by Calculated Risk on 8/13/2020 10:20:00 AM

A few comments:

On a monthly basis, in normal times, most analysts focus on initial unemployment claims for the BLS reference week of the employment report. For August, the BLS reference week is August 9th through the 15th (the current week), and initial claims for this week will be released next week.

However, continued claims are probably much more useful now. Continued claims are released with a one week lag, so continued claims for the reference week will be released in two weeks. Continued claims are down 1.5 million from the reference week in July, suggesting some increase in employment in August.

Continued claims decreased last week to 15,486,000 (SA) from 16,090,000 (SA) the previous week. Continued claims are now down 9.4 million from the peak, suggesting a large number of people have returned to their jobs (as the last three employment reports showed).

There are another 10,723,396 people receiving continued PUA.

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 21st consecutive week with extraordinarily high initial claims, however initial claims have declined over the last two weeks.

We are probably seeing some layoffs related to the higher level of COVID cases and also from the end of some Payroll Protection Programs (PPP).

by Calculated Risk on 8/13/2020 08:38:00 AM

The DOL reported:

In the week ending August 8, the advance figure for seasonally adjusted initial claims was 963,000, a decrease of 228,000 from the previous week's revised level. The previous week's level was revised up by 5,000 from 1,186,000 to 1,191,000. The 4-week moving average was 1,252,750, a decrease of 86,250 from the previous week's revised average. The previous week's average was revised up by 1,250 from 1,337,750 to 1,339,000.
emphasis added

The previous week was revised up.

This does not include the 488,622 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 1,252,750.

Initial weekly claims was below the consensus forecast of 1.100 million initial claims, however the previous week was revised up slightly.

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 15,486,000 (SA) from 16,090,000 (SA) last week and will likely stay at a high level until the crisis abates.

Note: There are an additional 10,723,396 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 8/12/2020 09:10:00 PM

Thursday:
• At 8:30 AM, The initial weekly unemployment claims report will be released. The early consensus is for a 1.100 million initial claims, down from 1.186 million the previous week.

by Calculated Risk on 8/12/2020 07:09:00 PM

SPECIAL NOTE: North Carolina removed 220,000 tests from its cumulative total (a correction). I've added 220,000 to the total today to make the percent positive correct.

The US is now mostly 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 683,291 test results reported over the last 24 hours.

There were 55,742 positive tests.

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 8/12/2020 12:38:00 PM

From the HAR: July Home Sales Across Houston Reach Record Territory

A continued surge in closings from homes that went under contract after the lifting of COVID-19 stay-at-home measures propelled Houston real estate into record territory in July – surpassing June’s stronger-than-expected performance. However, a dwindling supply of homes caused by the burst of homebuying and home sellers holding back amid the ongoing COVID-19 crisis will make it difficult to keep up with the strong buyer demand.

According to the latest Houston Association of Realtors (HAR) Market Update, 10,975 single-family homes sold in July compared to 8,921 a year earlier. That translated to a 23.0 percent increase. That is a record sales volume for a single month and marks the first time that figure has surpassed 10,000.
...
Sales of all property types totaled 13,043 – another record high – up 25.0 percent from July 2019. Total dollar volume for the month leapt 33.8 percent to $4.1 billion. Consumers also sent lease properties into positive territory in July.
emphasis added

Inventory declined 19.4% year-over-year from 44,722 in July 2019 to 36,055 in July 2020.

Note that the closed sales in July were for contracts that were mostly signed in May and June.

by Calculated Risk on 8/12/2020 11:24:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% July. The 16% trimmed-mean Consumer Price Index rose 0.4% in July. "The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report".

Note: The Cleveland Fed released the median CPI details for July here. Motor fuel increased at a 90% annualized rate in July.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.7%, the trimmed-mean CPI rose 2.4%, and the CPI less food and energy rose 1.6%. Core PCE is for June and increased 1.0% year-over-year.

Even with the sharp increase in inflation in July, overall inflation will not be a concern during the crisis.

by Calculated Risk on 8/12/2020 10:14:00 AM

The BLS reported this morning:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 1.0 percent over the last 12 months to an index level of 252.636 (1982-84=100). For the month, the index rose 0.6 percent prior to seasonal adjustment.

CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U, and is not seasonally adjusted (NSA).

• In 2019, the Q3 average of CPI-W was 250.200.

The 2019 Q3 average was the highest Q3 average, so we only have to compare Q3 this year to last year.

Click on graph for larger image.

This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.

Note: The year labeled for the calculation, and the adjustment is effective for December of that year (received by beneficiaries in January of the following year).

CPI-W was up 1.0% year-over-year in July, and although this is very early - we need the data for August and September - my current guess is COLA will probably increase over 1% this year, but lower than the 1.6% last year, and the smallest increase since 2016.

Contribution and Benefit Base

The contribution base will be adjusted using the National Average Wage Index. This is based on a one year lag. The National Average Wage Index is not available for 2019 yet, but wages probably increased again in 2019. If wages increased the same as in 2018, then the contribution base next year will increase to around $142,700 in 2021, from the current $137,700.

Remember - this is an early look. What matters is average CPI-W for all three months in Q3 (July, August and September).

by Calculated Risk on 8/12/2020 08:31:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in July on a seasonally adjusted basis, the same increase as in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.0 percent before seasonal adjustment.

The gasoline index continued to rise in July after increasing sharply in June and accounted for about one quarter of the monthly increase in the seasonally adjusted all items index. ...

The index for all items less food and energy rose 0.6 percent in July, its largest increase since January 1991. ...

The all items index increased 1.0 percent for the 12 months ending July, a larger increase than the 0.6-percent rise for the period ending June. The index for all items less food and energy increased 1.6 percent over the last 12 months.
emphasis added

Overall inflation was above expectations in July. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 8/12/2020 07:00:00 AM

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

Mortgage applications increased 6.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 7, 2020.

... The Refinance Index increased 9 percent from the previous week and was 47 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 22 percent higher than the same week one year ago.

Mortgage rates fell across the board last week, as investors grew less optimistic of the economic rebound given the resurgence of virus cases. Loan types such as the 30-year fixed, 15-year fixed, and jumbo all reached survey lows. Refi activity responded to these lower rates, with the refi share reaching almost 66 percent of all applications, its highest level since May. And the refi index jumped 9 percent, reaching its highest level since April, as both conventional and government applications for refinances increased,” said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. “Home purchase activity continued its strong run with a 2 percent increase over the week and was up around 22 percent compared to the same week a year ago. While this was still positive news for the purchase market, the gradual slowdown in the improvement in the job market and tight housing inventory remain a concern for the coming months, even as low mortgage rates continue to provide support."
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.06 percent from 3.14 percent, with points decreasing to 0.33 from 0.39 (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 22% year-over-year.

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

by Calculated Risk on 8/11/2020 08:26:00 PM

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

• At 8:30 AM, The Consumer Price Index for July from the BLS. The consensus is for a 0.3% increase in CPI, and a 0.2% increase in core CPI.