by Calculated Risk on 9/01/2017 10:05:00 AM

The ISM manufacturing index indicated expansion in August. The PMI was at 58.8% in August, up from 56.3% in July. The employment index was at 59.9%, up from 55.2% last month, and the new orders index was at 60.3%, down from 60.4%.

From the Institute for Supply Management: August 2017 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded in August, and the overall economy grew for the 99th consecutive month, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: "The August PMI® registered 58.8 percent, an increase of 2.5 percentage points from the July reading of 56.3 percent. The New Orders Index registered 60.3 percent, a decrease of 0.1 percentage point from the July reading of 60.4 percent. The Production Index registered 61 percent, a 0.4 percentage point increase compared to the July reading of 60.6 percent. The Employment Index registered 59.9 percent, an increase of 4.7 percentage points from the July reading of 55.2 percent. The Supplier Deliveries Index registered 57.1 percent, a 1.7 percentage point increase from the July reading of 55.4 percent. The Inventories Index registered 55.5 percent, an increase of 5.5 percentage points from the July reading of 50 percent. The Prices Index registered 62 percent in August, the same reading as July, indicating higher raw materials’ prices for the 18th consecutive month. Comments from the panel reflect expanding business conditions, with new orders, production, employment, backlog and exports all growing in August, as well as supplier deliveries slowing (improving) and inventories increasing during the period. The Customers’ Inventories Index experienced a sharp decline in August compared to July."
emphasis added

Click on graph for larger image.

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

This was above expectations of 56.6%, and suggests manufacturing expanded at a faster pace in August than in July.

A solid report.

by Calculated Risk on 9/01/2017 08:42:00 AM

From the BLS:

Total nonfarm payroll employment increased by 156,000 in August, and the unemployment rate was little changed at 4.4 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, construction, professional and technical services, health care, and mining.
...
The change in total nonfarm payroll employment for June was revised down from +231,000 to +210,000, and the change for July was revised down from +209,000 to +189,000. With these revisions, employment gains in June and July combined were 41,000 less than previously reported.
...
In August, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $26.39, after rising by 9 cents in July. Over the past 12 months, average hourly earnings have increased by 65 cents, or 2.5 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 156 thousand in August (private payrolls increased 165 thousand).

Payrolls for June and July were revised down by a combined 41 thousand.

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

In August the year-over-year change was 2.10 million jobs.  This is a decent year-over-year gain.


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

The Labor Force Participation Rate was unchanged in August at 62.9%. 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 60.1% (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 August to 4.4%. 

This was below expectations of 180,000 jobs, and the previous two months were revised down.  A somewhat disappointing report.

I'll have much more later ...

by Calculated Risk on 8/31/2017 08:22:00 PM

Note: August vehicle sales might be the first economic report impacted by Hurricane Harvey. Next Thursday, weekly unemployment claims will probably be impacted.

Earlier:

My August Employment Preview

and Goldman: August Payrolls Preview

Friday:
• At 8:30 AM ET, Employment Report for August. The consensus is for an increase of 180,000 non-farm payroll jobs added in August, down from the 209,000 non-farm payroll jobs added in July. The consensus is for the unemployment rate to be unchanged at 4.3%.

• At 10:00 AM, ISM Manufacturing Index for August. The consensus is for the ISM to be at 56.6, up from 56.3 in August.

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

• Also at 10:00 AM, University of Michigan's Consumer sentiment index (final for July). The consensus is for a reading of 97.2, unchanged from the preliminary reading 97.6.

• All day: Light vehicle sales for August. The consensus is for light vehicle sales to be 16.7 million SAAR in August, unchanged from 16.7 million in  July (Seasonally Adjusted Annual Rate).

by Calculated Risk on 8/31/2017 05:09:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined to 1.00% in July, from 1.01% in June. The serious delinquency rate is down from 1.30% in July 2016.

This is the lowest serious delinquency rate since December 2007.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Click on graph for larger image

Although the rate is declining, the "normal" serious delinquency rate is somewhat under 1%. 

The Fannie Mae serious delinquency rate has fallen 0.30 percentage points over the last year, and at that rate of improvement, the serious delinquency rate should be below 1% next month.

