by Calculated Risk on 3/07/2013 08:30:00 AM

The DOL reports:

In the week ending March 2, the advance figure for seasonally adjusted initial claims was 340,000, a decrease of 7,000 from the previous week's revised figure of 347,000. The 4-week moving average was 348,750, a decrease of 7,000 from the previous week's revised average of 355,750.

The previous week was revised up from 344,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

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 348,750 - this is the lowest level since March 2008.

Weekly claims were below the 355,000 consensus forecast. Note: Claims might increase soon due to the "sequestration" budget cuts.

by Calculated Risk on 3/06/2013 08:45:00 PM

With housing for sale inventory still low, I expect to see some upward revisions to 2013 house price forecasts. The consensus is for prices to increase about 3% this year. From Merrill Lynch tonight:

Paying homage to home prices. Our mortgage strategists and economists provide an upbeat assessment of the January CoreLogic release that showed US home prices rising nearly 10% annually (Jan-Jan). That leaves "substantial upside risk to our 2013 HPA forecast of 4.7%".

Thursday economic releases:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 355 thousand from 344 thousand last week. This is pre "sequester", and unemployment claims might increase soon.

• Also at 8:30 AM, Trade Balance report for January from the Census Bureau. The consensus is for the U.S. trade deficit to increase to $43.0 billion in January from $38.5 billion in December.

• At 12:00 PM, Q4 Flow of Funds Accounts of the United States from the Federal Reserve will be released.

• At 3:00 PM, Consumer Credit for January from the Federal Reserve. The consensus is for credit to increase $15.0 billion in January.

by Calculated Risk on 3/06/2013 06:20:00 PM

Imagine going six months without a manufactured crisis?  Maybe it will happen. I expect the Senate will restore some of the sequestration cuts, but this sounds like a little progress.

From the NY Times: Moving First on Budget, House Passes Funding Bill

The House on Wednesday easily passed legislation to keep the government financed through September, raising pressure on the Senate to quickly follow suit before the current financing runs out on March 27.

The House bill gives military and veterans programs some breathing room under the automatic spending cuts that took effect on Friday by increasing financing for Pentagon priorities.

But domestic programs are left largely unprotected from cuts of up to 11 percent under the so-called sequestration.

Senator Barbara Mikulski of Maryland ... said she would demand the kind of changes the House afforded military programs for at least some of the domestic side of the spending bill. That way Congress can prioritize programs that lift economic growth now, like transportation and infrastructure, and strengthen future economic growth through science and technology, even within the strictures of across-the-board cuts.
...
Senator Mitch McConnell of Kentucky, the Republican leader, said Republican leaders in the House and Senate accepted that Senate Democrats would want to put their mark on the spending plan. He was still sanguine that a final measure would reach President Obama in time for Congress’s two-week spring recess, set to begin on March 23.

by Calculated Risk on 3/06/2013 02:00:00 PM

Fed's Beige Book "Prepared at the Federal Reserve Bank of Kansas City and based on information collected on or before February 22, 2013"

Reports from the twelve Federal Reserve Districts indicated that economic activity generally expanded at a modest to moderate pace since the previous Beige Book. ...

Most Districts reported expansion in consumer spending, although retail sales slowed in several Districts. Automobile sales were strong or solid most Districts, and tourism strengthened in a number of Districts. The demand for services was generally positive across Districts, most notably for technology and logistics firms. ... Many Districts noted rising gasoline prices and fiscal policy as having a negative effect on consumer sales, and contacts in the Boston, New York, and Minneapolis Districts said severe weather depressed sales somewhat.

And on real estate:

Residential real estate activity continued to strengthen in most Districts, although the pace of growth varied. Contacts in the Boston, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco Districts noted strong growth in home sales, while New York and Chicago reported slight improvements. A realtor in the Richmond District indicated that low interest rates continued to motivate home buyers, and potential buyers in the Philadelphia District expressed greater confidence, including entry-level purchasers who had been increasingly opting to rent since mid-summer. Contacts in the Cleveland and Atlanta Districts said sales were higher than a year ago. Home construction increased in most Districts, with the exception of the Kansas City District where it was reported as unchanged. Several Districts noted ongoing strength in multifamily construction, although contacts in the Atlanta and Cleveland Districts mentioned continued financing difficulties for builders. Home prices edged higher in the majority of Districts, with lower inventories generally cited as the primary cause. Richmond and Atlanta Realtors observed multiple offers on many homes. Philadelphia real estate contacts continued to report low-end home prices as firm or rising slightly, while high-end home prices were still falling. Inventories declined in nearly all Districts, with Realtors in several Districts concerned about the impact on future sales volume.

