Payroll Employment and Seasonal Factors
Posted:2015-08-06 15:10:00 UTC-04:00
The seasonal adjustment for July is a little tricky, so this might be a good time to review the seasonal pattern for employment.
Even in the best of years there are a significant number of jobs lost in the months of January and July. In 1994, when the economy added almost 3.9 million jobs, there were 2.25 million lost in January 1994 Not Seasonally Adjusted (NSA), and almost 1 million payroll jobs lost in July of that year (NSA).
Last year, in July 2014, 1.11 million total jobs were lost (NSA), however all of the decline in non-farm payrolls NSA was from the public sector (teacher layoffs). Usually those teachers return to the payrolls in September and early October. Since this happens every year, the BLS applies a seasonal adjustment before reporting the headline number.
Although there were 1.11 million jobs lost in July 2014 (NSA), after the seasonal adjustment, the BLS reported 209 thousand non-farm jobs were added (SA) .
For the private sector, there are always a large number of jobs lost in January (retailers and others cutting jobs) and some jobs lost in September (summer hires let go).
Click on graph for larger image.
This graph shows the seasonal pattern since 2002 for both total non-farm jobs and private sector only payroll jobs. Notice the large spike down every January.
Also notice the second large spike down every July for public sector jobs (teachers).
In July 2014, there are about 1.3 million teacher jobs lost (NSA), and that was seasonally adjusted to a 5 thousand job gain. This will be something to check in the jobs report tomorrow.
The key point is this series needs a seasonal adjustment, but the adjustment can be tricky.
Preview: Employment Report for July
Posted:2015-08-06 12:16:15 UTC-04:00
On Friday at 8:30 AM ET, the BLS will release the employment report for July. The consensus, according to Bloomberg, is for an increase of 212,000 non-farm payroll jobs in July (with a range of estimates between 210,000 to 262,000), and for the unemployment rate to be unchanged at 5.3%.
The BLS reported 223,000 jobs added in June.
Here is a summary of recent data:
• The ADP employment report showed an increase of 185,000 private sector payroll jobs in July. This was below expectations of 210,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth below expectations.
• The ISM manufacturing employment index decreased in July to 52.7%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs decreased about 5,000 in July. The ADP report indicated a 2,000 increase for manufacturing jobs.
The ISM non-manufacturing employment index increased in July to 59.6%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 330,000 in July. This employment reading was unusually strong, and the correlation might not be as useful.
Combined, the ISM indexes suggests employment gains of 325,000. This suggests employment growth well above expectations.
• Initial weekly unemployment claims averaged close to 275,000 in July, about the same as in June. For the BLS reference week (includes the 12th of the month), initial claims were at 255,000; down from 268,000 during the reference week in June.
This suggests a lower level of layoffs in July.
• The final July University of Michigan consumer sentiment index decreased to 93.1 from the June reading of 96.1. Sentiment is frequently coincident with changes in the labor market, but there are other factors too - like gasoline prices.
• On small business hiring: The small business index from Intuit showed a 10,000 increase in small business employment in July, lower than in June. From Intuit: Small Businesses Employment Increases in June
Small business employment rose by 10,000 jobs in July, an annual rate of 0.5 percent. However, Susan Woodward, the economist who works with Intuit to produce the indexes, said this is slower than the growth rate of 1.0 percent over the past year.
• Trim Tabs reported that the U.S. economy added 268,000 jobs in July. Note: "TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 142 million U.S. workers subject to withholding."
“Small business employment is still 2.3 percent below its pre-recession peak,” said Woodward. “The continued low level of construction employment, which is 17.5 percent below the pre-recession peak in mid-2006, accounts for the slow rate of small business recovery.
“A sign of continuing recovery in small business activity is the hiring rate, which has risen slowly but steadily since July 2009. An increase in the hiring rate reflects improved opportunities for workers,” Woodward said.
• Conclusion: Unfortunately none of the indicators above is very good at predicting the initial BLS employment report. And the data was mixed.
There were several weaker indicators such the ADP report, ISM manufacturing, and small business hiring.
The ISM non-manufacturing, TrimTabs, and the low level of unemployment claims for the BLS reference week, all suggest a stronger report.
Historically the initial report for July tends to be weak, and I'll take the under on the consensus this month.
Weekly Initial Unemployment Claims increased to 270,000
Posted:2015-08-06 08:36:55 UTC-04:00
The DOL reported:
In the week ending August 1, the advance figure for seasonally adjusted initial claims was 270,000, an increase of 3,000 from the previous week's unrevised level of 267,000. The 4-week moving average was 268,250, a decrease of 6,500 from the previous week's unrevised average of 274,750.
The previous week was unrevised.
There were no special factors impacting this week's initial claims.
The following graph shows the 4-week moving average of weekly claims since 1971.
Click on graph for larger image.
The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 268,250.
This was lower than the consensus forecast of 273,000, and the low level of the 4-week average suggests few layoffs.
