by Calculated Risk on 6/05/2015 08:42:00 AM

From the BLS:

Total nonfarm payroll employment increased by 280,000 in May, and the unemployment rate was essentially unchanged at 5.5 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, leisure and hospitality, and health care. Mining employment continued to decline.
...
The change in total nonfarm payroll employment for March was revised from +85,000 to +119,000, and the change for April was revised from +223,000 to +221,000. With these revisions, employment gains in March and April combined were 32,000 more than previously reported.
...
In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $24.96. Over the year, average hourly earnings have risen by 2.3 percent.
emphasis added

Click on graph for larger image.

The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes).

Total payrolls increased by 280 thousand in May (private payrolls increased 262 thousand).

Payrolls for March and April were revised up by a combined 32 thousand.

This graph shows the year-over-year change in total non-farm employment since 1968.

In May, the year-over-year change was almost 3.1 million jobs.

This is a solid year-over-year gain.


The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate increased in May to 62.9%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics.

The Employment-Population ratio increased to 59.4% (black line).

I'll post the 25 to 54 age group employment-population ratio graph later.

The fourth graph shows the unemployment rate.

The unemployment rate increased in May to 5.5%.

This was above expectations of 220,000 jobs, and combined revisions were up ... a strong report.

I'll have much more later ...

by Calculated Risk on 6/04/2015 08:00:00 PM

Here is the employment preview I posted earlier: Preview: Employment Report for May

And some comments on various employment indicators: Public and Private Employment Data

Goldman Sachs is forecasting 210,000 jobs added, and for the unemployment rate to be unchanged at 5.4%.

Merrill Lynch is forecasting 220,000 jobs added in May, and the unemployment rate at 5.4%, and 0.3% mom increase hourly earnings

Nomura is forecasting 190,000 jobs, a 0.28% increase in wages mom, and a 5.4% unemployment rate.

Friday:
• At 8:30 AM ET, the Employment Report for May. The consensus is for an increase of 220,000 non-farm payroll jobs added in May, up from the 213,000 non-farm payroll jobs added in April. The consensus is for the unemployment rate be unchanged at 5.4%.

• At 3:00 PM, Consumer Credit for April from the Federal Reserve. The consensus is for an increase of $16.0 billion in credit.

by Calculated Risk on 6/04/2015 04:21:00 PM

From Housing economist Tom Lawler:

Earlier this week the Census Bureau released its annual report on the Characteristics of New Housing Units Completed/Sold for 2014. The report, based on data collected from the Survey of Construction, includes (among a lot of other things) estimates for the number of housing units completed or sold by square feet of floor area, number of bath rooms, and number of bedrooms. On the single-family home front, one of the most striking statistics for the last few years (including 2014) is the incredibly small number of moderately-sized (and priced) homes built. Here is a table from the report showing the number of single-family homes completed by square feet of floor area from 1999 to 2014.

Compared to 2000, the number of single-family homes completed in 2014 was down by 50%. The number of homes completed in 2014 with square footage below 1,800 was down by a staggering 70%, while the number of homes completed with square footage of 4,000 or more last year was unchanged from 2000! And the number of single family homes completed with square footage below 1,800 last year showed no increase from 2013’s record low.

Square Feet of Floor Area in New Single-Family Houses Completed1
(Components may not add to totals because of rounding)
	Number of houses (in thousands) by square feet
Year	Total	Under 1,400	1,400 to 1,799	1,800 to 2,399	2,400 to 2,999	3,000 to 3,999	4,000 or more
1999	1,270	197	276	370	211	157	59
2000	1,242	178	268	363	208	158	66
2001	1,256	167	261	359	222	172	75
2002	1,325	172	283	375	240	180	76
2003	1,386	179	279	401	251	199	77
2004	1,532	186	311	433	291	219	92
2005	1,636	165	317	467	306	262	119
2006	1,654	164	312	452	326	263	137
2007	1,218	120	220	335	227	202	115
2008	819	104	146	219	138	127	84
2009	520	66	106	139	89	72	48
2010	496	66	96	135	87	75	37
2011	447	57	84	111	79	76	40
2012	483	53	83	126	93	88	40
2013	569	46	89	154	115	110	56
2014	620	48	87	162	131	127	66
1Includes houses built for rent, not shown separately

Below is a longer-run chart showing the median square footage of single-family homes completed. (I can’t show a longer-run chart by similar square-footage ranges, as Census changed its ranges.)

