by Calculated Risk on 1/05/2025 12:39:00 PM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2024.

1) Economic growth: Economic growth was probably close to 2.8% in 2024 (around 2.6% Q4-over-Q4).  The FOMC is expecting growth of 1.8% to 2.2% Q4-over-Q4 in 2025. How much will the economy grow in 2025?  Will there be a recession in 2025?

A year ago, I argued that "the economy will avoid recession" in 2024, and that a soft landing was the likely outcome.  Looking at 2025, a recession is mostly off the table.  Of course there are always exogenous events such as another pandemic, super volcanoes, a major meteor strike or even nuclear war.  There are several geopolitical issues that could lead to recession - in Ukraine, the Middle East, and with China.   However, none of those risks appear likely to cause a U.S. recession this year.

Here is a table of the annual change in real GDP since 2005.  Prior to the pandemic, economic activity was mostly in the 2%+ range since 2010.  Given current demographics, that is about what we'd expect: See: 2% is the new 4%..

Note: This table includes both annual change and Q4 over the previous Q4 (two slightly different measures).   For 2024, I used a 2.6% growth rate Q4 over Q4.  (this gives 2.8% real annual growth).  

Real GDP Growth
Year	Annual GDP	Q4 / Q4
2005	3.5%	3.0%
2006	2.8%	2.6%
2007	2.0%	2.1%
2008	0.1%	-2.5%
2009	-2.6%	0.1%
2010	2.7%	2.8%
2011	1.6%	1.5%
2012	2.3%	1.6%
2013	2.1%	3.0%
2014	2.5%	2.7%
2015	2.9%	2.1%
2016	1.8%	2.2%
2017	2.5%	3.0%
2018	3.0%	2.1%
2019	2.6%	3.4%
2020	-2.2%	-1.0%
2021	6.1%	5.7%
2022	2.5%	1.3%
2023	2.9%	3.2%
20241	2.8%	2.6%
1 2024 estimate based on 2.8% Q4 SAAR annualized real growth rate.

  

Real GDP growth is a combination of labor force growth and productivity.  

Productivity varies and is difficult to predict, but the labor force growth will likely be sluggish in 2025.  So, my guess is that real annual GDP growth will be less than most expect, perhaps around 1.5% in 2025.

Here are the Ten Economic Questions for 2025 and a few predictions:

• Question #1 for 2025: How much will the economy grow in 2025? Will there be a recession in 2025?

• Question #2 for 2025: How much will job growth slow in 2025? Or will the economy lose jobs?

• Question #3 for 2025: What will the unemployment rate be in December 2025?

• Question #4 for 2025: What will the participation rate be in December 2025?

• Question #5 for 2025: What will the YoY core inflation rate be in December 2025?

• Question #6 for 2025: What will the Fed Funds rate be in December 2025?

• Question #7 for 2025: How much will wages increase in 2025?

• Question #8 for 2025: How much will Residential investment change in 2025? How about housing starts and new home sales in 2025?

• Question #9 for 2025: What will happen with house prices in 2025?

• Question #10 for 2025: Will inventory increase further in 2025?

by Calculated Risk on 1/05/2025 10:27:00 AM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2024.

2) Employment: Through November 2024, the economy added 2.0 million jobs in 2024. This is down from 3.0 million jobs added in 2023, 4.8 million in 2022, and 7.3 million in 2021 (2021 and 2022 were the two best years ever), but still a solid year for employment gains. How much will job growth slow in 2025? Or will the economy lose jobs?

For review, here is a table of the annual change in total nonfarm, private and public sector payrolls jobs since 1997.  

Change in Payroll Jobs per Year (000s)
	Total, Nonfarm	Private	Public
1997	3,406	3,211	195
1998	3,047	2,734	313
1999	3,183	2,722	461
2000	1,937	1,673	264
2001	-1,734	-2,285	551
2002	-515	-748	233
2003	125	167	-42
2004	2,039	1,892	147
2005	2,527	2,341	186
2006	2,091	1,882	209
2007	1,145	857	288
2008	-3,548	-3,728	180
2009	-5,041	-4,967	-74
2010	1,029	1,245	-216
2011	2,066	2,378	-312
2012	2,172	2,239	-67
2013	2,293	2,360	-67
2014	2,999	2,872	127
2015	2,717	2,567	150
2016	2,327	2,120	207
2017	2,111	2,031	80
2018	2,283	2,156	127
2019	1,988	1,773	215
2020	-9,274	-8,224	-1,050
2021	7,245	6,853	392
2022	4,528	4,229	299
2023	3,013	2,304	709
2024	2,2741	1,7841	4901
112 Month Change Ending in November.

The good news is job market still has momentum heading into 2025.

