by Calculated Risk on 2/11/2020 08:56:00 AM

From Fed Chair Jerome Powell: Semiannual Monetary Policy Report to the Congress. A few excerpts:

"Some of the uncertainties around trade have diminished recently, but risks to the outlook remain. In particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy."
emphasis added

This suggests the Fed might cut rates if the economic impact from 2019-nCov is significant.

"The FOMC believes that the current stance of monetary policy will support continued economic growth, a strong labor market, and inflation returning to the Committee's symmetric 2 percent objective. As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate. Of course, policy is not on a preset course. If developments emerge that cause a material reassessment of our outlook, we would respond accordingly. …

The current low interest rate environment also means that it would be important for fiscal policy to help support the economy if it weakens. Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn. A more sustainable federal budget could also support the economy's growth over the long term."

by Calculated Risk on 2/11/2020 08:47:00 AM

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): January 2020 Report

The small business Optimism Index started the New Year ... rising 1.6 points to 104.3 in the month of January.
..
New job creation jumped in January, with an average addition of 0.49 workers per firm, the highest level since March 2019, rebounding back into strong territory. Finding qualified workers remains the top issue for 26 percent reporting this as their number one problem, 1 point below August’s record high.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 104.3 in January.

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 2/10/2020 07:22:00 PM

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

• At 10:00 AM, Job Openings and Labor Turnover Survey for December from the BLS.

• At 10:00 AM, Testimony, Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives

• At 11:00 AM, NY Fed: Q4 Quarterly Report on Household Debt and Credit

by Calculated Risk on 2/10/2020 02:36:00 PM

This might be a good time to review the seasonal pattern for employment.

Even in the best of years there are a significant number of jobs lost in the months of January and July. In 1994, when the economy added almost 3.9 million jobs, there were 2.25 million lost in January 1994 (not seasonally adjusted, NSA), and almost 1 million payroll jobs lost in July of that year.

This year, in January 2020, 2.83 million total jobs were lost (NSA).   On a seasonally adjusted basis, the BLS reported 225 thousand jobs (SA) added in January.

A clear example of the a seasonal pattern is that teachers leave the workforce every year in July.  And then those teachers return to the payrolls in September and early October. Since this happens every year, the BLS applies a seasonal adjustment before reporting the headline number.   

For the private sector, there are always a large number of jobs lost in January (retailers and others cutting jobs) and in September (summer hires let go).

Click on graph for larger image.

This graph shows the seasonal pattern since 2002 for both total nonfarm jobs and private sector only payroll jobs. Notice the large spike down every January.

Also notice the spike down in July (red) that is related to teachers leaving the labor force.

The key point is this is a series that NEEDS a seasonal adjustment.  There is significant, but predictable, seasonal variation in employment.

by Calculated Risk on 2/10/2020 11:44:00 AM

Another update ... during the recession, I wrote about the troubles in Las Vegas and included a chart of visitor and convention attendance: Lost Vegas.

Since then both Las Vegas visitor and convention traffic has recovered.

Visitor traffic was up 1.0% from 2018, and about 1.0% below the record set in 2016.

Here is the data from the Las Vegas Convention and Visitors Authority.  

Click on graph for larger image.

The blue bars are annual visitor traffic (left scale), and the red line is convention attendance (right scale). 

Convention traffic was up 2.3% in 2019 compared to 2018, and was slightly above the previous record set in 2017.

There were many housing related conventions during the housing bubble, so it took some time for convention traffic to recover.   Now there are marijuana conventions boosting traffic!

From the Las Vegas Convention and Visitors Authority:

While usually a relatively slower convention month, December 2019 bucked the trend as the destination enjoyed particularly strong convention attendance estimated at 356,100, +60.6% over last December; the YoY increase is largely due to the scheduling of Amazon Web Services (65k attendees) and Marijuana Business Conference (35k attendees) in December this year vs. November in 2018, plus the rotation of American Society of Health‐System Pharmacists (20k attendees) into the destination.

by Calculated Risk on 2/10/2020 10:03:00 AM

The Northwest Multiple Listing Service reported Home buyers in Western Washington “hit the ground running” in January

“All indicators point to a vigorous spring market,” suggested broker Dean Rebhuhn when reviewing just-released statistics from Northwest Multiple Listing Service. The report covering 23 counties shows pending sales outgained new listings, record-low inventory that’s down 33% from a year ago, and double-digit price increases.
...
Northwest MLS members tallied 5,074 closed sales during January for a 4.3% increase from the year-ago total of 4,865. Median prices jumped 10.7% from a year ago.
…
At the end of January, the MLS database totaled only 7,791 active listings of single family homes and condos, well-below the year-ago figure of 11,687 (down 33.3%). A check of records dating to 2005 shows the selection is at a new low level, shrinking below the previous low of 7,921 reported for February 2018. In fact, for the 15 year span from 2005-2019 (180 months), inventory has dipped below 10,000 listings during only eight of those months.

