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Wednesday, February 12, 2025

Poor Weather Reduced Employment by About 90,000 in January

by Calculated Risk on 2/12/2025 03:18:00 PM

The BLS reported 143 thousand non-farm jobs were added in January.   During the Winter months, I like to look at the weather impact on the report.

The BLS reported 573 thousand people were employed in non-agriculture industries, with a job, but not at work due to bad weather. The average for January over the previous 10 years was 304 thousand (median 258 thousand), so more people than normal were impacted by bad weather.

The BLS also reported 1.175 million people that are usually full-time employees were working part time in January due to bad weather.  The average for January over the previous 10 years was 945 thousand (the median was 670 thousand).  This series suggests weather negatively impacted employment more than usual.

The San Francisco Fed estimates Weather-Adjusted Change in Total Nonfarm Employment (monthly change, seasonally adjusted). They use local area weather to estimate the impact on employment. For January, the San Francisco Fed estimated that weather reduced employment by 85 to 90 thousand jobs.

It appears weather adjusted job gains were around 230 thousand in January (seasonally adjusted)

Lawler: More Ruminations on the “Neutral” Rate of Interest

by Calculated Risk on 2/12/2025 12:34:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: More Ruminations on the “Neutral” Rate of Interest

A brief excerpt:

When talking about the so-called “neutral” interest rate, many financial commentators, financial analysts, and even monetary policymakers talk about the nominal interest rate. However, the theoretical “neutral” interest rate is a real, or inflation-adjusted interest rate.
...
In sum, (1) the market’s view of the neutral fed funds rate is higher than the majority of FOMC participants; and (2) using implied market expectations the current stance of monetary policy is not meaningfully restrictive.
There is much more in the article.

Cleveland Fed: Median CPI increased 0.3% and Trimmed-mean CPI increased 0.4% in January

by Calculated Risk on 2/12/2025 11:26:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI.

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% in December. The 16% trimmed-mean Consumer Price Index increased 0.4%. "The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report".

Inflation Measures Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. 

On a year-over-year basis, the median CPI rose 3.6% (down from 3.7% YoY in December), the trimmed-mean CPI rose 3.1% (down from 3.2%), and the CPI less food and energy rose 3.3% (up from 3.2%). 

Core PCE is for December was up 2.8% YoY, mostly unchanged from 2.8% in November.

YoY Measures of Inflation: Services, Goods and Shelter

by Calculated Risk on 2/12/2025 08:57:00 AM

Here are a few measures of inflation:

The first graph is the one Fed Chair Powell had mentioned when services less rent of shelter was up around 8% year-over-year.  This declined, but is still elevated, and is now up 3.9% YoY.

Services ex-ShelterClick on graph for larger image.

This graph shows the YoY price change for Services and Services less rent of shelter through December 2024.


Services were up 4.2% YoY as of January 2025, down from 4.4% YoY in December.

Services less rent of shelter was up 3.9% YoY in January, down from 4.0% YoY in December

Goods CPIThe second graph shows that goods prices started to increase year-over-year (YoY) in 2020 and accelerated in 2021 due to both strong demand and supply chain disruptions.

Durables were at -1.2% YoY as of January 2025, up from -1.9% YoY in December.

Commodities less food and energy commodities were at -0.1% YoY in January, up from -0.7% YoY in December.

ShelterHere is a graph of the year-over-year change in shelter from the CPI report (through January) and housing from the PCE report (through December)

Shelter was up 4.4% year-over-year in January, down from 4.6% in December. Housing (PCE) was up 4.7% YoY in December, down from 4.8% in November.

This is still catching up with private new lease data.

Core CPI ex-shelter was up 2.4% YoY in January.

BLS: CPI Increased 0.5% in January; Core CPI increased 0.4%

by Calculated Risk on 2/12/2025 08:30:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent on a seasonally adjusted basis in January, after rising 0.4 percent in December, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.0 percent before seasonal adjustment.

The index for shelter rose 0.4 percent in January, accounting for nearly 30 percent of the monthly all items increase. The energy index rose 1.1 percent over the month, as the gasoline index increased 1.8 percent. The index for food also increased in January, rising 0.4 percent as the index for food at home rose 0.5 percent and the index for food away from home increased 0.2 percent.

The index for all items less food and energy rose 0.4 percent in January. Indexes that increased over the month include motor vehicle insurance, recreation, used cars and trucks, medical care, communication, and airline fares. The indexes for apparel, personal care, and household furnishings and operations were among the few major indexes that decreased in January.

The all items index rose 3.0 percent for the 12 months ending January, after rising 2.9 percent over the 12 months ending December. The all items less food and energy index rose 3.3 percent over the last 12 months. The energy index increased 1.0 percent for the 12 months ending January. The food index increased 2.5 percent over the last year.
emphasis added
The change in CPI was above expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

MBA: Mortgage Refinance Applications Increased in Weekly Survey; Purchase Applications Declined

by Calculated Risk on 2/12/2025 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 7, 2025.

The Market Composite Index, a measure of mortgage loan application volume, increased 2.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 6 percent compared with the previous week. The Refinance Index increased 10 percent from the previous week and was 33 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 2 percent higher than the same week one year ago.