During most of the 1970’s and the first half of the 1980’s, over half of new single-family homes completed had square footage at or below 1,600.

While the de minimus production of moderately sized and priced new single-family home production over the past few years almost certainly reflects extremely low purchase volumes from entry-level buyers, there is some debate regarding how much of this weak production/sales reflects weak demand, and how much reflects “supply” issues (e.g., an inability of many builders in many markets to produce small, moderately-priced homes at high enough profit margins to make it worth there while.)

Those looking for an eventual rebound in single-family housing production to more “normal” unit levels should realize that such a rebound is extremely unlikely without a major increase in the production of smaller, more moderately priced homes.

by Calculated Risk on 6/04/2015 02:19:00 PM

Some readers have wondered about the accuracy of the monthly BLS employment report. The report is based on a survey of households, and reports from businesses - for differences see: Household vs. Establishment Series - and the establishment report is benchmarked annually to state unemployment insurance tax reports.

On a monthly basis, the establishment report may have a large margin of error, but - with the annual benchmarks - the report should track payroll employment very well over time.

Another public source of employment related data is the initial and continuing weekly unemployment reports.  The initial weekly unemployment claims report shows unemployment claims are near all time lows.

The good news is private sources of employment data are suggesting similar gains in employment (for those who doubt the accuracy of government data).

The most followed private source is from ADP.  However, ADP makes some adjustment based on data from the BLS report and from the Philadelphia Federal Reserve’s Aruoba-Diebold-Scotti Business Conditions Index. So this isn't entirely independent series.

Another private source is the ISM surveys of manufacturing and non-manufacturing companies.   Although these surveys are based on the number of companies hiring (or laying off workers), the index has tracked changes in private BLS employment over time.

For small business, the Intuit index is very useful - and the NFIB monthly surveys also provides information on hiring.  From NFIB: Small Business Hiring Strong for 5th Consecutive Month

“May continued to show solid, but not spectacular hiring, continuing the trend of previous months in 2015. For the second time this year, a high of 29 percent had openings they couldn’t fill; a high we hadn’t seen since April 2006. This is a strong indication that the unemployment rate will decline further.

“Small employers are starting to feel the economy picking up and they are working hard to meet this demand."

Other sources of private data include:
• TrimTabs (based on analysis of daily income tax deposits)

• The Conference Board's labor differential (a spread between the share of households reporting jobs are plentiful versus hard to get).

• The Chicago PMI (a regional survey).

• The Challenger, Gray & Christmas report on planned layoffs. From Reuters today: US job cuts plunged 33% to 41,034 in May: Challenger

Job cuts announced by U.S.-based companies declined sharply in May as the energy sector took another pause following successive rounds of big payroll reductions.

Employers laid off 33 percent fewer workers in May from the previous month, global outsourcing firm Challenger, Gray & Christmas reported Thursday. Companies announced 41,034 cuts in the last four weeks, compared with 61,582 in April.

There are other sources too. The bottom line is all of the data - both private and public - is telling a similar story on employment.

by Calculated Risk on 6/04/2015 10:42:00 AM

Yesterday I discussed several indicators: Preview: Employment Report for May

Some excerpts from a research piece by Goldman Sachs economist Kris Dawsey:

We forecast a 210k gain in nonfarm payrolls in May, a bit below consensus of 226k and down slightly from April's pace of increase. ... the trend in payroll job growth seems to have softened a bit since reaching a high-water mark in late-2014 / early-2015.
...
We expect the unemployment rate to remain unchanged at 5.4%. ...

Average hourly earnings (AHE) for all employees will probably increase 0.3%, in our view. As we have noted in the past, the monthly earnings estimates appear to be influenced by calendar effects. The smaller number of working days in May, combined with relatively late timing of the survey reference week within the month, would historically be consistent with a firm AHE print. Including base effects, we think that the year-on-year change in all-employee AHE is likely to remain stable at 2.2% (with upside risk), while year-on-year growth in production and nonsupervisory AHE will probably rise one-tenth to 2.0%.

