Philadelphia Fed manufacturing survey, select components, chart by Mish

Please consider the Philadelphia Fed February 2023 Manufacturing Business Outlook Survey

Key Points 

• The diffusion index for current activity fell from a reading of -8.9 last month to -24.3 this month, its sixth consecutive negative reading and lowest reading since May 2020.
• Excluding the Covid pandemic, the activity index is the lowest since April 2009.
• Inventories and employment are up.
• New orders are -13.6.
• Unfilled orders are -17.0. 

This is a disaster. Manufacturers increased inventories for orders that did not arrive.

New orders and unfilled orders are down, but employment is up. This divergence can't last. 

Diffusion indexes have flaws because direction is more important than magnitude. For example, one business hiring 10 workers offsets another laying off 250 workers. 

Such flaws run in both directions. 

Nonetheless, long-term trends suggest major problems.

Philadelphia Fed Manufacturing Survey Since 2007

These are the worse set of numbers since April 2009. Housing and Industrial production were additional disasters.

Nonetheless, someone repeated the meme of the day to me today: We are not in recession because jobs are strong.

Housing Starts Drop Another 4.5 Percent to a New Post-Covid Low

Earlier today I noted Housing Starts Drop Another 4.5 Percent to a New Post-Covid Low.

Industrial Production Much Weaker Than Expected, With Negative Revisions Too

Yesterday, I noted Industrial Production Much Weaker Than Expected, With Negative Revisions Too

Industrial production was flat in January vs an expected 0.5 percent gain. Negative numbers make the miss worse than it looks although manufacturing did rebound.

Let's see what those February manufacturing numbers look like. Meanwhile, please note that manufacturing peaked four months ago despite the bounce.

Consumers Go on Huge Retail Sales Shopping Spree in January After Months of Weakness

On the positive side, Consumers Go on Huge Retail Sales Shopping Spree in January After Months of Weakness

That not jobs is the strongest reason to think we are just on the verge of recession and not in one. 

But seasonal adjustments lately have been haywire in a number of areas. And negative revisions have run rampant nearly everywhere.

Major Jobs Discrepancy Continues

Jobs are nowhere near as strong as they look. For discussion, please see Unemployment Rate Hits New Low of 3.4 Percent as Jobs and Employment Jump But...

Jobs and employment rose more than expected in January. But because of massive revisions, the BLS cautions all of its household data is full of errors.

Payrolls vs Employment Since May 2022

• Nonfarm Payrolls: +3,031,000
• Employment Level: +1,893,000
• Full Time Employment: -166,000

I expect major negative revisions in jobs. Regardless, It's clear we are adding part-time but not full-time employment.

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