Click on graph for larger image.

The bad news - for job growth - is that the labor force will grow slowly in 2025!

This graph shows the jobs added per month since January 2021.  

There was strong job growth in 2021 and 2022 as the economy bounced back from the pandemic recession.

Job growth slowed in 2023 but was still historically strong.  Job growth slowed further in 2024 but was still solid.

It appears that population growth will slow to around 1.2 million in 2025 (births minus deaths plus net immigration) and the overall participation rate will decline due to demographics.  That suggests that labor force will grow slowly or might even contract.  That is why I think the unemployment rate will decline.

So, my forecast is for gains of around 1.0 million jobs in 2025.  This will probably be the slowest job growth since 2010 (excluding the 2020 pandemic job losses).  

Here are the Ten Economic Questions for 2025 and a few predictions:

• Question #1 for 2025: How much will the economy grow in 2025? Will there be a recession in 2025?

• Question #2 for 2025: How much will job growth slow in 2025? Or will the economy lose jobs?

• Question #3 for 2025: What will the unemployment rate be in December 2025?

• Question #4 for 2025: What will the participation rate be in December 2025?

• Question #5 for 2025: What will the YoY core inflation rate be in December 2025?

• Question #6 for 2025: What will the Fed Funds rate be in December 2025?

• Question #7 for 2025: How much will wages increase in 2025?

• Question #8 for 2025: How much will Residential investment change in 2025? How about housing starts and new home sales in 2025?

• Question #9 for 2025: What will happen with house prices in 2025?

• Question #10 for 2025: Will inventory increase further in 2025?

by Calculated Risk on 1/04/2025 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Case-Shiller: National House Price Index Up 3.6% year-over-year in October

• Final Look at Local Housing Markets in November and a Look Ahead to December Sales

• Fannie and Freddie: Single Family and Multi-Family Serious Delinquency Rates Increased in November

• Freddie Mac House Price Index Increased in November; Up 4.0% Year-over-year

• Inflation Adjusted House Prices 1.3% Below 2022 Peak

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

by Calculated Risk on 1/04/2025 08:11:00 AM

The key report this week is the December employment report on Friday.

Other key indicators include the November Trade Deficit and November Job Openings.

----- Monday, January 6th -----
No major economic releases scheduled.

----- Tuesday, January 7th -----
8:30 AM: Trade Balance report for November from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is the trade deficit to be $77.5 billion.  The U.S. trade deficit was at $73.8 billion in October.

10:00 AM ET: Job Openings and Labor Turnover Survey for November from the BLS.

This graph shows job openings (black line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in October to 7.74 million from 7.37 million in September.

10:00 AM: the ISM Services Index for December.

----- Wednesday, January 8th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release two weeks of results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for December. This report is for private payrolls only (no government). The consensus is for 143,000, down from 146,000 jobs added in November.

----- Thursday, January 9th -----
The US NYSE and the NASDAQ will be closed in observance of a National Day of Mourning for former President Jimmy Carter.

6:00 AM: NFIB Small Business Optimism Index for December.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a decrease to 210 thousand from 211 thousand last week.

----- Friday, January 10th -----
8:30 AM: Employment Report for December.   The consensus is for 160,000 jobs added, and for the unemployment rate to be unchanged at 4.2%.

There were 227,000 jobs added in November, and the unemployment rate was at 4.2%.

This graph shows the jobs added per month since January 2021.

10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for January)

by Calculated Risk on 1/03/2025 09:11:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

For deaths, I'm currently using 4 weeks ago for "now", since the most recent three weeks will be revised significantly.

Note: "Effective May 1, 2024, hospitals are no longer required to report COVID-19 hospital admissions, hospital capacity, or hospital occupancy data."  So I'm no longer tracking hospitalizations.

COVID Metrics
	Now	Week Ago	Goal
Deaths per Week	432	464	≤3501
1my goals to stop weekly posts. 🚩 Increasing number weekly for Deaths. ✅ Goal met.

Click on graph for larger image.

This graph shows the weekly (columns) number of deaths reported for the last 2 years.

Although weekly deaths met the original goal to stop posting, I'm continuing to post now that deaths are above the goal again - and at a minimum, I'll continue to post through the Winter.  

Weekly deaths have been declining, however weekly deaths are still above the low of 313 in early June 2024.

And here is a graph I'm following concerning COVID in wastewater as of January 2nd:

This appears to be a leading indicator for COVID hospitalizations and deaths.

COVID in wastewater is "HIGH" according to the CDC - especially in the Midwest - and almost triple the lows of last May - and increasing sharply.  Something to watch.

by Calculated Risk on 1/03/2025 06:18:00 PM

Wards Auto released their estimate of light vehicle sales for December: U.S. Light-Vehicle Sales End 2024 With Long-Time High December, Q4 SAARs (pay site).

