by Calculated Risk on 9/01/2016 05:37:00 PM

A few excerpts from Goldman Sachs' August Payroll Preview by economist Elad Pashtan:

We expect a 165k increase in nonfarm payroll employment in August, below consensus expectations for a 180k gain. ...

The unemployment rate is likely to decline to 4.8%, while average hourly earnings were likely flat in August and up 2.3% over the past year.
...
Our below-consensus forecast primarily reflects seasonal quirks specific to the August payroll period. Since 2011, August payroll growth has fallen short of Bloomberg consensus expectations by an average of 49k, only to be revised up by an average of 71k in subsequent releases. Industry-level payroll data indicate that the education sector (specifically, education services and state & local government employment, the latter largely reflecting public schools) accounts for much of the upward revision, which mostly occurs from the first to the second estimate of payroll growth. In our view, the initial August weakness and subsequent revisions reflects seasonal adjustment challenges related to shifts in the timing of school calendars. Since this pattern failed to hold last year, we are estimating a more conservative 20k impact this year.
emphasis added

by Calculated Risk on 9/01/2016 03:09:00 PM

Based on a preliminary estimate from WardsAuto (ex-Porsche), light vehicle sales were at a 16.89 million SAAR in August.

That is down about 5% from August 2015, and down 5.0% from the 17.77 million annual sales rate last month.


Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for August (red, light vehicle sales of 16.89 million SAAR from WardsAuto).

This was below the consensus forecast of 17.1 million SAAR (seasonally adjusted annual rate).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

Sales for 2016 - through the first eight months - are up slightly from the comparable period last year.

After increasing significantly for several years following the financial crisis, auto sales are now moving mostly sideways ...

by Calculated Risk on 9/01/2016 11:59:00 AM

Earlier today, the Census Bureau reported that overall construction spending was "nearly the same" as in June:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2016 was estimated at a seasonally adjusted annual rate of $1,153.2 billion, nearly the same as the revised June estimate of $1,153.5 billion. The July figure is 1.5 percent above the July 2015 estimate of $1,135.9 billion.

Private spending increased and public spending decreased in July:

Spending on private construction was at a seasonally adjusted annual rate of $875.0 billion, 1.0 percent above the revised June estimate of $866.5 billion. ...

In July, the estimated seasonally adjusted annual rate of public construction spending was $278.2 billion, 3.1 percent below the revised June estimate of $287.0 billion.
emphasis added

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Residential and public spending have slumped a little recently.

Private residential spending has been generally increasing, but is 34% below the bubble peak.

Non-residential spending is now 3.6% the peak in January 2008 (nominal dollars).

Public construction spending is now 15% below the peak in March 2009.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 2%. Non-residential spending is up 7% year-over-year. Public spending is down 7% year-over-year.

Looking forward, all categories of construction spending should increase in 2016. Residential spending is still fairly low, non-residential is increasing, and public spending is also generally increasing after several years of austerity.

This was well below the consensus forecast of a 0.6% increase for July, however construction spending for the previous two months were revised up.

by Calculated Risk on 9/01/2016 10:11:00 AM

The ISM manufacturing index indicated contraction in August. The PMI was at 49.4% in August, down from 52.6% in July. The employment index was at 48.3%, down from 49.4% in July, and the new orders index was at 49.1%, down from 56.9% in July.

From the Institute for Supply Management: August 2016 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector contracted in August following five consecutive months of expansion, while the overall economy grew for the 87th consecutive month, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The August PMI® registered 49.4 percent, a decrease of 3.2 percentage points from the July reading of 52.6 percent. The New Orders Index registered 49.1 percent, a decrease of 7.8 percentage points from the July reading of 56.9 percent. The Production Index registered 49.6 percent, 5.8 percentage points lower than the July reading of 55.4 percent. The Employment Index registered 48.3 percent, a decrease of 1.1 percentage points from the July reading of 49.4 percent. Inventories of raw materials registered 49 percent, a decrease of 0.5 percentage point from the July reading of 49.5 percent. The Prices Index registered 53 percent, a decrease of 2 percentage points from the July reading of 55 percent, indicating higher raw materials prices for the sixth consecutive month. Manufacturing contracted in August for the first time since February of this year, as only six of our 18 industries reported an increase in new orders in August (down from 12 in July), and only eight of our 18 industries reported an increase in production in August (down from nine in July)."
emphasis added

Click on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was below expectations of 52.2%, and suggests manufacturing contracted in August following five months of expansion.

by Calculated Risk on 9/01/2016 08:33:00 AM

The DOL reported:

In the week ending August 27, the advance figure for seasonally adjusted initial claims was 263,000, an increase of 2,000 from the previous week's unrevised level of 261,000. The 4-week moving average was 263,000, a decrease of 1,000 from the previous week's unrevised average of 264,000.

