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Friday, December 08, 2017

AAR: Rail Carloads decreased, Intermodal Solid in November

by Calculated Risk on 12/08/2017 04:16:00 PM

From the Association of American Railroads (AAR) Rail Time Indicators. Graphs and excerpts reprinted with permission.

In November 2017, like in October 2017, U.S. rail traffic had both a glass-is-half-empty and a glass-is-half-full feel to it. It’s half empty because total carloads were down 0.9% (11,442 carloads) in November, their fifth straight year-over-year monthly decline after eight straight monthly increases. Railroads, of course, are concerned with their total level of business, not just particular commodities, so total carloads matter. Eight of the 20 categories the AAR tracks had carload declines in November, but three of these were especially important: coal (down 22,560 carloads, or 5.0%), grain (down 16,311 carloads, or 12.7%), and petroleum and petroleum products (down 3,877 carloads, or 7.2%). All three of these categories saw carload declines in November for reasons that don’t have much to do with the state of the economy. So, the half-full feel comes from the fact that many traffic categories that are more sensitive to the economy did relatively well in November (e.g., steel, up 6.9%; stone, clay, and glass products, up 6.0%; chemicals up 3.6%). That’s a good sign for the economy going forward. The fact that intermodal originations were up 3.8% (50,029 containers and trailers) in November and will almost certainly set a new annual record in 2017 is a good sign as well.
Rail Traffic Click on graph for larger image.

This graph from the Rail Time Indicators report shows U.S. average weekly rail carloads (NSA).  Dark blue is 2017.

Rail carloads have been weak over the last decade due to the decline in coal shipments.
Originated carloads on U.S. railroads totaled 1,307,521 in November 2017, down 0.9% (11,442 carloads) from November 2016 thanks mainly to big declines in carloads of coal, grain, and petroleum products. Total carloads averaged 261,504 per week in November 2017, ahead of November 2015 (260,453) but otherwise the lowest weekly average for November since sometime prior to 1988, when our data begin.
Rail TrafficThe second graph is for intermodal traffic (using intermodal or shipping containers):
U.S. intermodal originations totaled 1.37 million containers and trailers in November 2017. That’s 3.8%, or 50,029 units, higher than in November 2016 and the tenth straight monthly increase. Weekly volume in November 2017 averaged 273,832 units, the eighth largest weekly average for any month on record and the fourth highest for any month this year.

Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama, Trump

by Calculated Risk on 12/08/2017 02:35:00 PM

Here is another update of tracking employment during Presidential terms.  We frequently use Presidential terms as time markers - we could use Speaker of the House, Fed Chair, or any other marker.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I'll just stick to the beginning of each term.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (dark blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (dark red) took office.

There was a recession towards the end of President G.H.W. Bush (light purple) term, and Mr Clinton (light blue) served for eight years without a recession.

Private Sector Payrolls Click on graph for larger image.

The first graph is for private employment only.

Mr. Trump is in Orange (just ten months).

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 811,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 396,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased by 20,966,000 under President Clinton (light blue), by 14,717,000 under President Reagan (dark red), 9,041,000 under President Carter (dashed green), 1,510,000 under President G.H.W. Bush (light purple), and 11,756,000 under President Obama (dark blue).

During the first ten months of Mr. Trump's term, the economy has added 1,670,000 private sector jobs.

Public Sector Payrolls A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).  However the public sector declined significantly while Mr. Obama was in office (down 268,000 jobs).

During the first ten months of Mr. Trump's term, the economy has added 30,000 public sector jobs.

Trump Job TrackerThe third graph shows the progress towards the Trump goal of adding 10 million jobs over the next 4 years.

After ten months of Mr. Trump's presidency, the economy has added 1,700,000 jobs, about 383,000 behind the projection.

Solid Seasonal Retail Hiring in November

by Calculated Risk on 12/08/2017 11:00:00 AM

According to the BLS employment report, retailers hired seasonal workers in October and November at a higher pace than last year.

Seasonal Retail HiringTypically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year.

This graph really shows the collapse in retail hiring in 2008. Since then seasonal hiring has increased back close to more normal levels. Note: I expect the long term trend will be down with more and more internet holiday shopping.

Retailers hired 595 thousand workers (NSA) net in October and November, this is up from just over 509 thousand for the same period last year, and about the same level as the previous four years.   Note: this is NSA (Not Seasonally Adjusted).

This suggests retailers are optimistic about the holiday season, even though some retailers are probably having trouble finding seasonal hires.

