, big spending states due to the greater flexibility in work arrangements that have exposed the reality that wealth is mobile.

With more residents fleeing high tax states to low tax states, states will need to reevaluate their tax and regulatory climate to stay competitive. 

Regulation can raise the costs for consumers and slow job growth. A series of studies shows the regulation raises prices and worsens poverty.

Working with local governments to revisit restrictive laws that contribute to higher housing prices, such as building height restrictions and zoning rules, as well as removing unnecessary restrictions on business operations will lead to more economic growth.

Another way states can aid productivity and long-term economic growth with their temporary budget surplus, is to fund training programs for middle-skilled jobs.

Nearly every industry has experienced labor shortages and that reality is especially acute in trades like auto, refrigeration, HVAC, electrical, welding, and manufacturing.

States can invest in these skills through high school and vocational school programs. With college borrowing costs astronomically high, this encourages individuals to pursue careers that are lucrative and budget friendly, as well as fill the over 75,000 job openings that our state of New Jersey is projected to need in just a few years.

To further long-term economic growth many states should also concentrate on fixing their unfunded pension liabilities for public employees. This impacts red and blue states alike, with massive liabilities in California ($1.53 trillion), Illinois ($533.72 billion), Texas ($529.70 billion), New York ($508.70 billion) and Ohio ($429.53 billion). Here in New Jersey, our liability is nearly $40,000 for every resident of the state, which can dramatically deter future growth. Beyond using some of states’ budget surplus to shore up pension liabilities, states should move public employees to defined contribution plans, which are used by more than 100 million Americans. These are found to have better investment returns than state-wide pension plans and cost taxpayers less.

Our final recommendation is perhaps our most important: Save for a rainy day. If the U.S. economy enters into a recession, this will mean fewer jobs and less tax revenue for states. To prepare for the future when states again face a budget shortfall, which may be sooner than we think, states should follow best practices of reserving 10% of their budget in a rainy day fund, to sustain essential programs should a downturn occur in the future.

As state leaders consider their budgets, they should focus on long-term economic growth initiatives. Proposals like funding middle-skilled job trainings ensure workers are ready for the next decade, whereas eliminating unnecessary regulations and focusing on pro-growth tax reforms encourages residents to build businesses and create jobs. Lastly, taking care of state finances by properly funding state employees’ retirement plans and saving for a rainy day will ensure that no state is left behind in the next economic downturn.

Tyler Durden Thu, 06/30/2022 - 17:50

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Spread & Containment

Aging-US | Time makes histone H3 modifications drift in mouse liver

BUFFALO, NY- June 30, 2022 – A new research paper was published in Aging (Aging-US) on the cover of Volume 14, Issue 12, entitled, “Time makes histone…

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BUFFALO, NY- June 30, 2022 – A new research paper was published in Aging (Aging-US) on the cover of Volume 14, Issue 12, entitled, “Time makes histone H3 modifications drift in mouse liver.”

Credit: Hillje et al.

BUFFALO, NY- June 30, 2022 – A new research paper was published in Aging (Aging-US) on the cover of Volume 14, Issue 12, entitled, “Time makes histone H3 modifications drift in mouse liver.”

Aging is known to involve epigenetic histone modifications, which are associated with transcriptional changes, occurring throughout the entire lifespan of an individual.

“So far, no study discloses any drift of histone marks in mammals which is time-dependent or influenced by pro-longevity caloric restriction treatment.”

To detect the epigenetic drift of time passing, researchers—from Istituto di Ricovero e Cura a Carattere Scientifico, University of Urbino ‘Carlo Bo’, University of Milan, and University of Padua—determined the genome-wide distributions of mono- and tri-methylated lysine 4 and acetylated and tri-methylated lysine 27 of histone H3 in the livers of healthy 3, 6 and 12 months old C57BL/6 mice. 

“In this study, we used chromatin immunoprecipitation sequencing technology to acquire 108 high-resolution profiles of H3K4me3, H3K4me1, H3K27me3 and H3K27ac from the livers of mice aged between 3 months and 12 months and fed 30% caloric restriction diet (CR) or standard diet (SD).”

The comparison of different age profiles of histone H3 marks revealed global redistribution of histone H3 modifications with time, in particular in intergenic regions and near transcription start sites, as well as altered correlation between the profiles of different histone modifications. Moreover, feeding mice with caloric restriction diet, a treatment known to retard aging, reduced the extent of changes occurring during the first year of life in these genomic regions.

“In conclusion, while our data do not establish that the observed changes in H3 modification are causally involved in aging, they indicate age, buffered by caloric restriction, releases the histone H3 marking process of transcriptional suppression in gene desert regions of mouse liver genome most of which remain to be functionally understood.”

DOI: https://doi.org/10.18632/aging.204107 

Corresponding Author: Marco Giorgio – marco.giorgio@unipd.it 

Keywords: epigenetics, aging, histones, ChIP-seq, diet

Sign up for free Altmetric alerts about this article:  https://aging.altmetric.com/details/email_updates?id=10.18632%2Faging.204107

About Aging-US:

Launched in 2009, Aging (Aging-US) publishes papers of general interest and biological significance in all fields of aging research and age-related diseases, including cancer—and now, with a special focus on COVID-19 vulnerability as an age-dependent syndrome. Topics in Aging go beyond traditional gerontology, including, but not limited to, cellular and molecular biology, human age-related diseases, pathology in model organisms, signal transduction pathways (e.g., p53, sirtuins, and PI-3K/AKT/mTOR, among others), and approaches to modulating these signaling pathways.

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Orchard Park, NY 14127
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