Thursday, May 05, 2016

Weekly Initial Unemployment Claims increase to 274,000

by Bill McBride on 5/05/2016 08:33:00 AM

The DOL reported:

In the week ending April 30, the advance figure for seasonally adjusted initial claims was 274,000, an increase of 17,000 from the previous week's unrevised level of 257,000. The 4-week moving average was 258,000, an increase of 2,000 from the previous week's unrevised average of 256,000.

There were no special factors impacting this week's initial claims. This marks 61 consecutive weeks of initial claims below 300,000, the longest streak since 1973.
The previous week was unrevised.

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 increased to 258,000.

This is the lowest level for the four-week average since 1973.

This was above the consensus forecast of 262,000. The low level of the 4-week average suggests few layoffs.

Wednesday, May 04, 2016

Freddie Mac: Mortgage Serious Delinquency rate decreased in March, Lowest since Aug 2008

by Bill McBride on 5/04/2016 05:17:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate decreased in March to 1.20% from 1.26% in February. Freddie's rate is down from 1.73% in March 2015. This is the lowest rate since August 2008.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Note: Fannie Mae reported last week.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. 

The serious delinquency rate has fallen 0.53 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until the second half of this year.

I expect an above normal level of Fannie and Freddie distressed sales through 2016 (mostly in judicial foreclosure states).

Preview of April Employment Report

by Bill McBride on 5/04/2016 01:21:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for April. The consensus, according to Bloomberg, is for an increase of 200,000 non-farm payroll jobs in April (with a range of estimates between 175,000 to 245,000, and for the unemployment rate to decline to 4.9%.

The BLS reported 215,000 jobs added in March.

Here is a summary of recent data:

• The ADP employment report showed an increase of 156,000 private sector payroll jobs in April. This was below expectations of 193,000 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.

However, the ADP report tends to be too low in April. In 2015, the ADP report showed an increase of 169,000 jobs, and the BLS report showed 223,000. And in 2014, the ADP report showed 220,000 private sector jobs added, and the BLS report showed 288,000 jobs added.

• The ISM manufacturing employment index increased in April to 49.2%. 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 25,000 in April. The ADP report indicated 13,000 fewer manufacturing jobs.  Note: Recently the ADP has been a better predictor for BLS reported manufacturing employment than the ISM survey.

The ISM non-manufacturing employment index increased in April to 53.0%. 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 155,000 in April.

Combined, the ISM indexes suggests employment gains of 130,000.  This suggests employment growth below expectations.

Initial weekly unemployment claims averaged 256,000 in April, down from 263,000 in March, and the lowest 4-week average since 1973. For the BLS reference week (includes the 12th of the month), initial claims were at 247,000, down from 259,000 during the reference week in March.

The decrease during the reference suggests fewer layoffs in April as compared to March.

• The final April University of Michigan consumer sentiment index decreased to 89.0 from the March reading of 91.0. Sentiment is frequently coincident with changes in the labor market, but there are other factors too - like gasoline prices.

• Conclusion: Unfortunately none of the indicators above is very good at predicting the initial BLS employment report.    The ADP and ISM reports suggest a weaker than consensus report, although unemployment claims suggest stronger job growth.  However, as I noted above, the ADP report tends to be low in April.

My guess the employment report will be below consensus in April.


ISM Non-Manufacturing Index increased to 55.7% in April

by Bill McBride on 5/04/2016 10:05:00 AM

The April ISM Non-manufacturing index was at 55.7%, up from 54.5% in March. The employment index increased in April to 53.0%, up from 50.3% in March. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management:April 2016 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in April for the 75th 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 55.7 percent in April, 1.2 percentage points higher than the March reading of 54.5 percent. This represents continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index decreased to 58.8 percent, 1 percentage point lower than the March reading of 59.8 percent, reflecting growth for the 81st consecutive month, at a slower rate in April. The New Orders Index registered 59.9 percent, 3.2 percentage points higher than the reading of 56.7 percent in March. The Employment Index increased 2.7 percentage points to 53 percent from the March reading of 50.3 percent and indicates growth for the second consecutive month. The Prices Index increased 4.3 percentage points from the March reading of 49.1 percent to 53.4 percent, indicating prices increased in April for the first time in three months. According to the NMI®, 13 non-manufacturing industries reported growth in April. The majority of the respondents’ comments reflect optimism about the business climate and the direction of the economy."
emphasis added
ISM Non-Manufacturing Index 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 above the consensus forecast of 54.7, and suggests faster expansion in April than in March.

Trade Deficit decreased in March to $40.4 Billion

by Bill McBride on 5/04/2016 08:42:00 AM

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 $40.4 billion in March, down $6.5 billion from $47.0 billion in February, revised. March exports were $176.6 billion, $1.5 billion less than February exports. March imports were $217.1 billion, $8.1 billion less than February imports.
The trade deficit was smaller than the consensus forecast of $41.4 billion.

The first graph shows the monthly U.S. exports and imports in dollars through March 2016.

U.S. Trade Exports Imports Click on graph for larger image.

Both imports and exports decreased in March.

Exports are 6% above the pre-recession peak and down 5% compared to March 2015; imports are 6% below the pre-recession peak, and down 9% compared to March 2015. 

The second graph shows the U.S. trade deficit, with and without petroleum.

U.S. Trade Deficit 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.

Oil imports averaged $27.68 in March, up from $27.48 in February, and down from $46.47 in March 2015.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined a little since early 2012.

The trade deficit with China decreased to $20.9 billion in March, from $31.2 billion in March 2015 (there was a surge in imports last year in March -as ships were unloaded - following the West Coast port slowdown). The deficit with China is a substantial portion of the overall deficit.

