by Calculated Risk on 4/16/2020 08:35:00 AM

The DOL reported:

In the week ending April 11, the advance figure for seasonally adjusted initial claims was 5,245,000, a decrease of 1,370,000 from the previous week's revised level. The previous week's level was revised up by 9,000 from 6,606,000 to 6,615,000. The 4-week moving average was 5,508,500, an increase of 1,240,750 from the previous week's revised average. The previous week's average was revised up by 2,250 from 4,265,500 to 4,267,750.
emphasis added

The previous week was revised up.

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 5,508,500.

This was lower than the consensus forecast.

The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week while increasing sharply).

At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined.

Continued claims have already increased to a new record high of 11,976,000 (SA) and will increase further over the next few weeks - and likely stay at that high level until the crisis abates.

by Calculated Risk on 4/15/2020 07:40:00 PM

CR Note: The number of weekly claims will be huge again. Also, the March housing starts report will likely show weakness due to COVID-19.

The Philly Fed manufacturing survey is for April, and will probably be very weak.

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for a 6.500 million initial claims, down from 6.606 million the previous week.

• Also at 8:30 AM, Housing Starts for March. The consensus is for 1.307 million SAAR, down from 1.599 million SAAR in February.

• Also at 8:30 AM, the Philly Fed manufacturing survey for April. The consensus is for a reading of -30.0, down from -12.7.

by Calculated Risk on 4/15/2020 05:08:00 PM

Test-and-trace is a key criterion in starting to reopen the country.   My current guess is test-and-trace will require around 300,000 tests per day at first since the US is far behind the curve.  Some scientists believe we need around 800,000 tests per day.

Note: The Financial Times reports that Germany is doing more than 50,000 tests per day (with about one-fourth of the US population). That would be 200,000 in the US.  I rounded up to 300,000 per day since the US is so behind on testing. But there are recommendations that Germany needs 200,000 tests per day to do test-and-trace.  (800,000 adjusted for population).

This is just test results reported daily.

There were 161,135 test results reported over the last 24 hours.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 18.7% (red line).  The US probably needs enough tests to push  the percentage below 5% (probably much lower based on testing in New Zealand).

All experts agree: We need many more tests!

by Calculated Risk on 4/15/2020 02:04:00 PM

Fed's Beige Book "This report was prepared at the Federal Reserve Bank of Boston based on information collected on or before April 6, 2020."

Economic activity contracted sharply and abruptly across all regions in the United States as a result of the COVID-19 pandemic. The hardest-hit industries—because of social distancing measures and mandated closures—were leisure and hospitality, and retail aside from essential goods. Most Districts reported declines in manufacturing, but cited significant variation across industries. Producers of food and medical products reported strong demand but faced both production delays, due to infection-prevention measures, and supply chain disruptions. Some other manufacturing industries, such as autos, mostly shut down. The energy sector, suffering from low prices, reduced investment and output. Districts reporting on loan demand said it was high, both from companies accessing credit lines and from households refinancing mortgages. All Districts reported highly uncertain outlooks among business contacts, with most expecting conditions to worsen in the next several months.
...
Employment declined in all Districts, steeply in many cases, as the COVID-19 pandemic affected firms in many sectors. Employment cuts were most severe in the retail and leisure and hospitality sectors, where most Districts reported widespread mandatory closures and steep falloffs in demand. Many Districts said severe job cuts were widespread, including the manufacturing and energy sectors. Contacts in several Districts noted they were cutting employment via temporary layoffs and furloughs that they hoped to reverse once business activity resumes. The near-term outlook was for more job cuts in coming months.
emphasis added

A few excerpts from the regional reports on real estate:

Boston: Real estate activity in the region paused in March.

Atlanta: Housing activity softened, and commercial real estate decelerated.

San Francisco: The residential real estate market was mixed, but grew slightly overall.

by Calculated Risk on 4/15/2020 11:25:00 AM

From the NMHC: Rent Payment Tracker Finds Rent Payment Rate at 93 Percent of Prior Month

The National Multifamily Housing Council (NMHC) found that 84 percent of apartment households made a full or partial rent payment by April 12 in its second survey of 11.5 million units of professionally managed apartment units across the country, up 15 percentage points from April 5.

NMHC’s Rent Payment Tracker numbers also examined historical numbers and found that 90 percent of renters made full or partial payments from April 1-12, 2019, and 91 percent of renters in March 1-12, 2020. The latest tracker numbers reflect a payment rate of 93 percent compared to the same time last month. These data encompass a wide variety of market-rate rental properties, which can vary by size, type and average rental price.

“We are pleased to see that it appears that the vast majority of apartment residents who can pay their rent are doing so to help ensure that their properties can continue to operate safely and so apartment owners can help residents who legitimately need help,” said Doug Bibby, President of NMHC. “Unfortunately, unemployment levels are continuing to rise and delays have been reported in getting assistance to residents, which could affect May’s rent levels. It is our hope that, as residents begin receiving the direct payments and the enhanced unemployment benefits the federal government passed, we will continue to see improvements in rent payments.”
…
"History offers us no frame of reference for the truly unprecedented economic situation we find ourselves in,” said Bibby. "With apartment firms stepping up to support their residents by waiving late fees, creating flexible payment plans and offering other creative solutions for residents impacted by COVID-19, we expected more renters to pay later in the month than has historically been the case. The increase in this week’s number over last week’s, however, shows that apartment residents are continuing to pay rent despite the financial challenges facing them.”
emphasis added

CR Note: I've noted before that a key goal of disaster relief is to fill the economic hole caused by the disaster.   There has been a sudden stop in economic activity, however the financial world continues.  Some people are advocating suspending paying bills, such as rents, mortgages, insurance, credit card, bond payments, and other bills during the crisis.  This is a terrible idea. We don’t want to add a financial crisis, on top of an economic crisis, on top of a healthcare crisis. If we have a financial crisis too, it will be much hard to eventually reopen the economy.   So it is good news that most people are still paying their rents (and many more will probably catch up once they receive Federal benefits).  The Federal government needs to keep filling the economic hole.

by Calculated Risk on 4/15/2020 10:07:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 30, down from 72 in March. Any number below 50 indicates that more builders view sales conditions as poor than good.

