by Calculated Risk on 10/05/2013 08:55:00 AM

Special Note: With the government shutdown, some economic data has been delayed. The first section is a list of delayed reports so far. If the shutdown ends, some of these delayed reports might be released soon.

The key report this week is September retail sales on Friday.

Other key releases include the trade deficit on Tuesday and FOMC minutes on Wednesday. 

----- Delayed Reports -----
Delayed: Construction Spending for August. The consensus is for a 0.4% increase in construction spending.

Delayed: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for August. The consensus is for a 0.2% increase in orders.

Delayed: Employment Report for September. The consensus is for an increase of 178,000 non-farm payroll jobs in September; the economy added 169,000 non-farm payroll jobs in August. The consensus is for the unemployment rate to be unchanged at 7.3% in September.

----- Monday, October 7th -----
Early: The LPS August Mortgage Monitor report. This is a monthly report of mortgage delinquencies and other mortgage data.

3:00 PM: Consumer Credit for August from the Federal Reserve. The consensus is for credit to increase $12.8 billion in August.

----- Tuesday, October 8th -----
7:30 AM ET: NFIB Small Business Optimism Index for September.

8:30 AM: Trade Balance report for August from the Census Bureau.

Imports increased in July, and exports decreased.

The consensus is for the U.S. trade deficit to increase to $40.0 billion in August from $39.1 billion in July.

10:00 AM: Job Openings and Labor Turnover Survey for August from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings decreased in July to 3.689 million, down from 3.869 million in June. number of job openings (yellow) is up 5.4% year-over-year compared to July 2012. 

Quits were up in July, and quits are up about 8% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

----- Wednesday, October 9th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for August. The consensus is for a 0.4% increase in inventories.

2:00 PM: FOMC Minutes for Meeting of September 17-18, 2013.

----- Thursday, October 10th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 310 thousand from 308 thousand last week.  This data is gathered by the states and will continue to be released.

----- Friday, October 11th -----
8:30 AM ET: Retail sales for September will be released.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales are up 28.7% from the bottom, and now 12.8% above the pre-recession peak (not inflation adjusted)

The consensus is for retail sales to be unchanged in September, and to increase 0.4% ex-autos.

8:30 AM: Producer Price Index for September. The consensus is for a 0.2% increase in producer prices (0.1% increase in core).

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (preliminary for October). The consensus is for a reading of 75.0, down from 77.5 in September.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for August.  The consensus is for a 0.2% increase in inventories.

by Calculated Risk on 10/04/2013 08:42:00 PM

Some thoughts from Alec Phillips at Goldman Sachs: Will the Federal Shutdown End with a Debt Ceiling Increase?

In our view, the most likely outcome of the current fiscal dispute is an agreement that combines an increase in the debt limit and a "continuing resolution" that reopens the federal government. We would expect this to pass no earlier than the end of next week (i.e., October 11-12) and more likely sometime around the Treasury's projected deadline of October 17.

Other outcomes are possible, but we believe they have lower probabilities. It is possible that political pressure to end the shutdown could build, but polling thus far does not indicate this has happened yet. It is also possible that if the effort to resolve the two issues together fails, the shutdown could remain unresolved even after the debt limit has been increased. This is a possibility, but we see it as less likely than a combined continuing resolution and debt limit increase.

The intense public focus on the shutdown may have actually raised the possibility of a "clean" debt limit increase. While the situation could go a number of ways, it still appears that the risk of a failure to raise the debt limit is low and that the shutdown has not had a negative effect on the prospects for increasing it.

And Phillips also mentions:

Congress is scheduled to go on recess the week of October 13, but this would presumably have to be cancelled if the debt limit had not yet been addressed. In the past, seemingly intractable political disputes have often been resolved around the start of planned congressional recesses.
emphasis added

Can't miss recess ...

by Calculated Risk on 10/04/2013 06:09:00 PM

From Ethan S. Harris at Merrill Lynch: Macro viewpoint: Breaking bad

We have changed our call: our base case is now for either a two-week shutdown or for more than one shutdown. With weak growth momentum and more damage from Washington, we are lowering 3Q growth to 1.7% and 4Q to 2.0%. We are also pushing Fed tapering to Jan 2014.

