by Calculated Risk on 7/30/2020 08:46:00 AM

The DOL reported:

In the week ending July 25, the advance figure for seasonally adjusted initial claims was 1,434,000, an increase of 12,000 from the previous week's revised level. The previous week's level was revised up by 6,000 from 1,416,000 to 1,422,000. The 4-week moving average was 1,368,500, an increase of 6,500 from the previous week's revised average. The previous week's average was revised up by 1,750 from 1,360,250 to 1,362,000
emphasis added

The previous week was revised up.

This does not include the 829,697 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 increased to 1,368,500.

Initial weekly claims was slightly below the consensus forecast of 1.5 million initial claims and the previous week was revised up.

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 increased to 17,018,000 (SA) from 16,151,000 (SA) last week and will likely stay at a high level until the crisis abates. Note that continued claims are released with a one week lag, but this increase (during the BLS reference week for the employment report) suggests weakness in the labor market.

Note: There are an additional 12,413,322 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 7/30/2020 08:35:00 AM

Note: This is the advance release. Most analysts expect downward revisions as more data become available.

From the BEA: Gross Domestic Product, Second Quarter 2019 (Advance Estimate) and Annual Update

Real gross domestic product (GDP) decreased at an annual rate of 32.9 percent in the second quarter of 2020, according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 5.0 percent.

The GDP estimate released today is based on source data that are incomplete or subject to further revision by the source agency. The "second" estimate for the second quarter, based on more complete data, will be released on August 27, 2020.
...
The decrease in real GDP reflected decreases in personal consumption expenditures (PCE), exports, private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending that were partly offset by an increase in federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased.

The decrease in PCE reflected decreases in services (led by health care) and goods (led by clothing and footwear). The decrease in exports primarily reflected a decrease in goods (led by capital goods). The decrease in private inventory investment primarily reflected a decrease in retail (led by motor vehicle dealers). The decrease in nonresidential fixed investment primarily reflected a decrease in equipment (led by transportation equipment), while the decrease in residential investment primarily reflected a decrease in new single-family housing.
emphasis added

The advance Q2 GDP report, at minus 32.9% annualized, was close to expectations.

Personal consumption expenditures (PCE) decreased at 34.6% annualized rate in Q2, down from 6.9% decrease in Q1.  Residential investment (RI) decreased at a 38.7% rate in Q2. Equipment investment decreased at a 37.7% annualized rate, and investment in non-residential structures decreased at a 34.9% pace.

I'll have more later ...

by Calculated Risk on 7/29/2020 08:39:00 PM

Note that GDP is reported on an annual rate basis. So a 34% decline in GDP doesn't mean that the economy shrunk by one-third. This will mean the economy declined close to 10% in Q2 from Q1.

The largest quarterly decline (since date reported in 1947), reported on an annual rate basis, was -10% in Q1 1958. The worst quarter during the financial crisis, on an annual rate basis, was -8.4%. The decline in Q2 will dwarf those previous declines.

The worst annual decline was in 1932 during the Great Depression (12.9%), but the quarterly data isn't available for that period.

Thursday:
• At 8:30 AM ET, Gross Domestic Product, 2nd quarter 2020 (advance estimate), and annual update. The consensus is that real GDP decreased 34.0% annualized in Q2, down from -5.0% in Q1.

• Also at 8:30 AM, The initial weekly unemployment claims report will be released. The early consensus is for a 1.550 million initial claims, up from 1.416 million the previous week.

by Calculated Risk on 7/29/2020 05:54:00 PM

Note: California is still having a data problem today, so the case and test counts are low for California.

California Department of Public Health (CDPH) is experiencing an issue processing electronic laboratory reports from some labs. As a result, there are reduced tests and cases reported due to the delay with receiving these reports.

The US is now reporting 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 839,868 test results reported over the last 24 hours.

There were 69,189 positive tests.

The seven day average of daily deaths has moved higher for the 14th consecutive day to over 1,000 per day. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 8.2% (red line).

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

And check out COVID Exit Strategy to see how each state is doing.

by Calculated Risk on 7/29/2020 02:02:00 PM

Fed Chair Powell press conference video here starting at 2:30 PM ET.

FOMC Statement:

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles.
emphasis added

by Calculated Risk on 7/29/2020 10:16:00 AM

Note on the question below on lost income is always since March 13, 2020 - so this percentage will not decline - but might increase.

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.

This will be updated weekly, and the Census Bureau released the recent 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.

The data was collected between July 16 and July 21, 2020.

Definitions:

Loss in employment income: "Percentage of adults in households where someone had a loss in employment income since March 13, 2020."

This number is since March 13, and has increased to 51.1% from 47% in the initial survey.

Expected Loss in Employment Income: "Percentage of adults who expect someone in their household to have a loss in employment income in the next 4 weeks."