From NAHB: Builder Confidence Posts Historic Decline on Coronavirus Pandemic

Reflecting the growing effects of the COVID-19 pandemic, builder confidence in the market for newly-built single-family homes plunged 42 points in April to 30, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released today. The decline in April was the largest single monthly change in the history of the index and marks the lowest builder confidence reading since June 2012. It is also the first time that builder confidence has been in negative territory (below 50) since June 2014.

“This unprecedented drop in builder confidence is due exclusively to the coronavirus outbreak across the nation, as unemployment has skyrocketed and gaps in the supply chain have hampered construction activities,” said NAHB Chairman Dean Mon.
...
The HMI index gauging current sales conditions dropped 43 points to 36, the component measuring sales expectations in the next six months fell 39 points to 36 and the gauge charting traffic of prospective buyers also decreased 43 points to 13.

Looking at the monthly averages regional HMI scores, the Northeast fell 45 points in April to 19, the Midwest dropped 42 points to 25, the South fell 42 points to 34 and the West dropped 47 points to 32.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was well below the consensus forecast. This survey took place between April 1 and April 13 and shows the impact of COVID-19.

Note: The graph shows the 2020 recession starting in March 2020.

by Calculated Risk on 4/15/2020 09:20:00 AM

From the Fed: Industrial Production and Capacity Utilization

Total industrial production fell 5.4 percent in March, as the COVID-19 (coronavirus disease 2019) pandemic led many factories to suspend operations late in the month. Manufacturing output fell 6.3 percent; most major industries posted decreases, with the largest decline registered by motor vehicles and parts. The decreases for total industrial production and for manufacturing were their largest since January 1946 and February 1946, respectively. The indexes for utilities and mining declined 3.9 percent and 2.0 percent, respectively. At 103.7 percent of its 2012 average, the level of total industrial production in March was 5.5 percent lower than a year earlier. Capacity utilization for the industrial sector decreased 4.3 percentage points to 72.7 percent in March, a rate that is 7.1 percentage points below its long-run (1972–2019) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 10.3 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 72.7% is 7.1% below the average from 1972 to 2017 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production decreased in March to  103.7. This is 19.1% above the recession low, and 1.5% below the pre-recession peak.

The change in industrial production was below consensus expectations.

Note: The graphs show the 2020 recession starting in March 2020.

by Calculated Risk on 4/15/2020 08:46:00 AM

From the NY Fed: Empire State Manufacturing Survey

Business activity plunged in New York State, according to firms responding to the April 2020 Empire State Manufacturing Survey. The headline general business conditions index plummeted fifty-seven points to -78.2, its lowest level in the history of the survey—by a wide margin. New orders and shipments declined at a record pace.
...
Labor market indicators were extremely weak. The index for number of employees fell fifty-four points to -55.3, with nearly 60 percent of respondents indicating lower employment levels. The average workweek index fell to -61.6, with 65 percent reporting shorter workweeks.
emphasis added

This was well below the consensus forecast.

by Calculated Risk on 4/15/2020 08:38:00 AM

On a monthly basis, retail sales decreased 8.7 percent from February to March (seasonally adjusted), and sales were down 6.2 percent from March 2019.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for March 2020, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $483.1 billion, a decrease of 8.7 percent from the previous month, and 6.2 percent below March 2019.
…
Due to recent events surrounding COVID-19, many businesses are operating on a limited capacity or have ceased operations completely. The Census Bureau has monitored response and data quality and determined estimates in this release meet publication standards.
emphasis added

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were down 8.0% in March.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail and Food service sales, ex-gasoline, decreased by 4.9% on a YoY basis.

The decrease in March was well below expectations, however sales in January and February were revised up, combined.

Note: The graphs show the 2020 recession starting in March 2020.

by Calculated Risk on 4/15/2020 07:00:00 AM

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

Mortgage applications increased 7.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 10, 2020.

... The Refinance Index increased 10 percent from the previous week and was 192 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 35 percent lower than the same week one year ago.
...
“The 30-year fixed mortgage rate decreased last week to the lowest level in MBA’s survey at 3.45 percent. The decline in rates – despite Treasury yields rising – is a sign that the mortgage-backed securities (MBS) market is stabilizing and lenders are successfully working through their lending pipelines,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Refinance activity has experienced a volatile four-week period, but did increase 10 percent last week. Refinancing will continue to be beneficial for the many borrowers able to lower their monthly payments during this time of economic distress.”

Added Kan, “Purchase applications decreased less than 2 percent last week – the fifth straight weekly decline. Compared to the first week of March, the purchase index was down around 35 percent, as the economic downturn and nationwide mitigation practices to slow the spread of COVID-19 have disrupted the spring homebuying season. The purchase market is still expected to rebound, as long as the public health measures to reduce the pandemic’s spread are successful and result in a broader recovery.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.45 percent from 3.49 percent, with points increasing to 0.29 from 0.28 (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.

The refinance index has been very volatile recently depending on rates and liquidity.

Note the Fed has stepped up buying of MBS last month and that helped with liquidity.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is down 35% year-over-year.

Purchase activity has fallen sharply.

Note: Red is a four-week average (blue is weekly).