Comment on Employment Report: Some Additional Hurricane Bounce Back

by Calculated Risk on 12/08/2017 10:00:00 AM

The headline jobs number was strong at 228  thousand, probably somewhat due to an additional bounce back from the hurricanes, and above expectations.  The previous two months were revised up slightly by a combined 3 thousand jobs.

The September jobs report was revised up again (now up to 38 thousand), and that keeps the record job streak alive, now at 86 consecutive months (93 months if we remove the decennial Census hiring and firing).

Earlier: November Employment Report: 228,000 Jobs Added, 4.1% Unemployment Rate

In November, the year-over-year change was 2.07 million jobs. This is still generally trending down.

Average Hourly Earnings

Wages CES, Nominal and RealClick on graph for larger image.

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.5% YoY in November.

Wage growth had been trending up, although the acceleration in wage growth stalled this year.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 4.8 million, was essentially unchanged in November but was down by 858,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find full-time jobs.
The number of persons working part time for economic reasons increased slightly in November. The number working part time for economic reasons suggests a little slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 8.0% in November.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.58 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.62 million in October

This is the lowest level since June 2008.

This is trending down, but still a little elevated.

The headline jobs number was solid and the unemployment rate unchanged at a low level - both positive signs and a continuation of multi-year trends.  However wage growth was disappointing again.

November Employment Report: 228,000 Jobs Added, 4.1% Unemployment Rate

by Calculated Risk on 12/08/2017 08:30:00 AM

From the BLS:

Total nonfarm payroll employment increased by 228,000 in November, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. ... The unemployment rate held at 4.1 percent in November, and the number of unemployed persons was essentially unchanged at 6.6 million.
...
The change in total nonfarm payroll employment for September was revised up from +18,000 to +38,000, and the change for October was revised down from +261,000 to +244,000. With these revisions, employment gains in September and October combined were 3,000 more than previously reported.
...
In November, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.55. Over the year, average hourly earnings have risen by 64 cents, or 2.5 percent.
emphasis added
Payroll jobs added per monthClick on graph for larger image.

The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes).

Total payrolls increased by 228 thousand in November (private payrolls increased 221 thousand).

Payrolls for September and October were revised up by a combined 3 thousand.

Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In November the year-over-year change was 2.07 million jobs.

The third graph shows the employment population ratio and the participation rate.

Employment Pop Ratio, participation and unemployment rates The Labor Force Participation Rate was unchanged in November at 62.7%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics.

The Employment-Population ratio decreased to 60.1% (black line).

I'll post the 25 to 54 age group employment-population ratio graph later.

unemployment rateThe fourth graph shows the unemployment rate.

The unemployment rate was unchanged in October at 4.1%. 

This was above expectations of 185,000 jobs, and the previous two months combined were revised up slightly.

I'll have much more later ...

Thursday, December 07, 2017

Friday: Employment Report

by Calculated Risk on 12/07/2017 08:17:00 PM

My November Employment Preview

and Goldman: November Payrolls Preview

Friday:
• At 8:30 AM ET, Employment Report for November. The consensus is for an increase of 185,000 non-farm payroll jobs added in November, down from the 261,000 non-farm payroll jobs added in October. The consensus is for the unemployment rate to be unchanged at 4.1%.

• At 10:00 AM, University of Michigan's Consumer sentiment index (preliminary for December). The consensus is for a reading of 98.8, up from 98.5 in November.

Leading Index for Commercial Real Estate "Remains Strong" in November

by Calculated Risk on 12/07/2017 05:28:00 PM

Note: This index is possibly a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.

From Dodge Data Analytics: Dodge Momentum Index Remains Strong in November

The Dodge Momentum Index surged again in November, climbing 13.9% to 149.5 (2000=100) from the revised October reading of 131.3. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The November increase was the second month of strong gains after a four-month period of softness. November’s advance was the result of healthy gains in both the commercial and institutional sectors. From October to November, the commercial portion of the Momentum Index advanced 19.6%, while the institutional portion grew 5.5%. On a year-over-year basis, the Momentum Index is now nearly 21% higher, with the commercial portion up 24% and the institutional side up 17%. The turnaround in October and November suggest that building activity should continue to expand in 2018.
emphasis added
Dodge Momentum Index Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 149.6 in November, up from 131.3 in October.

The index is up 21% year-over-year.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests further growth into 2018.

