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Friday, August 22, 2014

ATA Trucking Index increased 1.3% in July

by Calculated Risk on 8/22/2014 02:01:00 PM

Here is a minor indicator that I follow, from ATA: ATA Truck Tonnage Index Increased 1.3% in July

American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index rose 1.3% in July, following a decrease of 0.8% the previous month. In July, the index equaled 130.2 (2000=100) versus 128.6 in June. The index is off just 0.6% from the all-time high in November 2013 (131.0).

Compared with July 2013, the SA index increased 3.6%, up from June’s 2.3% year-over-year gain. The latest year-over-year increase was the largest in three months. ...

“After a surprising decrease in June, tonnage really snapped back in July,” said ATA Chief Economist Bob Costello. “This gain fits more with the anecdotal reports we are hearing from motor carriers that freight volumes are good.”

Costello added that tonnage is up 4.9% since hitting a recent low in January.

“The solid tonnage number in July fits with the strong factory output reading and a jump in housing starts for the same month,” he said. “I continue to expect moderate, but good, tonnage growth for the rest of the year.”
emphasis added
ATA Trucking Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index.

The index is now up 3.6% year-over-year.

DOT: Vehicle Miles Driven increased 0.9% year-over-year in May

by Calculated Risk on 8/22/2014 12:22:00 PM

The Department of Transportation (DOT) reported:

Travel on all roads and streets changed by +0.9 (2.4 billion vehicle miles) for May 2014 as compared with May 2013. Travel for the month is estimated to be 264.2 billion vehicle miles.

Cumulative Travel for 2014 changed by +0.2 (2.9 billion vehicle miles).
The following graph shows the rolling 12 month total vehicle miles driven.

The rolling 12 month total is still mostly moving sideways ...


Vehicle Miles Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 78 months - 6 1/2 years - and still counting.  Currently miles driven (rolling 12 months) are about 2.2% below the previous peak.

The second graph shows the year-over-year change from the same month in the previous year.

Vehicle Miles Driven YoY In May 2014, gasoline averaged of $3.75 per gallon according to the EIA.  That was up from May 2013 when prices averaged $3.67 per gallon.

Of course gasoline prices are just part of the story.  The lack of growth in miles driven over the last 6+ years is probably also due to the lingering effects of the great recession (high unemployment rate and lack of wage growth), the aging of the overall population (over 55 drivers drive fewer miles) and changing driving habits of young drivers.

With all these factors, it might take a few more years before we see a new peak in miles driven - but it does seem like miles driven is now increasing slowly.

Fed Chair Yellen: Unemployment Rate "somewhat overstates" Improvement in Labor Market

by Calculated Risk on 8/22/2014 10:00:00 AM

From Fed Chair Janet Yellen at Jackson Hole Economic Symposium: Labor Market Dynamics and Monetary Policy. Excerpts:

One convenient way to summarize the information contained in a large number of indicators is through the use of so-called factor models. Following this methodology, Federal Reserve Board staff developed a labor market conditions index from 19 labor market indicators, including four I just discussed. This broadly based metric supports the conclusion that the labor market has improved significantly over the past year, but it also suggests that the decline in the unemployment rate over this period somewhat overstates the improvement in overall labor market conditions.
emphasis added
More excerpts:
[W]ith the economy getting closer to our objectives, the FOMC's emphasis is naturally shifting to questions about the degree of remaining slack, how quickly that slack is likely to be taken up, and thereby to the question of under what conditions we should begin dialing back our extraordinary accommodation. As should be evident from my remarks so far, I believe that our assessments of the degree of slack must be based on a wide range of variables and will require difficult judgments about the cyclical and structural influences in the labor market. While these assessments have always been imprecise and subject to revision, the task has become especially challenging in the aftermath of the Great Recession, which brought nearly unprecedented cyclical dislocations and may have been associated with similarly unprecedented structural changes in the labor market--changes that have yet to be fully understood.

