by Calculated Risk on 5/21/2020 08:57:00 AM

From the Philly Fed: May 2020 Manufacturing Business Outlook Survey

Manufacturing firms reported continued weakness in regional manufacturing activity this month, according to results from the Manufacturing Business Outlook Survey. Despite remaining well below zero, the survey’s current indicators for general activity, new orders, shipments, and employment rose this month after reaching long-term low readings in April. The firms expect the current slump in manufacturing activity to last less than six months, as the broadest indicator of future activity strengthened further from last month’s reading; furthermore, the firms continue to expect overall growth in new orders, shipments, and employment over the next six months.

After reaching a 40-year low in April, the diffusion index for current general activity rose 13 points to -43.1, its third consecutive negative reading. The percentage of firms reporting decreases this month (58 percent) far exceeded the percentage reporting increases (15 percent). … The firms continued to report overall decreases in manufacturing employment this month, but the current employment index increased 31 points to -15.3.
emphasis added

This was well close to the consensus forecast. Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through May), and five Fed surveys are averaged (blue, through April) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through April (right axis).

These early reports suggest the ISM manufacturing index will show significant contraction in May.

by Calculated Risk on 5/21/2020 08:37:00 AM

Update Another error this week: "In Massachusetts, PUA initial claims for the week ending May 16 were 115,952." With MA correction, total PUA claims is 1,158,081.

The DOL reported:

In the week ending May 16, the advance figure for seasonally adjusted initial claims was 2,438,000, a decrease of 249,000 from the previous week's revised level. The previous week's level was revised down by 294,000 from 2,981,000 to 2,687,000. The 4-week moving average was 3,042,000, a decrease of 501,000 from the previous week's revised average. The previous week's average was revised down by 73,500 from 3,616,500 to 3,543,000.
emphasis added

The previous week was revised down.

This does not include the 2,226,921 initial claims for Pandemic Unemployment Assistance (PUA).

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 decreased to 3,042,000.

This was close to the consensus forecast of 2.5 million.

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 25,073,000 (SA) and will increase further over the next couple of weeks - and likely stay at a high level until the crisis abates.

Note: There are an additional 6,121,221 receiving Pandemic Unemployment Assistance (PUA). This is a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance.

by Calculated Risk on 5/21/2020 07:00:00 AM

Note: Loans in forbearance are counted as delinquent in this survey, so the delinquency rate jumped in April.

From Black Knight: Black Knight’s First Look: Past-Due Mortgages Increase by 1.6 Million in April, Largest Single-Month Increase Ever Recorded; Delinquency Rate Nearly Doubles

• 3.6 million homeowners were past due on their mortgages as of the end of April, the largest number since January 2015

• The number includes both homeowners past due on mortgage payments who are not in forbearance, as well as those in forbearance plans who did not make an April mortgage payment

• At 6.45%, the national delinquency rate nearly doubled (+3.06%) from March, the largest single-month increase ever recorded, and nearly three times the previous single-month record set back in late 2008

• There were declines in cure activity among later-stage delinquencies as well, with the number of seriously delinquent mortgages (90+ days) increasing by 56,000 (+14%) from March

• Both foreclosure starts and foreclosure sales hit record lows in April as moratoriums halted foreclosure activity across the country
emphasis added

According to Black Knight's First Look report for March, the percent of loans delinquent increased 90.2% in April compared to March, and increased 85.8% year-over-year.

The percent of loans in the foreclosure process decreased 3.8% in April and were down 19.3% over the last year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 6.45% in April, up from 3.39% in March.

The percent of loans in the foreclosure process decreased in April to 0.40% from 0.42% in March.

The number of delinquent properties, but not in foreclosure, is up 1,558,000 properties year-over-year, and the number of properties in the foreclosure process is down 48,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	Apr 2020	Mar 2020	Apr 2019	Apr 2018
Delinquent	6.45%	3.39%	3.47%	3.67%
In Foreclosure	0.40%	0.42%	0.50%	0.61%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:	3,400,000	1,792,000	1,812,000	1,885,000
Number of properties in foreclosure pre-sale inventory:	211,000	220,000	259,000	314,000
Total Properties	3,611,000	2,013,000	2,072,000	2,199,000

by Calculated Risk on 5/20/2020 09:36:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for a 2.500 million initial claims, down from 2.981 million the previous week.