December’s 6% year-over-year rise in the daily selling rate capped off a fourth quarter rebound after demand dropped in Q2 and Q3. The return to growth was aided by rising inventory, increased retail incentives and lower interest rates, while pull-ahead volume of electric vehicles from expectations of cuts in government incentives could have played a part. Also, improved consumer confidence in October and November likely helped, while a sudden downturn in confidence in December – as well as an above-normal drain to inventory during the month - might explain some reported softening in demand at the end of the period compared with pre-holiday trajectories.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and Wards' estimate for December (red).

Sales in December (16.80 million SAAR) were up 1.8% from November, and up 5.5% from December 2023.

Sales in December were above the consensus forecast.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

This was the best December since 2019.

by Calculated Risk on 1/03/2025 02:01:00 PM

From Goldman:

We left our Q4 GDP tracking estimate unchanged at +2.3% (quarter-over-quarter annualized) and our Q4 domestic final sales forecast unchanged at +2.3%. [Jan 2nd estimate]
emphasis added

And from the Atlanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2024 is 2.4 percent on January 3, down from 2.6 percent on January 2. After this morning’s Manufacturing ISM Report on Business from the Institute for Supply Management, the nowcasts of fourth-quarter real personal consumption expenditures growth and fourth-quarter real gross private domestic investment growth decreased from 3.2 percent and -0.7 percent, respectively, to 3.0 percent and -0.9 percent. [Jan 3rd estimate]

by Calculated Risk on 1/03/2025 10:37:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 1.3% Below 2022 Peak

Excerpt:

It has been over 18 years since the housing bubble peak. In the October Case-Shiller house price index released earlier this week, the seasonally adjusted National Index (SA), was reported as being 76% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 11% above the bubble peak (and historically there has been an upward slope to real house prices). The composite 20, in real terms, is 3% above the bubble peak.

People usually graph nominal house prices, but it is also important to look at prices in real terms.  As an example, if a house price was $300,000 in January 2010, the price would be $435,000 today adjusted for inflation (45% increase).  That is why the second graph below is important - this shows "real" prices.

The third graph shows the price-to-rent ratio, and the fourth graph is the affordability index. The last graph shows the 5-year real return based on the Case-Shiller National Index.
...
The second graph shows the same two indexes in real terms (adjusted for inflation using CPI).

In real terms (using CPI), the National index is 1.3% below the recent peak, and the Composite 20 index is 1.5% below the recent peak in 2022. The real National index and the Composite 20 index increased slightly in real terms in October.

It has now been 29 months since the real peak in house prices. Typically, after a sharp increase in prices, it takes a number of years for real prices to reach new highs (see House Prices: 7 Years in Purgatory)

There is much more in the article!

by Calculated Risk on 1/03/2025 10:00:00 AM

(Posted with permission). The ISM manufacturing index indicated contraction. The PMI® was at 49.3% in December, up from 48.4% in November. The employment index was at 45.3%, down from 48.1% the previous month, and the new orders index was at 52.5%, up from 50.4%.

From ISM: Manufacturing PMI® at 49.3% December 2024 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector contracted in December for the ninth consecutive month and the 25th time in the last 26 months, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The Manufacturing PMI® registered 49.3 percent in December, 0.9 percentage point higher compared to the 48.4 percent recorded in November. The overall economy continued in expansion for the 56th month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index continued in expansion territory for the second month after seven months of contraction, strengthening to 52.5 percent, 2.1 percentage points higher than the 50.4 percent recorded in November. The December reading of the Production Index (50.3 percent) is 3.5 percentage points higher than November’s figure of 46.8 percent. The index returned to expansion after six months in contraction. The Prices Index continued in expansion (or ‘increasing’) territory, registering 52.5 percent, up 2.2 percentage points compared to the reading of 50.3 percent in November. The Backlog of Orders Index registered 45.9 percent, up 4.1 percentage points compared to the 41.8 percent recorded in November. The Employment Index registered 45.3 percent, down 2.8 percentage points from November’s figure of 48.1 percent.
emphasis added

This suggests manufacturing contracted in December.  This was above the consensus forecast.

by Calculated Risk on 1/02/2025 07:21:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Mortgage rates as of Monday (a little lower on Tuesday).

Friday:
• At 10:00 AM: ISM Manufacturing Index for December. The consensus is for the ISM to be at 48.3, down from 48.4 in November.

All day: Light vehicle sales for December. The Wards forecast is for 16.7 million SAAR in December, up from the BEA estimate of 16.50 million SAAR in November (Seasonally Adjusted Annual Rate).