by Calculated Risk on 8/10/2015 02:01:00 PM

By request, a few more employment graphs ...

Here are the previous posts on the employment report:

• July Employment Report: 215,000 Jobs, 5.3% Unemployment Rate
• Employment Report Comments and more Graphs

Duration of Unemployment
This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

The general trend is down for all categories, and the "less than 5 weeks", "6 to 14 weeks" and "15 to 26 weeks" are all close to normal levels. 

The long term unemployed is less than 1.4% of the labor force, however the number (and percent) of long term unemployed remains elevated.

Unemployment by Education
This graph shows the unemployment rate by four levels of education (all groups are 25 years and older).

Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and it appears all four groups are generally trending down.

Although education matters for the unemployment rate, it doesn't appear to matter as far as finding new employment.

Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".

Construction Employment
This graph shows total construction employment as reported by the BLS (not just residential).

Since construction employment bottomed in January 2011, construction payrolls have increased by 951 thousand.

Construction employment is still far below the bubble peak - and below the level in the late '90s.

Diffusion Indexes
 The BLS diffusion index for total private employment was at 64.4 in July, up from 60.6 in June.

For manufacturing, the diffusion index was at 57.5, up from 52.5 in June.

Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS.  Above 60 is very good.  From the BLS:

Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.

Overall private job growth was widespread in July.  A positive indicator.

by Calculated Risk on 8/10/2015 10:18:00 AM

In addition to Case-Shiller, and CoreLogic, I'm also watching the FNC, Zillow and several other house price indexes.

FNC released their June 2015 index data today.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 1.2% from May to June (Composite 100 index, not seasonally adjusted). 

The 10 city MSA increased 1.7% in June, the 20-MSA RPI increased 1.6%, and the 30-MSA RPI increased 1.4%. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).

Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data.

The year-over-year (YoY) change was larger in June than in May, with the 100-MSA composite up 5.7% compared to June 2014.

The index is still down 15.2% from the peak in 2006 (not inflation adjusted).

Click on graph for larger image.

This graph shows the year-over-year change based on the FNC index (four composites) through June 2015. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

Most of the other indexes are also showing the year-over-year change around 5%, but increasing a little faster over the last several months.

Note: The June Case-Shiller index will be released on Tuesday, August 25th.

by Calculated Risk on 8/10/2015 08:11:00 AM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported GLVAR reports local home sales, prices continue to climb steadily from last year

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in July was 3,815, up from 3,314 one year ago. Compared to July 2014, 20.4 percent more homes, but 5.5 percent fewer condos and townhomes, sold this July.
...
For more than two years, GLVAR has been reporting fewer distressed sales and more traditional home sales, where lenders are not controlling the transaction. In July, 7.1 percent of all local sales were short sales – which occur when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 11.5 percent one year ago. Another 7.7 percent of July sales were bank-owned, down from 9.1 percent one year ago.
...
The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in July was 13,616, down 0.7 percent from one year ago. GLVAR tracked a total of 3,465 condos, high-rise condos and townhomes listed for sale on its MLS in July, down 4.4 percent from one year ago.

By the end of July, GLVAR reported 7,636 single-family homes listed without any sort of offer. That’s up 5.1 percent from one year ago. For condos and townhomes, the 2,320 properties listed without offers in July represented a 0.4 percent decrease from one year ago.
emphasis added

There are several key trends that we've been following:

1) Overall sales were up 15% year-over-year.

2) Conventional (equity, not distressed) sales were up 24% year-over-year.  In July 2014, 79.4% of all sales were conventional equity.  In July 2015, 85.2% were standard equity sales.

3) The percent of cash sales has declined year-over-year from 35.6% in July 2014 to 27.1% in July 2015. (investor buying appears to be declining).

4) Non-contingent inventory is up 5.1% year-over-year. The table below shows the year-over-year change for non-contingent inventory in Las Vegas. Inventory declined sharply through early 2013, and then inventory started increasing sharply year-over-year. It appears the inventory build is slowing  - but still ongoing.

Las Vegas: Year-over-year Change in Non-contingent Inventory
Month	YoY
Jan-13	-58.3%
Feb-13	-53.4%
Mar-13	-42.1%
Apr-13	-24.1%
May-13	-13.2%
Jun-13	3.7%
Jul-13	9.0%
Aug-13	41.1%
Sep-13	60.5%
Oct-13	73.4%
Nov-13	77.4%
Dec-13	78.6%
Jan-14	96.2%
Feb-14	107.3%
Mar-14	127.9%
Apr-14	103.1%
May-14	100.6%
Jun-14	86.2%
Jul-14	55.2%
Aug-14	38.8%
Sep-14	29.5%
Oct-14	25.6%
Nov-14	20.0%
Dec-14	18.0%
Jan-15	12.9%
Feb-15	15.8%
Mar-15	12.2%
Apr-15	7.6%
May-15	7.8%
Jun-15	4.3%
Jul-15	5.1%

by Calculated Risk on 8/09/2015 10:55:00 PM

From the WSJ: Oil Futures Signal Weak Prices Could Last Years

Benchmark U.S. oil futures for September delivery are nearing the six-year low hit in March. But contracts for delivery in later years have taken an even bigger hit, with prices for 2016 and 2017 already trading below their March lows.

