by Calculated Risk on 5/04/2018 04:13:00 PM

From the Association of American Railroads (AAR) Rail Time Indicators. Graphs and excerpts reprinted with permission.

April was a very good month for U.S. rail traffic. Fifteen of the 20 carload commodity categories the AAR tracks saw higher carloads in April 2018 than in April 2017 — 15 is the most since January 2015. Total carloads were up 3.3% (34,020 carloads) in April ...U.S. intermodal volume in April 2018 was up 6.8%, or 69,630 units, over April 2017. April was the 15th straight year-over-year monthly increase for intermodal, dating back to February 2017. Average weekly intermodal volume in April 2018 was 274,750 units, the third highest for any month on record. April is the seventh straight month in which U.S. intermodal volume was the highest ever for that month.

Click on graph for larger image.

This graph from the Rail Time Indicators report shows U.S. average weekly rail carloads (NSA).  Light blue is 2018.

Rail carloads have been weak over the last decade due to the decline in coal shipments.

Originated U.S. rail carloads in April 2018 were up 34,020, or 3.3%, over April 2017 to 1.05 million. Total carloads have risen in three of the past five months. Weekly average carloads in April 2018 were 262,757, the most for April since 2015.

The second graph is for intermodal traffic (using intermodal or shipping containers):

U.S. railroads originated 1,099,000 containers and trailers in April 2018, up 69,630 units, or 6.8%, over April 2017. It’s the 15th straight year-over-year monthly increase for intermodal, dating back to February 2017. Average weekly intermodal volume in April 2018 was 274,750 units, the third highest for any month on record (behind only February 2018 and October 2017). April is the seventh straight month in which U.S. intermodal volume was the highest ever for that month.

by Calculated Risk on 5/04/2018 02:55:00 PM

From Merrill Lynch:

We revise down our 2Q GDP forecast to 3.2% from 3.7% as consumer spending and capex trends appear less bullish and there is a weak handoff between 1Q and 2Q. [May 4 estimate].
emphasis added

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2018 is 4.0 percent on May 3, down from 4.1 percent on May 1. [May 3 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 3.0% for 2018:Q2. [May 4 estimate]

CR Note: These early estimates suggest GDP in the 3% to 4% in Q2.

by Calculated Risk on 5/04/2018 12:15:00 PM

By request, 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, Fed Chair, 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 (dark blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (dark red) took office.

There was a recession towards the end of President G.H.W. Bush (light 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 15 months).

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 804,000 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 391,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased by 20,964,000 under President Clinton (light blue), by 14,717,000 under President Reagan (dark red), 9,041,000 under President Carter (dashed green), 1,509,000 under President G.H.W. Bush (light purple), and 11,907,000 under President Obama (dark blue).

During the first 15 months of Mr. Trump's term, the economy has added 2,723,000 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 266,000 jobs).

During the first 15 months of Mr. Trump's term, the economy has added 5,000 public sector jobs.

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

After 15 months of Mr. Trump's presidency, the economy has added 2,728,000 jobs, about 397,000 behind the projection.

by Calculated Risk on 5/04/2018 09:19:00 AM

The headline jobs number at 164,000 for April was below consensus expectations of 190 thousand, however the previously two months were revised up a combined 30 thousand. With the revisions, this was close to expectations.

Earlier: April Employment Report: 164,000 Jobs Added, 3.9% Unemployment Rate

In April, the year-over-year employment change was 2.280 million jobs. This has been generally trending down, but is still solid year-over-year growth.

Average Hourly Earnings

Wage growth was about as expected in April, however hourly wages for March were revised down. From the BLS:

"In April, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.84. Over the year, average hourly earnings have increased by 67 cents, or 2.6 percent."

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 2.6% YoY in April.

Wage growth had been trending up, although growth has been moving sideways recently.

Prime (25 to 54 Years Old) Participation

Since the overall participation rate has declined 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 decreased in April to 82.0%, and the 25 to 54 employment population ratio was unchanged at 79.2%.

The participation rate had been trending down for this group since the late '90s, however, with more younger workers (and fewer 50+ age workers), the prime 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 essentially unchanged at 5.0 million in April. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or because they were unable to find full-time jobs."

The number of persons working part time for economic reasons has been generally trending down, and the number decreased in April. The number working part time for economic reasons 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 7.8% in April. This is the lowest level for U-6 since 2001.

Unemployed over 26 Weeks

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

According to the BLS, there are 1.293 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.322 million in March.

This is the lowest level since September 2007.

This is trending down, but remains a little elevated.

The headline jobs number was a little disappointing, however the previous two months were revised up.  For the first four months of 2018, job growth has been solid averaging close to 200 thousand per month.

by Calculated Risk on 5/04/2018 08:47:00 AM

From the BLS:

Total nonfarm payroll employment increased by 164,000 in April, and the unemployment rate edged down to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, manufacturing, health care, and mining.
...
The change in total nonfarm payroll employment for February was revised down from +326,000 to +324,000, and the change for March was revised up from +103,000 to +135,000. With these revisions, employment gains in February and March combined were 30,000 more than previously reported.
...
In April, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.84. Over the year, average hourly earnings have increased by 67 cents, or 2.6 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 164 thousand in April (private payrolls increased 168 thousand).

Payrolls for February and March were revised up by a combined 30 thousand.

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

In April the year-over-year change was 2.280 million jobs.

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

The Labor Force Participation Rate was decreased in April to 62.8%. 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 60.3% (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 declined in April to 3.9%. 

This was below the consensus expectations of 190,000 jobs, however the previous two months combined were revised up by 30,000.