Overall commercial real estate conditions were mixed or slightly improved in most Districts.

This suggests sluggish growth overall, with some negative impact from "fiscal policy" ... and with mostly "strong" growth for residential real estate.

by Calculated Risk on 3/06/2013 10:47:00 AM

From the American Bankruptcy Institute: February Bankruptcy Filings Decrease 21 Percent from Previous Year, Commercial Filings Fall 29 Percent

Total bankruptcy filings in the United States decreased 21 percent in February over last year, according to data provided by Epiq Systems, Inc. Bankruptcy filings totaled 82,285 in February 2013, down from the February 2012 total of 104,537. Consumer filings declined 21 percent to 78,611 from the February 2012 consumer filing total of 99,378.
...
“The post-recession trends of reduced consumer spending, low interest rates and tighter lending standards continue to be reflected in fewer bankruptcy filings,” said ABI Executive Director Samuel J. Gerdano. “As these trends persist, expect bankruptcy filings to continue to decline in 2013.”

Personal bankruptcy filings peaked in 2010 at 1.54 million (highest since the bankruptcy law change in 2005). Filings declined to 1.22 million last year, and will probably be just over 1 million this year - the lowest level since 2008. Note: Even in good economic years, there are around 800 thousand personal bankruptcy filings.

This is another indicator of less economic stress.

by Calculated Risk on 3/06/2013 08:19:00 AM

From ADP:

Private sector employment increased by 198,000 jobs from January to February, according to the February, according to the January ADP National Employment Report®, which is produced by ADP® ... in collaboration with Moody’s Analytics. 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. The January 2013 report, which reported job gains of 192,000, was revised upward by 23,000 to 215,000 jobs.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “The job market remains sturdy in the face of significant fiscal headwinds. Businesses are adding to payrolls more strongly at the start of 2013 with gains across all industries and business sizes. Tax increases and government spending cuts don’t appear to be affecting the job market.”

This was above the consensus forecast for 173,000 private sector jobs added in the ADP report. Note:  The BLS reports on Friday, and the consensus is for an increase of 171,000 payroll jobs in February, on a seasonally adjusted (SA) basis.

Note: ADP hasn't been very useful in predicting the BLS report.

by Calculated Risk on 3/06/2013 07:00:00 AM

From the MBA: Mortgage Applications Increase as Rates Drop in Latest MBA Weekly Survey

The Refinance Index increased 15 percent from the previous week and was at its highest level since mid-January. The seasonally adjusted Purchase Index also increased 15 percent from one week earlier and was at its highest level since the week ending February 1.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.70 percent from 3.77 percent, with points decreasing to 0.39 from 0.48 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the refinance index.

There has been a sustained refinance boom for over a year, and 77 percent of all mortgage applications are for refinancing.

Refinance activity will probably slow in 2013.

The second graph shows the MBA mortgage purchase index.  The 4-week average of the purchase index has generally been trending up (slowly) over the last six months.

This index will probably continue to increase as conventional home purchase activity increases.

by Calculated Risk on 3/05/2013 07:11:00 PM

Back in October, ADP revised their methodology for estimating changes in private employment. Here is a table of the four releases since the methodology was changed.

Comparison of BLS Private Employment and ADP (000s)
	ADP Initial	Revised	BLS Initial (Private Only)	BLS Revised (Private)
Oct-12	158	159	184	217
Nov-12	118	173	147	256
Dec-12	215	185	168	202
Jan-13	192	-	166	-

In general it appears the new methodology is better, but it is still too early for a statistical analysis. With this small sample, it appears that the initial BLS report will be +/- 20% of the ADP number or so.

Wednesday economic releases:
• At 10:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:15 AM, The ADP Employment Report for February. This report is for private payrolls only (no government). The consensus is for 173,000 payroll jobs added in February.

