by Calculated Risk on 5/14/2019 11:16:00 AM

From the NY Fed: Total Household Debt Rises for 19th Straight Quarter, Now Nearly $1 Trillion Above Previous Peak

The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit, which shows that total household debt increased by $124 billion (0.9%) to $13.67 trillion in the first quarter of 2019. It was the 19th consecutive quarter with an increase, and the total is now $993 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008. The Report is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.
...
"The rate at which credit card balances become delinquent has been rising, and that has coincided with an increase in younger borrowers entering the credit card market,” said Andrew Haughwout, senior vice president at the New York Fed. “However, these delinquency rates are increasing from historically low levels and remain below pre-financial-crisis levels.”
…
Mortgage balances rose by $120 billion, to $9.2 trillion.

Mortgage originations declined to $344 billion from $401 billion, the lowest level seen since the third quarter of 2014.

Mortgage delinquencies improved slightly, with 1.0% of mortgage balances 90 or more days delinquent, down from 1.1% in the fourth quarter of 2018.
emphasis added

Click on graph for larger image.

Here are two graphs from the report:

The first graph shows aggregate consumer debt increased in Q1.  Household debt previously peaked in 2008, and bottomed in Q2 2013.

From the NY Fed:

Aggregate household debt balances ticked up in the first quarter of 2019 for the 19th consecutive quarter, and are now $993 billion (7.8%) higher than the previous (2008Q3) peak of $12.68 trillion. As of March 31, 2019, total household indebtedness was $13.67 trillion, a $124 billion (0.9%) increase from the fourth quarter of 2018. Overall household debt is now 22.5% above the 2013Q2 trough.

Mortgage balances shown on consumer credit reports on March 31 stood at $9.2 trillion, a $120 billion increase from 2018Q4. Balances on home equity lines of credit (HELOC) declined modestly, by $6 billion, continuing their declining trend from 2009. HELOC balances are now at $406 billion. Non-housing balances increased by $10 billion in the first quarter, with a small increase in auto loan balances ($6 billion), a $29 billion increase in student loan balances, offset by a $22 billion decline in credit card balances.

New extensions of credit for mortgage and auto loans slowed in the first quarter. Mortgage originations, which we measure as appearances of new mortgage balances on consumer credit reports and which include refinanced mortgages, were at $344 billion, a notable decline from the volume seen in 2018Q4 and the lowest quarterly volume observed since 2014Q3. There were $139 billion in newly originated auto loans in the first quarter of 2019, a modest decline from the fourth quarter but higher than the volume observed in 2018Q1. The aggregate credit card limit rose for the 25th consecutive quarter, with a 1.3% increase from 2018Q4.

The second graph shows the percent of debt in delinquency.

The overall delinquency rate decreased slightly in Q1.  From the NY Fed:

Aggregate delinquency rates remained steady in the first quarter of 2019. As of March 31, 4.6% of outstanding debt was in some stage of delinquency. Of the $623 billion of debt that is delinquent, $417 billion is seriously delinquent (at least 90 days late or “severely derogatory”). The flow into 90+ day delinquency for credit card balances has been rising since 2017, while the flow into 90+ day delinquency for auto loan balances has been slowly trending upward since as early as 2012. Student loan delinquency transition rates remain at high levels relative to other types of debt.

There is much more in the report.

by Calculated Risk on 5/14/2019 09:01:00 AM

CR Note: Most of this survey is noise, but there is some information, especially on the labor market and the "Single Most Important Problem".

From the National Federation of Independent Business (NFIB): April 2019 Report: Small Business Optimism Index

The Small Business Optimism Index improved, increasing 1.7 points to 103.5. One Index component fell, one was unchanged, and eight improved.
..
More new jobs were created in April, although at a slower pace than in the last quarter, with a net addition of 0.32 workers per firm.
…
Twenty-four percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem, 1 point below the record high.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 103.5 in April.

Note: Usually small business owners complain about taxes and regulations (currently 2nd and 3rd on the "Single Most Important Problem" list).  However, during the recession, "poor sales" was the top problem. Now the difficulty of finding qualified workers is the top problem.

by Calculated Risk on 5/13/2019 08:19:00 PM

Tuesday:
• At 6:00 AM ET, NFIB Small Business Optimism Index for April.

• At 11:00 AM, NY Fed: Q1 Quarterly Report on Household Debt and Credit

by Calculated Risk on 5/13/2019 05:20:00 PM

From Matthew Graham at Mortgage News Daily: Lowest Mortgage Rates in More Than a Month

Mortgage rates moved moderately lower to start the new week as trade tensions remained in focus. In general, the worse the US/China trade relationship is looking at any given moment, the better it has been for the bond market (and the worse it's been for stocks).
…
Today's drop brings the average lender back to the lowest rates since April 2. [30YR FIXED - 4.125-4.25%]

CR Note: The decline in mortgage rates - from around 5% late last year, to just over 4% - has given the housing market a lift.

by Calculated Risk on 5/13/2019 12:51:00 PM

The first graph shows the unemployment rate by four levels of education (all groups are 25 years and older) through April 2019.

Unfortunately this data only goes back to 1992 and includes only two recessions (the stock / tech bust in 2001, and the housing bust/financial crisis). Clearly education matters with regards to the unemployment rate - and all four groups are generally trending down.