Measured by months of supply (the ratio of active listings to closed sales), there was 1.54 months of inventory system-wide at the end of January.
emphasis added

The press release is for the Northwest. In King County, sales were up 5.7% year-over-year, and active inventory was down 42.6% year-over-year.

In Seattle, sales were up 17.2% year-over-year, and inventory was down 32.9% year-over-year..  This puts the months-of-supply in Seattle at just 1.38 months.

by Calculated Risk on 2/09/2020 07:52:00 PM

Weekend:
• Schedule for Week of February 9, 2020

• Weather Adjusted Employment Gains in January

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 11 and DOW futures are down 90 (fair value).

Oil prices were down over the last week with WTI futures at $49.86 per barrel and Brent at $53.98 barrel.  A year ago, WTI was at $53, and Brent was at $61 - so oil prices are down about 10% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.43 per gallon. A year ago prices were at $2.28 per gallon, so gasoline prices are up 15 cents per gallon year-over-year.

by Calculated Risk on 2/09/2020 12:40:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 1 February

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 26 January through 1 February 2020, according to data from STR.

In comparison with the week of 27 January through 2 February 2019, the industry recorded the following:

• Occupancy: +1.7% to 57.6%
• Average daily rate (ADR): +2.2% to US$127.94
• Revenue per available room (RevPAR): +4.0% to US$73.73
emphasis added

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

Click on graph for larger image.

The red line is for 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

2020 is off to a solid start, however, STR notes that the new coronavirus could have a significant negative impact on hotels:

As fears over an outbreak of the new coronavirus centered in Wuhan, China, continue to restrict travel, visits to the U.S. from China could drop by 25% in 2020, according to analysis by Tourism Economics.

Speaking on a webinar Thursday titled “U.S. economy and hotel industry 2020 outlook: Navigating the slowdown,” Adam Sacks, president of Tourism Economics, said a 25% drop in Chinese visitors to the U.S. means a loss of 4 million hotel roomnights and $5.8 billion in visitor spending in 2020, and ultimately 7.8 million roomnights and $10.3 billion in spending through 2024.

This analysis was based on historical data from SARS. Based on more recent data, it appears the new coronavirus will have a larger impact than SARS.

Seasonally, the 4-week average of the occupancy rate will increase over the next several months.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 2/08/2020 11:07:00 AM

The weather boosted employment gains in January. The question is: how much?

The BLS reported 226 thousand people were employed in non-agriculture industries, with a job, but not at work due to bad weather. The average for January over the previous 10 years was 347 thousand.

The BLS also reported 744 thousand people were usually full time employees, but were working part time in January due to bad weather.  The average for January over the previous 10 years was 1.2 million.

Both of the series suggest weather negatively impacted employment less than usual (boosting seasonally adjusted employment).

The San Francisco Fed estimates Weather-Adjusted Change in Total Nonfarm Employment (monthly change, seasonally adjusted). They use local area weather to estimate the impact on employment. For January, the BLS reported 225 thousand jobs added, the San Francisco Fed estimates that weather adjusted employment gains were 125 thousand.

So we should expect some payback in coming months.   (Note: One of the reasons I took the "over" in January was because of the weather)

by Calculated Risk on 2/08/2020 08:11:00 AM

The key reports this week are January CPI and retail sales.

For manufacturing, the January Industrial Production report will be released.

Fed Chair Powell testifies to Congress this week.

----- Monday, Feb 10th -----
No major economic releases scheduled.

----- Tuesday, Feb 11th -----
6:00 AM ET: NFIB Small Business Optimism Index for January.

10:00 AM ET: Job Openings and Labor Turnover Survey for December from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings decreased in November to 6.800 million from 7.361 million in October.

The number of job openings (yellow) were down 11% year-over-year, and Quits were up 5% year-over-year.

10:00 AM: Testimony, Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives

11:00 AM: NY Fed: Q4 Quarterly Report on Household Debt and Credit

----- Wednesday, Feb 12th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Testimony, Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate

----- Thursday, Feb 13th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 212,000 initial claims, up from 202,000 last week.

8:30 AM: The Consumer Price Index for January from the BLS. The consensus is for 0.2% increase in CPI, and a 0.2% increase in core CPI.

----- Friday, Feb 14th -----
8:30 AM: Retail sales for January is scheduled to be released.  The consensus is for a 0.3% increase in retail sales.

This graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. In December, Retail and Food service sales, ex-gasoline, increased by 5.5% on a YoY basis.

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

This graph shows industrial production since 1967.

The consensus is for a 0.2% decrease in Industrial Production, and for Capacity Utilization to decrease to 76.8%.

10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for February). The consensus is for a reading of 99.3.