• At 8:30 AM, the Philly Fed manufacturing survey for May. The consensus is for a reading of -45.0, up from -56.6.

• At 10:00 AM, Existing Home Sales for April from the National Association of Realtors (NAR). The consensus is for 4.30 million SAAR, down from 5.27 million.

• At 2:30 PM, Speech, Fed Chair Jerome Powell, Opening Remarks, At Fed Listens: How is COVID-19 Affecting Your Community?

by Calculated Risk on 5/20/2020 06:33:00 PM

The Arizona Regional Multiple Listing Service (ARMLS) reports ("Stats Report"):

1) Overall sales were at 6,925 in April, down from 8,626 in March, and down from 9,493 in April 2019. Sales were down 19.7% from March 2020 (last month), and down 27.1% from April 2019.

2) Active inventory was at 13,889, down from 17,804 in April 2019. That is down 22% year-over-year.

3) Months of supply increased to 2.59 in April from 2.11 in March. This remains low.

Sales are reported at the close of escrow, so these sales were mostly signed in February and March.  Sales for May will be negatively impacted by COVID since few contracts were likely signed in April.

by Calculated Risk on 5/20/2020 05:03:00 PM

In addition to having enough tests for test-and-trace, we also need people to conduct the tests.

There is a great new website that tracks the progress of each towards test-and-trace. The website also has resources on how to implement test-and-trace. This includes software, training resources, a calculator for how many people to hire and more. Every state should review this site!

Click on graph for larger image.

This graph is from the test-and-trace website. The graph is interactive, and shows the percent positive tests by state, and the number of contract traces hired and more.

Check it out.

In late April, Dr. Fauci said the US might be able to test 400,000 to 600,000 people per day sometime in May, and  testing is now close to that range. This might be enough to allow test-and-trace in some areas.  However, the US might need more than 900,000 tests per day according to Dr. Jha of Harvard's Global Health Institute.

There were 413,804 test results reported over the last 24 hours.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 5.2% (red line). The US probably needs enough tests to keep  the percentage positive well below 5%. (probably much lower based on testing in New Zealand).

NOTE: A few states are apparently including antibody tests with virus tests. The COVID tracking project is working to straighten that out.

by Calculated Risk on 5/20/2020 02:08:00 PM

From the Fed: Minutes of the Federal Open Market Committee, April 28–29, 2020. A few excerpts:

Participants noted that the coronavirus outbreak was causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health were inducing sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices were holding down consumer price inflation. The disruptions to economic activity here and abroad had significantly affected financial conditions and had impaired the flow of credit to U.S. households and businesses.

Participants judged that the effects of the coronavirus outbreak and the ongoing public health crisis would continue to weigh heavily on economic activity, employment, and inflation in the near term and would pose considerable risks to the economic outlook over the medium term. Participants assessed that the second quarter would likely see overall economic activity decline at an unprecedented rate. Participants relayed information from their Districts that the burdens of the present crisis would fall disproportionately on the most vulnerable and financially constrained households in the economy.
...
Participants noted that recently enacted fiscal programs were crucial for limiting the severity of the economic downturn. In particular, the Cares Act and other legislation, which represented more than $2 trillion in federal spending in total, had provided direct help to households, businesses, and communities. For example, the PPP was providing a financial lifeline to small businesses, the expansion of unemployment benefits was helping restore lost income for laid-off workers, and the Treasury had provided a necessary financial backstop to many Federal Reserve lending facilities. Participants acknowledged that even greater fiscal support may be necessary if the economic downturn persists.
…
A number of participants commented on potential risks to financial stability. Participants were concerned that banks could come under greater stress, particularly if adverse scenarios for the spread of the pandemic and economic activity were realized, and so this sector should be monitored carefully. Participants saw risks to banks and some other financial institutions as exacerbated by high levels of indebtedness among nonfinancial corporations that prevailed before the pandemic; this indebtedness increased these firms' risk of insolvency. The upcoming financial stress tests for banks were seen as important for measuring the ability of large banks to withstand future downside scenarios. A number of participants emphasized that regulators should encourage banks to prepare for possible downside scenarios by further limiting payouts to shareholders, thereby preserving loss-absorbing capital. Indeed, historical loss models might understate losses in this context. A few participants stressed that the activities of some nonbank financial institutions presented vulnerabilities to the financial system that could worsen in the event of a protracted economic downturn and that these institutions and activities should be monitored closely.
…
Members further concurred that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term, and posed considerable downside risks to the economic outlook over the medium term. In light of these developments, members decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. Members noted that they expected to maintain this target range until they were confident that the economy had weathered recent events and was on track to achieve the Committee's maximum employment and price stability goals.
emphasis added

