by Calculated Risk on 9/11/2015 11:41:00 AM

Note: Some of the year-over-year improvement last week was due to the shift in timing of Labor Day.

From HotelNewsNow.com: STR: US results for week ending 5 September

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 30 August through 5 September 2015, according to data from STR, Inc.

In year-over-year measurements, the industry’s occupancy increased 7.5% to 63.6%. Average daily rate for the week was up 6.6% to US$115.73. Revenue per available room increased 14.6% to finish the week at US$73.58.
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  The occupancy rate is now declining following the summer travel season.

The red line is for 2015, dashed orange is 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.

Special Note: I added 2001 (yellow) to show the impact of 9/11/2001 on hotel occupancy.  Occupancy was already down in 2001 due to the recession, and really collapsed following 9/11.

For 2015, the 4-week average of the occupancy rate is solidly above the median for 2000-2007, and above last year.

Right now 2015 is above 2000 (best year for hotels), and 2015 will probably be the best year ever for hotels.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 9/11/2015 10:02:00 AM

The preliminary University of Michigan consumer sentiment index for September was at 85.7, down from 91.9 in August.

This was below the consensus forecast of 91.0.


Click on graph for larger image.

by Calculated Risk on 9/10/2015 07:33:00 PM

Merrill Lynch expects Q2 GDP to be revised up from 3.7% SAAR:

The Census Bureau released the 2Q Quarterly Services Survey, revealing a stronger trend for healthcare services spending. Feeding this into our tracking model added 0.2pp to 2Q GDP tracking, leaving us at 3.9% qoq saar. Meanwhile, 3Q tracking was unchanged at 2.9%.

Friday:
• At 8:30 AM ET, the Producer Price Index for August from the BLS. The consensus is for a 0.2% decrease in prices, and a 0.1% increase in core PPI.

• At 10:00 AM, University of Michigan's Consumer sentiment index (preliminary for September). The consensus is for a reading of 91.0, down from 91.9 in August.

• At 2:00 PM, the Monthly Treasury Budget Statement for August.

by Calculated Risk on 9/10/2015 02:58:00 PM

A brief excerpt from a research note by Goldman Sachs economist Alec Phillips:

[T]he political environment at the moment seems ripe for fiscal conflict. We are still closer to the last election than the next one, and it is not a coincidence that recent major fiscal disruptions occurred in 2011 and 2013—odd years—when upcoming elections were still more than a year off. In the 2013 experience, public sentiment toward Republicans dropped sharply during and after the shutdown (Gallup’s Republican favorability measure hit a 20-year low), but a year later Republicans won the majorities in the House and Senate. Some lawmakers may conclude from this that voters’ memories are short and the political price for a shutdown more than a year before the next election is low.

As we've discussed, these stunts happen in odd years, and then the voters forget by the next election.

[W]hile the probability of a shutdown of some kind seems to us to be approaching 50%, we think the probability of a shutdown that has a significant effect on the financial markets or real economy is much lower, for two reasons. First, unlike the 2013 shutdown, which coincided with the deadline to raise the debt limit, the next deadline to raise the debt limit is unlikely to be reached until at least mid-November. ... shutdowns that overlapped with debt limit deadlines—the 1990 and 2013 shutdowns—have tended to result in a stronger reaction in financial markets than other shutdowns where the debt limit deadline was not about to be reached.
emphasis added

This possible shutdown isn't related to the "debt ceiling" (incorrectly named - actually about paying the bills), so hopefully this will be resolved. If not, some data releases will probably be delayed (September employment report, etc).

by Calculated Risk on 9/10/2015 11:15:00 AM

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

FNC released their July 2015 index data today.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.2% from June to July (Composite 100 index, not seasonally adjusted). 

The 10 city MSA was unchanged in July (NSA), the 20-MSA RPI increased 0.1%, and the 30-MSA RPI was unchanged. 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 smaller in July than in June, with the 100-MSA composite up 5.5% compared to July 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 July 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 in the 5% range. For example, Case-Shiller was up 4.5% in June, CoreLogic was up 6.9% in July.

Note: The July Case-Shiller index will be released on Tuesday, September 29th.

by Calculated Risk on 9/10/2015 08:33:00 AM

The DOL reported:

In the week ending September 5, the advance figure for seasonally adjusted initial claims was 275,000, a decrease of 6,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 282,000 to 281,000. The 4-week moving average was 275,750, an increase of 500 from the previous week's revised average. The previous week's average was revised down by 250 from 275,500 to 275,250.

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

The previous week was revised down to 281,000.

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 275,750.

This was at the consensus forecast of 275,000, and the low level of the 4-week average suggests few layoffs.

by Calculated Risk on 9/09/2015 06:45:00 PM

First from Jon Hilsenrath at the WSJ: Agreement on September Rate Increase Eludes Fed

Though officials appear to remain on track to raise rates this year—after September, there are Fed meetings in October and December—their recent remarks in interviews and elsewhere showed divisions and uncertainty about whether to move as soon as next week.

It seems likely there will be several dissents at the meeting next week unless Fed Chair Janet Yellen can find a middle ground between the disparate views.

