by Calculated Risk on 7/17/2020 08:37:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,186,000. This is 17.3 percent above the revised May estimate of 1,011,000, but is 4.0 percent below the June 2019 rate of 1,235,000. Single-family housing starts in June were at a rate of 831,000; this is 17.2 percent above the revised May figure of 709,000. The June rate for units in buildings with five units or more was 350,000.

Building Permits:
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,241,000. This is 2.1 percent above the revised May rate of 1,216,000, but is 2.5 percent below the June 2019 rate of 1,273,000. Single-family authorizations in June were at a rate of 834,000; this is 11.8 percent above the revised May figure of 746,000. Authorizations of units in buildings with five units or more were at a rate of 368,000 in June.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) were up in June compared to May.   Multi-family starts were down 4.1% year-over-year in June.

Single-family starts (blue) increased in June, and were down 3.9% year-over-year.

The second graph shows total and single unit starts since 1968.

The second graph shows the huge collapse following the housing bubble, and then eventual recovery (but still historically low).

Total housing starts in June were at expectations, and starts in May were revised up.

Residential construction is considered an essential business, and held up better than some other sectors of the economy, but was still negatively impacted by COVID-19.

I'll have more later …

by Calculated Risk on 7/16/2020 09:03:00 PM

Friday:
• At 8:30 AM ET, Housing Starts for June. The consensus is for 1.180 million SAAR, up from 0.974 million SAAR in May.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Preliminary for July).

• Also at 10:00 AM, State Employment and Unemployment (Monthly) for June 2020

by Calculated Risk on 7/16/2020 05:57:00 PM

The US is now conducting over 700,000 tests per day. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly (or take actions to push down the number of new infections).

There were 831,918 test results reported over the last 24 hours. This is a new record.

There were 71,229 positive tests. This is a new record.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 8.6% (red line).

For the status of contact tracing by state, check out testandtrace.com.

by Calculated Risk on 7/16/2020 01:36:00 PM

A few comments:

On a monthly basis, most analysts focus on initial unemployment claims for the BLS reference week of the employment report.  For July, the BLS reference week will be July 12th through the 18th, and initial claims for that week will be released next week, on Thursday, July 23rd.

Note that a couple of states have not released Pandemic Unemployment Assistance (PUA) claims this week, so the number of PUA claims is too low. However, there may also be processing delays that are impacting the numbers.

Note: The seasonal adjustment is likely off this year due to the pandemic. If we look at initial claims Not Seasonally Adjusted (NSA), claims increased sharply this week to 1,503,892 from 1,395,081 the previous week. That could be more representative of what is actually happening.

Continued claims decreased last week to 17,338,000 (SA) from 17,760,000 (SA) the previous week. However, continued claims are down 7.6 million from the peak, suggesting a large number of people have returned to their jobs (as the employment report showed).

The following graph shows regular initial unemployment claims (blue) and PUA claims (red) since early February.

Click on graph for larger image.

This was the 17th consecutive week with extraordinarily high initial claims.

It is possible that we are starting to see some layoffs associated with the end of some early Payroll Protection Plan (PPP) participants.

We should start seeing layoffs associated with the rising COVID cases and hospitalization in some states (like Arizona, California, Florida and Texas).  With bar and restaurant closings in some areas, we will probably see more initial claims in those states this week, and that will show up in the report in the coming weeks.

Note that these states don't have to lockdown to see a decline in economic activity. As Merrill Lynch economists noted: "Most of the slowdown occurred due to voluntary social distancing rather than lockdown policies."

by Calculated Risk on 7/16/2020 01:34:00 PM

Note: Be careful with diffusion indexes. This shows a rebound off the bottom - some improvement from May to June to July - but doesn't show the level of activity.

From the Philly Fed: July 2020 Manufacturing Business Outlook Survey

Manufacturing activity in the region continued to expand this month, according to firms responding to the July Manufacturing Business Outlook Survey. The survey’s current indicators for general activity, new orders, and shipments showed positive readings for the second consecutive month, coinciding with the phased reopening of the economy in our region. The employment index reached positive territory for the first time since March. Although future indicators for general activity, new orders, and shipments declined from last month’s readings, the indexes remained elevated, suggesting that the firms expect overall growth over the next six months.