That indicates that investors, traders and oil companies see the global glut of crude oil persisting beyond this year.

This would be good news for consumers (bad news for producers).

Weekend:
• Schedule for Week of August 9, 2015

Monday:
• At 10:00 AM ET, The Fed will release the monthly Labor Market Conditions Index (LMCI).

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are up 4 and DOW futures are up 20 (fair value).

Oil prices were down over the last week with WTI futures at $43.65 per barrel and Brent at $48.34 per barrel.  A year ago, WTI was at $97, and Brent was at $104 - so prices are down over 50% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.60 per gallon (down about $0.85 per gallon from a year ago).  Gasoline prices should follow oil prices down.

by Calculated Risk on 8/09/2015 10:36:00 AM

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).

In 2015, even with the pickup in U.S. housing starts, prices are down year-over-year.  Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts.

Overall the decline in prices is probably due to more supply, and less demand from China.

Click on graph for larger image in graph gallery.

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

Right now Random Lengths prices are down about 14% from a year ago, and CME futures are down around 24% year-over-year.

by Calculated Risk on 8/08/2015 08:11:00 AM

The key economic report this week is July Retail sales on Thursday.

For manufacturing, the July Industrial Production and Capacity Utilization report will be released this week.

For prices, PPI will be released on Friday.

----- Monday, August 10th -----
10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

----- Tuesday, August 11th -----
9:00 AM: NFIB Small Business Optimism Index for July.

----- Wednesday, August 12th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Job Openings and Labor Turnover Survey for June 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 increased in May to 5.363 million from 5.334 million in April.

The number of job openings (yellow) were up 16% year-over-year, and Quits were up 8% year-over-year.

2:00 PM ET: The Monthly Treasury Budget Statement for July.

----- Thursday, August 13th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to be unchanged at 270 thousand.

8:30 AM ET: Retail sales for July will be released.

This graph shows retail sales since 1992 through June 2015. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). On a monthly basis, retail sales were down 0.3% from May to June (seasonally adjusted), and sales were up 1.4% from June 2014.

The consensus is for retail sales to increase 0.5% in July, and to increase 0.4% ex-autos.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for June.  The consensus is for a 0.3% increase in inventories.

11:00 AM: the New York Fed will Release the Q2 2015 Household Debt and Credit Report

----- Friday, August 14th -----
8:30 AM ET: The Producer Price Index for July from the BLS. The consensus is for a 0.1% increase in prices, and a 0.1% increase in core PPI.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for July.

This graph shows industrial production since 1967.

The consensus is for a 0.4% increase in Industrial Production, and for Capacity Utilization to increase to 78.1%.

10:00 AM: University of Michigan's Consumer sentiment index (preliminary for August). The consensus is for a reading of 93.5, up from 93.1 in July.

by Calculated Risk on 8/07/2015 09:19:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Surprisingly Calm After Jobs Report

Most lenders continue to quote conventional 30yr fixed rates of 4.0% on top tier scenarios, but with slightly lower closing costs today. The more aggressive lenders are increasingly able to quote 3.875% after these sorts of moves, though others are still stuck at 4.125% unless bond markets improve a bit further.

As of today, rates have improved for 3 straight weeks. ...
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 8/07/2015 06:05:00 PM

An excerpt from a research piece by Merrill Lynch economist Micheal Hanson:

After the July employment report largely matched expectations, we anticipate that the FOMC should see enough cumulative progress to start the hiking cycle at the September meeting — the chance that liftoff occurs then continues to creep up, in our view. That said, there are still another five weeks until that meeting. With data dependence as the focus of the Fed, unexpected shocks or a broad-based slowdown in the data could still lead the Committee to delay hiking. The bigger question for some Fed officials and market participants is low inflation. We expect continued labor market gains to leave the FOMC “reasonably confident” on the inflation outlook come September — something they should communicate in upcoming speeches.
emphasis added

It seems more and more likely that the Fed will hike in September.

by Calculated Risk on 8/07/2015 01:03:00 PM

By request, here is another update of an earlier post through the July employment report.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I'll just stick to the beginning of each term.

Note: We frequently use Presidential terms as time markers - we could use Speaker of the House, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.  Reagan's 2nd term saw about the same job growth as during Carter's term.  Note: There was a severe recession at the beginning of Reagan's first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter's term (gas prices increased sharply and there was an oil embargo).

Term	Private Sector Jobs Added (000s)
Carter	9,041
Reagan 1	5,360
Reagan 2	9,357
GHW Bush	1,510
Clinton 1	10,884
Clinton 2	10,073
GW Bush 1	-844
GW Bush 2	381
Obama 1	2,018
Obama 2	6,7321
130 months into 2nd term: 10,771 pace.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). President George H.W. Bush only served one term, and President Obama is in the third year of his second term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (yellow) took office.

