by Calculated Risk on 3/08/2018 08:04:00 PM

My February Employment Preview

Goldman: February Payrolls Preview

Friday:
• At 8:30 AM, Employment Report for February. The consensus is for an increase of 205,000 non-farm payroll jobs added in February, up from the 200,000 non-farm payroll jobs added in January. The consensus is for the unemployment rate to decrease to 4.0%.

by Calculated Risk on 3/08/2018 04:41:00 PM

From housing economist Tom Lawler: More on Deaths ...

In discussing available data on deaths earlier this week, I noted that data are deaths are only available with a considerable lag. While that is the case for detailed data on deaths, the National Center for Health Statistics does release provisional estimates for selected indicators of mortality – including both crude and age-adjusted death rates – that are relatively timely. E.g., aggregate crude and age-adjusted death rates are available through the third quarter of 2017, and these data suggested that both crude and age-adjusted death rates increased from 2016 to 2017. For those who track death assumptions in the Census population estimates (which reflect deaths over the 12 month period ending in June), the NCHS provisional death rate estimates imply that US deaths totaled about 2.785 million over the 12-months ended in June 2017, about 41,000 higher than the “Vintage 2017” assumption, and 104,000 above the projection from Census’s 2014 long-term population projection.

If the higher-than-projected death rates remained constant over the next three years (i.e., though 2020), then US deaths over the four-year period ending in 2020 would be over 600,000 higher than the number of deaths assumed in the Census 2014 population projection, with the most of this increase in deaths coming in the 15-44 year old age groups.

US Deaths Per 100,000, 12-month period ending at end of quarter
	Crude	Age Adjusted
Q1/2016	837.5	724.0
Q2/2016	839.3	723.6
Q3/2016	842.0	724.4
Q4/2016	849.3	728.8
Q1/2017	855.7	731.0
Q2/2017	858.4	731.7
Q3/2017	859.2	730.0
Source: NCHS

... And Some Thoughts About Next Week’s Release of Census Long-Term Population Projections

I got confirmation today that Census is on track to release its updated long-term population projections sometime next week. Here are a few things analysts should consider in evaluating/using these projections.

1. The starting point for the projections is “Vintage 2016,” and the latest population estimates (Vintage 2017) are different (though not massively so).

2. The latest data on deaths used for this projection were those for 2015, and I’m guessing the projection does not allow for rising death rates among teenagers and young/middle aged adults that we observed in 2016 and (apparently) 2017. I am guessing that the updated projections may significantly understate deaths for these age groups, and competent analysts should check this.

3. The updated assumptions on net international migration will be “model based,” and will not incorporate any probable or even possible policy changes on immigration. In terms of the immigration component of net international migration, these models look at recent inflows by country relative to their populations, and assume that future immigration will rise proportionately to projections of these countries’ populations. These models will almost certainly over-predict “likely” net international migration over the next few years, and analysts should check the NIM assumptions.

4. My understanding is that Census only plans to release its “baseline” projections next week, but that some alternative scenarios may be released sometime later (though I’m not positive about this).

What I and any competent analyst will do when these new population projections are released is to dig deeply into the key “component of change” assumptions, compare these assumptions either (1) to updated data (e.g., deaths), or (2) to what I believe are “reasonable” assumptions about net international migration, and produce a different set of population projections if the Census assumptions seem “off.” I and competent analysts will also probably produce alternative population projection using different but plausible assumptions about deaths and net international migration.

by Calculated Risk on 3/08/2018 02:15:00 PM

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

We estimate that nonfarm payrolls increased 210k in February, 5k above consensus. We believe warmer weather and unseasonably light snow during the survey week boosted job growth in the month. Labor market fundamentals also appear solid and may have improved further, given new cycle records for initial claims and Conference Board job availability.
...
we estimate the unemployment rate fell to 4.0% in February ... We estimate a 0.3% month-over-month increase in average hourly earnings ... we estimate the year-over-year rate fell a tenth to +2.8%. ...
emphasis added

by Calculated Risk on 3/08/2018 11:52:00 AM

On Friday at 8:30 AM ET, the BLS will release the employment report for February. The consensus, according to Bloomberg, is for an increase of 205,000 non-farm payroll jobs in February (with a range of estimates between 152,000 to 230,000), and for the unemployment rate to decline to 4.0%.