35.2% of households expect a loss in income over the next 4 weeks.   This is down from 38.8% in late April, but up from 31% five weeks ago.   This might suggest the job gains stalled after the data was collected for the June employment report.

Food Scarcity: Percentage of adults in households where there was either sometimes or often not enough to eat in the last 7 days.

12.1% of households report food scarcity.  This has increased over the last couple of weeks.

Delayed Medical Care: "Percentage of adults who delayed getting medical care because of the COVID-19 pandemic in the last 4 weeks."

40.1% of households report they delayed medical care over the last 4 weeks.

Housing Insecurity: "Percentage of adults who missed last month’s rent or mortgage payment, or who have slight or no confidence that their household can pay next month’s rent or mortgage on time."

26.5% of households reported they missed last month's rent or mortgage payment (or little confidence in making this month's payment).  This has increased from a low of 22.1% in the survey of June 4th - June 9th.

Without an extension of the extra unemployment benefits, we will likely see a significant increase in housing stress.

K-12 Educational Changes: "Percentage of adults in households with children in public or private school, where classes were taught in a distance learning format, or changed in some other way."

Essentially all households with children are reporting were not being taught in a normal format.

by Calculated Risk on 7/29/2020 10:03:00 AM

From the NAR: Pending Home Sales Mount 16.6% Increase in June

Pending home sales continued to ascend in June, sustaining two consecutive months of increases in contract activity, according to the National Association of Realtors®. Each of the four major regions experienced growth in month-over-month pending home sales transactions, while the Northeast was the only region to not record increases in year-over-year pending transactions.

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, rose 16.6% to 116.1 in June. Year-over-year, contract signings rose 6.3%. An index of 100 is equal to the level of contract activity in 2001.
...
The Northeast PHSI grew 54.4% to 95.4 in June, but was still down 0.9% from a year ago. In the Midwest, the index rose 12.2% to 110.9 last month, up 5.1% from June 2019.

Pending home sales in the South increased 11.9% to an index of 140.3 in June, up 10.3% from June 2019. The index in the West jumped 11.7% in June to 99.6, up 4.7% from a year ago.
emphasis added

This was slightly above expectations for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in July and August.

by Calculated Risk on 7/29/2020 07:00:00 AM

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

Mortgage applications decreased 0.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 24, 2020.

... The Refinance Index decreased 0.4 percent from the previous week and was 121 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 21 percent higher than the same week one year ago.

“Mortgage rates remained near record lows for conventional loans last week, and refinances in the conventional sector continued to slightly increase. However, rates on FHA loans rose, leading to an almost 18 percent drop in FHA refinances,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Homebuyers stepped back slightly, and there was a larger drop in purchase application volume for FHA, VA, and USDA loans. This trend, along with the fact that average loan sizes are increasing, indicate that prospective first-time buyers are being impacted more by the rising economic stress caused by the resurgence in COVID-19 cases, as well as the uncertainty on how the next round of government support will take shape.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) remained unchanged at 3.20 percent, with points increasing to 0.37 from 0.35 (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.

But with record low rates, the index is up significantly from last year.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 21% year-over-year.

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

by Calculated Risk on 7/28/2020 09:09:00 PM

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

• At 10:00 AM, Pending Home Sales Index for June. The consensus is for a 15.3% increase in the index.

• At 2:00 PM, FOMC Meeting Announcement. No change to policy is expected at this meeting.

• At 2:30 PM, Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

by Calculated Risk on 7/28/2020 07:47:00 PM

The Case-Shiller house price indexes for May were released earlier today. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Matthew Speakman at Zillow: May Case-Shiller Results and June Forecast: Housing Doesn't Blink in Face of Pandemic

Record-low mortgage rates and a shortage of available homes have fueled competition amongst buyers in the spring and early summer, leading to homes flying off the market at their fastest pace in years and home prices to continue to rise. The savings afforded by record-low mortgage rates allows those who are still in a strong financial position the opportunity to buy a home – and might also allow them to pursue homes that were previously above their price range. Some, of course, are not nearly as fortunate. Data since May suggest that demand and price dynamics have continued, but substantial risks have emerged in recent weeks. A resurgence in coronavirus case counts, and the broader economic uncertainty that accompanies it, poses new risks to the outlook for home prices, and seasonal factors should start to erode buyer demand. It’s likely that the housing market will feel the effects of this downturn at some point, but a shortage of inventory and low rates should continue to place upward pressure on prices.

... S&P Dow Jones Indices is expected to release data for the June S&P CoreLogic Case-Shiller Indices on Tuesday, August 25.
emphasis added

The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 4.3% in June, down from 4.5% in May.

The Zillow forecast is for the 20-City index to be up 3.4% YoY in June from 3.7% in May, and for the 10-City index to increase to be up 2.8% YoY compared to 3.1% YoY in May.