There were no special factors impacting this week's initial claims. This marks 78 consecutive weeks of initial claims below 300,000, the longest streak since 1970.

The previous week was unrevised.

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 decreased to 263,000.

This was lower than the consensus forecast of 265,000. The low level of claims suggests relatively few layoffs.

by Calculated Risk on 8/31/2016 06:19:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 265 thousand initial claims, up from 261 thousand the previous week.

• At 10:00 AM, the ISM Manufacturing Index for August. The consensus is for the ISM to be at 52.2, down from 52.6 in July. The employment index was at 49.4% in July, and the new orders index was at 56.9%.

• Also at 10:00 AM, Construction Spending for July. The consensus is for a 0.6% increase in construction spending.

• All day, Light vehicle sales for August. The consensus is for light vehicle sales to decrease to 17.1 million SAAR in August, from 17.8 million in July (Seasonally Adjusted Annual Rate).

by Calculated Risk on 8/31/2016 01:15:00 PM

Here is a minor indicator I follow from the National Restaurant Association: RPI ticks up slightly

Although same-store sales and customer traffic levels remain somewhat uneven, the National Restaurant Association’s Restaurant Performance Index (RPI) registered a modest increase in July. The RPI stood at 100.6 in July, up 0.3 percent from June.

“The primary driver of the modest RPI gain in July was positive capital expenditure levels,” said Hudson Riehle, senior vice president of research for the National Restaurant Association.

“While there is some volatility among index components, especially when looking at the current situation, operators’ plans for capital expenditures six months out remain solid. This fits in with how operators’ outlook for the future remains overall positive despite general economic choppiness,” Riehle said.
emphasis added

Click on graph for larger image.

The index increased to 100.6 in July, up from 100.3 in June. (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month.

by Calculated Risk on 8/31/2016 10:05:00 AM

From the NAR: Pending Home Sales Tick Up in July

Pending home sales expanded in most of the country in July and reached their second highest reading in over a decade, according to the National Association of Realtors®. Only the Midwest saw a dip in contract activity last month.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 1.3 percent to 111.3 in July from a downwardly revised 109.9 in June and is now 1.4 percent higher than July 2015 (109.8). The index is now at its second highest reading this year after April (115.0).
...
he PHSI in the Northeast moved up 0.8 percent to 96.8 in July, and is now 1.1 percent above a year ago. In the Midwest the index decreased 2.9 percent to 105.8 in July, and is now 1.1 percent lower than July 2015.

Pending home sales in the South inched higher (0.8 percent) to an index of 123.9 in July and are now 0.4 percent higher than last July. The index in the West surged 7.3 percent in July to 108.7, and is now 6.2 percent above a year ago.
emphasis added

This was above expectations of a 0.6% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in August and September.

by Calculated Risk on 8/31/2016 08:19:00 AM

From ADP:

Private sector employment increased by 177,000 jobs from July to August according to the August ... 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 6,000 jobs in August, following July losses of 5,000. The construction industry lost 2,000 jobs, following July losses of 5,000 jobs. Meanwhile, manufacturing jobs were flat in August, after gaining 5,000 in the previous month.

Service-providing employment rose by 183,000 jobs in August, fewer than July’s 199,000 jobs.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “The American job machine continues to hum along. Job creation remains strong, with most industries and companies of all sizes adding solidly to their payrolls. The U.S. economy will soon be at full employment.”

This was close to the consensus forecast for 175,000 private sector jobs added in the ADP report. 

The BLS report for August will be released Friday, and the consensus is for 175,000 non-farm payroll jobs added in August.

by Calculated Risk on 8/31/2016 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 2.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 26, 2016.

... The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 5 percent higher than the same week one year ago.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 3.67 percent, with points decreasing to 0.33 from 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index since 1990.

Refinance activity has increased this year since rates have declined.

However it would take another significant move down in mortgage rates to see a large increase in refinance activity.


The second graph shows the MBA mortgage purchase index.

The purchase index is "5 percent higher than the same week one year ago".