The BLS reported 200,000 jobs added in January.

Here is a summary of recent data:

• The ADP employment report showed an increase of 235,000 private sector payroll jobs in February. This was well above consensus expectations of 203,000 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.

• The ISM manufacturing employment index increased in February to 59.7%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased about 30,000 in February. The ADP report indicated manufacturing jobs increased 14,000 in February.

The ISM non-manufacturing employment index decreased in February to 55.0%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 200,000 in February.

Combined, the ISM indexes suggests employment gains of about 230,000.  This suggests employment growth slightly above expectations.

• Initial weekly unemployment claims averaged 222,500 in February, down from 234,500 in January. For the BLS reference week (includes the 12th of the month), initial claims were at 220,000, up from 216,000 during the reference week in January.

The slight increase during the reference week suggests a slightly weaker employment report in February than in January.

• The final February University of Michigan consumer sentiment index increased to 99.7 from the January reading of 95.7. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Merrill Lynch has introduced a new payrolls tracker based on private internal BAC data. The tracker suggests private payrolls increased by 136,000 in February, and this suggests employment growth below expectations.

• Conclusion:  In general, these reports suggest a solid employment report.  My guess - probably influenced by the new Merrill Lynch tracker, and the slight increase in unemployment claims during the reference week - is that the employment report will be below the consensus in February.

by Calculated Risk on 3/08/2018 08:34:00 AM

The DOL reported:

In the week ending March 3, the advance figure for seasonally adjusted initial claims was 231,000, an increase of 21,000 from the previous week's unrevised level of 210,000. The 4-week moving average was 222,500, an increase of 2,000 from the previous week's unrevised average of 220,500.

Claims taking procedures in Puerto Rico and in the Virgin Islands have still not returned to normal.
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 222,500.

This was higher than the consensus forecast. The low level of claims suggest relatively few layoffs.

by Calculated Risk on 3/07/2018 07:37:00 PM

A couple of February NFP forecasts (will be released Friday), from Merrill Lynch:

[W]e look for nonfarm payrolls to increase by 160k ... We look for the unemployment rate to be unchanged at 4.1% in February ... We forecast a trend-like 0.2% mom in average hourly earnings which will allow the yoy rate to slip to 2.8%.

And from Nomura:

We expect a strong, 210k increase in nonfarm payroll employment in February ... we expect a 0.2% (0.19%) m-o-m increase in February’s average hourly earnings (AHE). ... Our forecast of 0.2% mo-m corresponds to a 2.8% y-o-y increase, a slight dip from the 2.9% reading in January. Finally, we expect the unemployment rate to decline 0.1pp to 4.0% in February...

Thursday:
• At 8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 220 thousand initial claims, up from 210 thousand the previous week.

by Calculated Risk on 3/07/2018 04:45:00 PM

Note: This index is possibly a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.

From Dodge Data Analytics: Tepid Rise for Dodge Momentum Index in February

The Dodge Momentum Index increased 0.5% in February to 146.9 (2000=100) from the revised January reading of 146.2. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The move higher in February was the result of an 8.2% increase in the institutional component, while the commercial component contracted 4.8%. The commercial component has declined for two consecutive months, and while this should not lead to an outright decline in construction activity, it is an additional sign that commercial building construction growth could ease in 2018 in response to rising vacancy rates for offices and warehouses. On the other hand, institutional building construction continues to feed off the massive number of state and local bonds issued for schools and other institutional buildings over the past few election cycles.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 146.9 in February, up from 146.2 in January.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests further growth in 2018.

by Calculated Risk on 3/07/2018 03:13:00 PM

Fed's Beige Book "This report was prepared at the Federal Reserve Bank of San Francisco based on information collected on or before February 26, 2018. "

