by Calculated Risk on 9/06/2017 08:43:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $43.7 billion in July, up $0.1 billion from $43.5 billion in June, revised. July exports were $194.4 billion, $0.6 billion less than June exports. July imports were $238.1 billion, $0.4 billion less than June imports.

Click on graph for larger image.

Imports and exports decreased in June.

Exports are 18% above the pre-recession peak and up 5% compared to July 2016; imports are 3% above the pre-recession peak, and up 5% compared to June 2016.

In general, trade has been picking up.

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $43.20 in July, down from $44.68 in June, and up from $41.02 in July 2016.  The petroleum deficit had been declining for years - and is the major reason the overall deficit has mostly moved sideways since early 2012. 

The trade deficit with China increased to $35.6 billion in July, from $30.3 billion in July 2016.

by Calculated Risk on 9/06/2017 07:00:00 AM

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

Mortgage applications increased 3.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 1, 2017.

... The Refinance Index increased 5 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 ($424,100 or less) decreased to its lowest level since November 2016, 4.11 percent, from 4.12 percent, with points increasing to 0.43 from 0.39 (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 will not pick up significantly unless mortgage rates fall well below 4%.


The second graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 5% year-over-year.

by Calculated Risk on 9/05/2017 06:40:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Back in Line With 2017 Lows

Mortgage rates moved lower today on a combination of factors.  Chief among these were headlines over the weekend concerning more North Korean weapons testing--specifically, a detonation of its largest bomb ever on Sunday followed by reports from South Korea of another ballistic missile test by the end of the week. ...

Indeed most mortgages are being quoted at the same rates seen on Friday with the only improvement being seen in the form of modestly lower upfront costs. [3.875% fixed on top tier scenarios].
emphasis added

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

• At 8:30 AM, Trade Balance report for July from the Census Bureau. The consensus is for the U.S. trade deficit to be at $44.6 billion in July from $43.6 billion in June.

• At 10:00 AM, the ISM non-Manufacturing Index for August. The consensus is for index to increase to 55.4 from 53.9 in July.

• At 10:00 AM, 2017 Current Employment Statistics (CES) Preliminary Benchmark Revision. From the BLS:

"Each year, the Current Employment Statistics (CES) survey estimates are benchmarked to comprehensive counts of employment from the Quarterly Census of Employment and Wages (QCEW) for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. On September 6, 2017 at 10:00 a.m. the Bureau of Labor Statistics (BLS) will release the preliminary estimate of the upcoming annual benchmark revision to the establishment survey employment series. ... The final benchmark revision will be issued with the publication of the January 2018 Employment Situation news release in February. "

by Calculated Risk on 9/05/2017 02:51:00 PM

The prime working age population peaked in 2007, and bottomed at the end of 2012. As of August 2017, according to the BLS, there were still fewer people in the 25 to 54 age group than in 2007.

At the beginning of this year - based on demographics - it looked like the prime working age (25 to 54) would probably hit a new peak in 2017. 

However, since the end of last year, the prime working age population has declined slightly.

Changes in demographics are an important determinant of economic growth, and although most people focus on the aging of the "baby boomer" generation, the movement of younger cohorts into the prime working age is another key story. Here is a graph of the prime working age population (25 to 54 years old) from 1948 through August 2017.

Note: This is population, not work force.

Click on graph for larger image.

There was a huge surge in the prime working age population in the '70s, '80s and '90s.

The prime working age labor force grew even quicker than the population in the '70s and '80s due to the increase in participation of women. In fact, the prime working age labor force was increasing 3%+ per year in the '80s!

So when we compare economic growth to the '70s, '80, or 90's we have to remember this difference in demographics (the '60s saw solid economic growth as near-prime age groups increased sharply).

The good news is the prime working age group should start growing at 0.5% per year - and this should boost economic activity.

by Calculated Risk on 9/05/2017 11:49:00 AM

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.

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 seven months).

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 11,756,000 more private sector jobs than when Mr. Obama initially took office.

During the first seven months of Mr. Trump's term, the economy has added 1,202,000 private sector jobs.

 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 268,000 jobs).

During the first seven months of Mr. Trump's term, the economy has lost 13,000 public sector jobs.

The third graph shows the progress towards the Trump goal of adding 10 million jobs over the next 4 years.

After seven months of Mr. Trump's presidency, the economy has added 1,189,000 jobs, about 269,000 behind the projection.

by Calculated Risk on 9/05/2017 09:16:00 AM

Notes: This CoreLogic House Price Index report is for July. The recent Case-Shiller index release was for June. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic US Home Price Report Shows Prices Up 6.7 Percent in July 2017

Home prices nationally increased year over year by 6.7 percent from July 2016 to July 2017, and on a month-over-month basis, home prices increased by 0.9 percent in July 2017 compared with June 2017, according to the CoreLogic HPI.
...
“In July, home price growth in the Pacific Northwest and mountain states led the nation with the highest appreciation rates,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The sharp increase in prices in Washington and Utah has been especially striking, with home price growth in both states accelerating by 3 percentage points since the beginning of this year.”
emphasis added

Click on graph for larger image.

This graph from Corelogic shows the YoY change in the national CoreLogic HPI data since 2002.

The YoY increase had been moving sideways over the last two years, but might have picked up recently (the recent pickup could be revised away).

The year-over-year comparison has been positive for over five consecutive years since turning positive year-over-year in February 2012.

by Calculated Risk on 9/04/2017 08:15:00 PM

Tuesday:
• At 10:00 AM ET, The CoreLogic House Price index for July.