So, what is a monetary policymaker to do? Some have argued that, in light of the uncertainties associated with estimating labor market slack, policymakers should focus mainly on inflation developments in determining appropriate policy. To take an extreme case, if labor market slack was the dominant and predictable driver of inflation, we could largely ignore labor market indicators and look instead at the behavior of inflation to determine the extent of slack in the labor market. In present circumstances, with inflation still running below the FOMC's 2 percent objective, such an approach would suggest that we could maintain policy accommodation until inflation is clearly moving back toward 2 percent, at which point we could also be confident that slack had diminished.

Of course, our task is not nearly so straightforward. Historically, slack has accounted for only a small portion of the fluctuations in inflation. Indeed, unusual aspects of the current recovery may have shifted the lead-lag relationship between a tightening labor market and rising inflation pressures in either direction. For example, as I discussed earlier, if downward nominal wage rigidities created a stock of pent-up wage deflation during the economic downturn, observed wage and price pressures associated with a given amount of slack or pace of reduction in slack might be unusually low for a time. If so, the first clear signs of inflation pressure could come later than usual in the progression toward maximum employment. As a result, maintaining a high degree of monetary policy accommodation until inflation pressures emerge could, in this case, unduly delay the removal of accommodation, necessitating an abrupt and potentially disruptive tightening of policy later on.

Conversely, profound dislocations in the labor market in recent years--such as depressed participation associated with worker discouragement and a still-substantial level of long-term unemployment--may cause inflation pressures to arise earlier than usual as the degree of slack in the labor market declines. However, some of the resulting wage and price pressures could subsequently ease as higher real wages draw workers back into the labor force and lower long-term unemployment. As a consequence, tightening monetary policy as soon as inflation moves back toward 2 percent might, in this case, prevent labor markets from recovering fully and so would not be consistent with the dual mandate.

Thursday, August 21, 2014

Lawler: Fannie Survey on How Lenders “Adapt” to ATR/QM

by Calculated Risk on 8/21/2014 07:59:00 PM

From housing economist Tom Lawler:

The Fannie Mae Economic & Strategic Research Group released the results of a recent survey of senior mortgage executives designed to see how mortgage lenders had and/or would “adapt” to the new Ability-To-Repay (ATR) and Qualified Mortgage (QM) standards that become effective January 10, 2014. A total of 201 executives representing 186 institutions completed the survey between May 28 – June 8,2014.

Here are the results for a subset of the questions.

Impact of ATR/QM Rules (% of Respondents)
  EaseBasically UnchangedTighten
Credit Standards6%58%36%
  IncreaseRemain About the SameDecrease
Operational Costs74%19%7%
Strategy on Non-QM Mortgage Loans
  Actively PursueWait and SeeDo NOT Plan to Pursue
Non-QM Loans19%46%34%

A presentation on the survey results is available at Impact of Qualified Mortgage Rules and Quality Control Review

A Few Comments on Existing Home Sales

by Calculated Risk on 8/21/2014 03:31:00 PM

The most important number in the NAR report each month is inventory.   This morning the NAR reported that inventory was up 5.8% year-over-year in July.   It is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data. 

The headline NAR inventory number is not seasonally adjusted, even though there is a clear seasonal pattern. Trulia chief economist Jed Kolko has sent me the seasonally adjusted inventory. NOTE: The NAR does provide a seasonally adjusted months-of-supply, although that is in the supplemental data.

Existing Home Inventory Seasonally AdjustedClick on graph for larger image.

This shows that inventory bottomed in January 2013 (on a seasonally adjusted basis), and inventory is now up about 10.7% from the bottom. On a seasonally adjusted basis, inventory was only up 0.2% in July compared to June.

