by Calculated Risk on 12/16/2016 10:16:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were significantly lower in November in 18 states and stable in 32 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Nine states had notable jobless rate decreases from a year earlier, 2 states had increases, and 39 states and the District had no significant change. The national unemployment rate was 4.6 percent in November, down from 4.9 percent in October, and 0.4 percentage point lower than in November 2015.
...
New Hampshire and South Dakota had the lowest unemployment rates in November, 2.7 percent each. Alaska and New Mexico had the highest jobless rates, 6.8 percent and 6.7 percent, respectively.
emphasis added

Click on graph for larger image.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement.   The yellow squares are the lowest unemployment rate per state since 1976.

The states are ranked by the highest current unemployment rate. Alaska, at 6.8%, had the highest state unemployment rate.  Note that the lowest recorded unemployment rate in Alaska was 6.3%, so this is pretty close to the all time low.

The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently no state has an unemployment rate at or above 7% (light blue); Only four states and D.C are at or above 6% (dark blue). The states are Alaska (6.8%), New Mexico (6.7%),  Louisiana (6.2%),  D.C. (6.0%), and West Virginia (6.0%).

by Calculated Risk on 12/16/2016 08:38:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in November were at a seasonally adjusted annual rate of 1,090,000. This is 18.7 percent below the revised October estimate of 1,340,000 and is 6.9 percent below the November 2015 rate of 1,171,000.

Single-family housing starts in November were at a rate of 828,000; this is 4.1 percent below the revised October figure of 863,000. The November rate for units in buildings with five units or more was 259,000.

Building Permits:
Privately-owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,201,000. This is 4.7 percent below the revised October rate of 1,260,000 and is 6.6 percent below the November 2015 estimate of 1,286,000.

Single-family authorizations in November were at a rate of 778,000; this is 0.5 percent above the revised October figure of 774,000. Authorizations of units in buildings with five units or more were at a rate of 384,000 in November
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased in November compared to October.  Multi-family starts are down sharply year-over-year.

Multi-family is volatile, and the swings have been huge over the last three months.

Single-family starts (blue) decreased in November, and are up 5% year-over-year.

The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low),

Total housing starts in November were well below expectations due to the sharp decrease in multi-family starts.  However September and October were revised up, combined.  I'll have more later ...

by Calculated Risk on 12/15/2016 08:31:00 PM

Total housing starts this year are up 5.9% compared to the same period in 2015. Through October, there have been 999.6 thousand total starts compared to 943.7 thousand for the same period in 2015.

Single family starts are up 10.1% through October. and multi-family starts are down 1.8%.

In June 2015, I asked: Are Multi-Family Housing Starts near a peak?  That guess was based on demographics, and it looks like multi-family starts might have peaked that month (but are still solid).

Friday:
• At 8:30 AM, Housing Starts for November. Total housing starts increased to 1.323 million (SAAR) in October. Single family starts increased to 869 thousand SAAR in October. The consensus is for 1.230 million, down from the October rate.

• At 10:00 AM, Regional and State Employment and Unemployment (Monthly) for November 2016

by Calculated Risk on 12/15/2016 05:19:00 PM

Larry Kudlow is usually wrong and frequently absurd, as an example, in June 2005 Kudlow wrote "The Housing Bears are Wrong Again" and called me (or people like me) "bubbleheads".

Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.

I guess I was one of those "bubbleheads"!

In December 2007, he wrote: Bush Boom Continues

There’s no recession coming. The pessimistas were wrong. It’s not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It’s finishing up its sixth consecutive year with more to come. Yes, it’s still the greatest story never told.

Note the date of the article. The recession started in December 2007!

Note: At the beginning of 2007 I predicted a recession would start that year - made it by one month.  It seems I'm always on the opposite side from Kudlow of each forecast - and one of us has been consistently wrong.

In 2014, Kudlow claimed: "I've always believed the 1990s were Ronald Reagan's third term."

In that piece, Kudlow was rewriting his own history.  Near the beginning of Clinton's first term, Kudlow was arguing Clinton's policies would take the economy into a deep recession or even depression.  Kudlow was wrong then (I remember because I was on the other side of that debate), so he can't claim he "always believed" now.  Nonsense.

Also in 2007, Kudlow wrote: A Stock Market Vote of Confidence for Bush:

"I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today's stock market message is an unmistakable vote of confidence for the president."

Well, maybe Kudlow had a point ... but not for the President he was writing about.

Now Larry Kudlow will be the new administration's chief economist.  Oh my.

by Calculated Risk on 12/15/2016 11:49:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.2% annualized rate) in November. The 16% trimmed-mean Consumer Price Index also rose 0.2% (1.9% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.2% (2.4% annualized rate) in November. The CPI less food and energy rose 0.2% (1.8% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed released the median CPI details for November here. Motor fuel was up 36% annualized in November.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.5%, the trimmed-mean CPI rose 2.1%, and the CPI less food and energy rose 2.1%. Core PCE is for October and increased 1.7% year-over-year.

On a monthly basis, median CPI was at 2.2% annualized, trimmed-mean CPI was at 1.9% annualized, and core CPI was at 1.8% annualized.