By vintage, for loans made in 2004 or earlier (4% of portfolio), 2.63% are seriously delinquent. For loans made in 2005 through 2008 (7% of portfolio), 5.71% are seriously delinquent, For recent loans, originated in 2009 through 2017 (89% of portfolio), only 0.32% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

Note: Freddie Mac reported earlier.

by Calculated Risk on 8/31/2017 12:57:00 PM

A few brief excerpts from a note by Goldman Sachs economist Spencer Hill:

We estimate nonfarm payrolls increased by 160k in August, below consensus of +180k ... Our forecast reflects somewhat more mixed labor market fundamentals and a drag from residual seasonality, as first-reported August payroll growth has been consistently weak in recent years.

We expect household job growth will be sufficient to leave the unemployment rate unchanged at 4.3%, but due to particularly unfavorable calendar effects, we estimate a 0.1% monthly rise in average hourly earnings (+2.5% year-over-year).

by Calculated Risk on 8/31/2017 11:53:00 AM

On Friday at 8:30 AM ET, the BLS will release the employment report for August. The consensus, according to Bloomberg, is for an increase of 180,000 non-farm payroll jobs in August (with a range of estimates between 140,000 to 200,000), and for the unemployment rate to be unchanged at 4.3%.

The BLS reported 209,000 jobs added in July.

Here is a summary of recent data:

• The ADP employment report showed an increase of 237,000 private sector payroll jobs in August. This was well above consensus expectations of 182,000 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. However, the ADP number has frequently been above the BLS number for August.

• The ISM manufacturing and non-manufacturing indexes have not been released yet.

• Initial weekly unemployment claims averaged 237,000 in August,  down from 242,000 in July. For the BLS reference week (includes the 12th of the month), initial claims were at 232,000, down from 234,000 during the reference week in July.

The decrease during the reference week suggests slightly fewer layoffs during the reference week in August than in July. This suggests a similar employment report in August as in July.

• The final August University of Michigan consumer sentiment index increased to 97.6 from the July reading of 93.4. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion: Unfortunately the ISM reports will be released after the employment report this month, and those reports are helpful. Also August tends to be below the ADP report (and frequently below consensus). My sense (mostly based on history) is that job gains will be below consensus in August.

by Calculated Risk on 8/31/2017 10:03:00 AM

From the NAR: Pending Home Sales Lessen 0.8 Percent in July

Pending homes sales stumbled in July for the fourth time in five months as only the West saw an increase in contract activity, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.8 percent to 109.1 in July from a downwardly revised 110.0 in June. After last month’s decline, the index is now 1.3 percent below a year ago and has fallen on an annual basis in three of the past four months.
...
The PHSI in the Northeast inched backward 0.3 percent to 97.7 in July, but is still 2.4 percent above a year ago. In the Midwest the index decreased 0.7 percent to 103.3 in July, and is now 2.8 percent lower than July 2016.

Pending home sales in the South declined 1.7 percent to an index of 123.1 in July and are now 0.2 percent below last July. The index in the West expanded 0.6 percent in July to 102.3, but is still 4.0 percent below a year ago.
emphasis added

This was below expectations of a 0.8% 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 8/31/2017 08:39:00 AM

The BEA released the Personal Income and Outlays report for July:

Personal income increased $65.6 billion (0.4 percent) in July according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $39.6 billion (0.3 percent) and personal consumption expenditures (PCE) increased $44.7 billion (0.3 percent).
...
Real PCE increased 0.2 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

The July PCE price index increased 1.4 percent year-over-year and the July PCE price index, excluding food and energy, also increased 1.4 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through July 2017 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was at expectations,  and the increase in PCE was slightly below expectations.

by Calculated Risk on 8/31/2017 08:33:00 AM

The DOL reported:

In the week ending August 26, the advance figure for seasonally adjusted initial claims was 236,000, an increase of 1,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 234,000 to 235,000. The 4-week moving average was 236,750, a decrease of 1,250 from the previous week's revised average. The previous week's average was revised up by 250 from 237,750 to 238,000.
emphasis added

The previous week was revised up.

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 236,750.

This was close to the consensus forecast.

The low level of claims suggests relatively few layoffs.

Note: Claims will increase over the next few weeks due to Hurricane Harvey.

by Calculated Risk on 8/30/2017 07:46:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 237 thousand initial claims, up from 234 thousand the previous week. Note: The report tomorrow will be for the week ending Aug 26th. Unemployment claims will increase over the next few weeks due to Hurricane Harvey.

• Also at 8:30 AM, Personal Income and Outlays for July. The consensus is for a 0.4% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• At 9:45 AM, Chicago Purchasing Managers Index for August. The consensus is for a reading of 58.0, down from 58.9 in July.

• At 10:00 AM, Pending Home Sales Index for June. The consensus is for a 0.8% increase in the index.