There has been no change in rhetoric despite public opinion polls that strongly oppose the shutdown and that are particularly critical of Republicans. ... Most respondents also disagree with the strategy of shutting down the government over the health care law: basically by 3-to-1 in polls by Quinnipiac University, CBS News and CNBC.

The Affordable Care Act (ACA) continues to be in the center of the battle. In our view, this is an issue where there is no compromise. We believe it would take truly extraordinary circumstances for the President to agree to undercut his proudest legislative achievement; even a small concession would likely lead to further demands at each budget deadline.
...
Our new baseline assumes a two week shutdown, but no violation of the debt ceiling. ... We also continue to fear a much worse outcome. Recall that the failure to pass a continuing resolution cuts government spending by roughly one percent of GDP, while failure to raise the debt ceiling requires balancing the budget – a 4% of GDP cut in spending. ... Failure to raise the debt ceiling by the end of October would be catastrophic, in our view.
emphasis added

It is time for the House to end the shutdown.

by Calculated Risk on 10/04/2013 02:38:00 PM

From mortgage banker Lou Barnes:

The shutdown itself can't be quantified. ...

We are still taking applications, locking rates, processing our little hearts out, and closing. Our principal problem: in the post-Bubble spasm authorities decided that ALL borrowers should produce two years' tax returns (not just the few self-employed, or owners of rental property, or those needing investment income to qualify). And authorities decided that neither the borrowers nor their CPAs could be trusted to give us true copies, so we must pull transcripts from the IRS (the dreaded 4506T).

The IRS is shut. When it re-opens it will have to process a backlog growing by the hour. Are the authorities helping by waiving the transcript, or granting good faith safe harbor? NooOOOooo. Many lenders -- to their great credit -- seem willing to defer the risk to post-closing. However, home sales and closings will suffer soon, if only by expired rate locks.

Time to end the shutdown.

by Calculated Risk on 10/04/2013 11:57:00 AM

From the Association of American Railroads (AAR): AAR Reports Increased Intermodal, Carload Traffic for September and the Week

The Association of American Railroads (AAR) today reported increased total U.S. rail traffic for the month of September 2013, with intermodal and carload volume increasing overall compared with September 2012. Intermodal traffic in September totaled 1,027,522 containers and trailers, up 4.4 percent (43,055 units) compared with September 2012. The weekly average of 256,881 intermodal units in September was the second-highest monthly average of any month in history. The three highest-volume intermodal weeks in history for U.S. railroads occurred last month; only the Labor Day holiday prevented it from being the highest-volume intermodal month in history.
...
“Those who follow the rail industry know that carloads of grain and coal can rise or fall by substantial amounts for reasons that have little or nothing to do with the state of the economy,” said AAR Senior Vice President John T. Gray. “Not so with most other rail traffic categories, however. The fact that rail carloads excluding coal and grain were up 4.9 percent in September — the biggest year-over-year monthly gain since last December — is a hopeful sign.”
emphasis added

Click on graph for larger image.

This graph from the Rail Time Indicators report shows U.S. average weekly rail carloads (NSA).  Green is 2013.

U.S. rail carloads totaled 1,159,784 in September 2013, an average of 289,946 per week and up 0.7% (7,595 carloads) over September 2012. A 0.7% increase isn’t much, but it’s the first time since the end of 2011 that there’ve been two straight months with year-over-year monthly increases in total carloads. With the exception of January, carloads each month in 2013 have tracked 2012 extremely closely....

Carload gains in September 2013 were led by crushed stone, gravel, and sand, which saw carloads up 8,253, or 10.0%, over September 2012 ... The commodity with the largest year-over-year carload decline in September 2013 was coal, which saw carloads fall 12,894 (2.7%) from September 2012.

Note that lumber was up 9.8% from a year ago.

