by Calculated Risk on 7/08/2016 12:54:00 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 Southern Nevada Housing Market Stays Hot, GLVAR Housing Statistics for June 2016

“It’s shaping up to be a strong summer for our local housing market, and I think most of our members are optimistic that we can continue this momentum in the coming months,” said 2016 GLVAR President Scott Beaudry, a longtime local REALTOR®. “As we’ve been saying all year, we’re still concerned about our limited housing supply, which is about half of what we’d like it to be. But overall, the housing market seems to be moving in a positive direction and avoiding the volatility we experienced in past years.”

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in June was 3,957, up from 3,693 total sales in June of 2015. Compared to the same month one year ago, 6.3 percent more homes, and 11.3 percent more condos and townhomes sold in June.
...
At the current sales pace, Beaudry said Southern Nevada has been dealing with less than a three-month supply of homes available for sale, when a six-month supply is considered to be a balanced market.
...
GLVAR continued to track declines in distressed sales and a corresponding increase in traditional home sales, where lenders are not controlling the transaction. In June, 4.4 percent of all local sales were short sales – when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 6.7 percent of all sales one year ago. Another 5.9 percent of all June sales were bank-owned, down from 7.6 percent one year ago.
...
GLVAR said 27 percent of all local properties sold in June were purchased with cash, down from 28.4 percent one year ago. That cash buyer percentage has stabilized in recent months. It’s still less than half of the February 2013 peak of 59.5 percent, suggesting that cash buyers and investors remain more active in Southern Nevada than in most markets, but that their influence continues to wane.
emphasis added

1) Overall sales were up 7.1% year-over-year.

2) The exact number of listings - and homes listed without offers - is not currently available.

by Calculated Risk on 7/08/2016 10:04:00 AM

The headline jobs number was very strong, however there were small downward revisions to job growth for prior months.  The key positives were the number of jobs added in June (287,000), a decline in U-6, and a pickup in wage growth.

Earlier: June Employment Report: 287,000 Jobs, 4.9% Unemployment Rate

In June, the year-over-year change was 2.45 million jobs.

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 was at 2.6% YoY in June.  This series is noisy, however overall wage growth is trending up.

Note: CPI has been running under 2%, so there has been 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) decreased by 587,000 to 5.8 million in June, offsetting an increase in May. 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 sharply in June - reversing the sharp increase in May. This level suggests slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that declined to 9.6% in June - the lowest level since April 2008.

Unemployed over 26 Weeks

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

According to the BLS, there are 1.979 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 1.885 million in May.

This is generally trending down, but is still high.

There are still signs of slack (as example, elevated level of part time workers for economic reasons and U-6), but there also signs the labor market is tightening.

Overall this was a strong report.  However it is just one report and follows a weak report in May (only 11,000 jobs added).  Job growth only averaged 149,000 over the last two months, and 172,000 per month this year.

by Calculated Risk on 7/08/2016 08:44:00 AM

From the BLS:

Total nonfarm payroll employment increased by 287,000 in June, and the unemployment rate rose to 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Job growth occurred in leisure and hospitality, health care and social assistance, and financial activities. Employment also increased in information, mostly reflecting the return of workers from a strike.
...
The change in total nonfarm payroll employment for April was revised from +123,000 to +144,000, and the change for May was revised from +38,000 to +11,000. With these revisions, employment gains in April and May combined were 6,000 less, on net, than previously reported. Over the past 3 months, job gains have averaged 147,000 per month.
...
In June, average hourly earnings for all employees on private nonfarm payrolls edged up (+2 cents) to $25.61, following a 6-cent increase in May. Over the year, average hourly earnings have risen by 2.6 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 287 thousand in June (private payrolls increased 265 thousand).

Payrolls for April and May were revised down by a combined 6 thousand.

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

In June, the year-over-year change was 2.45 million jobs.  A solid gain.


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

The Labor Force Participation Rate increased in June to 62.7%. 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 decreased to 59.6% (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 June to 4.9%.

This was way above expectations of 180,000 jobs.

I'll have much more later ...

by Calculated Risk on 7/07/2016 08:31:00 PM

Earlier my employment preview (I took the under) and Goldman's NFP forecast (Goldman took the over).

Friday:
• At 8:30 AM ET, Employment Report for June. The consensus is for an increase of 180,000 non-farm payroll jobs added in June, up from the 38,000 non-farm payroll jobs added in May. The consensus is for the unemployment rate to increase to 4.8%. A key will be the change in wages.

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

by Calculated Risk on 7/07/2016 04:45:00 PM

A few excerpts from Goldman Sachs' June Payroll Preview by economist Zach Pandl:

We forecast that nonfarm payroll growth rebounded to +210k in June from just +38k in May. In part the pickup reflects the conclusion of a strike at Verizon Communications—this alone accounts for 70k of the month-over-month swing. However, we also see scope for improvement beyond Verizon, as other labor market data have generally looked encouraging.

We expect that the U3 unemployment rate increased by one tenth to 4.8%, following its three tenths decline in May.
...
Average hourly earnings for all workers likely rose 0.1% (mom) in June, following a 0.2% gain in May. ... Although we believe that wage growth has turned higher, this month the calendar quirks point to a smaller gain.

by Calculated Risk on 7/07/2016 02:11:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for June. The consensus, according to Bloomberg, is for an increase of 180,000 non-farm payroll jobs in June (with a range of estimates between 135,000 to 233,000, and for the unemployment rate to increase to 4.8%.

The BLS reported 38,000 jobs added in May.

