by Calculated Risk on 2/06/2025 07:48:00 PM
Thursday, February 06, 2025
Friday: Employment Report
Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.
Friday:
• At 8:30 AM: Employment Report for December. The consensus is for 170,000 jobs added, and for the unemployment rate to be unchanged at 4.1%.
NOTE: For the household survey, new population controls will be used - and this will boost overall household employment. For the establishment survey, the annual benchmark revision will be included, lowering past job growth.
10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for January).
Predicting the Next Recession
by Calculated Risk on 2/06/2025 05:39:00 PM
In that post, I noted that the next recession would likely be caused by one of the following:
• "An exogenous event such as a pandemic, significant military conflict, disruption of energy supplies for any reason, a major natural disaster (meteor strike, super volcano, etc), and a number of other low probability reasons. All of these events are possible, but they are unpredictable, and the probabilities are low that they will happen in the next few years or even decades." emphasis added
Unfortunately, in 2020, one of those low probability events happened (pandemic), and that led to a recession in 2020. Another exogenous event is possible, but unpredictable.
During the previous Trump administration, we saw several policy errors, like the failed TCJA (Tax Cut and Jobs Act), but none that were significant enough to take the economy into a recession (I stayed positive on the economy back then).
January Employment Preview
by Calculated Risk on 2/06/2025 03:05:00 PM
On Friday at 8:30 AM ET, the BLS will release the employment report for January. The consensus is for 170,000 jobs added, and for the unemployment rate to be unchanged at 4.1%.
There were 256,000 jobs added in December, and the unemployment rate was at 4.1%.
We estimate nonfarm payrolls rose by 190k in January, above consensus of +170k ... We assume that the Los Angeles wildfires and colder-than-usual weather will each subtract 20k from January job growth. ... We estimate that the unemployment rate was unchanged at 4.1%, in line with consensusFrom BofA:
emphasis added
We forecast a 200k increase in nonfarm payrolls (170k private) in Jan. The u-rate should remain steady at 4.1%. The Jan jobs report will be impacted by the wildfires & snowstorms, potential residual seasonality, and annual revisions.• ADP Report: The ADP employment report showed 183,000 private sector jobs were added in January. This was above consensus forecasts and suggests job gains above consensus expectations, however, in general, ADP hasn't been very useful in forecasting the BLS report.
• ISM Surveys: Note that the ISM indexes are diffusion indexes based on the number of firms hiring (not the number of hires). The ISM® manufacturing employment index increased to 50.3%, up from 45.4% the previous month. This would suggest about 15,000 jobs lost in manufacturing. The ADP report indicated 13,000 manufacturing jobs lost in January.
The ISM® services employment index increased to 52.3%, from 51.3%. This would suggest 110,000 jobs added in the service sector. Combined this suggests 95,000 jobs added, far below consensus expectations. (Note: The ISM surveys have been way off recently)
• Unemployment Claims: The weekly claims report showed slightly more initial unemployment claims during the reference week at 223,000 in January compared to 220,000 in December. This suggests slightly more layoffs in January compared to December.
MBA: Mortgage Delinquencies Increased Slightly in Q4 2024
by Calculated Risk on 2/06/2025 12:13:00 PM
Today, in the Calculated Risk Real Estate Newsletter: MBA: Mortgage Delinquencies Increased Slightly in Q4 2024
A brief excerpt:
From the MBA: Mortgage Delinquencies Increase in the Fourth Quarter of 2024There is much more in the article.The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 3.98 percent of all loans outstanding at the end of the fourth quarter of 2024, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.The following graph shows the percent of loans delinquent by days past due. Overall delinquencies increased in Q2. The sharp increase in 2020 in the 90-day bucket was due to loans in forbearance (included as delinquent, but not reported to the credit bureaus).
The percent of loans in the foreclosure process decreased year-over-year from 0.47 percent in Q4 2023 to 0.45 percent in Q4 2024 (red) and remains historically low.
...
The primary concern is the increase in FHA and VA delinquency rates. Some of the increase is probably due to the hurricanes last year.
We will likely see an increase in 30-day delinquencies in Q1 2025 due to the wildfires in California.
CoreLogic: US Home Prices Increased 3.4% Year-over-year in December
by Calculated Risk on 2/06/2025 11:08:00 AM
Notes: This CoreLogic House Price Index report is for December. The recent Case-Shiller index release was for November. The CoreLogic HPI is a three-month weighted average and is not seasonally adjusted (NSA).
From CoreLogic: CoreLogic: Home Price Growth Ticks Up Slightly in December
• The national home price gain was 3.4% year over year in November 2024, down from the 5.2% growth recorded in the same month of 2023.This was the same YoY increase as reported for November.
• The national home price gain was 3.4% year over year in December 2024, down from the 5.6% growth recorded in the final month of 2023.
• Home prices are projected to rise by 4.1% annually by December 2025.
• Northeastern states again showed strong annual price appreciation in December.
...
