by Bill McBride on 10/06/2012 08:01:00 AM
Saturday, October 06, 2012
This was a very busy week for US economic data, capped off with an encouraging employment report. Yesterday I wrote Employment: Somewhat Better (also more graphs) and I pointed out a number of positives (and a few negatives) in the September report.
Most of the other economic data was somewhat positive too (even without housing!). Both ISM surveys (manufacturing and service) were weak, but above expectations. And auto sales were at the highest level since February 2008.
Also the impact of QE3 was evident in the MBA mortgage refinance index that increased to the highest level since 2009.
Here is a summary of last week in graphs:
• September Employment Report: 114,000 Jobs, 7.8% Unemployment Rate
Even though payroll growth was weak, this was a much stronger report than the last few months, especially considering the upward revisions to the July and August reports. And that doesn't include the annual benchmark revision (that will also show more jobs).
This was slightly above expectations of 113,000 payroll jobs added.
The second graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate decreased to 7.8% (red line). This is from the household report, and that report showed strong job growth.
The Labor Force Participation Rate increased slightly to 63.6% in September (blue line. This is the percentage of the working age population in the labor force.
The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although most of the recent decline is due to demographics.
The Employment-Population ratio increased to 58.7% in September (black line). This is still very low.
The third graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions. The dotted line is ex-Census hiring.
This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.
The fourth graph shows the job losses from the start of the employment recession, in percentage terms compared to other financial crisis (including the Great Depression).
This is an update to a graph by economist Josh Lehner (ht Josh for the data):
[I]n the context of the Big 5 financial crises, the current U.S. cycle suddenly does not look quite as dire. Notice how the x-axis, how long it takes to return to peak levels of employment, is measured in years(!) not months like the first graph.Even though payroll growth was weak and close to expectations (expected was 113,000), overall this was a much stronger report than for recent months.
[T]he U.S. labor market has performed better than 4 of the previous Big 5 crises, as identified by Reinhart and Rogoff, in terms of job loss and the return to peak time line.
• ISM Manufacturing index increases in September to 51.5
Click on graph for larger image.
The ISM index indicated expansion after three consecutive months of contraction. PMI was at 51.5% in September, up from 49.6% in August. The employment index was at 54.7%, up from 51.6%, and the new orders index was at 52.3%, up from 47.1%.
Here is a long term graph of the ISM manufacturing index.
This was above expectations of 49.7% and suggests manufacturing expanded in September. The internals were positive too with new orders and employment increasing.
• ISM Non-Manufacturing Index increases in September
The September ISM Non-manufacturing index was at 55.1%, up from 53.7% in August. The employment index decreased in September to 51.1%, down from 53.8% in August. Note: Above 50 indicates expansion, below 50 contraction.
This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.
This was above the consensus forecast of 53.5% and indicates faster expansion in September than in August. The internals were mixed with the employment index down, but new orders up.
• U.S. Light Vehicle Sales at 14.94 million annual rate in September, Highest since Feb 2008
Based on an estimate from Autodata Corp, light vehicle sales were at a 14.94 million SAAR in September. That is up 14% from September 2011, and up 3% from the sales rate last month.
This was above the consensus forecast of 14.5 million SAAR (seasonally adjusted annual rate).
It looks like auto sales were up about 2.7% in Q3 compared to Q2 (over 10% annualized increase), and auto sales will probably make another small positive contribution to GDP. However it appears there is a shift to smaller cars, so total revenue might not increase much.
• Office Vacancy Rate declines slightly in Q3 to 17.1%
From Reuters: U.S. office market barely gains in third quarter
This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual).
Reis is reporting the vacancy rate declined in Q3 to 17.1%, down slightly from 17.2% in Q2, and down from 17.4% in Q3 2011. The vacancy rate peaked in this cycle at 17.6% in Q3 and Q4 2010.
This is a sluggish recovery for office space.
• Reis: Apartment Vacancy Rate declined slightly to 4.6% in Q3, More Supply coming in 2013
Reis reported that the apartment vacancy rate (82 markets) fell slightly to 4.6% in Q3, down from 4.7% in Q1 2012. The vacancy rate was at 5.6% in Q3 2011 and peaked at 8.0% at the end of 2009.
This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999).
Reis is just for large cities. It appears that the declines in vacancy rates is slowing, and rent increases might slow too. Also, as Reis economist Calanog notes, there will be a significant increase in new supply in 2013 (and in 2014).
• Reis: Regional Mall Vacancy Rate declines in Q3, Strip Mall vacancy rate unchanged
Reis reported that the vacancy rate for regional malls declined to 8.7% in Q3 from 8.9% in Q2. This is down from a cycle peak of 9.4% in Q3 of last year.
For Neighborhood and Community malls (strip malls), the vacancy rate was unchanged at 10.8% in Q3. For strip malls, the vacancy rate peaked at 11.0% in Q2 of last year.
This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). The yellow line shows mall investment as a percent of GDP. This has been increasing a little recently because this includes renovations and improvements. New mall investment has essentially stopped.
• Weekly Initial Unemployment Claims increase to 367,000
The DOL reports:
In the week ending September 29, the advance figure for seasonally adjusted initial claims was 367,000, an increase of 4,000 from the previous week's revised figure of 363,000. The 4-week moving average was 375,000, unchanged from the previous week's revised average.The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims was unchanged at 375,000.
This was lower than the consensus forecast of 370,000. Mostly moving sideways this year ...
• Construction Spending decreased in August
This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.
Private residential spending is 60% below the peak in early 2006, and up 23% from the post-bubble low. Non-residential spending is 30% below the peak in January 2008, and up about 27% from the recent low.
Public construction spending is now 16% below the peak in March 2009 and near the post-bubble low.
Note: Spending in August would have been up compared to July without the upward revision to July spending. With both June and July revised up, this report was decent. Residential construction spending was up in August, and the solid year-over-year increase in private residential investment is a positive for the economy (the increase in 2010 was related to the tax credit).
• Other Economic Stories ...
• LPS: Mortgage prepayment rates highest since 2005
• MBA: Mortgage Refinance Applications increases sharply, Highest Since 2009
• U.S. Births Decline for the fourth consecutive year in 2011
• Trulia: Asking House Prices increased in September
• FOMC Minutes: "Most participants agreed numerical thresholds could be useful"
• ADP: Private Employment increased 162,000 in September