Q2 2015 GDP Details on Residential and Commercial Real Estate
Posted:2015-08-05 20:01:00 UTC-04:00
The BEA released the underlying details for the Q2 advance GDP report today.
Last Thursday, the BEA reported that investment in non-residential structures decreased slightly in Q2.
The decline was due to less investment in petroleum exploration. Investment in petroleum and natural gas exploration declined from a $112.5 billion annual rate in Q1 to a $81.1 billion annual rate in Q2.
Excluding petroleum, non-residential investment in structures increased at a 6.8% annual rate in Q2 (solid growth).
Click on graph for larger image.
The first graph shows investment in offices, malls and lodging as a percent of GDP. Office, mall and lodging investment has increased a little recently, but from a very low level.
Investment in offices increased in Q2, is down about 33% from the recent peak (as a percent of GDP) and increasing from a very low level - and is still below the lows for previous recessions (as percent of GDP). .
Investment in multimerchandise shopping structures (malls) peaked in 2007 and is down about 54% from the peak. The vacancy rate for malls is still very high, so investment will probably stay low for some time.
Lodging investment increased in Q2, and with the hotel occupancy rate near record levels, it is likely that hotel investment will increase further in the near future. Lodging investment peaked at 0.31% of GDP in Q3 2008 and is down about 57%.
The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).
Investment in single family structures is now back to being the top category for residential investment. Home improvement was the top category for twenty consecutive quarters following the housing bust ... but now investment in single family structures has been back on top for the last 7 quarters and will probably stay there for a long time.
However - even though investment in single family structures has increased from the bottom - single family investment is still very low, and still below the bottom for previous recessions as a percent of GDP. I expect further increases over the next few years.
Investment in single family structures was $210 billion (SAAR) (almost 1.2% of GDP).
Investment in home improvement was at a $176 billion Seasonally Adjusted Annual Rate (SAAR) in Q1 (just under 1.0% of GDP).
These graphs show investment is generally increasing, but is still very low.
Phoenix Real Estate in July: Sales Up 17%, Inventory DOWN 15% Year-over-year
Posted:2015-08-05 16:10:39 UTC-04:00
This is a key distressed market to follow since Phoenix saw a large bubble / bust followed by strong investor buying. These key markets hopefully show us changes in trends for sales and inventory.
For the eight consecutive month, inventory was down year-over-year in Phoenix. This is a significant change from last year.
The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):
1) Overall sales in July were up 16.6% year-over-year.
2) Cash Sales (frequently investors) were down to 21.9% of total sales.
3) Active inventory is now down 15.3% year-over-year.
More inventory (a theme in 2014) - and less investor buying - suggested price increases would slow sharply in 2014. And prices increases did slow in 2014, only increasing 2.4% according to Case-Shiller.
Now, with falling inventory, prices might increase a little faster in 2015 (something to watch if inventory continues to decline). Prices are already up 2.1% through May (increasing faster than in 2014).
July Residential Sales and Inventory, Greater Phoenix Area, ARMLS Sales YoY
Change
SalesCash
SalesPercent
CashActive
InventoryYoY
Change
InventoryJul-08 5,9741 --- --- --- 54,5272 --- Jul-09 9,095 52.2% 3,269 35.9% 38,024 ---2 Jul-10 7,101 -21.9% 2,901 40.9% 42,887 12.8% Jul-11 8,397 18.3% 3,779 45.0% 27,663 -35.5% Jul-12 7,152 -14.8% 3,214 44.9% 20,384 -26.3% Jul-13 8,214 14.8% 2,944 35.8% 20,049 -1.6% Jul-14 6,790 -17.3% 1,681 24.8% 27,081 35.1% Jul-15 7,915 16.6% 1,731 21.9% 22,940 -15.3% 1 July 2008 does not include manufactured homes, ~100 more
2 July 2008 Inventory includes pending
Lawler: Updated Table of Distressed Sales and Cash buyers for Selected Cities in June
Posted:2015-08-05 13:45:00 UTC-04:00
Economist Tom Lawler sent me an updated table below of short sales, foreclosures and cash buyers for selected cities in June.
On distressed: Total "distressed" share is down in most of these markets mostly due to a decline in short sales (Baltimore is up because of an increase in foreclosures).
Short sales are down in all of these areas.
The All Cash Share (last two columns) is declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.
As Lawler noted earlier: The Baltimore Metro area is included in the overall Mid-Atlantic region (covered by MRIS). Baltimore is also shown separately because a large portion of the YOY increase in the foreclosure share of home sales in the Mid-Atlantic region was attributable to the significant increase in foreclosure sales in the Baltimore Metro area.
