by Calculated Risk on 12/05/2019 07:16:00 PM

My November Employment Preview.

Goldman's November Payrolls preview.

Friday:
• At 8:30 AM ET, Employment Report for November.   The consensus is for 180,000 jobs added, and for the unemployment rate to be unchanged at 3.6%.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Preliminary for December).

• At 3:00 PM, Consumer Credit from the Federal Reserve.

by Calculated Risk on 12/05/2019 04:04:00 PM

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

We estimate nonfarm payrolls increased 180k in November ... We expect a 46k boost from the end of the General Motors strike … We also believe some of the 68k ADP miss this month reflected legitimate weakness in the ADP jobs panel.

We estimate an unchanged unemployment rate at 3.6% …
emphasis added

by Calculated Risk on 12/05/2019 11:24:00 AM

Special Notes on GM Strike and the Decennial Census: The GM strike ended in October, and 46,000 workers were on strike during the BLS reference week in October. These workers returned to their jobs in November, and this should boost employment gains for November. Decennial Census: In August and September, the Census Bureau increased the number of temporary workers by 25,000. This phase of the Decennial Census ended mid-October, and most of these temporary workers were let go in October (20,000), however another 5,000 or so were probably let go in November.

On Friday at 8:30 AM ET, the BLS will release the employment report for November. The consensus is for an increase of 180,000 non-farm payroll jobs in October, and for the unemployment rate to be unchanged at 3.6%.

Last month, the BLS reported 128,000 jobs added in October (including 20,000 temporary Census fires).

Here is a summary of recent data:

• The ADP employment report showed an increase of 67,000 private sector payroll jobs in October. This was well below consensus expectations of 140,000 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.

• The ISM manufacturing employment index decreased in November to 46.6%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll decreased around 40,000 in November. The ADP report indicated manufacturing jobs decreased 6,000 in November.

The ISM non-manufacturing employment index increased in November to 55.5%. 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 increased 220,000 in November.

Combined, the ISM surveys suggest employment gains at 180,000 suggesting gains close to consensus expectations.

• Initial weekly unemployment claims averaged 218,000 in November, up from 215,000 in October. For the BLS reference week (includes the 12th of the month), initial claims were at 228,000, up from 218,000 during the reference week the previous month.

This suggest a few more layoffs (during the reference week) in November than in October.

• The final November University of Michigan consumer sentiment index increased to 96.8 from the October reading of 95.5. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• The BofA job tracker bounced back in November suggesting 195K jobs added in November.

• Conclusion: There were special factors in October (GM strike, decennial Census layoffs) that reduced employment. In November, the resolution of the GM strike will boost employment. Based on these indicators, my guess is employment gains are close to expectations.

by Calculated Risk on 12/05/2019 08:44:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $47.2 billion in October, down $3.9 billion from $51.1 billion in September, revised.

October exports were $207.1 billion, $0.4 billion less than September exports. October imports were $254.3 billion, $4.3 billion less than September imports.

Click on graph for larger image.

Both exports and imports decreased in October.

Exports are 25% above the pre-recession peak and down 1% to October 2018; imports are 10% above the pre-recession peak, and down 5% compared to October 2018.

In general, trade both imports and exports have moved more sideways or down recently.

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

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.

Note that the U.S. exported a slight net positive petroleum products in September and October.

Oil imports averaged $52.00 per barrel in October, down from $53.12 in September, and down from $61.25 in October 2018.

The trade deficit with China decreased to $31.3 billion in October, from $43.1 billion in October 2018.

by Calculated Risk on 12/05/2019 08:33:00 AM

The DOL reported:

In the week ending November 30, the advance figure for seasonally adjusted initial claims was 203,000, a decrease of 10,000 from the previous week's unrevised level of 213,000. The 4-week moving average was 217,750, a decrease of 2,000 from the previous week's unrevised average of 219,750.
emphasis added

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 decreased to 217,750.

This was lower than the consensus forecast.

by Calculated Risk on 12/04/2019 07:15:00 PM

Thursday:
• At 8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 215,000 initial claims, up from 213,000 last week.

• At 8:30 AM: Trade Balance report for October from the Census Bureau. The consensus is the trade deficit to be $49.0 billion.  The U.S. trade deficit was at $52.5 billion in September.

by Calculated Risk on 12/04/2019 01:12:00 PM

Note: I follow several house price indexes (Case-Shiller, CoreLogic, Black Knight, Zillow, FHFA and more). Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From Black Knight:

Based on the latest data from the Black Knight HPI, October was a strong month for home price gains. And it makes perfect sense.

The annual home price growth rate rose from 3.9% in September to 4.25% in October.

Click on graph for larger image.

This graph from Black Knight shows their estimate of the MoM and YoY change in House Prices.

This index suggests a pickup in house price appreciation.

by Calculated Risk on 12/04/2019 10:05:00 AM

The November ISM Non-manufacturing index was at 53.9%, down from 54.7% in October. The employment index increased to 55.5%, from 53.7%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: November 2019 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in November for the 118th 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., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: “The NMI® registered 53.9 percent, which is 0.8 percentage points lower than the October reading of 54.7 percent. This represents continued growth in the non-manufacturing sector, at a slightly slower rate. The Non-Manufacturing Business Activity Index decreased to 51.6 percent, 5.4 percentage points lower than the October reading of 57 percent, reflecting growth for the 124th consecutive month. The New Orders Index registered 57.1 percent; 1.5 percentage points higher than the reading of 55.6 percent in October. The Employment Index increased 1.8 percentage points in November to 55.5 percent from the October reading of 53.7 percent. The Prices Index increased 1.9 percentage points from the October reading of 56.6 percent to 58.5 percent, indicating that prices increased in November for the 30th consecutive month. According to the NMI®, 12 non-manufacturing industries reported growth. The non-manufacturing sector had a slight pullback in November. The respondents hope for a resolution on tariffs and continue to be hampered by constraints in labor resources.”
emphasis added

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 suggests slower expansion in November than in October.

by Calculated Risk on 12/04/2019 08:39:00 AM

The BEA released their estimate of November vehicle sales this morning. The BEA estimated sales of 17.09 million SAAR in November 2019 (Seasonally Adjusted Annual Rate), up 3.4% from the October sales rate, and down 1.7% from November 2019.

Sales in 2019 are averaging 16.92 million (average of seasonally adjusted rate), down 1.6% compared to the same period in 2018.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and an estimate for November (red).

Note: The GM strike might have impacted sales in October.

A small decline in sales to date this year isn't a concern - I think sales will move mostly sideways at near record levels.

This means the economic boost from increasing auto sales is over (from the bottom in 2009, auto sales boosted growth every year through 2016).

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

Note: dashed line is current estimated sales rate of 17.09 million SAAR.

by Calculated Risk on 12/04/2019 08:20:00 AM

From ADP:

Private sector employment increased by 67,000 jobs from October to November according to the November 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.
...
“In November, the labor market showed signs of slowing,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “The goods producers still struggled; whereas, the service providers remained in positive territory driven by healthcare and professional services. Job creation slowed across all company sizes; however, the pattern remained largely the same, as small companies continued to face more pressure than their larger competitors.”

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market is losing its shine. Manufacturers, commodity producers, and retailers are shedding jobs. Job openings are declining and if job growth slows any further unemployment will increase.”

This was below the consensus forecast for 140,000 private sector jobs added in the ADP report.

The BLS report will be released Friday, and the consensus is for 180,000 non-farm payroll jobs added in November.