The diffusion index for current activity edged down 3 points to 24.1 in July, its second consecutive positive reading after reaching long-term lows in the spring … The firms reported increases in manufacturing employment overall for the first time since March, as the current employment index rose 24 points to 20.1 this month, its highest reading since October.
emphasis added

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

These early reports suggest the ISM manufacturing index will increase further in July.

by Calculated Risk on 7/16/2020 11:01:00 AM

From HotelNewsNow.com: STR: US hotel results for week ending 11 July

U.S. hotel performance data for the week ending 11 July showed mostly flat occupancy and lower room rates from the previous week, according to STR.

5-11 July 2020 (percentage change from comparable week in 2019):

• Occupancy: 45.9% (-38.0%)
• Average daily rate (ADR): US$97.33 (-26.8%)
• Revenue per available room (RevPAR): US$44.67 (-54.6%)
emphasis added

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

The occupancy rate for the last four weeks was 43.9%, 46.2%, 45.6% and 45.9%. Flattening out well below the median for this week of 75%.

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).

Usually hotel occupancy starts to pick up seasonally in early June. So some of the recent pickup might be seasonal (summer travel).   Note that summer occupancy usually peaks at the end of July or in early August.

According to STR, the improvement appears related mostly to leisure travel as opposed to business travel.

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

by Calculated Risk on 7/16/2020 10:08:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 72, up from 58 in June. Any number above 50 indicates that more builders view sales conditions as good than poor.

From NAHB: Builder Confidence Rallies to Pre-Pandemic Level in July

In a strong signal that the housing market is ready to lead a post-COVID economic recovery, builder confidence in the market for newly-built single-family homes jumped 14 points to 72 in July, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released today. The HMI now stands at the solid pre-pandemic reading in March before the outbreak affected much of the nation.

“Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean,” said NAHB Chairman Chuck Fowke. “Moreover, builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring. Low interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.”

“While the housing market is clearly rebounding, challenges exist,” said NAHB Chief Economist Robert Dietz. “Lumber prices are at a two-year high and builders are reporting rising costs for other building materials while lot and skilled labor availability issues persist. Nonetheless, the important story of the changing geography of housing demand is benefiting new construction. New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead. Flight to the suburbs is real.”
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was above the consensus forecast.

by Calculated Risk on 7/16/2020 08:48:00 AM

On a monthly basis, retail sales increased 7.5 percent from May to June (seasonally adjusted), and sales were up 1.1 percent from June 2019.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for June 2020, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $524.3 billion, an increase of 7.5 percent from the previous month, and 1.1 percent above June 2019. Total sales for the April 2020 through June 2020 period were down 8.1 percent from the same period a year ago. The April 2020 to May 2020 percent change was revised from up 17.7 percent to up 18.2 percent.
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 up 7.0% in June.

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, increased by 2.7% on a YoY basis.

The increase in June was above expectations, and sales in April and May were revised up.

by Calculated Risk on 7/16/2020 08:37:00 AM

The DOL reported:

In the week ending July 11, the advance figure for seasonally adjusted initial claims was 1,300,000, a decrease of 10,000 from the previous week's revised level. The previous week's level was revised down by 4,000 from 1,314,000 to 1,310,000. The 4-week moving average was 1,375,000, a decrease of 60,000 from the previous week's revised average. The previous week's average was revised down by 2,250 from 1,437,250 to 1,435,000.
emphasis added

The previous week was revised down.

This does not include the 928,488 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 1,375,000.

Initial weekly claims was at the consensus forecast of 1.3 million initial claims and the previous week was revised down.

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

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

Continued claims decreased to 17,338,000 (SA) from 17,760,000 (SA) last week and will likely stay at a high level until the crisis abates.

Note: There are an additional 14,282,999 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 7/15/2020 08:40:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for a 1.200 million initial claims, down from 1.314 million the previous week.

• Also at 8:30 AM, Retail sales for June is scheduled to be released.  The consensus is for 5.5% increase in retail sales.

• Also at 8:30 AM, the Philly Fed manufacturing survey for July. The consensus is for a reading of 20.0, down from 27.5.

• At 10:00 AM, The July NAHB homebuilder survey. The consensus is for a reading of 60, up from 58. Any number above 50 indicates that more builders view sales conditions as good than poor.