And from economists at Nomura:

[W]e forecast a 185k increase in private payrolls, with a 5k increase in government jobs, implying that total nonfarm payrolls will gain 190k. ... We forecast that average hourly earnings for private employees rose by 0.28% m-o-m in May, indicative of our expectation for a gradual pickup in wage growth as a result of the tightening labor market and a rebound after a slight 0.1% increase in April. Last, we expect the household survey to show that the unemployment rate remained unchanged at 5.4%.

by Calculated Risk on 6/04/2015 08:34:00 AM

The DOL reported:

In the week ending May 30, the advance figure for seasonally adjusted initial claims was 276,000, a decrease of 8,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 282,000 to 284,000. The 4-week moving average was 274,750, an increase of 2,750 from the previous week's revised average. The previous week's average was revised up by 500 from 271,500 to 272,000.

There were no special factors impacting this week's initial claims.

The previous week was revised to 284,000.

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 increased to 274,750.

This was at the consensus forecast of 276,000, and the low level of the 4-week average suggests few layoffs.

by Calculated Risk on 6/03/2015 07:18:00 PM

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 276 thousand from 282 thousand.

• Also at 8:30 AM, Productivity and Costs for Q1. The consensus is for a 6.0% increase in unit labor costs.

From Matthew Graham: MBS RECAP: The Real Drama is in Europe, but Little to do with Greece

If you missed it, or are otherwise looking for a recap on why bond markets got crushed today, here it is. Nothing materially changed from that update, and that's no surprise considering the source of the drama was Europe.

For those of you who don't click links, suffice it to say that the European Central Bank is not the Federal Reserve. ...

It's actually not too complicated. Europe fought tooth and nail for several years to roll out a QE program. They finally launched it in early 2015 and specified the amount and timing. When markets began speculating that the amount might be less or the timing might be cut short, the head of the European Central Bank provided reassurance that the timing and amounts were predetermined. And now today, he said they weren't. It's really that simple.

For the sake of perspective, he did say that the European economy requires the full program for the full amount of time (Sep 2016). The problem is that he also said that the program could end early if there was a sustained adjustment toward inflation targets. Jeez... To reiterate some of my incredulity from this morning, this is dirty pool. The Fed has been widely criticized, to be sure, but I couldn't imagine the backlash if they pulled a similar move with one of our QE iterations that had a predetermined amount of bond-buying.

It's a surefire way to cause chaos. And that's exactly what it did. German Bunds sold off 20bps today (vs 10bps in US Treasuries).

Here is a table of mortgage rates from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 6/03/2015 03:15:00 PM

Another month, another employment report ...

On Friday at 8:30 AM ET, the BLS will release the employment report for May. The consensus, according to Bloomberg, is for an increase of 220,000 non-farm payroll jobs in May (with a range of estimates between 190,000 and 289,000), and for the unemployment rate to be unchanged at 5.4%.

The BLS reported 223,000 jobs added in April.

Here is a summary of recent data:

• The ADP employment report showed an increase of 201,000 private sector payroll jobs in May. This was at expectations of 200,000 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 at expectations.

• The ISM manufacturing employment index increased in May to 51.7%. 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 10,000 in May. The ADP report indicated a 5,000 decrease for manufacturing jobs.

The ISM non-manufacturing employment index decreased in May to 56.7%. 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 jobs increased about 215,000 in May.

Combined, the ISM indexes suggests employment gains of 205,000.  This suggests employment growth slightly below expectations.

• Initial weekly unemployment claims averaged close to 271,000 in May, down from 284,000 in April - and the lowest monthly average since early 2001. For the BLS reference week (includes the 12th of the month), initial claims were at 275,000; down from 296,000 during the reference week in April.

This suggests a lower level of layoffs in May compared to the previous months.

• The final May University of Michigan consumer sentiment index decreased to 90.0 from the April reading of 95.9. 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 25,000 increase in small business employment in May, up from 15,000 in March.  From Intuit: Small Businesses Employment Shows Sharp Growth in May

Small business employment rose by 25,000 jobs in May, an increase of 0.13 percent, or an annual rate of 1.6 percent. The hiring rate also continued to rise, showing the fastest increase since the hiring rate began growing for small businesses in July 2009. Hourly employees worked an average of 41 minutes longer than in April.