Short Sales Share Foreclosure Sales Share Total "Distressed" Share All Cash Share Jun-
2015Jun-
2014Jun-
2015Jun-
2014Jun-
2015Jun-
2014Jun-
2015Jun-
2014Las Vegas 6.7% 10.8% 7.6% 10.1% 14.3% 20.9% 28.4% 34.7% Reno** 5.0% 10.0% 3.0% 7.0% 8.0% 17.0% Phoenix 2.8% 3.8% 3.6% 6.2% 6.4% 10.0% 23.0% 26.6% Sacramento 5.8% 7.0% 4.6% 6.5% 10.4% 13.6% 17.8% 19.8% Minneapolis 2.0% 3.0% 5.6% 9.7% 7.6% 12.7% Mid-Atlantic 3.1% 4.8% 8.7% 7.4% 11.7% 12.2% 15.2% 16.5% Baltimore MSA**** 3.1% 4.3% 14.3% 10.7% 17.4% 15.0% 20.7% 19.8% Orlando 3.7% 7.8% 24.9% 26.5% 28.6% 34.3% 35.7% 40.5% Tampa MSA SF 3.7% 6.4% 17.4% 21.3% 21.1% 27.6% 33.1% 36.3% Tampa MSA C/TH 2.5% 4.2% 12.1% 17.0% 14.6% 21.2% 57.1% 60.4% Miami MSA SF 5.8% 8.7% 17.1% 17.6% 22.9% 26.3% 34.9% 41.9% Miami MSA C/TH 2.9% 5.3% 19.2% 19.6% 22.2% 24.8% 63.1% 68.9% Florida SF 3.4% 5.9% 16.5% 20.3% 20.0% 26.2% 33.4% 39.3% Florida C/TH 2.4% 4.4% 14.6% 17.5% 17.1% 21.9% 60.9% 65.8% Bay Area CA* 2.1% 3.0% 1.9% 2.8% 4.0% 5.8% 20.0% 21.6% So. California* 3.1% 4.6% 3.8% 4.7% 6.9% 9.3% 22.3% 25.9% Chicago (city) 12.4% 18.7% Hampton Roads 16.6% 20.1% Northeast Florida 25.6% 32.4% Spokane 10.7% 14.1% Tucson 25.1% 26.1% Toledo 27.0% 28.4% Wichita 21.9% 22.6% Des Moines 14.4% 14.6% Peoria 16.1% 21.3% Georgia*** 20.3% 24.6% Omaha 14.6% 16.3% Pensacola 31.6% 30.5% Knoxville 18.9% 22.9% Richmond VA MSA 7.1% 9.7% 13.8% 16.1% Memphis 11.4% 12.4% Springfield IL** 5.1% 8.4% *share of existing home sales, based on property records
**Single Family Only
***GAMLS
****Baltimore is included in the Mid-Atlantic region, but is shown separately here
ISM Non-Manufacturing Index increased to 60.3% in July
Posted:2015-08-05 10:17:17 UTC-04:00
The July ISM Non-manufacturing index was at 60.3%, up from 56.0% in June. The employment index increased in July to 59.6%,up from 52.7% in June. Note: Above 50 indicates expansion, below 50 contraction.
From the Institute for Supply Management: July 2015 Non-Manufacturing ISM Report On Business®
Economic activity in the non-manufacturing sector grew in July for the 66th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.
The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 60.3 percent in July, 4.3 percentage points higher than the June reading of 56 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 64.9 percent, which is 3.4 percentage points higher than the June reading of 61.5 percent, reflecting growth for the 72nd consecutive month at a faster rate. The New Orders Index registered 63.8 percent, 5.5 percentage points higher than the reading of 58.3 percent registered in June. The Employment Index increased 6.9 percentage points to 59.6 percent from the June reading of 52.7 percent and indicates growth for the 17th consecutive month. The Prices Index increased 0.7 percentage point from the June reading of 53 percent to 53.7 percent, indicating prices increased in July for the fifth consecutive month. According to the NMI®, 15 non-manufacturing industries reported growth in July. The majority of the respondents continue to have a positive outlook on business conditions and the overall economy. This is reflected directly by a number of new highs for some of the indexes." "
emphasis added
Click on graph for larger image.
This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.
This was well above the consensus forecast of 56.2% and suggests much faster expansion in July than in June. Very strong.
Trade Deficit increased in June to $43.8 Billion
Posted:2015-08-05 08:39:23 UTC-04:00
The Department of Commerce reported:
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $43.8 billion in June, up $2.9 billion from $40.9 billion in May, revised. June exports were $188.6 billion, $0.1 billion less than May exports. June imports were $232.4 billion, $2.8 billion more than May imports.
The trade deficit was close to the consensus forecast of $43.0 billion.
The first graph shows the monthly U.S. exports and imports in dollars through June 2015.
Click on graph for larger image.
Imports increased and exports were mostly unchanged in June.
Exports are 14% above the pre-recession peak and down 4% compared to June 2014; imports are at the pre-recession peak, and down 2% compared to June 2014.
The second graph shows the U.S. trade deficit, with and without petroleum.
The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products (wild swings earlier this year were due to West Coast port slowdown).
Oil imports averaged $53.76 in June, up from $50.76 in May, and down from $96.41 in June 2014. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.
The trade deficit with China increased to $31.5 billion in June, from $30.1 billion in June 2014. The deficit with China is a large portion of the overall deficit.