Note: On Wednesday, the BLS will release the Preliminary Benchmark Revision for the 2017 Current Employment Statistics (CES). From the BLS:

"Each year, the Current Employment Statistics (CES) survey estimates are benchmarked to comprehensive counts of employment from the Quarterly Census of Employment and Wages (QCEW) for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. On September 6, 2017 at 10:00 a.m. the Bureau of Labor Statistics (BLS) will release the preliminary estimate of the upcoming annual benchmark revision to the establishment survey employment series. ... The final benchmark revision will be issued with the publication of the January 2018 Employment Situation news release in February. "

The preliminary estimate is usually pretty close to the annual revision. The following table shows the benchmark revisions since 2006.

Employment Benchmark Revisions (000s)
Year	Revision
2006	752
2007	-293
2008	-89
2009	-902
2010	-378
2011	162
2012	424
2013	-119
2014	67
2015	-172
2016	-81

by Calculated Risk on 9/04/2017 11:13:00 AM

Last week, in my employment preview, I noted "My sense (mostly based on history) is that job gains will be below consensus in August." Sure enough.

Here is a table of revisions for August since 2005.  Note that most of the revisions have been up.   This doesn't mean that the August 2017 revision will be up, but it does seem likely.   I'm not sure why the BLS has underestimated job growth in August (possibly because of the timing of seasonal teacher hiring and the end of the summer jobs).

August Employment Report (000s)
Year	Initial	Revised	Revision
2005	169	196	+27
2006	128	183	55
2007	-4	-20	-16
2008	-84	-267	-183
2009	-216	-213	3
2010	-54	-36	18
2011	0	110	110
2012	96	177	81
2013	169	261	92
2014	142	230	88
2015	173	157	-16
2016	151	176	25
2017	156	---	---

Note: In 2008, the BLS significantly under reported job losses. That wasn't surprising since the initial models the BLS used missed turning points (something I wrote about in 2007). The BLS has since improved this model.

by Calculated Risk on 9/03/2017 07:20:00 PM

On Monday, all US markets will be closed in observance of the Labor Day holiday.

Weekend:
• Schedule for Week of Sept 3, 2017

An update on Q3 GDP forecasts, from the Altanta Fed: GDPNow

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 3.2 percent on September 1, down from 3.3 percent on August 31.

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.2% for 2017:Q3.

From Merrill Lynch:

[Recent] data chopped 0.4pp from our 3Q GDP tracking estimate, bringing it down to 2.7% qoq saar.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 10, and DOW futures are down 60 (fair value).

Oil prices were down slightly over the last week with WTI futures at $47.38 per barrel and Brent at $52.45 per barrel.  A year ago, WTI was at $45, and Brent was at $47 - so oil prices are up year-over-year.

Note: When refineries shut down, oil prices tend to decline - since demand for oil falls - and gasoline prices increase - since the supply of gasoline falls.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.63 per gallon - up sharply due the Hurricane Harvey - a year ago prices were at $2.21 per gallon - so gasoline prices are up 41 cents per gallon year-over-year.

by Calculated Risk on 9/03/2017 10:17:00 AM

Note: Hotel occupancy rates increased noticeably following Hurricanes Katrina and Rita in 2005. I expect the overall occupancy rate will also increase following Hurricane Harvey - and stay elevated for several months. This might even push 2017 into record territory.

From HotelNewsNow.com: How Hurricane Harvey could affect US hotel industry

We expect that the room supply number of Texas will decline for at least a year. After Katrina, Louisiana room supply dropped by roughly 25% between September 2005 and August 2006. This equated to a supply loss for the U.S. of 0.5%, in fact negating the slow U.S. supply growth we had reported so that—for the first time in history—the annualized supply growth for the U.S. was negative.

It is still too early to tell which hotels are closed for business. We hope that the number is relatively small, and current industry commentary gives us reason for optimism. But it is not a stretch to assume that the supply decline in and around Houston will affect the national numbers.
...
If a hotel makes it through the storm unscathed or can be re-opened pretty quickly after the event, there is a high likelihood that it will post very strong demand numbers in the months to come. Demand will be generated by multiple sources: displaced residents, FEMA and other federal personnel, insurance adjusters and contractors. Most of these will stay for months in the area keeping room demand numbers artificially high.
...
If the room supply declines, but room demand remains steady, then occupancy is increasing. This could imply that our STR forecast of 0% occupancy growth for 2017 is too low and that we may be able to report a slight occupancy increase this year and through the second half of next year.

And on a happier note: Hotels in path of total eclipse see unprecedented boon

From HotelNewsNow.com: STR: US hotel results for week ending 26 August

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 20-26 August 2017, according to data from STR.

In comparison with the week of 21-27 August 2016, the industry recorded the following:

• Occupancy: +3.0% to 69.5%
• Average daily rate (ADR): +3.2% to US$125.57
• Revenue per available room (RevPAR): +6.3% to US$87.28

Among the Top 25 Markets, Nashville, Tennessee, reported the largest year-over-year increases in ADR (+21.7% to US$155.04) and RevPAR (+39.4% to US$126.48). Occupancy in Nashville, a key market in the Great American Eclipse path of totality, was up 14.6% to 81.6%. ... St. Louis, another key market in the band of totality, recorded the largest increase in occupancy (+18.9% to 80.6%).
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

The red line is for 2017, dash light blue is 2016, dashed orange is 2015 (best year on record), blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels).

Currently the occupancy rate is slightly ahead of last year, and behind the record year in 2015.

Seasonally, the occupancy rate has peaked and will decline into the Fall.

Data Source: STR, Courtesy of HotelNewsNow.com