I'll have much more later ...

by Calculated Risk on 5/03/2018 05:22:00 PM

My April Employment Preview

Goldman: April Payrolls Preview

Friday:
• At 8:30 AM ET, Employment Report for April. The consensus is for an increase of 190,000 non-farm payroll jobs added in April, up from the 103,000 non-farm payroll jobs added in March. The consensus is for the unemployment rate to decrease to 4.0%.

by Calculated Risk on 5/03/2018 04:17:00 PM

Fannie and Freddie reported results for Q1. Here is some information on Real Estate Owned (REOs).

Freddie Mac reported the number of REO declined to 7,718 at the end of Q1 2017 compared to 10,938 at the end of Q1 2017.

For Freddie, this is down 90% from the 74,897 peak number of REOs in Q3 2010. For Freddie, this is the lowest since at least 2007.

Fannie Mae reported the number of REO declined to 24,063 at the end of Q1 2018 compared to 34,551 at the end of Q1 2017.

For Fannie, this is down 86% from the 166,787 peak number of REOs in Q3 2010. For Fannie, this is the lowest since at least 2007.

Click on graph for larger image.

Here is a graph of Fannie and Freddie Real Estate Owned (REO).

REO inventory decreased in Q1 for both Fannie and Freddie, and combined inventory is down 30% year-over-year.

There are still a number of properties in the foreclosure process with long time lines in judicial foreclosure states - but this is close to normal levels of REOs.

by Calculated Risk on 5/03/2018 03:35:00 PM

A few brief excerpts from a note by Goldman Sachs economists Daan Struyven and Spencer Hill:

We expect a 180k increase in nonfarm payroll employment in April, slightly below consensus expectations for a 190k gain. Most labor market indicators decelerated somewhat, and we don’t expect a meaningful weather rebound (relative to trend).

... the unemployment rate likely fell to 4.0% in April. Average hourly earnings likely rose 0.2% in April, reflecting somewhat unfavorable calendar effects, and 2.6% over the past year. ...
emphasis added

by Calculated Risk on 5/03/2018 12:34:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for April. The consensus, according to Bloomberg, is for an increase of 191,000 non-farm payroll jobs in April (with a range of estimates between 145,000 to 255,000), and for the unemployment rate to decline to 4.0%.

The BLS reported 103,000 jobs added in March.

Here is a summary of recent data:

• The ADP employment report showed an increase of 204,000 private sector payroll jobs in April. This was above consensus expectations of 193,000 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 slightly above expectations.

However, the ADP report tends to be too low in April. In 2017, the ADP report showed an increase of 177,000 jobs, and the BLS report showed an increase of 211,000 jobs.    In 2016, the ADP report showed an increase of 156,000 jobs, and the BLS report showed 160,000 jobs added.  In 2015, the ADP report showed an increase of 169,000 jobs, and the BLS report showed 223,000. And in 2014, the ADP report showed 220,000 private sector jobs added, and the BLS report showed 288,000 jobs added.

• The ISM manufacturing employment index decreased in April to 54.2%. 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 3,000 in April. The ADP report indicated manufacturing jobs increased 10,000 in April.

The ISM non-manufacturing employment index decreased in April to 53.6%. 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 170,000 in April.

Combined, the ISM indexes suggests employment gains of about 173,000.  This suggests employment growth below expectations.

• Initial weekly unemployment claims averaged 222,000 in April, down from 228,000 in March. For the BLS reference week (includes the 12th of the month), initial claims were at 233,000, up from 227,000 during the reference week in March.

The slight increase during the reference week suggests a slightly weaker employment report in April than in March.   (Note: Employment in March was negatively impacted by payback for the nice weather in February.  Excluding the weather impacts, March employment was probably close to 190,000.  So this suggests weaker than March ex-weather).

• The final April University of Michigan consumer sentiment index decreased to 98.8 from the March reading of 101.4. 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 208,000 in April, and this suggests employment growth slightly above expectations.

• Looking back at the three previous years:

In April 2017, the consensus was for 185,000 jobs, and the BLS reported 211,000 jobs added. In April 2016, the consensus was for 200,000 jobs, and the BLS reported 160,000 jobs added. In April 2015, the consensus was for 220,000 jobs, and the BLS reported 223,000 jobs added.

• Conclusion:  In general, these reports suggest a solid employment report, and probably close to expectations.  The ADP report tends to be lower than the BLS report in April, but the ISM surveys and the reference week for unemployment claims suggests a weaker report.   My guess is that the employment report will be close to the consensus in April.

by Calculated Risk on 5/03/2018 10:03:00 AM

The April ISM Non-manufacturing index was at 56.8%, down from 58.8% in March. The employment index decreased in April to 53.6%, from 56.6%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: April 2018 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in April for the 99th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: "The NMI® registered 56.8 percent, which is 2 percentage points lower than the March reading of 58.8 percent. This represents continued growth in the non-manufacturing sector at a slower rate. The Non-Manufacturing Business Activity Index decreased to 59.1 percent, 1.5 percentage points lower than the March reading of 60.6 percent, reflecting growth for the 105th consecutive month, at a slower rate in April. The New Orders Index registered 60 percent, 0.5 percentage point higher than the reading of 59.5 percent in March. The Employment Index decreased 3 percentage points in April to 53.6 percent from the March reading of 56.6 percent. The Prices Index increased by 0.3 percentage point from the March reading of 61.5 percent to 61.8 percent, indicating that prices increased in April for the 26th consecutive month. According to the NMI®, all 18 non-manufacturing industries reported growth. There was a slowing in the rate of growth that was mostly attributed to the decline in the Employment and Supplier Deliveries indexes. The respondents have expressed concern regarding the uncertainty about tariffs and the effect on the cost of goods. Overall, the respondents remain positive about business conditions and the economy."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This suggests slower expansion in April than in March.