Economic activity expanded at a modest to moderate pace across the 12 Federal Reserve Districts in January and February. Consumer spending was mixed, as non-auto retail sales increased in just over half of the Districts while auto sales declined or were flat in every District. Tourism activity was broadly solid, with Atlanta and Richmond recording robust growth in this sector. On balance, Districts reported modest growth in home sales and construction, with the latter constrained by shortages of labor and materials. Conditions in the nonresidential real estate market improved moderately since the previous report, with robust construction activity noted in three Districts. Commercial rents in and around New York City were up significantly, according to contacts in the area. Increases in production were broad based across manufacturing sectors, with all but one District noting at least modest growth in activity. Loan volumes were generally flat, with a handful of Districts noting a modest decrease in delinquency rates. Among reporting Districts, agricultural sector activity was mixed but flat overall. Contacts in natural resource sectors saw modestly improving industry conditions, except in the Minneapolis District, where energy and mining activity was robust.
...
On balance, employment grew at a moderate pace since the previous report. Across the country, contacts observed persistent labor market tightness and brisk demand for qualified workers, as well as increased activity at staffing placement services. Several Districts reported continued worker shortages across most sectors, with contacts often mentioning shortages in the construction, information technology, and manufacturing sectors. In many Districts, wage growth picked up to a moderate pace. Most Districts saw employers raise wages and expand benefit packages in response to tight labor market conditions. Contacts in a few Districts conveyed reports of modest increases in compensation following passage of the Tax Cuts and Jobs Act.
emphasis added

by Calculated Risk on 3/07/2018 10:59:00 AM

This is a key distressed market to follow since Las Vegas saw the largest price decline, following the housing bubble, of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported Southern Nevada home prices warming up while sales cooling down; GLVAR housing statistics for February 2018

Local home prices rose again in February while sales slowed down amid a shrinking housing supply, according to a report released today by the Greater Las Vegas Association of REALTORS®(GLVAR).
...
Meanwhile, the total number of existing local homes, condos and townhomes sold during February fell to 2,704. Compared to one year ago, February sales were down 5.4 percent for homes, but up 1.8 percent for condos and townhomes.

“Our shrinking housing supply may finally be catching up to us and slowing down our home sales,” said 2018 GLVAR President Chris Bishop, a longtime local REALTOR®. “Sales have continued to go up over the last few years, even as our inventory has been going down. But with fewer homes on the market each month, it seems like it was only a matter of time before it started to affect sales.”

He said Southern Nevada still has less than a two-month supply of existing homes available for sale when a six-month supply is considered a balanced market.

By the end of February, GLVAR reported 3,653 single-family homes listed for sale without any sort of offer. That’s down 34.3 percent from one year ago. For condos and townhomes, the 679 properties listed without offers in February represented a 10.4 percent drop from one year ago. The inventory of condos and townhomes listed for sale is as low as it has been since 2004, Bishop added.
...
GLVAR reported that 32.4 percent of all local properties sold in February were purchased with cash, compared to 31.4 percent one year ago. That’s well below the February 2013 peak of 59.5 percent, indicating that cash buyers and investors are still active, but are playing a much smaller role in the local housing market than they were five years ago.

At the same time, the number of so-called distressed sales continues to decline. GLVAR reported that short sales and foreclosures combined accounted for 3.8 percent of all existing local home sales in February, compared to 10.6 percent of all sales one year ago.
emphasis added

1) Overall sales were down 4% year-over-year from 2,815 in February 2017 to 2,704 in February 2018.

2) Active inventory (single-family and condos) is down sharply from a year ago, from a total of 6,322 in February 2017 to 4,352 in February 2018.

3) Fewer distressed sales.

by Calculated Risk on 3/07/2018 08:46:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $56.6 billion in January, up $2.7 billion from $53.9 billion in December, revised. ... January exports were $200.9 billion, $2.7 billion less than December exports. January imports were $257.5 billion, down less than $0.1 billion from December imports.

Click on graph for larger image.

Both exports and imports decreased in January.

Exports are 21% above the pre-recession peak and up 5% compared to January 2017; imports are 11% above the pre-recession peak, and up 7% compared to January 2017.

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 $54.76 in January, up from $52.10 in December, and up from $43.94 in January 2016.

The petroleum deficit increased in January, and this is the main reason the overall trade deficit increased in January.

The trade deficit with China increased to $36.0 billion in January, from $31.3 billion in January 2016.