ADP: Private Employment increased 185,000 in July
Posted:2015-08-05 08:19:24 UTC-04:00
From ADP:
Private sector employment increased by 185,000 jobs from June to July according to the June [July] ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
This was below the consensus forecast for 210,000 private sector jobs added in the ADP report.
...
Goods-producing employment rose by 8,000 jobs in July, after adding 13,000 in June. The construction industry added 15,000 jobs in July, down from 17,000 last month. Meanwhile, manufacturing added 2,000 jobs in July, after gaining 9,000 in June.
Service-providing employment rose by 178,000 jobs in July, down from 216,000 in June. month. The 19,000 new jobs added in financial activities was an increase from last month’s 12,000. ...
Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is strong, but it has moderated since the beginning of the year. Layoffs in the energy industry and weaker job gains in manufacturing are behind the slowdown. Nonetheless, even at this slower pace of growth, the labor market is fast approaching full employment.”
The BLS report for July will be released Friday, and the consensus is for 212,000 non-farm payroll jobs added in July.
MBA: Mortgage Applications Increase in Latest Weekly Survey, Purchase Index up 23% YoY
Posted:2015-08-05 07:00:02 UTC-04:00
From the MBA: Refinance, Purchase Mortgage Applications Increase in Latest MBA Weekly Survey
Mortgage applications increased 4.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 31, 2015. ...
The Refinance Index increased 6 percent from the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 3 percent compared with the previous week and was 23 percent higher than the same week one year ago.
“Despite recent concerns about the economy, both purchase and refinance applications increased strongly in response to lower interest rates last week,” said Lynn Fisher, MBA’s Vice President of Research and Economics. “Refinance activity was the highest since May when rates were last at this level. The increase in purchase activity was also notable for this time of year, up 23 percent relative to a year ago.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.13 percent, its lowest level since May 2015, from 4.17 percent, with points decreasing to 0.34 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Click on graph for larger image.
The first graph shows the refinance index.
Even with the increase in activity, refinance activity is very low.
2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015.
The second graph shows the MBA mortgage purchase index.
According to the MBA, the unadjusted purchase index is 23% higher than a year ago.
Wednesday: Trade Deficit, ADP Employment, ISM non-Mfg Survey
Posted:2015-08-04 18:59:00 UTC-04:00
From Jon Hilsenrath at the WSJ: Atlanta Fed’s Lockhart: Fed Is ‘Close’ to Being Ready to Raise Short-Term Rates
“I think there is a high bar right now to not acting, speaking for myself,” Mr. Lockhart said ...
Wednesday:
• At 7:00 AM, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
• At 8:15 AM, the ADP Employment Report for July. This report is for private payrolls only (no government). The consensus is for 210,000 payroll jobs added in July, down from 238,000 in June.
• At 8:30 AM, Trade Balance report for June from the Census Bureau. The consensus is for the U.S. trade deficit to be at $43.0 billion in June from $41.9 billion in May.
• At 10:00 AM, the ISM non-Manufacturing Index for July. The consensus is for index to increase to 56.2 from 56.0 in June.
• Also at 10:00 AM, Speech by Fed Governor Jerome Powell, The Structure and Liquidity of Treasury Bond Markets, At the Brookings Institute Conference: Are There Structural Issues in the U.S. Bond Markets?, Washington, D.C.
Lawler: Large Home Builder Results, Q2/2015
Posted:2015-08-04 15:31:40 UTC-04:00
From housing economist Tom Lawler:
Below is a table showing some selected operating statistics for nine large, publicly-traded home builders for the quarter ended June 30, 2015.
As the table indicates, reported net home orders for these nine home builders in the quarter ended June 30, 2015 were up 13.7% from the comparable quarter of 2014. There are a few things worth noting. First, while Standard Pacific’s reported net home orders for the latest quarter exclude orders associated with the acquisition of a small Austin builder last June, both Horton’s orders and Meritage’s orders include orders associated with acquisitions of builders subsequent to the beginning of the second quarter of 2014. My “best guess” is that net home orders for these nine builders last quarter excluding the impact of such acquisitions were up about 12.5% from the comparable quarter of 2014.
On July 24th Census, in its “New Residential Sales” report for June, estimated that new home sales ran at a seasonally adjusted annual rate of 482,000, well below the “consensus” forecast. In addition, Census revised downward its estimate for home sales for each of the previous three months. For the second quarter as a whole Census estimated that new home sales were up 19% (not seasonally adjusted) from the comparable quarter of 2014 – well above the YOY gain the nine large builders shown above.
Of course, there are several reasons why net home orders for these nine builders do not always track Census’ estimate of new home sales. First, Census treats sales cancellations different than do builders. Second, the geographic “footprint” of these nine builders does not match that of the US as a whole. Third, the market share of these builders can change significantly. And finally, there may be timing differences between when a builder “books” a sale and when a sale is recorded in Census’ Survey of Construction.
Nevertheless, reported home orders from publicly-treaded builders not only “confirm” that new home sales last quarter were below “consensus” forecasts, but also suggest that Census may revise downward its estimate for second-quarter new home sales in the July “New Residential Sales” report.