“Mortgage rates moved slightly lower last week, which led to the pace of refinance applications reaching its strongest week since October 2024,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The average loan size for refinance borrowers increased, as these borrowers tend to be more responsive for a given change in rates. Purchase applications were down from the previous week’s level but were slightly ahead of last year’s pace. The average loan size for a purchase application increased to its highest level since March 2022 at $456,100, partially driven by fewer FHA purchase applications but more VA loans compared to the previous week.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.95 percent from 6.97 percent, with points remained unchanged at 0.64 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Purchase IndexClick on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 2% year-over-year unadjusted. 

Red is a four-week average (blue is weekly).  

Purchase application activity is up about 22% from the lows in late October 2023 and is now 1% above the lowest levels during the housing bust.  

Mortgage Refinance Index
The second graph shows the refinance index since 1990.

The refinance index remains very low.

Tuesday, February 11, 2025

Wednesday: CPI

by Calculated Risk on 2/11/2025 07:21:00 PM

Mortgage Rates Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

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

• At 8:30 AM, The Consumer Price Index for January from the BLS. The consensus is for 0.3% increase in CPI, and a 0.3% increase in core CPI.  The consensus is for CPI to be up 2.9% year-over-year and core CPI to be up 3.2% YoY.

• At 10:00 AM, Testimony, Fed Chair Jerome Powell, Semiannual Monetary Policy Report to Congress, Before the U.S. House Financial Services Committee

CPI Preview

by Calculated Risk on 2/11/2025 02:13:00 PM

The Consumer Price Index for January is scheduled to be released tomorrow. The consensus is for a 0.3% increase in CPI, and a 0.3% increase in core CPI. The consensus is for CPI to be up 2.9% year-over-year and core CPI to be up 3.2% YoY.

From Goldman Sachs economists:

We expect a 0.34% increase in January core CPI (vs. 0.3% consensus), corresponding to a year-over-year rate of 3.19% (vs. 3.1% consensus). We expect a 0.36% increase in January headline CPI (vs. 0.3% consensus), reflecting 0.4% higher food prices and 0.6% higher energy prices.
From BofA:
We anticipate January headline and core CPI to each increase by 0.3% m/m. The y/y rates should decline a tenth to 2.8% and 3.1%, respectively. Residual seasonality and base effects are likely to have played a role, adding noise to the report. Additionally, CPI seasonal factors will be revised with the January release.

2nd Look at Local Housing Markets in January

by Calculated Risk on 2/11/2025 11:07:00 AM

Today, in the Calculated Risk Real Estate Newsletter: 2nd Look at Local Housing Markets in January

A brief excerpt:

NOTE: The tables for active listings, new listings and closed sales all include a comparison to January 2019 for each local market (some 2019 data is not available).

This is the second look at several early reporting local markets in January. I’m tracking over 40 local housing markets in the US. Some of the 40 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.

Closed sales in January were mostly for contracts signed in November and December when 30-year mortgage rates averaged 6.81% and 6.72%, respectively (Freddie Mac PMMS). This was an increase from the average rate for homes that closed in November, but down from the average rate of 7.1% in November and December 2023.
...
Closed Existing Home SalesHere is a look at months-of-supply using NSA sales. Since this is NSA data, it is likely this will be near the seasonal low for months-of-supply.

Months in red are areas that will likely see over 6 months of supply later this year.
...
Many more local markets to come!
There is much more in the article.

Semiannual Monetary Policy Report to the Congress

by Calculated Risk on 2/11/2025 09:32:00 AM

This testimony will be live here at 10:00 AM ET and also on C-SPAN 3.

Report here.

An excerpt:

The Federal Open Market Committee (FOMC) is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decisionmaking by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.

Employment, inflation, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Monetary policy plays an important role in stabilizing the economy in response to these disturbances. The Committee's primary means of adjusting the stance of monetary policy is through changes in the target range for the federal funds rate. The Committee judges that the level of the federal funds rate consistent with maximum employment and price stability over the longer run has declined relative to its historical average. Therefore, the federal funds rate is likely to be constrained by its effective lower bound more frequently than in the past. Owing in part to the proximity of interest rates to the effective lower bound, the Committee judges that downward risks to employment and inflation have increased. The Committee is prepared to use its full range of tools to achieve its maximum employment and price stability goals.

The maximum level of employment is a broad-based and inclusive goal that is not directly measurable and changes over time owing largely to nonmonetary factors that affect the structure and dynamics of the labor market. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the shortfalls of employment from its maximum level, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments.

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee reaffirms its judgment that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. The Committee judges that longer-term inflation expectations that are well anchored at 2 percent foster price stability and moderate long-term interest rates and enhance the Committee's ability to promote maximum employment in the face of significant economic disturbances. In order to anchor longer-term inflation expectations at this level, the Committee seeks to achieve inflation that averages 2 percent over time, and therefore judges that, following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.

Monetary policy actions tend to influence economic activity, employment, and prices with a lag. In setting monetary policy, the Committee seeks over time to mitigate shortfalls of employment from the Committee's assessment of its maximum level and deviations of inflation from its longer-run goal. Moreover, sustainably achieving maximum employment and price stability depends on a stable financial system. Therefore, the Committee's policy decisions reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee's goals.

The Committee's employment and inflation objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it takes into account the employment shortfalls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate.

The Committee intends to review these principles and to make adjustments as appropriate at its annual organizational meeting each January, and to undertake roughly every 5 years a thorough public review of its monetary policy strategy, tools, and communication practices. emphasis added