Goldman: November Payrolls Preview

by Calculated Risk on 12/07/2017 02:54:00 PM

A few brief excerpts from a note by Goldman Sachs economist Spencer Hill:

We estimate that nonfarm payrolls increased 225k in November, above consensus of +195k. In addition to a firm pace of underlying job growth, our forecast reflects some additional normalization in hurricane-affected regions, as well as above-trend retail job growth associated with the early Thanksgiving. The arrival of over 200k Puerto Ricans in Florida may also boost payroll growth this month.

We estimate the unemployment rate remained unchanged at 4.1%, as the brisk downtrend in recent months seems due a pause. For average hourly earnings, we estimate +0.3% month-over-month (+2.7% yoy) with risks skewed to the upside, reflecting a boost from unwinding hurricane distortions and somewhat favorable calendar effects.
emphasis added

November Employment Preview

by Calculated Risk on 12/07/2017 01:46:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for November. Merrill Lynch economists expect the following:

We forecast that nonfarm payrolls increased by an above-trend 210k in November. While nonfarm payrolls rebounded ... in October, it was well short of offsetting the decline seen in September and therefore we expect a further rebound in job growth in November. ... Elsewhere, we expect the unemployment rate to tick up to 4.2% from 4.1%. The unemployment rate declined in October as the labor force participation rate and household employment dropped sharply, potentially due to noise in the household survey. On wages, with labor market conditions continuing to tighten, we look for average hourly earnings growth to rebound to 0.3% mom in November after a flat reading in October. If realized, the yoy rate should jump to 2.7% from 2.4%, previously.
The consensus, according to Bloomberg, is for an increase of 190,000 non-farm payroll jobs in November (with a range of estimates between 153,000 to 250,000), and for the unemployment rate to be unchanged at 4.1%.

The BLS reported 261,000 jobs added in October.

Here is a summary of recent data:

• The ADP employment report showed an increase of 190,000 private sector payroll jobs in November. This was above consensus expectations of 186,000 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 close to or above expectations.

• The ISM manufacturing employment index decreased in November to 59.7%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased about 34,000 in October. The ADP report indicated manufacturing jobs increased 40,000 in November.

The ISM non-manufacturing employment index decreased in November to 55.3%. 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 215,000 in November.

Combined, the ISM indexes suggests employment gains of about 249,000.  This suggests employment growth above expectations.

Initial weekly unemployment claims averaged 241,500 in November,  up from 232,000 in October. For the BLS reference week (includes the 12th of the month), initial claims were at 240,000, up from 223,000 during the reference week in October.

The increase during the reference week suggests a weaker employment report in November than in October.

• The final November University of Michigan consumer sentiment index decreased to 98.5 from the October reading of 10000.7. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion:  The ISM reports suggest a strong report.  The ADP report and weekly claims suggest a an employment report close to expectations.   My guess is the employment report will be above the consensus.

Fed's Flow of Funds: Household Net Worth increased in Q3

by Calculated Risk on 12/07/2017 12:21:00 PM

The Federal Reserve released the Q3 2017 Flow of Funds report today: Flow of Funds.

According to the Fed, household net worth increased in Q3 2017 compared to Q2 2017:

The net worth of households and nonprofits rose to $96.9 trillion during the third quarter of 2017. The value of directly and indirectly held corporate equities increased $1.1 trillion and the value of real estate increased $0.4 trillion.
The Fed estimated that the value of household real estate increased to $24.2 trillion in Q3. The value of household real estate is now above the bubble peak in early 2006 - but not adjusted for inflation, and this also includes new construction.

Household Net Worth as Percent of GDP Click on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  Household net worth, as a percent of GDP, is higher than the peak in 2006 (housing bubble), and above the stock bubble peak.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

Household Percent EquityThis graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q3 2017, household percent equity (of household real estate) was at 58.5% - up from Q3, and the highest since Q1 2006. This was because of an increase in house prices in Q3 (the Fed uses CoreLogic).

Note: about 30.3% of owner occupied households had no mortgage debt as of April 2010. So the approximately 50+ million households with mortgages have far less than 58.5% equity - and about 2.5 million homeowners still have negative equity.

Household Real Estate Assets Percent GDP The third graph shows household real estate assets and mortgage debt as a percent of GDP.

Mortgage debt increased by $85 billion in Q3.

Mortgage debt has declined by $0.7 trillion from the peak. Studies suggest most of the decline in debt has been because of foreclosures (or short sales), but some of the decline is from homeowners paying down debt (sometimes so they can refinance at better rates).

The value of real estate, as a percent of GDP, was up in Q3, and  is above the average of the last 30 years (excluding bubble).  However, mortgage debt as a percent of GDP, continues to decline.