Using these measures, inflation has generally been moving up, and most of these measures are close to the Fed's 2% target (Core PCE is still below).

by Calculated Risk on 12/15/2016 10:08:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 70 in December, up from 63 in November. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Confidence Closes Year on a High Note

Builder confidence in the market for newly-built single-family homes jumped seven points to a level of 70 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the highest reading since July 2005.
...
“Though this significant increase in builder confidence could be considered an outlier, the fact remains that the economic fundamentals continue to look good for housing,” said NAHB Chief Economist Robert Dietz. “The rise in the HMI is consistent with recent gains for the stock market and consumer confidence. At the same time, builders remain sensitive to rising mortgage rates and continue to deal with shortages of lots and labor.”
...
All three HMI components posted healthy gains in December. The component gauging current sales conditions increased seven points to 76 while the index charting sales expectations in the next six months jumped nine points to 78. Meanwhile, the component measuring buyer traffic rose six points to 53, marking the first time this gauge has topped 50 since October 2005.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose six points to 51, the Midwest posted a three-point gain to 61, the South rose one point to 67 and the West registered a two-point gain to 79.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was well above the consensus forecast of 63, and is another solid reading.

by Calculated Risk on 12/15/2016 09:01:00 AM

From the NY Fed: Empire State Manufacturing Survey

Business activity grew modestly in New York State, according to firms responding to the December 2016 Empire State Manufacturing Survey. The headline general business conditions index climbed eight points to 9.0. The new orders index rose to 11.4, and the shipments index was unchanged at 8.5.
...
As in November, both employment indexes remained negative in December. The index for number of employees was little changed at -12.2, a sign that employment levels continued to wane, and the average workweek index, at -7.0, pointed to a decline in hours worked. ...

Indexes for the six-month outlook strengthened, and suggested that respondents were very optimistic about future conditions. The index for future business conditions shot up twenty points to 50.2, its highest level in nearly five years, with 61 percent of respondents expecting conditions to improve in the months ahead.
emphasis added

And from the Philly Fed: December 2016 Manufacturing Business Outlook Survey

The index for current manufacturing activity in the region increased from a reading of 7.6 in November to 21.5 this month. Nearly 34 percent of the firms reported increases in activity this month, compared with 24 percent last month. The general activity index has remained positive for five consecutive months, and the activity index reading was the highest since November 2014 [at 12.2].
...
The current employment index improved 9 points [to 6.4], its first positive reading in 12 months. Firms also reported an increase in work hours this month: The average workweek index, which increased 2 points, has now been positive for two consecutive months. ...

The diffusion index for future general activity increased from a reading of 29.3 in November to 52.6 this month. The index is now at its highest reading since January 2015.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through December), and five Fed surveys are averaged (blue, through November) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through November (right axis).

It seems likely the ISM manufacturing index will show faster expansion again in December.

by Calculated Risk on 12/15/2016 08:32:00 AM

The DOL reported:

In the week ending December 10, the advance figure for seasonally adjusted initial claims was 254,000, a decrease of 4,000 from the previous week's unrevised level of 258,000. The 4-week moving average was 257,750, an increase of 5,250 from the previous week's unrevised average of 252,500.

There were no special factors impacting this week's initial claims. This marks 93 consecutive weeks of initial claims below 300,000, the longest streak since 1970.
emphasis added

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 increased to 257,750.

This was close to the consensus forecast. The low level of claims suggests relatively few layoffs.

by Calculated Risk on 12/14/2016 08:26:00 PM

Thursday:
• At 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 255 thousand initial claims, down from 258 thousand the previous week.

• At 8:30 AM, The Consumer Price Index for November from the BLS. The consensus is for 0.2% increase in CPI, and a 0.2% increase in core CPI.

• At 8:30 AM, The New York Fed Empire State manufacturing survey for December. The consensus is for a reading of 3.0, up from 1.5.

• At 8:30 AM, the Philly Fed manufacturing survey for December. The consensus is for a reading of 10.0, up from 7.6.

• At 10:00 AM, The December NAHB homebuilder survey. The consensus is for a reading of  63, unchanged from 63 in November. Any number above 50 indicates that more builders view sales conditions as good than poor.

by Calculated Risk on 12/14/2016 04:42:00 PM

The Fed raised the Fed Funds rate 25bp to a range of "1/2 to 3/4 percent".

On the assessment of appropriate monetary policy, one FOMC member sees just one 25bp rate hike in 2017, four members see two hikes, six members see three hikes, and five see four or more. This is an increase of one additional rate hike from previous expectations.

Note: Merrill Lynch published a note after the announcement, and they are forecasting just one rate hike in 2017.

By the end of 2018, 5 members see a total of five rate hikes over the next two years, and three members see six. There are outliers - one member sees just one hike over the next two years, and one member sees 11 rate hikes!

Based on Fed Chair Yellen's comments, most FOMC members are waiting to see the fiscal proposals before incorporating those policies in their forecasts. Yellen said at the press conference: "all the FOMC participants recognize that there is considerable uncertainty about how economic policies may change and what effect they will have on the economy."

So right now I think the Fed is on hold.  Many analysts are thinking the next rate hike might happen in March, but that probably won't give the Fed enough time to consider the impact of various fiscal proposals.  So my guess - depending on the proposals and the incoming data - is the next rate hike might happen in June (or later in the year).