by Calculated Risk on 7/10/2016 10:07:00 AM

A few more employment graphs ...

Here are the previous posts on the employment report:

• June Employment Report: 287,000 Jobs, 4.9% Unemployment Rate
• Employment Comments: A Strong Report following a Weak Report
• Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

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 has been 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 at 1.2% 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 all four groups were generally trending down - although the rate has somewhat flattened out recently.

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 1.22 million.

Construction employment is still below the bubble peak, but close to the level in the late '90s.

Diffusion Indexes
 The BLS diffusion index for total private employment was at 62.4 in June, up from 48.1 in May.

For manufacturing, the diffusion index was at 55.1, up from 39.9 in May.

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 June (after a weak May), and manufacturing employment was somewhat widespread.

by Calculated Risk on 7/09/2016 08:09:00 AM

The key economic reports this week are Retail Sales and the Consumer Price Index (CPI) on Friday.

For manufacturing, Industrial Production, and the July New York Fed manufacturing survey, will be released this week.

----- Monday, July 11th -----
10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

----- Tuesday, July 12th -----
9:00 AM ET: NFIB Small Business Optimism Index for June.

10:00 AM: Job Openings and Labor Turnover Survey for May 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 April to 5.788 million from 5.670 million in March.

The number of job openings (yellow) were up 4% year-over-year, and Quits were up 9% year-over-year.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for May. The consensus is for a 0.2% increase in inventories.

----- Wednesday, July 13th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, July 14th -----
8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 265 thousand initial claims, up from 254 thousand the previous week.

8:30 AM: The Producer Price Index for June from the BLS. The consensus is for a 0.3% increase in prices, and a 0.2% increase in core PPI.

----- Friday, July 15th -----
8:30 AM: The Consumer Price Index for June from the BLS. The consensus is for a 0.3% increase in CPI, and a 0.2% increase in core CPI.

8:30 AM ET: Retail sales for June will be released.  The consensus is for retail sales to increase 0.1% in June.

This graph shows retail sales since 1992 through May 2016.

8:30 AM: the New York Fed Empire State manufacturing survey for July. The consensus is for a reading of 5.0, down from 6.0.

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

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 75.0%.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for May.  The consensus is for a 0.1% increase in inventories.

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

by Calculated Risk on 7/08/2016 03:00:00 PM

By request, here is another update of an earlier post through the June 2016 employment report including all revisions.

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	10,082
GW Bush 1	-811
GW Bush 2	415
Obama 1	1,921
Obama 2	8,6611
141 months into 2nd term: 10,140 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). Presidents Carter and George H.W. Bush only served one term, and President Obama is in the fourth 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 811,000 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 396,000 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 20,966,000 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 1,921,000 more private sector jobs at the end of Mr. Obama's first term.  Forty one months into Mr. Obama's second term, there are now 10,582,000 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 460,000 jobs). 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	-708
Obama 2	2481
141 months into 2nd term, 290 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 down turn due to the bursting of the housing bubble - and I predicted a recession in 2007).

For the public sector, the cutbacks are clearly over.  Right now I'm expecting some increase in public employment during the remainder of Obama's 2nd term, but nothing like what happened during Reagan's second term.

Below 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 fourth best for total job creation.

Note: Only 248 thousand public sector jobs have been added during the first forty one months of Obama's 2nd term (following a record loss of 708 thousand public sector jobs during Obama's 1st term).  This is about 17% 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	10,082	1,242	11,312
3	Reagan 2	9,357	1,438	10,795
	Obama 21	8,385	205	8,590
	Pace2	10,140	290	10,430
141 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. Right now it looks like Obama's 2nd term will be in the top 3 for private employment, but not for total employment.

Average Jobs needed per month (000s) for remainder of Obama's 2nd Term
to Rank	Private	Total
#1	318	381
#2	203	345
#3	99	269

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.