“Looking back to January 2004, we see only seven months when the change in hours worked was larger than 25 minutes. This is a sign that small businesses are working hard to meet increased demands – and get work done,” said Susan Woodward, the economist who works with Intuit to produce the Small Business Employment and Revenue Indexes.

“Another sign of stronger small business activity is the hiring rate, which rose at nearly twice the rate of any other month since beginning to rise in September 2009. The hiring rate always exceeds the employment increase because hiring reflects replacing workers who leave, as well as added workers,” Woodward said

• Trim Tabs reported that the U.S. economy added 273,000 jobs in May. From  TrimTabs:

TrimTabs Investment Research estimates that the U.S. economy added 273,000 jobs in May, the eleventh consecutive month that employment growth exceeded 200,000 jobs.

“While the Bureau of Economic Analysis’ latest GDP growth estimate has Wall Street worried about a slowdown, our figures paint a different picture,” said David Santschi, chief executive officer of TrimTabs. “Real-time tax data indicates employment growth remains solid.”

TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 141 million U.S. workers subject to withholding.

• Conclusion: Unfortunately none of the indicators above is very good at predicting the initial BLS employment report. However it looks like this should be another 200+ month (based on ADP, ISM, unemployment claims, and small business hiring). There is always some randomness to the employment report, but my guess is something close to the consensus this month.

by Calculated Risk on 6/03/2015 02:00:00 PM

Fed's Beige Book "Prepared at the Federal Reserve Bank of Dallas based on information collected on or before May 22, 2015"

Reports from the twelve Federal Reserve Districts suggest overall economic activity expanded during the reporting period from early April to late May. Activity in the Richmond, Chicago, Minneapolis, and San Francisco Districts was characterized as growing at a moderate pace, while the New York, Philadelphia, and St. Louis Districts cited modest growth. Contacts in the Boston District reported mixed conditions, and the Cleveland and Kansas City Districts indicated a slight pace of expansion. Compared to the previous report, the pace of growth slowed slightly in the Dallas District but held steady in the Atlanta District. Outlooks among respondents were generally optimistic, with growth expected to continue at a modest to moderate pace in several districts. ...

Manufacturing activity generally held steady or increased over the reporting period, except for in the Dallas District where it was slightly weaker and in the Kansas City District where it fell markedly.

And on real estate:

Residential real estate activity and construction expanded in most districts since the prior report, and outlooks were largely positive. Homes sales rose strongly in the Minneapolis District on a year-over-year basis, while more modest to moderate gains were reported by all of the remaining districts, except for Philadelphia where builders reported mixed conditions for new home sales and brokers noted slightly slower existing-home sales in April on a year-over-year basis. ... Residential construction was flat to up during the reporting period, although a few districts reported a slower pace of homebuilding activity due to financing and capacity constraints and severe weather.

Commercial real estate leasing and construction activity improved in most districts, and outlooks were optimistic.
emphasis added

by Calculated Risk on 6/03/2015 10:04:00 AM

The May ISM Non-manufacturing index was at 55.7%, down from 57.8% in April. The employment index decreased in May to 55.3%, down from 56.7% in April. Note: Above 50 indicates expansion, below 50 contraction.

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

Economic activity in the non-manufacturing sector grew in May for the 64th 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 55.7 percent in May, 2.1 percentage points lower than the April reading of 57.8 percent. This represents continued growth in the non-manufacturing sector although at a slower rate. The Non-Manufacturing Business Activity Index decreased to 59.5 percent, which is 2.1 percentage points lower than the April reading of 61.6 percent, reflecting growth for the 70th consecutive month at a slower rate. The New Orders Index registered 57.9 percent, 1.3 percentage points lower than the reading of 59.2 percent registered in April. The Employment Index decreased 1.4 percentage points to 55.3 percent from the April reading of 56.7 percent and indicates growth for the 15th consecutive month. The Prices Index increased 5.8 percentage points from the April reading of 50.1 percent to 55.9 percent, indicating prices increased in May for the third consecutive month. According to the NMI®, 15 non-manufacturing industries reported growth in May. Overall there has been a slight slowing in the rate of growth for the non-manufacturing sector. Respondents’ comments are mostly positive about business conditions and indicate economic growth will continue."
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 below the consensus forecast of 57.2% and suggests slower expansion in May than in April. Overall this was a decent report.