Click on graph for larger image.

Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".

This brings up an interesting question: What is the composition of the labor force by educational attainment, and how has that been changing over time?

Note: Thanks to Tim Duy, Economics Professor at the University of Oregon, and Josh Lehner, at the Oregon Office of Economic Analysis.

Here is some data on the U.S. labor force by educational attainment since 1992.

Currently, over 58 million people in the U.S. labor force (25 and over) have a Bachelor's degree or higher.  This is 41.2% of the labor force, up from 26.2% in 1992.

This is the only category trending up.  "Some college" has declined recently, and both "high school" and "less than high school" have been trending down for some time.

Based on current trends, probably more than half the labor force will have at least a bachelor's degree around 2030 or so.

Some thoughts: Since workers with bachelor's degrees typically have a lower unemployment rate, this is probably a factor in pushing down the overall unemployment rate over time.

Also, I'd guess more education means less labor turnover, and that education is a factor in fewer weekly claims (I haven't seen data on unemployment claims by education).

A more educated labor force is one of the reasons I remain optimistic about the future.

by Calculated Risk on 5/13/2019 10:08:00 AM

Special note: The expansion to the Panama Canal was completed in 2016 (As I noted a few years ago), and some of the traffic that used the ports of Los Angeles and Long Beach is probably going through the canal. This might be impacting TEUs on the West Coast.

On the impact of the trade war, from Port of Long Beach Executive Director Mario Cordero: “With peak season approaching, we’re expecting imports to continue to grow, but it’s clear exports are suffering under the weight of tariffs.” emphasis added

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 0.1% in April compared to the rolling 12 months ending in March.   Outbound traffic was down 0.8% compared to the rolling 12 months ending the previous month.

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 (February 5th this year).

In general imports have been increasing, and exports have mostly moved sideways over the last 8 years.

by Calculated Risk on 5/12/2019 09:56:00 PM

Weekend:
• Schedule for Week of May 12, 2019

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 22 and DOW futures are down 200 (fair value).

Oil prices were up over the last week with WTI futures at $61.58 per barrel and Brent at $70.73 per barrel.  A year ago, WTI was at $71, and Brent was at $78 - so oil prices are down 10% to 15% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.85 per gallon. A year ago prices were at $2.86 per gallon, so gasoline prices are unchanged per gallon year-over-year.

by Calculated Risk on 5/12/2019 09:55:00 AM

From Merrill Lynch:

We are tracking 3.0% for 1Q GDP. ... 2Q remains at 2.1%. [May 10 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.2% for 2019:Q2. [May 10 estimate].

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2019 is 1.6 percent on May 9, down from 1.7 percent on May 3. [May 9 estimate]

CR Note: These early estimates suggest real GDP growth will be around 2% annualized in Q2.

by Calculated Risk on 5/11/2019 08:11:00 AM

The key reports this week are April housing starts and retail sales.

For manufacturing, the April Industrial Production report and the May NY and Philly Fed manufacturing surveys will be released this week.

----- Monday, May 13th -----
No major economic releases scheduled.

----- Tuesday, May 14th -----
6:00 AM ET: NFIB Small Business Optimism Index for April.

11:00 AM: NY Fed: Q1 Quarterly Report on Household Debt and Credit

----- Wednesday, May 15th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Retail sales for April is scheduled to be released.  The consensus is for 0.3% increase in retail sales.

This 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 by 3.65% on a YoY basis in March.

8:30 AM: The New York Fed Empire State manufacturing survey for May. The consensus is for a reading of 9.9, down from 10.1.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for April.

This graph shows industrial production since 1967.

The consensus is for a no change in Industrial Production, and for Capacity Utilization to be unchanged at 78.8%.

10:00 AM: The May NAHB homebuilder survey. Any number above 50 indicates that more builders view sales conditions as good than poor.

----- Thursday, May 16th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 219 thousand initial claims, down from 228 thousand last week.

8:30 AM ET: Housing Starts for April.

This graph shows single and total housing starts since 1968.

The consensus is for 1.200 million SAAR, up from 1.139 million SAAR in March.

8:30 AM: the Philly Fed manufacturing survey for May. The consensus is for a reading of 9.3, up from 8.5.

----- Friday, May 17th -----
10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for May).

10:00 AM: State Employment and Unemployment (Monthly) for April 2019

by Calculated Risk on 5/10/2019 02:43:00 PM

With the ten year yield at 2.45%, and based on an historical relationship, 30-year rates should currently be around 4.4%.

As of yesterday, Mortgage News Daily reported: Mortgage Rates Unchanged to Slightly Lower

Mortgage rates were just slightly lower on average today with some lenders flat and others distinctly lower. [30YR FIXED - 4.25%]
emphasis added

The graph shows the relationship between the monthly 10 year Treasury Yield and 30 year mortgage rates from the Freddie Mac survey.

Currently the 10 year Treasury yield is at 2.45%, and 30 year mortgage rates were at 4.10% according to the Freddie Mac survey this week.

To fall to 4% on the Freddie Mac survey, and based on the historical relationship, the Ten Year yield would have to fall to around 2.1%

To increase to 5% (on the Freddie Mac survey), based on the historical relationship, the Ten Year yield would have to increase to about 3.3%.