Net Orders Settlements Average Closing
Price ($000s)Qtr. Ended: 6/15 6/14 % Chg 6/15 6/14 % Chg 6/15 6/14 % Chg D.R. Horton 10,398 8,591 21.0% 9,856 7,676 28.4% 290 272 6.5% Pulte
Group5,118 4,778 7.1% 3,744 3,798 -1.4% 332 328 1.2% NVR 3,796 3,415 11.2% 3,175 2,943 7.9% 384 368 4.4% The Ryland Group 2,387 2,228 7.1% 1,814 1,700 6.7% 351 333 5.4% Beazer Homes 1,524 1,290 18.1% 1,293 1,241 4.2% 410 372 10.2% Standard Pacific 1,567 1,425 10.0% 1,305 1,236 5.6% 532 479 11.1% Meritage Homes 1,986 1,647 20.6% 1,556 1,368 13.7% 380 368 3.3% MDC Holdings 1,481 1,419 4.4% 1,126 1,158 -2.8% 410 372 10.2% M/I Homes 1,100 1,016 8.3% 919 894 2.8% 340 306 11.1% Total 29,357 25,809 13.7% 24,788 22,014 12.6% $345 $329 4.7%
Goldman: "What's Keeping the Kids at Their Parents' Homes?"
Posted:2015-08-04 12:05:42 UTC-04:00
A few excerpts from a research note by Goldman Sachs economists David Mericle and Karen Reichgott: What's Keeping the Kids at Their Parents' Homes?
The share of 18-34 year-olds living with their parents rose about four percentage points (pp) during the recession and its aftermath, resulting in a few million extra "kids in the basement." This group accounts for the bulk of the recent shortfall in household formation and represents a potentially large pool of pent-up demand for homebuilding. While the share of young people living with their parents began to decline in 2014, the decline has stalled over the last six months ...
To what extent do current labor market conditions explain the elevated rate of young people living with their parents? ... We find that this current labor force status "composition effect" accounts for about 1.3pp, or roughly one-third of the "excess" kids living with their parents.
...
What accounts for the rest? Part of the explanation is likely that the legacy of the recession wears off only gradually ...
Three other factors might also have played a role. First, researchers at the New York Fed and the Fed Board have found evidence that rising student debt and poor credit scores have contributed to the elevated share of young people living with their parents. Second, the median age at first marriage has increased at a faster than usual rate since 2007 ... Third ... rent-to-income ratios are at historic highs, especially for young people. The future trajectory of these three factors is less clear, suggesting that the share of 18-34 year-olds living at home might not fully return to pre-recession rates.
...
What are the implications for the long-run homebuilding outlook? The pool of "excess" young people living at home is so large that even if only two-thirds ever move out and even if this process takes another decade, trend household formation would likely fall near the upper end of our 1.2-1.3mn forecast range. Combined with a 300k annual rate of demolitions, such a scenario would imply a trend demand for new housing units of about 1.6mn per year, well above the current sub-1.2mn run rate of housing starts. As a result, we continue to see plenty of upside for residential investment.
CoreLogic: House Prices up 6.5% Year-over-year in June
Posted:2015-08-04 09:11:26 UTC-04:00
Notes: This CoreLogic House Price Index report is for June. The recent Case-Shiller index release was for May. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).
From CoreLogic: CoreLogic Reports National Home Prices Rose by 6.5 Percent Year Over Year in June 2015
CoreLogic® ... today released its June 2015 CoreLogic Home Price Index (HPI®) which shows that home prices nationwide, including distressed sales, increased by 6.5 percent in June 2015 compared with June 2014. This change represents 40 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased by 1.7 percent in June 2015 compared with May 2015.
Including distressed sales, 35 states and the District of Columbia were at or within 10 percent of their peak prices in June 2015. Fifteen states and the District of Columbia reached new price peaks—Alaska, Arkansas, Colorado, Hawaii, Iowa, Kentucky, Nebraska, New York, North Carolina, North Dakota, Oklahoma, South Dakota, Tennessee, Texas and Wyoming. The CoreLogic HPI begins in January 1976.
Excluding distressed sales, home prices increased by 6.4 percent in June 2015 compared with June 2014 and increased by 1.4 percent month over month compared with May 2015. ...
emphasis added
Click on graph for larger image.
This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.
The index was up 1.7% in June (NSA), and is up 6.5% over the last year.
This index is not seasonally adjusted, and this was a solid month-to-month increase.
The second graph is from CoreLogic. The year-over-year comparison has been positive for forty consecutive months.
The YoY increase had been moving sideways over most of the last year, but has picked up a little recently.