Graphs and excerpts reprinted with permission.

The second graph is for intermodal traffic (using intermodal or shipping containers):

Intermodal traffic is on track for a record year in 2013.

U.S. railroads originated 1,027,522 intermodal containers and trailers in September 2013, an average of 256,881 per week. That’s up 4.4% (43,055 units) over September 2012 and the second-highest monthly average of any month in history. If not for the Labor Day holiday, September would have been the highest-volume intermodal month in history. The fourth week of September had the highest intermodal volume (269,853 units) of any week in history; the second week of September 2013 had the second-highest intermodal volume (265,873 units) in history; and the third week of September had the third-highest intermodal volume (262,897) in history.

Rail traffic and the economy usually grow together, so this is a good sign for the overall economy (at least through September).

by Calculated Risk on 10/04/2013 11:25:00 AM

From Treasury Secretary Jack Lew: U.S. failure to pay bills hurts everyone

An increase in the debt limit simply allows us to pay our bills. Without a debt limit increase, our government will — in a matter of days — not have the resources it needs to make good on its commitments.

Only Congress has the power to lift the debt limit. That means only Congress can clear the way for our government to meet all of its financial obligations.

The United States has met all its financial obligations for more than 200 years. We are a nation that keeps our word. We are a nation that stands behind our full faith and credit.

Some claim that the United States does not need to meet every one of its commitments. They argue that the government could pay certain bills and let others go unpaid without consequences.

The United States cannot be put in a position of having to choose which commitments it should meet. How could we possibly decide among supporting our veterans, maintaining food assistance for children in need, or sending Medicare payments to hospitals?

CR Note: I think Congress will pay the bills (i.e. raise the "debt ceiling"). As I've noted, the "debt ceiling" sounds virtuous, but it isn't. It is actually just a question of paying the bills. As Republican Senator Mitch McConnell said in 2011, if the debt ceiling isn't raised the "Republican brand" would become "toxic" and synonymous with fiscal irresponsibility. If Congress stopped paying the bills - for the first time in 237 years (except some minor glitches) - people will remember when they vote. So it won't happen; Congress will pay the bills.

by Calculated Risk on 10/04/2013 08:28:00 AM

It is pretty clear - no jobs report, no taper. The September report is delayed, but - important - if the shutdown impacts data collection for October (the week including the 12th of the month), there might not be an October report.

From the WSJ: No Jobs Report Complicates Fed's Thinking

"If this lasts for several more days" or weeks, Federal Reserve Bank of Atlanta President Dennis Lockhart said Thursday, "by the end of October we will still be looking at a very ambiguous situation."

"Less data is not helpful in gauging where the economy is and where it's going," said Mr. Lockhart, whose views often represent the emerging consensus at the central bank. "So that would tend to make me somewhat more cautious." ...
Beyond the loss of economic data, the shutdown could also act as a drag on economic growth, Mr. Lockhart said.

"It's a little early to draw any conclusions," Mr. Lockhart said. "If it's protracted then I would expect that there would be some measurable impact at least on fourth-quarter growth."

And on the October employment report:

A shutdown lasting more than a few weeks could also cause headaches for the October jobs report, due out Nov. 1, said Keith Hall, a former commissioner of the Bureau of Labor Statistics, which produces the jobs report. Government analysts are due to start the next survey of households in mid-October, muddying the data due to a delay in data collection.

by Calculated Risk on 10/03/2013 09:00:00 PM

Here was my employment overview post from earlier today.

Some exerpts from an interview with Mark A. Patterson, chief of staff at the Treasury Department 2009 until May 2013:

We have this unbelievably unique and privileged position to have always had the world’s trust that our treasury securities are the safest and most secure investment in the world. We have always paid all our bills on time and in full. For 200 years we’ve built that reputation. It’s worth an awful lot. I think that if we squandered it suddenly the potential is there for the whole world to reevaluate if that trust was misplaced. And once you lose somebody’s trust it’s pretty hard to get it back. ...

