by Calculated Risk on 3/13/2017 12:22:00 PM

I've mentioned this before ... although the consensus is for a 0.2% increase in retail sales in February (to be released on Wednesday), it seems likely retail sales will disappoint due to delayed tax refunds.

An excerpt from a Merrill Lynch note this morning:

Based on the aggregated BAC credit and debit card data, retail sales ex-autos declined 0.2% mom seasonally adjusted in February. ... We think there is a specific reason for the contraction in sales in February: tax refunds were delayed. This is due to a change in tax law which calls for the IRS to wait until February 15th to issue refunds to taxpayers who claimed the earned-income tax credit (EITC) or the additional child tax credit (ACTC). Although refunds nearly caught up at the very end of the month with a spike on February 23, the lack of refunds earlier in the month likely weighed on sales.

by Calculated Risk on 3/13/2017 10:28:00 AM

Update: First graph corrected.

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were significantly lower in January in 5 states and stable in 45 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Six states had notable jobless rate decreases from a year earlier and 44 states and the District had no significant change. The national unemployment rate was 4.8 percent in January, little changed from that of both December 2016 and January 2016.
...
New Hampshire had the lowest unemployment rate in January, 2.7 percent, closely followed by Hawaii, 2.8 percent, and Colorado and South Dakota, 2.9 percent each. The rates in both Arkansas (3.8 percent) and Oregon (4.3 percent) set new series lows. ... New Mexico had the highest jobless rate, 6.7 percent, followed by Alaska and Alabama, 6.5 percent and 6.4 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. New Mexico, at 6.7%, had the highest state unemployment rate.

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 three states are at or above 6% (dark blue). The states are New Mexico (6.7%), Alaska (6.5%), and Alabama (6.4%).

by Calculated Risk on 3/12/2017 07:46:00 PM

Weekend:
• Schedule for Week of Mar 12, 2017

• Review of FOMC Projections

From CNBC: Pre-Market Data and Bloomberg futures: S&P futures are down 3, and DOW futures are down 22 (fair value).

Oil prices were down about 10% over the last week with WTI futures at $48.01 per barrel and Brent at $50.90 per barrel.  A year ago, WTI was at $36, and Brent was at $38 - so oil prices are up about 33% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.29 per gallon - a year ago prices were at $1.93 per gallon - so gasoline prices are up about 35 cents a gallon year-over-year.

by Calculated Risk on 3/12/2017 01:37:00 PM

The consensus is that the Fed will raise the Fed Funds Rate 25 bps following the FOMC meeting this coming week.

Since a rate hike is expected (and assuming it happens), the focus this month will be on the wording of the statement, the projections, and Fed Chair Janet Yellen's press conference.

Here are the December FOMC projections.  In general, the data has surprised somewhat to the upside since the December FOMC projections were released.

Projections for GDP in 2017 and 2018 might be revised up slightly.  My guess is, as far as the impact of fiscal stimulus, the Fed will wait and see what the actual proposals will be.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2017	2018	2019
Dec 2016	1.9 to 2.3	1.8 to 2.2	1.8 to 2.0
Sept 2016	1.9 to 2.2	1.9 to 2.2	1.7 to 2.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 4.7% in February. So the unemployment rate for Q4 2017 might be revised down slightly.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2017	2018	2019
Dec 2016	4.5 to 4.6	4.3 to 4.7	4.3 to 4.8
Sept 2016	4.5 to 4.7	4.4 to 4.7	4.4 to 4.8

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of January, PCE inflation was up 1.9% from January 2016.  It appears inflation might be revised up slightly for 2017.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2017	2018	2019
Dec 2016	1.7 to 2.0	1.9 to 2.0	2.0 to 2.1
Sept 2016	1.7 to 1.9	1.8 to 2.0	1.9 to 2.0

PCE core inflation was up 1.7% in January year-over-year.  Core PCE inflation might be revised up slightly for 2017.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2017	2018	2019
Dec 2016	1.8 to 1.9	1.9 to 2.0	2.0
Sept 2016	1.7 to 1.9	1.9 to 2.0	2.0

In general, it appears GDP and inflation might be revised up slightly, and the unemployment rate revised slightly lower.

by Calculated Risk on 3/11/2017 02:58:00 PM

A few excerpts from a note by Goldman Sachs economists Zach Pandl and Jan Hatzius:

A rate increase at the March FOMC meeting now looks like a forgone conclusion ...