And analysis from Greg Ip at the WSJ: How the Fed Leaves Margin for Error Around Rate Hike

The Fed’s extraordinary patience thus far has brought the economy to the point where higher rates are no longer an existential threat. And by promising that the pace of rate increases will be glacial, the Fed gives itself ample room to stop or reverse course if something goes awry.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for 275 thousand initial claims, down from 282 thousand the previous week.

• At 10:00 AM, Monthly Wholesale Trade: Sales and Inventories for July. The consensus is for a 0.3% increase in inventories.

by Calculated Risk on 9/09/2015 03:45:00 PM

With the first Fed Funds rate hike expected soon - maybe next week, maybe in October or December, or maybe early next year - here is an updated timeline of QE (and Twist operations):

• November 25, 2008: Press Release: $100 Billion GSE direct obligations, $500 billion in MBS

• December 16, 2008 FOMC Statement: Evaluating benefits of purchasing longer-term Treasury Securities

• January 28, 2009: FOMC Statement: FOMC Stands Ready to expand program.

• March 18, 2009: FOMC Statement: Expand MBS program to $1.25 trillion, buy up to $300 billion of longer-term Treasury securities

• March 31, 2010: QE1 purchases were completed at the end of Q1 2010.

• August 27, 2010: Fed Chairman Ben Bernanke hints at QE2: Analysis: Bernanke paves the way for QE2

• November 3, 2010: FOMC Statement: $600 Billion QE2 announced.

• June 30, 2011: QE2 purchases were completed at the end of Q2 2011.

This graph show the S&P 500 and the Fed actions. Click on graph for larger image.

• September 21, 2011: "Operation Twist" announced. "The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less."

• June 20, 2012: "Operation Twist" extended. "The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities."

• August 31, 2012: Fed Chairman Ben Bernanke hints at QE3: Analysis: Bernanke Clears the way for QE3 in September

• September 13, 2012: FOMC Statement: $40 Billion per month QE3 announced.

• December 12, 2012: FOMC Statement: Announced completion of "Operation Twist", expanded QE3 to $85 Billion per month.

• May 22, 2013: In Testimony to Congress, The Economic Outlook, Fed Chairman Ben Bernanke said “If we see continued improvement and we have confidence that that is going to be sustained, then in the next few meetings, we could take a step down in our pace of purchases.” (aka "Taper Tantrum").

• June 19, 2013: In Chairman Bernanke’s Press Conference, Bernanke said "If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year."

• December 18, 2013: FOMC Statement: Announced "tapering" of QE3. Note: QE3 tapered $10 billion per month at each meeting of 2014.

• October 29, 2014: FOMC Statement: FOMC completed QE3 in October 2014.

by Calculated Risk on 9/09/2015 12:51:00 PM

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 Moving on up: GLVAR reports local home sales, prices up from same time last year

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in August was 3,454, up from 3,120 one year ago. Compared to August 2014, 11.2 percent more homes and 8.3 percent more condos and townhomes sold this August. Through Aug. 31, GLVAR reported a total of 26,225 sales so far in 2015, compared to 24,965 sales during the same period in 2014.
...
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 August, 6.2 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 7.0 percent of August sales were bank-owned, down from 8.9 percent one year ago.
...
The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in August was 13,608, down 1.0 percent from one year ago. GLVAR tracked a total of 3,459 condos, high-rise condos and townhomes listed for sale on its MLS in August, down 4.5 percent from one year ago.

By the end of August, GLVAR reported 8,060 single-family homes listed without any sort of offer. That’s up 3.5 percent from one year ago. For condos and townhomes, the 2,319 properties listed without offers in August represented a 3.3 percent decrease from one year ago.
emphasis added

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

1) Overall sales were up 11% year-over-year.

2) Conventional (equity, not distressed) sales were up 21% year-over-year.  In Aug 2014, 79.6% of all sales were conventional equity.  In Aug 2015, 86.8% were standard equity sales.

3) The percent of cash sales has declined year-over-year from 32.1% in Aug 2014 to 28.2% in Aug 2015. (investor buying appears to be declining).

4) Non-contingent inventory is up 3.5% 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%
Aug-15	3.5%

by Calculated Risk on 9/09/2015 10:05:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings again rose to a series high of 5.8 million on the last business day of July, the U.S. Bureau of Labor Statistics reported today. The number of hires and separations edged down to 5.0 million and 4.7 million, respectively. Within separations, the quits rate was 1.9 percent for the fourth month in a row, and the layoffs and discharges rate declined to 1.1 percent. ...
...
Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. ... There were 2.7 million quits in July, little changed from June. Although the number of quits has been increasing overall since the end of the recession, the number has held between 2.7 million and 2.8 million for the past 11 months.
emphasis added

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

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for July, the most recent employment report was for August.

Click on graph for larger image.


Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased in July to 5.753 million from 5.323 million in June.

The number of job openings (yellow) are up 22% year-over-year compared to July 2014.

Quits are up 6% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

This is another solid report.  It is a good sign that job openings are at a series high, and that quits are increasing year-over-year.