Fed Survey: Banks reports stronger demand for Home-purchase loans and CRE Loans
Posted:2015-08-03 17:42:00 UTC-04:00
From the Federal Reserve: The July 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices
Regarding loans to businesses, the July survey results indicated that, on balance, banks reported little change in their standards on commercial and industrial (C&I) loans in the second quarter of 2015. In addition, banks reported having eased some loan terms, such as spreads and covenants, especially for larger firms on net. Meanwhile, survey respondents also reported that standards on commercial real estate (CRE) loans remained unchanged on balance. On the demand side, modest to moderate net fractions of banks indicated having experienced stronger demand for C&I and CRE loans during the second quarter.
Regarding loans to households, banks reported having eased lending standards for a number of categories of residential mortgage loans over the past three months on net. Most banks reported no change in standards and terms on consumer loans. On the demand side, moderate to large net fractions of banks reported stronger demand across most categories of home-purchase loans. Similarly, respondents experienced stronger demand for auto and credit card loans on net.
emphasis added
Click on graph for larger image.
Here are some charts from the Fed.
This graph shows the change in lending standards and for CRE (commercial real estate) loans.
Mostly standards were unchanged for various categories of CRE (right half of graph).
The second graph shows the change in demand for CRE loans.
Banks are seeing a pickup in demand for all categories of CRE - including multi-family.
This suggests that we will see further increases in commercial real estate development.
Also the banks are easing credit a little for residential mortgages (see graph on page 3).
U.S. Light Vehicle Sales increased to 17.5 million annual rate in July
Posted:2015-08-03 14:13:59 UTC-04:00
Based on a WardsAuto estimate, light vehicle sales were at a 17.5 million SAAR in June. That is up 6.4% from July 2014, and up 3.3% from the 17.0 million annual sales rate last month.
Click on graph for larger image.
This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for July (red, light vehicle sales of 17.5 million SAAR from WardsAuto).
This was above to the consensus forecast of 17.2 million SAAR (seasonally adjusted annual rate).
The second graph shows light vehicle sales since the BEA started keeping data in 1967.
Note: dashed line is current estimated sales rate.
This was another strong month for auto sales. It appears 2015 will be the best year for light vehicle sales since 2001.
Construction Spending increased 0.1% in June
Posted:2015-08-03 10:17:35 UTC-04:00
The Census Bureau reported that overall construction spending increased slightly in June:
The U.S. Census Bureau of the Department of Commerce announced today that construction spending during June 2015 was estimated at a seasonally adjusted annual rate of $1,064.6 billion, 0.1 percent above the revised May estimate of $1,063.5 billion. The June figure is 12.0 percent above the June 2014 estimate of $950.3 billion.
Private spending decreased and public spending increased:
Spending on private construction was at a seasonally adjusted annual rate of $766.4 billion, 0.5 percent below the revised May estimate of $770.0 billion ...
Note: Non-residential for offices and hotels is generally increasing, but spending for oil and gas has been declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because oil prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.
In June, the estimated seasonally adjusted annual rate of public construction spending was $298.2 billion, 1.6 percent above the revised May estimate of $293.5 billion.
emphasis added
As an example, construction spending for private lodging is up 42% year-over-year, whereas spending for power (includes oil and gas) construction peaked in mid-2014 and is down 16% year-over-year.
Click on graph for larger image.
This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.
Private residential spending has been increasing recently, and is 45% below the bubble peak.
Non-residential spending is only 5% below the peak in January 2008 (nominal dollars).
Public construction spending is now 8% below the peak in March 2009 and about 13% above the post-recession low.
The second graph shows the year-over-year change in construction spending.
On a year-over-year basis, private residential construction spending is up 13%. Non-residential spending is up 15% year-over-year. Public spending is up 8% year-over-year.
Looking forward, all categories of construction spending should increase in 2015. Residential spending is still very low, non-residential is starting to pickup (except oil and gas), and public spending has also increasing after several years of austerity.
This was below the consensus forecast of a 0.6% increase, however spending for April and May was revised up significantly. Overall, a solid report.
ISM Manufacturing index decreased to 52.7 in July
Posted:2015-08-03 09:44:57 UTC-04:00
Note: This was released early.
The ISM manufacturing index suggested expansion in July. The PMI was at 52.7% in July, down from 53.5% in June. The employment index was at 52.7%, down from 55.5% in June, and the new orders index was at 56.5%, up from 56.0%.
From the Institute for Supply Management: July 2015 Manufacturing ISM® Report On Business®
Economic activity in the manufacturing sector expanded in July for the 31st consecutive month, and the overall economy grew for the 74th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.
The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The July PMI® registered 52.7 percent, a decrease of 0.8 percentage point below the June reading of 53.5 percent. The New Orders Index registered 56.5 percent, an increase of 0.5 percentage point from the reading of 56 percent in June. The Production Index registered 56 percent, 2 percentage points above the June reading of 54 percent. The Employment Index registered 52.7 percent, 2.8 percentage points below the June reading of 55.5 percent, reflecting growing employment levels from June but at a slower rate. Inventories of raw materials registered 49.5 percent, a decrease of 3.5 percentage points from the June reading of 53 percent. The Prices Index registered 44 percent, down 5.5 percentage points from the June reading of 49.5 percent, indicating lower raw materials prices for the ninth consecutive month. Comments from the panel reflect a combination of optimism mixed with uncertainties about international markets and the impacts of the continuing decline in oil prices."
emphasis added
Click on graph for larger image.
