by Calculated Risk on 5/06/2015 11:45:00 AM

Friday at 8:30 AM ET, the BLS will release the employment report for April. The consensus, according to Bloomberg, is for an increase of 220,000 non-farm payroll jobs in April (with a range of estimates between 180,000 and 335,000), and for the unemployment rate to decline to 5.4%.

The BLS reported 126,000 jobs added in March.

Here is a summary of recent data:

• The ADP employment report showed an increase of 169,000 private sector payroll jobs in April. This was below expectations of 205,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month (see table at bottom), but in general, this suggests employment growth below expectations.

• The ISM manufacturing employment index decreased in April to 48.3%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs decreased about 30,000 in April. The ADP report indicated a 10,000 decrease for manufacturing jobs.

The ISM non-manufacturing employment index increased in April to 56.7%. A historical correlation (linear) between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 250,000 in April.

Combined, the ISM indexes suggests employment gains of 220,000.  This suggests employment growth at expectations.

• Initial weekly unemployment claims averaged close to 283,000 in April, down slightly from March. For the BLS reference week (includes the 12th of the month), initial claims were at 296,000; this was up slightly from 293,000 during the reference week in March.

Generally this suggests about the same low level of layoffs in April as for the previous eight months (employment gains averaged 253,000 per month over that period).

• The final April University of Michigan consumer sentiment index increased to 95.9 from the March reading of 93.0. Sentiment is frequently coincident with changes in the labor market, but there are other factors too - like gasoline prices.

• On small business hiring: The small business index from Intuit showed a 15,000 increase in small business employment in April, the same strong level as in March.

• Trim Tabs reported that the U.S. economy added 327,000 jobs in April. This is up from their estimate of 268,000 last month. "TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 140 million U.S. workers subject to withholding" .

• Conclusion: Below is a table showing several employment indicators and the initial BLS report (the first column is the revised employment). Two key points:

1) Unfortunately none of the indicators below is very good at predicting the initial BLS employment report.

2) In general it looks like this should be another 200+ month (based on ISM, unemployment claims, and small business hiring).

There is always some randomness to the employment report.  My guess is something close to the consensus this month.

Employment Indicators (000s)
	BLS Revised	BLS Initial	ADP Initial	ISM	Weekly Claims Reference Week1	Intuit Small Business
Jan 2014	166	113	175	236	329	10
Feb 2014	188	175	139	-6	334	0
Mar 2014	225	192	191	153	323	0
Apr 2014	330	288	220	NA	320	25
May 2014	236	217	179	130	327	35
Jun 2014	286	288	281	NA	314	20
Jul 2104	249	209	218	NA	303	15
Aug 2014	213	142	204	285	299	0
Sep 2014	250	248	213	NA	281	10
Oct 2014	221	214	230	340	284	15
Nov 2014	423	321	208	260	292	30
Dec 2014	329	252	241	252	289	30
Jan 2015	201	257	213	115	308	20
Feb 2015	264	295	212	235	282	10
Mar 2015		126	189	NA	293	15
Apr 2015		Friday	169	220	296	15
1Lower is better for Unemployment Claims

by Calculated Risk on 5/06/2015 08:19:00 AM

From ADP:

Private sector employment increased by 169,000 jobs from March to April according to the March 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.
...
Goods-producing employment declined by 1,000 jobs in April, down from 3,000 jobs gained in March. The construction industry added 23,000 jobs, up from 21,000 last month. Meanwhile, manufacturing lost 10,000 jobs in April, after losing 3,000 in March.

Service-providing employment rose by 170,000 jobs in April, down slightly from 172,000 in March. The ADP National Employment Report indicates that professional/business services contributed 34,000 jobs in April, up from March’s 28,000. Expansion in trade/transportation/utilities grew by 44,000, up from March’s 41,000. The 7,000 new jobs added in financial activities is a drop from last month’s 12,000.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “Fallout from the collapse of oil prices and the surging value of the dollar are weighing on job creation. Employment in the energy sector and manufacturing is declining. However, this should prove temporary and job growth will reaccelerate this summer."

This was below the consensus forecast for 205,000 private sector jobs added in the ADP report. 