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, many "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

Another key point: The NAR reported total sales were down 4.3% from July 2013, but normal equity sales were probably up from July 2013, and distressed sales down sharply.  The NAR reported that 9% of sales were distressed in July (from a survey that is far from perfect):

Distressed homes – foreclosures and short sales – accounted for 9 percent of July sales, down from 15 percent a year ago and the first time they were in the single-digits since NAR started tracking the category in October 2008. Six percent of July sales were foreclosures and 3 percent were short sales.
Last year in July the NAR reported that 15% of sales were distressed sales.

A rough estimate: Sales in July 2013 were reported at 5.38 million SAAR with 15% distressed.  That gives 807 thousand distressed (annual rate), and 4.57 million equity / non-distressed.  In July 2014, sales were 5.15 million SAAR, with 9% distressed.  That gives 464 thousand distressed - a decline of over 40% from July 2013 - and 4.69 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up slightly (even with less investor buying). 

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Home Sales NSAClick on graph for larger image.

Sales NSA in July (red column) were below the level of sales in July 2013, and above sales for 2008 through 2012. 

Overall this was a solid report.

Earlier:
Existing Home Sales in July: 5.15 million SAAR, Inventory up 5.8% Year-over-year

Philly Fed Manufacturing Survey increases to 28 in August, Highest since March 2011

by Calculated Risk on 8/21/2014 12:45:00 PM

Earlier from the Philly Fed: August Manufacturing Survey

The diffusion index of current general activity increased from a reading of 23.9 in July to 28.0 this month. The index has increased for three consecutive months and is at its highest reading since March 2011 The new orders and shipments indexes remained positive but fell to near their levels in June. The new orders index decreased 20 points [to 14.7], while the shipments index decreased 18 points.
...
The current indicators for labor market conditions suggested continued modest expansion in employment. The employment index remained positive for the 14th consecutive month but declined 3 points from its reading in July [to 9.1] ...

Most of the survey’s broad indicators of future growth showed improvement this month. The future general activity index increased 8 points and is at its highest reading since June 1992 emphasis added
This was above the consensus forecast of a reading of 15.5 for July.

ISM PMI Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through August. The ISM and total Fed surveys are through July.

The average of the Empire State and Philly Fed surveys was solid in August, and this suggests another strong ISM report for August.

Existing Home Sales in July: 5.15 million SAAR, Inventory up 5.8% Year-over-year

by Calculated Risk on 8/21/2014 10:00:00 AM

The NAR reports: Existing-Home Sales Continue to Climb in July

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million in July from a slight downwardly-revised 5.03 million in June. Sales are at the highest pace of 2014 and have risen four consecutive months, but remain 4.3 percent below the 5.38 million-unit level from last July, which was the peak of 2013. ...

Total housing inventory at the end of July rose 3.5 percent to 2.37 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace. Unsold inventory is 5.8 percent higher than a year ago, when there were 2.24 million existing homes available for sale.
Existing Home SalesClick on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in July (5.15 million SAAR) were 2.4% higher than last month, but were 4.3% below the July 2013 rate.

The second graph shows nationwide inventory for existing homes.

Existing Home InventoryAccording to the NAR, inventory increased to 2.37 million in July from 2.29 million in June.   Headline inventory is not seasonally adjusted, and inventory usually increases from the seasonal lows in December and January, and peaks in mid-to-late summer.

The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Year-over-year Inventory Inventory increased 5.8% year-over-year in July compared to July 2013.  

Months of supply was at 5.5 months in July.

This was above expectations of sales of 5.00 million.  For existing home sales, the key number is inventory - and inventory is still low, but up solidly year-over-year.    I'll have more later ...

Weekly Initial Unemployment Claims decrease to 298,000

by Calculated Risk on 8/21/2014 08:30:00 AM

The DOL reports:

In the week ending August 16, the advance figure for seasonally adjusted initial claims was 298,000, a decrease of 14,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 311,000 to 312,000. The 4-week moving average was 300,750, an increase of 4,750 from the previous week's revised average. The previous week's average was revised up by 250 from 295,750 to 296,000.

There were no special factors impacting this week's initial claims.
The previous week was revised up to 312,000.

