Economics Update

It's the last day of the year, and we are finally getting a picture of how retail did during the holiday season, and it is not pretty.

ShopperTrak is revising its original holiday sales figures downward, from a sales increase of 0.1% and a traffic drop of 9.9%. which was already pretty grim, to a sales decrease of 2.3% with a 16% drop in traffic.

The estimates now are that 2009 is not going to be good either and that over ¼ of all retailers are at significant risk for bankruptcy (see graph pr0n above), which will hose suppliers too.

The unemployment claims numbers from last week were better than recent reports, 492,000 new applications, down 94,000 from the last week's 586,000, and the 4 week moving average fell by about 1%.

I would note, however, that there are two things that make this news less good than it sounds, first, we are talking about the week of Christmas which means that everything was shut down on last Thursday, and, perhaps more significantly, continuing jobless claims continued to rise, hitting a 26 year high of 4.5 million.

Real estate still appears grim, with Manhattan office rents down about 25% (h/t Calculated Risk), though mortgage application activity remains at a 5 year high.

My real question though would be as to the number of mortgages granted, not the number of applications, which are likely multiple refi applications driven by even lower mortgage rates.

Additionally, the Federal reserve is to start buying mortgage backed securities, so they are going even deeper into the sh&%pile.

In currency, the dollar is up, and infact it's up against the Euro this year, the first time 2005 that this has happened.

I guess that investors still think of the US Dollar as a safe haven, though the same cannot be said about the Ruble, which is down again.

In the stock market the VIX, the Chicago Board Options Exchange Volatility Index, fell below 40 for the first time since October 2, to 39.9, which indicates that traders are a bit less twitchy.

But that's only a bit, because before the Lehman collapse, it was around 25, and a year and a half ago, it hung around 10-15.

In energy, oil rose about 5½ bucks/bbl, to settle at $44.60/bbl.