The BLS report for April will be released on Friday and the consensus is for 220,000 non-farm payroll jobs added in April.

by Calculated Risk on 5/06/2015 07:01:00 AM

From the MBA: Mortgage Applications Decrease 4.6 % in Latest MBA Weekly Survey

Mortgage applications decreased 4.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 1, 2015. ...

The Refinance Index decreased 8 percent from the previous week to the lowest level since January 2015. The seasonally adjusted Purchase Index increased 1 percent from one week earlier to its highest level since June 2013. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 12 percent higher than the same week one year ago.
...
“Refinance volume dropped last week as rates in the US increased sharply towards the end of the week, with signs of recovery in Europe lifting rates across the globe. Purchase activity increased slightly over the week, and the average loan amount for a purchase application reached a record high, a sign that the mix of purchase activity is still skewed toward higher priced homes,” said Mike Fratantoni, MBA’s Chief Economist.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.93 percent from 3.85 percent, with points remaining unchanged from 0.35 (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.

2014 was the lowest year for refinance activity since year 2000.

It would take much lower rates - below 3.5% - to see a significant refinance boom this year.

The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 12% higher than a year ago.

by Calculated Risk on 5/05/2015 05:56:00 PM

Wednesday:
• At 7:00 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 April. This report is for private payrolls only (no government). The consensus is for 205,000 payroll jobs added in April, up from 189,000 in March.

• At 9:15 AM, Speech by Fed Chair Janet Yellen, Finance and Society, At the Institute for New Economic Thinking Conference on Finance and Society, Washington, D.C

From Matthew Graham at Mortgage News Daily: Mortgage Rates Dangerously Close to 2015 Highs

In terms of conventional 30yr fixed rate quotes, several major lenders are now up to 4.0%, even for top tier scenarios, though many remain at 3.875%. Just one short week ago, 3.625% was widely available.

In the broader context, there has only been one day in 2015 where rates were any higher. Before that, you'd need to go back to November to see higher rates.

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 5/05/2015 03:17:00 PM

I posted these graphs regularly during the recession and recovery.

 Here is a final update (until the next recession) to four key indicators used by the NBER for business cycle dating: GDP, Employment, Industrial production and real personal income less transfer payments.

Note: The following graphs are all constructed as a percent of the peak in each indicator. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%.

All four of the indicators are above pre-recession levels (GDP and Personal Income less Transfer Payments, Industrial Production, and employment).

Click on graph for larger image.

The first graph is for real GDP through Q1 2015.

Real GDP returned to the pre-recession peak in Q3 2011, and is at a new post-recession high (although Q1 2015 GDP might be revised down).

At the worst point - in Q2 2009 - real GDP was off 4.2% from the 2007 peak.

The second graph shows real personal income less transfer payments as a percent of the previous peak through the March 2015 report.

This indicator was off 8.3% at the worst point.

Real personal income less transfer payments reached the pre-recession peak in January 2012.  Then real personal income less transfer payments increased sharply in December 2012 due to a one time surge in income as some high income earners accelerated earnings to avoid higher taxes in 2013.   This is why there is a second dip in this indicator in 2013.

Real personal income less transfer payments are now above the pre-recession peak - and above the December 2012 surge.

The third graph is for industrial production through March 2015.

Industrial production was off 16.9% at the trough in June 2009.

There has been a little weakness recently (mostly related to oil and gas), and now industrial production is 4.4% above the pre-recession peak. 

The final graph is for employment through March 2015. 

Employment is probably the most important indicator and payroll employment exceeded pre-recession levels in April 2014.

Payroll employment is now 2.0% above the pre-recession peak.

by Calculated Risk on 5/05/2015 11:59:00 AM

Notes: This CoreLogic House Price Index report is for March. The recent Case-Shiller index release was for February. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports National Homes Prices Rose by 5.6 Percent Year Over Year in February 2015

CoreLogic® ... today released its March 2015 CoreLogic Home Price Index (HPI®) which shows that home prices nationwide, including distressed sales, increased by 5.9 percent in March 2015 compared with March 2014. This change represents 37 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased by 2 percent in March 2015 compared with February 2015.

Including distressed sales in March, 27 states plus the District of Columbia were at or within 10 percent of their peak prices. Seven states, including Colorado, Nebraska, New York, Oklahoma, Tennessee, Texas and Wyoming, reached new home price highs since January 1976 when the CoreLogic HPI started.

