by Calculated Risk on 6/15/2017 08:35:00 AM

The DOL reported:

In the week ending June 10, the advance figure for seasonally adjusted initial claims was 237,000, a decrease of 8,000 from the previous week's unrevised level of 245,000. The 4-week moving average was 243,000, an increase of 1,000 from the previous week's unrevised average of 242,000.
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 243,000.

This was below the consensus forecast.

The low level of claims suggests relatively few layoffs.

by Calculated Risk on 6/14/2017 06:08:00 PM

From Matthew Graham at Mortgage News Daily: Rates Drop to 8-Month Lows

Mortgage rates fell convincingly today, though not all lenders adjusted rates sheets in proportion to the gains seen in bond markets (which underlie rate movement).  Those gains came early, with this morning's economic data coming in much weaker than expected.  Markets were especially sensitive to the Consumer Price Index (an inflation report) which showed core annual inflation at 1.7% versus a median forecast of 1.9%.  [30 Year fixed at 3.875%].
...
[T]he day ended with most lenders offering their lowest rates in exactly 8 months ( a few days following the presidential election).
emphasis added

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 242 thousand initial claims, down from 245 thousand the previous week.

• Also at 8:30 AM, The New York Fed Empire State manufacturing survey for June. The consensus is for a reading of 5.0, up from -1.0.

• Also at 8:30 AM, the Philly Fed manufacturing survey for June. The consensus is for a reading of 27.0, down from 38.8.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for May. The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to increase to 76.8%.

• At 10:00 AM, the June NAHB homebuilder survey. The consensus is for a reading of 70, unchanged from 70 in May. Any number above 50 indicates that more builders view sales conditions as good than poor.

by Calculated Risk on 6/14/2017 02:09:00 PM

Statement here. 25 bps rate hike.

Yellen press conference video here.

On the projections, projections for GDP in 2017 narrowed slightly.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2017	2018	2019
June 2017	2.1 to 2.2	1.8 to 2.2	1.8 to 2.0
Mar 2017	2.0 to 2.2	1.8 to 2.3	1.8 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 4.3% in May, so unemployment rate projections were revised down.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2017	2018	2019
June 2017	4.2 to 4.3	4.0 to 4.3	4.1 to 4.4
Mar 2017	4.5 to 4.6	4.3 to 4.6	4.3 to 4.7

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

As of April, PCE inflation was up 1.7% from April 2016. Inflation was revised down for 2017.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2017	2018	2019
June 2017	1.6 to 1.7	1.8 to 2.0	2.0 to 2.1
Mar 2017	1.8 to 2.0	1.9 to 2.0	2.0 to 2.1

PCE core inflation was up 1.5% in April year-over-year.  Core PCE inflation was revised down for 2017.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2017	2018	2019
June 2017	1.6 to 1.7	1.8 to 2.0	2.0 to 2.1
Mar 2017	1.8 to 1.9	1.9 to 2.0	2.0 to 2.1

by Calculated Risk on 6/14/2017 02:03:00 PM

Note: The FOMC also released an Implementation Note: Decisions Regarding Monetary Policy Implementation

FOMC Statement:

Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending has picked up in recent months, and business fixed investment has continued to expand. On a 12-month basis, inflation has declined recently and, like the measure excluding food and energy prices, is running somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated. This program, which would gradually reduce the Federal Reserve's securities holdings by decreasing reinvestment of principal payments from those securities, is described in the accompanying addendum to the Committee's Policy Normalization Principles and Plans.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; and Jerome H. Powell. Voting against the action was Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate.
emphasis added

by Calculated Risk on 6/14/2017 11:10:00 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 May. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.2% 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 fell 0.1% (-1.5% annualized rate) in May. The CPI less food and energy rose 0.1% (0.8% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed released the median CPI details for May here. Motor fuel declined 55% in May annualized.

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 2.3%, the trimmed-mean CPI rose 1.9%, and the CPI less food and energy rose 1.7%. Core PCE is for April and increased 1.5% year-over-year.

On a monthly basis, median CPI was at 2.2% annualized, trimmed-mean CPI was at 1.2% annualized, and core CPI was at 0.8% annualized.

Using these measures, inflation was soft again in May.  Overall these measures are mostly below the Fed's 2% target (Median CPI is slightly above).

by Calculated Risk on 6/14/2017 08:39:00 AM

On a monthly basis, retail sales decreased 0.3 percent from April to May (seasonally adjusted), and sales were up 3.8 percent from May 2016.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for May 2017, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $473.8 billion, a decrease of 0.3 percent from the previous month, and 3.8 percent above May 2016. ... The March 2017 to April 2017 percent change was unrevised at 0.4 percent.

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were down 0.1% in May.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail and Food service sales, ex-gasoline, increased by3.7% on a YoY basis.

The decrease in May was below expectations. A disappointing report.

by Calculated Risk on 6/14/2017 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 June 9, 2017. Last week’s results included an adjustment for the Memorial Day holiday.

... The Refinance Index increased 9 percent from the previous week to the highest level since November 2016. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index increased 19 percent compared with the previous week and was 8 percent higher than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.13 percent from 4.14 percent, with points increasing to 0.35 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 increased as rates declined, but will not increase significantly unless rates fall well below 4%.


The second graph shows the MBA mortgage purchase index.

Even with the increase in mortgage rates late last year, purchase activity is still up 8% year-over-year.

by Calculated Risk on 6/13/2017 07:04:00 PM

• My FOMC preview.

• Excerpts from Goldman's FOMC preview.

• Excerpts from Merrill Lynch's FOMC preview.

Tuesday:
• At 7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, Retail sales for May will be released.  The consensus is for a 0.2% increase in retail sales.

• Also at 8:30 AM, The Consumer Price Index for May from the BLS. The consensus is for no change in CPI, and a 0.2% increase in core CPI.

• At 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for April.  The consensus is for a 0.1% decrease in inventories.

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

• At 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.

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

by Calculated Risk on 6/13/2017 02:45:00 PM

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was up 0.2% compared to the rolling 12 months ending in April.   Outbound traffic was down 0.4 compared to 12 months ending in April.

The downturn in exports in 2015 was probably due to the slowdown in China and the stronger dollar.  Now exports are picking up again,

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March depending on the timing of the Chinese New Year.  

In general both exports and imports have been increasing.

by Calculated Risk on 6/13/2017 12:05:00 PM

Way back in 2005, I posted a graph of the Real Estate Agent Boom. Here is another update to the graph.

The graph shows the number of real estate licensees in California.

The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).

The number of salesperson's licenses is off 30% from the peak, and is increasing again (up 5.2% from low). The number of salesperson's licenses has increased to July 2004 levels.

Brokers' licenses are off 12.4% from the peak and have only fallen to March 2006 levels, but are still slowly declining (down almost 1% year-over-year).

Click on graph for larger image.

We are seeing a pickup in Real Estate licensees in California, although the number of Brokers is still declining.