Someone wrote up an analogy saying imagine the situation was reversed and a Democratic House said to a Republican president that we want to double the minimum wage or enact a sweeping gun control law or we throw the country into default. The underlying tactics being used here is totally irresponsible and can’t be accepted by any president.

• DELAYED: At 8:30 AM ET, the Employment Report for September was scheduled. The consensus was for an increase of 178,000 non-farm payroll jobs in September; the economy added 169,000 non-farm payroll jobs in August. The consensus is for the unemployment rate to be unchanged at 7.3% in September.

by Calculated Risk on 10/03/2013 05:00:00 PM

Important Note: The employment report will be delayed. If the government shutdown lasts into the week of the 12th (when employment data is collected), it is unclear if there will be an October employment report.

Tomorrow (Friday), at 8:30 AM ET, the BLS will NOT release the employment report for September. The consensus was for an increase of 178,000 non-farm payroll jobs in September, and for the unemployment rate to be unchanged at 7.3%.

Although the employment report will be delayed, here is a summary of recent data:

• The ADP employment report showed an increase of 166,000 private sector payroll jobs in September. This was below expectations of 175,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any particular month. But in general, this suggests employment growth slightly below expectations.

• The ISM manufacturing employment index increased in September to 55.4% from 53.3% in August. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs increased about 10,000 in September.

The ISM non-manufacturing employment index decreased in September to 52.7% from 57.0% in August. A historical correlation between the ISM non-manufacturing index and the BLS employment report for non-manufacturing, suggests that private sector BLS reported payroll jobs for non-manufacturing increased by about 145,000 in September.

Taken together, these surveys suggest around 155,000 jobs added in September, somewhat below the consensus forecast.

• Initial weekly unemployment claims averaged 308,000 in September. This was down from an average of 323,000 in August, and is at the lowest level since early-2007 (before the recession).

For the BLS reference week (includes the 12th of the month), initial claims were at 311,000; the lowest level in years (although there were reporting issues that have since been resolved).

• The final September Reuters / University of Michigan consumer sentiment index decreased to 77.5 from the August reading of 82.1. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors (like threats from the House).

• The small business index from Intuit showed a slight increase in small business employment in September.

• Conclusion: The data was mixed. The ADP report was a little lower the consensus, and the ISM surveys suggest slightly less hiring in September than in August. Also consumer sentiment decreased. However weekly claims for the reference week have declined to pre-recession levels.

The employment report will be delayed, but my guess is the report would have been somewhat below expectations.

by Calculated Risk on 10/03/2013 03:33:00 PM

This was released earlier today: Trulia Reports Asking Home Prices Slow Down in Hottest Housing Markets

Nationally, asking home prices rose 3.0 percent quarter-over-quarter (Q-o-Q) in September – the smallest Q-o-Q change since February. However, the downward trend is harder to spot in the more volatile monthly changes and smoothed out yearly changes. Asking prices rose 2.0 percent month-over-month (M-o-M) and 11.5 percent year-over-year (Y-o-Y), but year-over-year changes should start to shrink in the coming months. At the metro level, 89 of the 100 largest metros had Q-o-Q price increases in September, down from 97 in June.
...
Nationally, rents rose 3.0 percent Y-o-Y in September, down from 3.9 percent Y-o-Y in June. Locally, rent rose more slowly in September than in June in 18 of the 25 largest rental markets, including Seattle, Denver, and Houston. However, rents rose faster in September than in June in Portland, San Diego, Phoenix, and several other metros.

“Asking home prices give us the first look at where home sale prices are headed, and they point to a slowdown,” said Jed Kolko, Trulia’s Chief Economist. “After rising rapidly in the first half of 2013, asking prices in two thirds of the largest metros are cooling. In fact, asking prices are falling – not just rising more slowly – in 11 of the 100 largest metros, the most markets to see prices slip in six months.”
emphasis added

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 (but the year-over-year increases will probably slow).

More from Kolko: Asking Prices Slowing in Two Thirds of the Largest Metros