Excluding distressed sales, home prices increased by 6.1 percent in March 2015 compared with March 2014 and increased by 2 percent month over month compared with February 2015. ...

“The homes for sale inventory continues to be limited while buyer demand has picked up with low mortgage rates and improving consumer confidence,” said Frank Nothaft, chief economist for CoreLogic. “As a result, there has been continued upward pressure on prices in most markets, with our national monthly index up 2 percent for March 2015 and up approximately 6 percent from a year ago.”
emphasis added

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 2.0% in March, and is up 5.9% over the last year.

This index is not seasonally adjusted, and this was a solid month-to-month increase.


The second graph is from CoreLogic. The year-over-year comparison has been positive for thirty seven consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

The YoY increase had mostly moved sideways over the last eight months, but might be increasing a little faster now.

by Calculated Risk on 5/05/2015 10:05:00 AM

The April ISM Non-manufacturing index was at 57.8%, up from 56.5% in March. The employment index increased in April to 56.7%, up slightly from 56.6% in March. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: April 2015 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in April for the 63rd 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., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 57.8 percent in April, 1.3 percentage points higher than the March reading of 56.5 percent. This represents continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased substantially to 61.6 percent, which is 4.1 percentage points higher than the March reading of 57.5 percent, reflecting growth for the 69th consecutive month at a faster rate. The New Orders Index registered 59.2 percent, 1.4 percentage points higher than the reading of 57.8 percent registered in March. The Employment Index increased 0.1 percentage point to 56.7 percent from the March reading of 56.6 percent and indicates growth for the 14th consecutive month. The Prices Index decreased 2.3 percentage points from the March reading of 52.4 percent to 50.1 percent, indicating prices increased in April for the second consecutive month, but at a slower rate. According to the NMI®, 14 non-manufacturing industries reported growth in April. The majority of respondents indicate that there has been an uptick in business activity due to the improved economic climate and prevailing stability in business conditions."
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 was above the consensus forecast of 57.8% and suggests faster expansion in April than in March.  Overall this was a solid report.

by Calculated Risk on 5/05/2015 08:43:00 AM

The Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $51.4 billion in March, up $15.5 billion from $35.9 billion in February, revised. March exports were $187.8 billion, $1.6 billion more than February exports. March imports were $239.2 billion, $17.1 billion more than February imports.

The trade deficit much larger than the consensus forecast of $42.0 billion.

The first graph shows the monthly U.S. exports and imports in dollars through March 2015.

Click on graph for larger image.

Imports and exports increased in March ( due a bounce back following the resolution of the West Coast port slowdown).

Exports are 13% above the pre-recession peak and down 3% compared to March 2014; imports are 3% above the pre-recession peak, and up 1% compared to March 2014. 

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.

Oil imports averaged $46.47 in March, down from $49.53 in February, and down from $93.91 in March 2014.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.

The trade deficit with China increased to $31.2 billion in March, from $20.4 billion in March 2014. Much of this increase was due to unloading all the ships backed up at West Coast ports. The deficit with China is a large portion of the overall deficit.

Note: The deficit was larger than the BEA assumed for the advance GDP estimate, and this suggests GDP be revised down for Q1.

by Calculated Risk on 5/04/2015 08:06:00 PM

Note: West Coast port traffic increased sharply in March following the resolution of the labor issue in February. The workers were catching up with all the ships anchored in the harbor (now gone).

This graph is monthly for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).



Both imports and exports rebounded in March, but imports rebounded more - and were up 36% year-over-year - whereas exports were down 20% year-over-year.

This suggests more imports from Asia in March, and also suggests the trade deficit was significantly higher in March than in February.

Tuesday:
• At 8:30 AM ET, Trade Balance report for March from the Census Bureau. The consensus is for the U.S. trade deficit to be at $42.0 billion in March from $35.4 billion in February.

• At 10:00 AM, the ISM non-Manufacturing Index for April. The consensus is for index to decrease to 56.2 from 56.5 in March.

by Calculated Risk on 5/04/2015 05:15:00 PM

Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs.

The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand), however prices didn't fall as sharply either.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through April 2015 (via NAHB), and 2) CME framing futures.

Right now Random Lengths prices are down about 11% from a year ago, and CME futures are down around 25% year-over-year.