by Calculated Risk on 5/20/2020 11:46:00 AM

From the Census Bureau: Measuring Household Experiences during the Coronavirus (COVID-19) Pandemic

The U.S. Census Bureau, in collaboration with five federal agencies, is in a unique position to produce data on the social and economic effects of COVID-19 on American households. The Household Pulse Survey is designed to deploy quickly and efficiently, collecting data to measure household experiences during the Coronavirus (COVID-19) pandemic. Data will be disseminated in near real-time to inform federal and state response and recovery planning.
…
Data collection for the Household Pulse Survey began on April 23, 2020. The Census Bureau will collect data for 90 days, and release data on a weekly basis. (For the first release, the Census Bureau anticipates it will take two weeks after the first week of data collection to prepare and weight the data; subsequent releases will then be made on a weekly basis.)

This will be updated weekly, and the Census Bureau released the first survey results today. This survey asks about Loss in Employment Income, Expected Loss in Employment Income, Food Scarcity, Delayed Medical Care, Housing Insecurity and K-12 Educational Changes.

Click on graph for larger image.

This survey will be useful in tracking the "opening" of the economy.

This is the first release. The data was collected between April 23 and May 12, 2020.

The data will be updated weekly for the next 90 days.

by Calculated Risk on 5/20/2020 10:38:00 AM

From the National Center for Health Statistics: Births: Provisional Data for 2019. The NCHS reports:

The provisional number of births for the United States in 2019 was 3,745,540, down 1% from the number in 2018 (3,791,712). This is the fifth year that the number of births has declined after the increase in 2014, down an average of 1% per year, and the lowest number of births since 1985.

The provisional general fertility rate (GFR) for the United States in 2019 was 58.2 births per 1,000 females aged 15–44, down 2% from the rate in 2018 (59.1), another record low for the nation. From 2014 to 2019, the GFR declined by an average of 2% per year.
…
The birth rate for teenagers in 2019 was 16.6 births per 1,000 females aged 15–19, down 5% from 2018 (17.4), reaching another record low for this age group. The rate has declined by 60% since 2007 (41.5), the most recent period of continued decline, and 73% since 1991, the most recent peak.

Here is a long term graph of annual U.S. births through 2018.

Click on graph for larger image.

Births have declined for five consecutive years following increases in 2013 and 2014.

Note the amazing decline in teenage births.

With fewer births, and less net migration, demographics will not be as favorable as I was expecting a few years ago.

There is much more in the report.

by Calculated Risk on 5/20/2020 08:32:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture billings continue historic contraction

Demand for design services in April saw its steepest decline on record, according to a new report today from The American Institute of Architects (AIA).

AIA’s Architecture Billings Index (ABI) score of 29.5 for April reflects a decrease in design services provided by U.S. architecture firms (any number below 50 indicates a decrease in billings). During April, both the new project inquiries and design contracts scores also declined significantly, posting scores of 28.4 and 27.6 respectively.

“With the dramatic deceleration that we have seen in the economy since mid-March, it’s not surprising that businesses and households are waiting for signs of stability before proceeding with new facilities,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Once business activity resumes, demand for design services should pick up fairly quickly. Unfortunately, the precipitous drop in demand for design services will have lasting consequences for some firms.”
...
• Regional averages: West (38.1); Midwest (31.2); South (31.1); Northeast (23.0)

• Sector index breakdown: institutional (36.1); multi-family residential (30.3); mixed practice (29.0); commercial/industrial (27.8)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 29.5 in April, down from 33.3 in March. Anything below 50 indicates contraction in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

This is the lowest level for this index on record, even below the lowest level during the Great Recession.