Verizon Strike Note: See my earlier post. The resolution of the strike will increase the NFP total by about 35,100 jobs in June. These jobs were lost in May, but are now back.

Here is a summary of recent data:

• The ADP employment report showed an increase of 172,000 private sector payroll jobs in June. This was above expectations of 150,000 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 above expectations.

• The ISM manufacturing employment index increased in June to 50.4%. 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 17,000 in June. The ADP report indicated 21,000 fewer manufacturing jobs.

The ISM non-manufacturing employment index increased in June to 52.7%. 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 145,000 in June.

Combined, the ISM indexes suggests employment gains of about 130,000.  This suggests employment growth below expectations.

• Initial weekly unemployment claims averaged 265,000 in June, down from 276,000 in May. For the BLS reference week (includes the 12th of the month), initial claims were at 258,000, down from 278,000 during the reference week in May.

The decrease during the reference suggests fewer layoffs in June as compared to May, however some of the change might be due to the resolution of the Verizon strike.

• The final June University of Michigan consumer sentiment index decreased to 93.5 from the May reading of 94.7. Sentiment is frequently coincident with changes in the labor market, but there are other factors too - like gasoline prices.

• Conclusion: Unfortunately none of the indicators alone is very good at predicting the initial BLS employment report.    The ADP report and unemployment claims suggest stronger job growth. The ISM reports suggests stronger job growth than in May, but a below consensus report.

My guess is the June report will be below the consensus forecast.

by Calculated Risk on 7/07/2016 11:01:00 AM

Reis reported that the vacancy rate for regional malls was increased to 7.9% in Q2 2016 from 7.8% in Q1, and unchanged from Q2 2015. This is down from a cycle peak of 9.4% in Q3 2011.

For Neighborhood and Community malls (strip malls), the vacancy rate declined to 9.9% in Q2 2016 from 10.0% in Q1, and down year-over-year from 10.1% in Q2 2015. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011.

Comments from Reis Senior Economist and Director of Research Ryan Severino:

The national vacancy rate for neighborhood and community shopping declined by 10 basis points to 9.9% during the second quarter. Although the rate of improvement is not yet accelerating, net absorption once again outpaced new construction. The vacancy rate for malls increased by 10 basis points to 7.9%.
...
Asking and effective rents grew by 0.4% and 0.5% respectively during the second quarter. Although this is a minor pullback from recent quarters, it is only noteworthy because rents have been growing so slowly. On a year-over-year basis, asking and effective rents having grown by just 2.0% and 2.1% respectively. These growth rates are just a tad slower than core inflation. That is weak by historical standards, but is certainly reflective of a market with an elevated vacancy rate. It is highly unlikely that vacancy will fall sufficiently low enough to engender more meaningful rent growth before the onset of the next recession.
emphasis added

Click on graph for larger image.

This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). The regional mall data starts in 2000. Back in the '80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.

In the mid-'00s, mall investment picked up as mall builders followed the "roof tops" of the residential boom (more loose lending). This led to the vacancy rate moving higher even before the recession started. Then there was a sharp increase in the vacancy rate during the recession and financial crisis.

Currently the strip mall vacancy rate is declining slowly and remains at an elevated level.  The regional mall vacancy rate is moving sideways, also at an elevated level.

Mall vacancy data courtesy of Reis.

by Calculated Risk on 7/07/2016 08:35:00 AM

The DOL reported:

In the week ending July 2, the advance figure for seasonally adjusted initial claims was 254,000, a decrease of 16,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 268,000 to 270,000. The 4-week moving average was 264,750, a decrease of 2,500 from the previous week's revised average. The previous week's average was revised up by 500 from 266,750 to 267,250.

There were no special factors impacting this week's initial claims. This marks 70 consecutive weeks of initial claims below 300,000, the longest streak since 1973.

The previous week was revised up by 2,000.

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 declined to 264,750.

This was lower than the consensus forecast. The low level of claims suggests relatively few layoffs.

by Calculated Risk on 7/07/2016 08:19:00 AM

From ADP:

Private sector employment increased by 172,000 jobs from May to June according to the June 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 was down by 36,000 jobs in June after an additional loss of 5,000 jobs in May. The construction industry lost 5,000 jobs, offsetting May’s gain of 9,000 jobs. Meanwhile, manufacturing lost 21,000 jobs after losing 3,000 the previous month.

Service-providing employment rose by 208,000 jobs in June, a stronger increase when compared to May’s 173,000 jobs. The ADP National Employment Report indicates that professional/business services contributed 51,000 jobs, up from May’s 47,000. Trade/transportation/utilities grew by 55,000, nearly twice that of the 27,000 jobs added the previous month. Financial activities added 2,000, down from last month’s gain of 13,000 jobs.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth revived last month from its spring slump. Job growth remains healthy except in the energy and trade-sensitive manufacturing sectors. Large multinationals are struggling a bit, and Brexit won’t help, but small- and mid-sized companies continue to add strongly to payrolls.”

This was above the consensus forecast for 150,000 private sector jobs added in the ADP report. 

The BLS report for June will be released Friday, and the consensus is for 180,000 non-farm payroll jobs added in June.

by Calculated Risk on 7/06/2016 08:25:00 PM

Thursday:
• At 8:15 AM ET, The ADP Employment Report for June. This report is for private payrolls only (no government). The consensus is for 150,000 payroll jobs added in June, down from 173,000 added in May.

Early: Reis Q2 2016 Mall Survey of rents and vacancy rates.

• At 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 269 thousand initial claims, up from 268 thousand the previous week.