First, financial conditions have eased substantially. ... Second, incoming activity data continue to surprise on the upside.
...
We expect the FOMC to make a few changes ... including indicating that risks to the economic outlook are “balanced”, and signaling that the 2% inflation objective will likely be reached before too long. In the Summary of Economic Projections (SEP) we look for slight upgrades to GDP growth and core inflation ...
emphasis added

CR Note: Just about everyone expects a rate hike at the FOMC meeting this week.

by Calculated Risk on 3/11/2017 08:11:00 AM

The key economic reports this week are Retail Sales, Housing Starts, and the Consumer Price Index (CPI).

For manufacturing, February industrial production, and the March New York, and Philly Fed manufacturing surveys, will be released this week.

The FOMC meets on Tuesday and Wednesday, and the FOMC is expected to raise rates at this meeting.

----- Monday, Mar 13th -----
10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

10:00 AM: Regional and State Employment and Unemployment (Monthly) for January 2017

----- Tuesday, Mar 14th-----
6:00 AM ET: NFIB Small Business Optimism Index for February.

8:30 AM: The Producer Price Index for February from the BLS. The consensus is for 0.1% increase in PPI, and a 0.2% increase in core PPI.

----- Wednesday, Mar 15th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM ET: Retail sales for February will be released.  The consensus is for 0.2% increase in retail sales in February.

This graph shows retail sales since 1992 through January 2017.

8:30 AM: The Consumer Price Index for February from the BLS. The consensus is for 0.1% increase in CPI, and a 0.2% increase in core CPI.

8:30 AM ET: The New York Fed Empire State manufacturing survey for March. The consensus is for a reading of 15.7, down from 18.7.

10:00 AM: The March NAHB homebuilder survey. The consensus is for a reading of  66, up from 65 in February. Any number above 50 indicates that more builders view sales conditions as good than poor.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for January.  The consensus is for a 0.3% increase in inventories.

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to increase the Fed Funds rate 25 bps at this meeting.

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Janet Yellen holds a press briefing following the FOMC announcement.

----- Thursday, Mar 16th -----
8:30 AM: Housing Starts for February.

The consensus is for 1.266 million, up from the January rate of 1.246 million.

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 242 thousand initial claims, down from 243 thousand the previous week.

8:30 AM: the Philly Fed manufacturing survey for March. The consensus is for a reading of 32.5, down from 43.3.

10:00 AM: Job Openings and Labor Turnover Survey for January 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 were mostly unchanged in December at 5.501 million compared to 5.505 million in November.

The number of job openings (yellow) were up 4% year-over-year, and Quits were down 3% year-over-year.

----- Friday, Mar 17th -----
9:15 AM: The Fed will release Industrial Production and Capacity Utilization for February.

This graph shows industrial production since 1967.

The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to increase to 75.4%.

10:00 AM: University of Michigan's Consumer sentiment index (preliminary for March). The consensus is for a reading of 97.0, up from 96.3 in February.

by Calculated Risk on 3/10/2017 06:48:00 PM

A few excerpts from a research note from Merrill Lynch:

The markets listened to the chorus of Fed officials and are now pricing in near certainty of a hike. With the rate decision on 15 March likely to be a non-event, attention turns to the Summary of Economic Projections and the press conference. We believe the combination of a shift higher in the dots and language changes in the statement will send a hawkish signal. However, we suspect that Chair Yellen will sound more balanced in her press conference.

We expect a number of tweaks to the statement which will deliver a more hawkish message. In the first paragraph, we think the Fed will present a more positive assessment of the economy. We also think that the Fed will change the economic outlook paragraph to argue that the balance of risks has improved. ...