The following graph shows the 4-week moving average of weekly claims since January 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 300,750.

This was lower than the consensus forecast of 305,000. 

Wednesday, August 20, 2014

Thursday: Existing Home Sales, Philly Fed Mfg Survey, Unemployment Claims

by Calculated Risk on 8/20/2014 08:30:00 PM

From Andrew Ross at the San Francisco Chronicle: Household income hasn't shared in recovery

As of June, median annual household income was 4.8 percent below December 2007, when the recession began, dropping from $56,000 to $54,000. Going back to the good old days, it's down 5.9 percent from January 2000, according to the Sentier Research Group, which compiled the numbers from the latest Current Population Survey by the U.S. Census Bureau.
I think this is real household income (adjusted for inflation). Hopefully, as the unemployment rate continues to decline, the median real household income will start to increase.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 305 thousand from 311 thousand.

• At 10:00 AM, Existing Home Sales for July from the National Association of Realtors (NAR). The consensus is for sales of 5.00 million on seasonally adjusted annual rate (SAAR) basis. Sales in June were at a 5.04 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 5.09 million SAAR. A key will be the reported year-over-year increase in inventory of homes for sale.

• Also at 10:00 AM, the Philly Fed manufacturing survey for August. The consensus is for a reading of 18.5, down from 23.9 last month (above zero indicates expansion).

Lawler: Updated Table of Distressed Sales and Cash buyers for Selected Cities in July

by Calculated Risk on 8/20/2014 04:34:00 PM

Economist Tom Lawler sent me the updated table below of short sales, foreclosures and cash buyers for several selected cities in July.

Comments from CR: Tom Lawler has been sending me this table every month for several years. I think it is very useful for looking at the trend for distressed sales and cash buyers in these areas. I sincerely appreciate Tom sharing this data with us!

On distressed: Total "distressed" share is down in all of these markets, mostly because of a sharp decline in short sales.

Short sales are down in all of these areas.

Foreclosures are down in most of these areas too, although foreclosures are up a little in few areas like Nevada, Sacramento, Orlando, Miami and the Mid-Atlantic (areas with foreclosure delays related to a judicial foreclosure process or state law changes).

The All Cash Share (last two columns) is mostly declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

  Short Sales ShareForeclosure Sales Share Total "Distressed" ShareAll Cash Share
July-14July-13July-14July-13July-14July-13July-14July-13
Las Vegas11.5%28.0%10.1%8.0%21.6%36.0%35.6%54.5%
Reno**8.0%21.0%4.0%7.0%12.0%28.0% 
Phoenix3.7%11.5%5.9%9.4%9.6%20.8%24.8%35.8%
Sacramento5.7%17.9%6.3%5.1%12.0%23.0%20.9%25.5%
Minneapolis3.0%5.7%9.5%15.0%12.5%20.7% 
Mid-Atlantic 4.3%6.6%7.7%6.6%12.1%13.2%17.1%16.1%
Orlando8.3%17.9%24.4%17.5%32.7%35.4%39.6%47.8%
California *6.6%12.7%5.6%8.3%12.2%21.0% 
Bay Area CA*4.2%8.5%2.7%4.6%6.9%13.1%20.2%23.5%
So. California*5.9%12.7%5.2%7.7%11.1%20.4%24.5%30.0%
Miami MSA SF8.5%17.8%17.4%12.9%25.9%30.7%38.6%43.2%
Miami MSA C/TH5.1%12.6%21.7%17.1%26.8%29.7%68.1%75.0%
Georgia***            24.1%N/A
Toledo            32.9%35.0%
Wichita            28.0%24.1%
Des Moines            15.1%15.1%
Peoria            18.4%18.6%
Tucson            26.2%29.1%
Omaha            17.0%15.9%
Pensacola            32.9%30.0%
Memphis*    13.4%16.9%       
*share of existing home sales, based on property records
**Single Family Only
***GAMLS