U.S. home price gains showed a slight marginal uptick to 3.4% year over year in December, though the uptick mostly reflects weak 2023 year-end. Otherwise, home price appreciation has been almost flat since the typically busy fall selling season began in September. ...
“Home prices have remained flat since the housing market began seeing slower activity this past summer," said CoreLogic Chief Economist Dr. Selma Hepp. "Bifurcation across markets has also persisted. Northeastern markets drove appreciation growth due to low inventories of homes for sale while Southern markets readjusted to higher inventories and increases in variable mortgage costs, such as taxes and insurance. Home prices are also cooling in the markets in Mountain West, which have been trying to find stability over the last year following the surge in mortgage rates and price declines from pandemic highs. Despite the difficult housing markets conditions in 2024, home prices increased about 4.5% over the course of the year, a small jump compared to the 4.1% uptick in 2023. Going forward, with inventories slowing improving and mortgage rates remaining elevated, forecasts suggest a smaller overall increase in prices in 2025.”
emphasis added
This map is from the report.
Nationally, home prices increased by 3.4% year over year in December. The state of Hawaii and the District of Colombia both posted annual home price declines of -1.1% and -0.7%, respectively. The states with the highest increases year over year were Connecticut (up by 7.8%) and New Jersey (up by 7.7%).
Weekly Initial Unemployment Claims Increase to 219,000
by Calculated Risk on 2/06/2025 08:30:00 AM
The DOL reported:
In the week ending February 1, the advance figure for seasonally adjusted initial claims was 219,000, an increase of 11,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 207,000 to 208,000. The 4-week moving average was 216,750, an increase of 4,000 from the previous week's revised average. The previous week's average was revised up by 250 from 212,500 to 212,750.The following graph shows the 4-week moving average of weekly claims since 1971.
emphasis added
The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 216,750.
The previous week was revised up.
Weekly claims were above the consensus forecast.
Wednesday, February 05, 2025
Thursday: Unemployment Claims
by Calculated Risk on 2/05/2025 07:32:00 PM
Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.
Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for a increase to 214 thousand from 207 thousand last week.
The Changing Mix of Light Vehicle Sales
by Calculated Risk on 2/05/2025 03:31:00 PM
An update: The first graph below shows the mix of sales since 1976 (Blue is cars, Red is light trucks and SUVs) through January 2025.
Click on graph for larger image.
The mix has changed significantly. Back in 1976, most light vehicles were passenger cars - however passenger car sales have trended down over time.
Note that the big dips in sales are related to economic recessions (early '80s, early '90s, the Great Recession of 2007 through mid-2009 and the pandemic in 2020).
The second graph shows the percent of light vehicle sales between passenger cars and trucks / SUVs.
Over time the mix has changed toward more and more light trucks and SUVs. Only when oil prices are high, does the trend slow or reverse.
Asking Rents Mostly Unchanged Year-over-year
by Calculated Risk on 2/05/2025 11:37:00 AM
Today, in the Real Estate Newsletter: Asking Rents Mostly Unchanged Year-over-year
Brief excerpt:
Another monthly update on rents.This is much more in the article.
Tracking rents is important for understanding the dynamics of the housing market. Slower household formation and increased supply (more multi-family completions) has kept asking rents under pressure. ...
Apartment List: Asking Rent Growth -0.5% Year-over-year ...
On the supply side of the rental market, our national vacancy index ticked up to 6.9 percent in January, the highest reading in the history of that monthly data series, which goes back to the start of 2017.Realtor.com: 17th Consecutive Month with Year-over-year Decline in RentsIn December 2024, the US median asking rent continued to decline month-over-month for the seventeenth consecutive month. The national median rent was $1,695 in December, down $8 (0.5%) from November 2024 and $18 (1.1%) from December 2023 across the 50 largest metropolitan areas in the country.
ISM® Services Index Decreases to 52.8% in January
by Calculated Risk on 2/05/2025 10:00:00 AM
(Posted with permission). The ISM® Services index was at 52.8%, down from 54.0% last month. The employment index increased to 52.3%, from 51.3%. Note: Above 50 indicates expansion, below 50 in contraction.
From the Institute for Supply Management: Services PMI® at 52.8% January 2025 Services ISM® Report On Business®
Economic activity in the services sector expanded for the seventh consecutive month in January, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 52.8 percent, indicating expansion for the 53rd time in 56 months since recovery from the coronavirus pandemic-induced recession began in June 2020.This was below consensus expectations.
The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In January, the Services PMI® registered 52.8 percent, 1.2 percentage points lower than the seasonally adjusted December figure of 54 percent. The Business Activity Index registered 54.5 percent in January, 3.5 percentage points lower than the seasonally adjusted 58 percent recorded in December. After seasonal adjustments, this is the 56th consecutive month of expansion for the index. The New Orders Index recorded a reading of 51.3 percent in January, 3.1 percentage points lower than the seasonally adjusted December figure of 54.4 percent. The Employment Index remained in expansion territory for the fourth consecutive month; the reading of 52.3 percent is a 1-percentage point increase compared to the seasonally adjusted 51.3 percent recorded in December.
emphasis added