Here is a long term graph of the ISM manufacturing index.
This was below expectations of 53.7%, and indicates slower manufacturing expansion in July.
BEA: Personal Income increased 0.4% in June, Core PCE prices up 1.3% year-over-year
Posted:2015-08-03 08:36:29 UTC-04:00
From the BEA, the Personal Income and Outlays report for June:
Personal income increased $68.1 billion, or 0.4 percent ... in June, according to the Bureau of Economic Analysis.
On inflation: the PCE price index was up 0.3% year-over-year (the decline in oil prices pushed down the headline price index). However core PCE is only up 1.3% year-over-year - still way below the Fed's target.
...
Real PCE -- PCE adjusted to remove price changes -- decreased less than 0.1 percent in June, in contrast to an increase of 0.4 percent in May. ... The price index for PCE increased 0.2 percent in June, compared with an increase of 0.3 percent in May. The PCE price index, excluding food and energy, increased 0.1 percent in June, the same increase as in May.
The June price index for PCE increased 0.3 percent from June a year ago. The June PCE price index, excluding food and energy, increased 1.3 percent from June a year ago.
Monday: Auto Sales, ISM Mfg Index, Construction Spending, Personal Income and Outlays
Posted:2015-08-02 20:53:20 UTC-04:00
Weekend:
• Schedule for Week of August 2, 2015
Monday:
• At 8:30 AM, Personal Income and Outlays for June. The consensus is for a 0.3% increase in personal income, and for a 0.2% increase in personal spending. And for the Core PCE price index to increase 0.1%.
• At 10:00 AM, ISM Manufacturing Index for July. The consensus is for the ISM to be at 53.7, up from 53.5 in June. The ISM manufacturing index indicated expansion at 53.5% in June. The employment index was at 55.5%, and the new orders index was at 56.0%.
• Also at 10:00 AM, Construction Spending for June. The consensus is for a 0.6% increase in construction spending.
• All day: Light vehicle sales for July. The consensus is for light vehicle sales to increase to 17.2 million SAAR in July from 17.1 million in June (Seasonally Adjusted Annual Rate).
From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are up slightly and DOW futures are up 20 (fair value).
Oil prices were down over the last week with WTI futures at $46.84 per barrel and Brent at $51.81 per barrel. A year ago, WTI was at $105, and Brent was at $106 - so prices are down over 50% year-over-year.
Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.65 per gallon (down about $0.85 per gallon from a year ago).
Hotels: Best Week Ever, On Pace for Record Occupancy in 2015
Posted:2015-08-02 11:14:48 UTC-04:00
From HotelNewsNow.com: STR: US hotel results for week ending 25 July
The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 19-25 July 2015, according to data from STR, Inc.
The 79.1% occupancy rate reported for last week was the best week on record (the four week average will peak in August).
In year-over-year measurements, the industry’s occupancy increased 1.5% to 79.1%. Average daily rate for the week was up 5.1% to US$125.04. Revenue per available room increased 6.6% to finish the week at US$98.91.
emphasis added
For the same week in 2009, ADR (average daily rate) was $98.13 and RevPAR (Revenue per available room) was $65.77. ADR is up 25% since July 2009, and RevPAR is up 50%!
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average. The occupancy rate will be high during the summer travel season.
The red line is for 2015, dashed orange is 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels. Purple is for 2000.
The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and above last year.
Right now 2015 is above 2000 (best year for hotels), and 2015 will probably be the best year ever for hotels.
Late July is usually the best time of the year for hotels - although the four week average usually peaks in August. A very strong year, and a key reason new hotel construction has picked up.
Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com
Schedule for Week of August 2, 2015
Posted:2015-08-01 11:51:00 UTC-04:00
The key report this week is the July employment report on Friday.
Other key indicators include the July ISM manufacturing index and July vehicle sales, both on Monday, and the Trade Deficit on Wednesday.
----- Monday, August 3rd -----
8:30 AM ET: Personal Income and Outlays for June. The consensus is for a 0.3% increase in personal income, and for a 0.2% increase in personal spending. And for the Core PCE price index to increase 0.1%.
10:00 AM: ISM Manufacturing Index for July. The consensus is for the ISM to be at 53.7, up from 53.5 in June.
Here is a long term graph of the ISM manufacturing index.
The ISM manufacturing index indicated expansion at 53.5% in June. The employment index was at 55.5%, and the new orders index was at 56.0%.
10:00 AM: Construction Spending for June. The consensus is for a 0.6% increase in construction spending.
All day: Light vehicle sales for July. The consensus is for light vehicle sales to increase to 17.2 million SAAR in July from 17.1 million in June (Seasonally Adjusted Annual Rate).
This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the June sales rate.
----- Tuesday, August 4th -----
10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for June. The consensus is a 1.7% increase in orders.