There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.

Click on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 844,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 463,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,955,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 2,018,000 more private sector jobs at the end of Mr. Obama's first term.  Thirty months into Mr. Obama's second term, there are now 8,750,000 more private sector jobs than when he initially took office.

 A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 656,000 jobs). These job losses have mostly been at the state and local level, but more recently at the Federal level.  This has been a significant drag on overall employment.

And a table for public sector jobs. Public sector jobs declined the most during Obama's first term, and increased the most during Reagan's 2nd term.

Term	Public Sector Jobs Added (000s)
Carter	1,304
Reagan 1	-24
Reagan 2	1,438
GHW Bush	1,127
Clinton 1	692
Clinton 2	1,242
GW Bush 1	900
GW Bush 2	844
Obama 1	-702
Obama 2	461
130 months into 2nd term, 74 pace

Looking forward, I expect the economy to continue to expand through 2016 (at least), so I don't expect a sharp decline in private employment as happened at the end of Mr. Bush's 2nd term (In 2005 and 2006 I was warning of a coming recession due to the bursting of the housing bubble).

For the public sector, the cutbacks are clearly over at the state and local levels, and it appears cutbacks at the Federal level might also be over.  Right now I'm expecting some increase in public employment during Obama's 2nd term, but nothing like what happened during Reagan's second term.

Here is a table of the top three presidential terms for private job creation (they also happen to be the three best terms for total non-farm job creation).

Clinton's two terms were the best for both private and total non-farm job creation, followed by Reagan's 2nd term.

Currently Obama's 2nd term is on pace to be the 2nd best ever for private job creation.  However, with very few public sector jobs added, Obama's 2nd term is only on pace to be the third best for total job creation.

Note: Only 46 thousand public sector jobs have been added during the first thirty months of Obama's 2nd term (following a record loss of 702 thousand public sector jobs during Obama's 1st term).  This is about 5% of the public sector jobs added during Reagan's 2nd term!

Top Employment Gains per Presidential Terms (000s)
Rank	Term	Private	Public	Total Non-Farm
1	Clinton 1	10,884	692	11,576
2	Clinton 2	10,073	1,242	11,315
3	Reagan 2	9,357	1,438	10,795
	Obama 21	6,732	46	6,778
	Pace2	10,771	74	10,845
130 Months into 2nd Term 2Current Pace for Obama's 2nd Term

The last table shows the jobs needed per month for Obama's 2nd term to be in the top three presidential terms.

Average Jobs needed per month (000s) for remainder of Obama's 2nd Term
to Rank	Private	Total
#1	231	267
#2	186	252
#3	146	223

by Calculated Risk on 8/07/2015 09:52:00 AM

Earlier: July Employment Report: 215,000 Jobs, 5.3% Unemployment Rate

This was a solid employment report with 215,000 jobs added, and employment gains for May and June were revised up slightly.

There was even a little wage growth, from the BLS: "In July, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $24.99. Over the year, average hourly earnings have risen by 2.1 percent." Weekly hours increased slightly in July.

A few more numbers:  Total employment increased 215,000 from June to July and is now 3.7 million above the previous peak.  Total employment is up 12.4 million from the employment recession low.

Private payroll employment increased 210,000 from June to July, and private employment is now 4.2 million above the previous peak. Private employment is up 13.0 million from the recession low.

In July, the year-over-year change was just over 2.9 million jobs.

Note: The unemployment rate at 5.3%, and still little real wage growth - and a higher than normal level of people working part time for economic reasons - indicates slack in the labor market.  My view, partially based on demographics, is that the unemployment rate can fall below 5% without a significant pickup in inflation.

Overall this was a solid report.

Employment-Population Ratio, 25 to 54 years old

Since the overall participation rate declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate declined in July to 80.7%, and the 25 to 54 employment population ratio declined to 77.1%.  As the recovery continues, I expect the participation rate for this group to increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s.

Average Hourly Earnings

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth increased 2.1% YoY - and although the series is noisy - it does appear wage growth is trending up a little.  Wages will probably pick up a little more this year.

Note: CPI has been running under 2%, so there has been some real wage growth.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in July at 6.3 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of persons working part time for economic reasons decreased in July to 6.32 million from 6.51 million in June.  This is the lowest level since Sept 2008 and suggests slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that declined to 10.4% in July (lowest level since June 2008).

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 2.18 million workers who have been unemployed for more than 26 weeks and still want a job. This was up slightly from 2.12 million in June.

This is trending down, but is still high.

State and Local Government

This graph shows total state and government payroll employment since January 2007. (Note: Scale doesn't start at zero to better show the change.)

In July 2015, state and local governments added five thousand jobs. State and local government employment is now up 145,000 from the bottom, but still 613,000 below the peak.

State and local employment is now generally increasing - slowly.  And Federal government layoffs appear to have ended (Federal payrolls were unchanged in July, and Federal employment is up 3,000 year-to-date).

Overall this was a solid employment report for July and indicates further improvement in the labor market.