ADP: Private Employment increased 156,000 in April

by Bill McBride on 5/04/2016 08:19:00 AM

From ADP:

Private sector employment increased by 156,000 jobs from March to April according to the April 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.
...
Goods-producing employment dropped by 11,000 jobs in April, down from a downwardly revised 5,000 in March. The construction industry added 14,000 jobs, which was down from March’s 18,000. Meanwhile, manufacturing lost 13,000 jobs after being revised down to -3,000 the previous month.

Service-providing employment rose by 166,000 jobs in April, down from 189,000 in March.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “The job market appears to have stumbled in April. Job growth noticeably slowed, with some weakness across most sectors. One month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring.”
This was below the consensus forecast for 193,000 private sector jobs added in the ADP report. 

The BLS report for April will be released Friday, and the consensus is for 200,000 non-farm payroll jobs added in April.

MBA: Mortgage "Refis Down, Purchases Flat in Latest MBA Weekly Survey"

by Bill McBride on 5/04/2016 07:00:00 AM

From the MBA: Refis Down, Purchases Flat in Latest MBA Weekly Survey

Mortgage applications decreased 3.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 29, 2016.
...
The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 13 percent higher than the same week one year ago.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.85 percent from 3.83 percent, with points increasing to 0.35 from 0.32 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Refinance Index Click on graph for larger image.


The first graph shows the refinance index since 1990.

Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000.

Refinance activity increased a little earlier this year when rates declined.


Mortgage Purchase Index The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 13% higher than a year ago.

Tuesday, May 03, 2016

Wednesday: Trade Deficit, ADP Employment, ISM non-Manufacturing

by Bill McBride on 5/03/2016 07:34:00 PM

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:15 AM, the ADP Employment Report for April. This report is for private payrolls only (no government). The consensus is for 193,000 payroll jobs added in April, down from 200,000 added in March.

• At 8:30 AM, the Trade Balance report for March from the Census Bureau. The consensus is for the U.S. trade deficit to be at $41.4 billion in March from $47.1 billion in February.

• At 10:00 AM, the ISM non-Manufacturing Index for April. The consensus is for index to increase to 54.7 from 54.5 in March.

• Also at 10:00 AM, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for March. The consensus is a 0.6% increase in orders.

U.S. Light Vehicle Sales increase to 17.4 million annual rate in April

by Bill McBride on 5/03/2016 03:40:00 PM

Based on an estimate from AutoData, light vehicle sales were at a 17.42 million SAAR in April.

That is up about 4% from April 2015, and up about 6% from the 16.46 million annual sales rate last month.

Vehicle Sales
Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for April (red, light vehicle sales of 17.42 million SAAR from AutoData).

This was slightly above the consensus forecast of 17.3 million SAAR (seasonally adjusted annual rate).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Vehicle SalesNote: dashed line is current estimated sales rate.

Sales for 2016 - through the first four months - are up about 3% from the comparable period last year.

The Projected Improvement in Life Expectancy

by Bill McBride on 5/03/2016 12:07:00 PM

Note: This is an update to a post I wrote some time ago with more recent data and projections.

Here is something different, but it is important when looking at demographics ...

The following data is from the CDC United States Life Tables, 2010 by Elizabeth Arias.

The most frequently used life table statistic is life expectancy (ex), which is the average number of years of life remaining for persons who have attained a given age (x). ... Life expectancy at birth (e0) for 2010 for the total population was 78.7 years. ... Another way of assessing the longevity of the period life table cohort is by determining the proportion that survives to specified ages. ... To illustrate, 57,188 persons out of the original 2010 hypothetical life table cohort of 100,000 (or 57.2 %) were alive at exact age 80.
emphasis added
Instead of look at life expectancy, here is a graph of survivors out of 100,000 born alive, by age for three groups: those born in 1900-1902, born in 1949-1951 (baby boomers), and born in 2010.

Survivors Click on graph for larger image.

There was a dramatic change between those born in 1900 (blue) and those born mid-century (orange). The risk of infant and early childhood deaths dropped sharply, and the risk of death in the prime working years also declined significantly.

The CDC is projecting further improvement for childhood and prime working age for those born in 2010, but they are also projecting that people will live longer.

Death by AgeThe second graph uses the same data but looks at the number of people who die before a certain age, but after the previous age. As an example, for those born in 1900 (blue), 12,448 of the 100,000 born alive died before age 1, and another 5,748 died between age 1 and age 5.  That is 18.2% of those born in 1900 died before age 5.

In 1950, only 3.5% died before age 5.  In 2010, it was 0.7%.

The peak age for deaths didn't change much for those born in 1900 and 1950 (between 76 and 80, but many more people born in 1950 will make it).

Now the CDC is projection the peak age for deaths - for those born in 2010 - will increase to 86 to 90!

Also the number of deaths for those younger than 20 will be very small (down to mostly accidents, guns, and drugs).  Self-driving cars might reduce the accident components of young deaths.

In 1900, 25,2% died before age 20.  And another 26.8% died before 55.

In 1950, 5.3% died before age 20.  And another 18.7% died before 55.  A dramatic decline in early deaths.

In 2010, 1.5% are projected to die before age 20.  And only 9.7% before 55.  A dramatic decline in prime working age deaths.

An amazing statistic: for those born in 1900, about 13 out of 100,000 made it to 100.  For those born in 1950, 199 are projected to make to 100 - an significant increase.   Now the CDC is projecting that 1,968 out of 100,000 born in 2010 will make it to 100.  Stunning!

Some people look at this data and worry about supporting all the old people.  To me, this is all great news - the vast majority of people can look forward to a long life - with fewer people dying in childhood or during their prime working years.  Awesome!