----- Wednesday, August 5th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
8:15 AM: The ADP Employment Report for July. This report is for private payrolls only (no government). The consensus is for 210,000 payroll jobs added in July, down from 238,000 in June.
8:30 AM: Trade Balance report for June from the Census Bureau.
This graph shows the U.S. trade deficit, with and without petroleum, through April. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.
The consensus is for the U.S. trade deficit to be at $43.0 billion in June from $41.9 billion in May.
10:00 AM: the ISM non-Manufacturing Index for July. The consensus is for index to increase to 56.2 from 56.0 in June.
10:00 AM: Speech by Fed Governor Jerome Powell, The Structure and Liquidity of Treasury Bond Markets, At the Brookings Institute Conference: Are There Structural Issues in the U.S. Bond Markets?, Washington, D.C.
----- Thursday, August 6th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 273 thousand from 267 thousand.
----- Friday, August 7th -----
8:30 AM: Employment Report for June. The consensus is for an increase of 212,000 non-farm payroll jobs added in July, down from the 223,000 non-farm payroll jobs added in June.
The consensus is for the unemployment rate to be unchanged at 5.3%.
This graph shows the year-over-year change in total non-farm employment since 1968.
In June, the year-over-year change was over 2.9 million jobs.
As always, a key will be the change in real wages - and as the unemployment rate falls, wage growth should pickup.
3:00 PM: Consumer Credit for June from the Federal Reserve. The consensus is for an increase of $17.4 billion in credit.
July 2015: Unofficial Problem Bank list declines to 290 Institutions
Posted:2015-08-01 08:13:00 UTC-04:00
This is an unofficial list of Problem Banks compiled only from public sources.
Here is the unofficial problem bank list for July 2015.
Changes and comments from surferdude808:
Update on the Unofficial Problem Bank List for July 2015. During the month, the list fell from 309 institutions to 290 after 20 removals and one addition. Assets dropped by $5.9 billion to an aggregate $83.9 billion. A year ago, the list held 452 institutions with assets of $146.1 billion.
Actions have been terminated against Anderson Brothers Bank, Mullins, SC ($506 million); Pacific National Bank, Miami, FL ($379 million); Geauga Savings Bank, Newbury, OH ($357 million); The Peoples Bank, Chestertown, MD ($229 million); Home Loan Investment Bank, F.S.B., Warwick, RI ($216 million); Crown Bank, Edina, MN ($193 million); Farmers & Merchants Bank, Statesboro, GA ($170 million); Eagle Valley Bank, National Association, Saint Croix Falls, WI ($127 million); Evergreen National Bank, Evergreen, CO ($102 million); Surety Bank, DeLand, FL ($96 million); Peoples State Bank, Lake City, FL ($70 million); Liberty Savings Bank, FSB, Whiting, IN ($55 million); First Security Bank of Helena, Helena, MT ($40 million); Peoples Bank and Trust Company of Clinton County, Albany, KY ($33 million); and Hometown Community Bank, Cyrus, MN ($26 million).
Premier Bank, Denver, CO ($32 million) failed. Finding merger partners were Bank of Manhattan, N.A., El Segundo, CA ($481 million Ticker: MNHN); American Bank of St. Paul, Saint Paul, MN ($312 million); Pacific Rim Bank, Honolulu, HI ($131 million); and ProBank, Tallahassee, FL ($45 million).
The addition this month was Home Federal Savings and Loan Association of Nebraska, Lexington, NE ($56 million).
Fannie Mae: Mortgage Serious Delinquency rate declined in June, Lowest since August 2008
Posted:2015-07-31 18:27:44 UTC-04:00
Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in June to 1.66% from 1.70% in May. The serious delinquency rate is down from 2.05% in June 2014, and this is the lowest level since August 2008.
The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.
Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".
Click on graph for larger image
The Fannie Mae serious delinquency rate has only fallen 0.39 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will not be below 1% until 2017.
The "normal" serious delinquency rate is under 1%, so maybe serious delinquencies will be close to normal in 2017. This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog.
Restaurant Performance Index declined in June
Posted:2015-07-31 16:16:00 UTC-04:00
Here is a minor indicator I follow from the National Restaurant Association: Dampened Outlook Causes Restaurant Performance Index Decline in June
As a result of a somewhat dampened outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) declined in June for the second consecutive month. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 102.0 in June, down 0.4 percent from May and its lowest level in nine months. Despite the decline, June represented the 28th consecutive month in which the RPI stood above 100, which signifies continued expansion in the index of key industry indicators.
“Although same-store sales and customer traffic levels remained positive in June, the overall RPI declined as a result of dampened optimism among restaurant operators,” said Hudson Riehle, Senior Vice President of the Research and Knowledge Group for the Association. “The proportion of restaurant operators expecting sales growth fell to its lowest level in nine months, while operators’ outlook for the economy turned negative for the first time in nearly two years.”
emphasis added
Click on graph for larger image.
The index decreased to 102.0 in June, down from 102.4 in May. (above 100 indicates expansion).
Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month. Even with the decline in the index, this is a solid reading.
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