We think Chair Yellen's press conference will be less hawkish than the statement or SEP. ... Chair Yellen is likely to sound more positive about the outlook, noting the improvement in sentiment measures and reduction in labor market slack. However, we expect her to argue that inflation should only increase slowly to the target. Also, she is likely to argue that the Fed is not behind the curve and isn't “playing catch up” with policy. We also look for Yellen to note that the committee is discussing the plan for addressing the balance sheet and that more formal communication will be forthcoming. In the meantime, she is likely to note that the Fed will continue with the reinvestment program until an increase in fed funds rates is “well underway”.
emphasis added

by Calculated Risk on 3/10/2017 01:53:00 PM

Here is another update of tracking employment during Presidential terms.  We frequently use Presidential terms as time markers - we could use Speaker of the House, or any other marker.

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.

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.

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 final months 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.

Mr. Trump is in Orange (just one month).

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 1,937,000 more private sector jobs at the end of Mr. Obama's first term.  At the end of his second term, there were 11,773,000 more private sector jobs than when Mr. Obama 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 declined significantly while Mr. Obama was in office (down 263,000 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.

Below is a table of the top five presidential terms for total non-farm job creation.

Obama's 2nd term was the 3rd best ever for private job creation.  However, with very few public sector jobs added, Obama's 2nd term was only the fifth best for total job creation.

Top Employment Gains per Presidential Terms (000s)
Rank	Term	Private	Public	Total Non-Farm
1	Clinton 1	10,883	692	11,575
2	Clinton 2	10,085	1,242	11,317
3	Reagan 2	9,357	1,438	10,795
4	Carter	9,041	1,304	10,345
5	Obama 2	9,836	444	10,280

by Calculated Risk on 3/10/2017 10:00:00 AM

The headline jobs number was above expectations, and there were combined slight upward revisions to the previous two months. In addition wage growth picked up.  This was a solid report.

Note: The warm weather was a factor in the solid February employment report and there may be some payback in March.

Earlier: February Employment Report: 235,000 Jobs, 4.7% Unemployment Rate

In February, the year-over-year change was 2.35 million jobs. Solid job growth.

Average Hourly Earnings

Click on graph for larger image.

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 2.8% YoY in February.

Wage growth is trending up.

Employment-Population Ratio, 25 to 54 years old

Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate increased in January to 81.7%, and the 25 to 54 employment population ratio increase to 78.3%.

The participation rate has been trending down for this group since the late '90s, however, with more younger workers (and fewer older workers), the participation rate might move up some more.

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) was little changed at 5.7 million in February. 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 full-time jobs.

The number of persons working part time for economic reasons decreased in February. This level suggests a little slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 9.2% in February.

Unemployed over 26 Weeks

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

According to the BLS, there are 1.80 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.85 million in January.

This was the lowest number since 2008.

This is generally trending down, but still somewhat elevated.

Overall this was another solid report.

by Calculated Risk on 3/10/2017 08:42:00 AM

From the BLS:

Total nonfarm payroll employment increased by 235,000 in February, and the unemployment rate was little changed at 4.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in construction, private educational services, manufacturing, health care, and mining.
...
The change in total nonfarm payroll employment for December was revised down from +157,000 to +155,000, and the change for January was revised up from +227,000 to +238,000. With these revisions, employment gains in December and January combined were 9,000 more than previously reported.
...
In February, average hourly earnings for all employees on private nonfarm payrolls increased by 6 cents to $26.09, following a 5-cent increase in January. Over the year, average hourly earnings have risen by 71 cents, or 2.8 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 235 thousand in February (private payrolls increased 227 thousand).

Payrolls for December and January were revised up by a combined 9 thousand.

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

In February, the year-over-year change was 2.35 million jobs.  This is a solid year-over-year gain.


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

The Labor Force Participation Rate increased in February to 63.0%. 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 was increased to 60.0% (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 decreased in February to 4.7%.

This was above expectations of 195,000 jobs, and the previous two months were revised up slightly (combined).  Another solid report.

I'll have much more later ...