• At 10:00 AM, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for January. The consensus is for a 2.2% decrease in orders.

• At 2:00 PM, the Federal Reserve Beige Book will be released. This is an informal review by the Federal Reserve Banks of current economic conditions in their Districts. Analysts will look for signs of an impact from the recent tax increases.

by Calculated Risk on 3/05/2013 04:45:00 PM

Click on graph for larger image.

By request - following the new high on the Dow today - here are a couple of stock market graphs. The first graph shows the S&P 500 since 1990 (this excludes dividends).

The dashed line is the closing price today. The S&P 500 was first at this level in July 2007, just before the recession started. We can't call it a "lost decade" for stocks any more.

Another note: A new high doesn't tell us much. Over the last 50 years (starting in 1963) there were 27 years with new highs. If we excluded the miserable '00s, there were new highs in 26 of 38 years.  So new highs are not unusual.

The second graph (click on graph for larger image) is from Doug Short and shows the S&P 500 since the 2007 high ...

by Calculated Risk on 3/05/2013 12:39:00 PM

Press Release: Trulia Reports Asking Home Price Gains Accelerating While Housing Inventory No Longer in Free Fall

Since bottoming 12 months ago, national asking home prices rose 7.0 percent year-over-year (Y-o-Y) in February. Seasonally adjusted, asking prices also increased 1.4 percent month-over-month (M-o-M) and 3.0 percent quarter-over-quarter (Q-o-Q) – marking two post-recession highs. Asking prices locally are up in 90 of the 100 largest U.S. metros, rising fastest in Phoenix, Las Vegas, and Oakland.

Meanwhile, rent increases are slowing down. In February, rents rose just 3.2 percent Y-o-Y. This is a notable decrease from three months ago, in November, when rents were up 5.4 percent Y-o-Y. Among the 25 largest rental markets, rents rose the most in Houston, Oakland, and Miami, while falling slightly in San Francisco and Las Vegas.
...
Inventory Will Not Turn Around in 2013 Even Though Decline Is Slowing Down

Inventory falls most sharply just after prices bottom, creating an “inventory spiral”: rising prices reduce inventory as would-be home sellers hold off in the hopes of selling later at a higher price, and falling inventory boosts prices further as buyers compete for a limited number of for-sale homes. Nationally, the annualized rate of inventory decline was 23 to 29 percent from March to September 2012, the months after home prices first bottomed one year ago, but has softened to a 14 to 21 percent rate since October [1]
emphasis added

More on inventory from Jed Kolko, Trulia Chief Economist: Rising Prices Mean Falling Inventory … in the Short Term

Inventory and prices affect each other in three ways:

1.Less inventory leads to higher prices. That’s because buyers are competing for a limited number of for-sale homes.

2.Higher prices lead to less inventory – at least in the short term. Everyone wants to buy at the bottom; no one wants to sell at the bottom. When prices start to rise, buyers get impatient while many would-be sellers want to hold out in the hopes of selling later at a higher price.

3.Higher prices lead to more inventory – in the long term. As prices keep rising, more homeowners decide it’s worthwhile to sell, especially those who get back above water, which adds to inventory. Also, builders take rising prices as a cue to rev up construction activity, which also adds to inventory.

In the short term, the first two reasons create an “inventory spiral”: less inventory leads to higher prices, which leads to less inventory, and so on. But the inventory spiral can’t go on forever because eventually rising prices will encourage homeowners to sell and builders to build, which add to inventory and breaks the spiral. The critical question for the housing market – especially for buyers fighting over tight inventories – is how long until that kicks in? How long do prices have to rise before sellers and builders start adding to inventory?
...
How long until inventory turns positive, rather than becoming just less negative? ... it could be at least another year until national inventory starts expanding. Of course, inventory will probably turn up this spring and summer because of the regular seasonal pattern, but the underlying trend will be less inventory than is typical for each season, not more.

These are important points on inventory, and I now think inventory will not bottom this year (this is why I've been tracking inventory weekly).  This probably means more price appreciation in 2013 than most analysts expect (I think the consensus was around 3% price increase in 2013), and this is also positive for new home sales.

Note: These asking prices are SA (Seasonally Adjusted) - and adjusted for the mix of homes - and this suggests further house price increases over the next few months on a seasonally adjusted basis.