by Calculated Risk on 12/05/2024 02:39:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for November. The consensus is for 183,000 jobs added, and for the unemployment rate to be unchanged at 4.1%.

There were 12,000 jobs added in October, and the unemployment rate was at 4.1%.

From Goldman Sachs:

We estimate nonfarm payrolls rose by 235k in November, above consensus of +215k ... the end of strikes and the recent hurricanes that weighed on October job growth will likely boost November job growth. We estimate that the unemployment rate was unchanged at 4.1%, in line with consensus.
emphasis added

• ADP Report: The ADP employment report showed 146,000 private sector jobs were added in November.  This was below consensus forecasts and suggests job gains below consensus expectations, however, in general, ADP hasn't been very useful in forecasting the BLS report (this also doesn't include the boost from the end of Boeing strike and bounce back from the hurricane impact in October).

• ISM Surveys: Note that the ISM indexes are diffusion indexes based on the number of firms hiring (not the number of hires).  The ISM® manufacturing employment index increased to was at 48.1%, up from 44.4%.   This would suggest about 30,000 jobs lost in manufacturing. The ADP report indicated 26,000 manufacturing jobs lost in November.

The ISM® services employment index decreased to 51.5% from 53.0%. This would suggest 115,000 jobs added in the service sector. Combined this suggests 85,000 jobs added, far below consensus expectations.  (Note: The ISM surveys have been way off recently)

• Unemployment Claims: The weekly claims report showed more initial unemployment claims during the reference week at 215,000 in November compared to 242,000 in October.  This suggests fewer layoffs in November compared to October.

• Strikes: The CES strike report shows almost 40,000 employees returned from strikes during the reference period in November. This will boost the headline jobs number.

• Conclusion: Employment was impacted by strikes and hurricanes in October.  There should be a bounce back in November.  In the four months prior to October, employment gains averaged 140 thousand.  Adding close to 40 thousand for the strikes, and maybe 50 thousand workers returning following the hurricane impact in October, would suggest employment gains will be above consensus expectations.

Weekly Schedule

by Calculated Risk on 12/05/2024 02:11:00 PM

What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For November, Realtor.com reported inventory was up 26.2% YoY, but still down 21.5% compared to the 2017 to 2019 same month levels. 

 Now - on a weekly basis - inventory is up 25.9% YoY.

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report: Weekly Housing Trends View—Data for Week Ending Nov. 30, 2024

• Active inventory increased, with for-sale homes 25.9% above year-ago levels

For the 56th consecutive week, the number of homes for sale has increased compared with the same time last year. However, this week’s growth was smaller than last week’s, marking the ninth consecutive week of deceleration and tied for the smallest annual increase since late March. Sluggish listing activity, combined with subdued buyer demand, has contributed to this slowdown in inventory growth.

• New listings—a measure of sellers putting homes up for sale—plummeted 29% during an idle Thanksgiving week

The number of newly listed homes plummeted 29% last week. While some of the drop may be due to a mortgage rate environment that remains persistently high, most of the large decrease is likely due to the Thanksgiving holiday as sellers are likely deciding to hold off listing their home until buyers are less occupied with their holiday festivities.

Here is a graph of the year-over-year change in inventory according to realtor.com. 

Inventory was up year-over-year for the 56th consecutive week.  

However, inventory is still historically low.

New listings remain below typical pre-pandemic levels.

by Calculated Risk on 12/05/2024 11:03:00 AM

Today, in the Real Estate Newsletter: Asking Rents Mostly Unchanged Year-over-year

Brief excerpt:

Another monthly update on rents.

Tracking rents is important for understanding the dynamics of the housing market. Slower household formation and increased supply (more multi-family completions) has kept asking rents under pressure. ...

Welcome to the December 2024 Apartment List National Rent Report. The national median rent dipped by 0.8% in November, as we get further into the slow season for the rental market. Nationwide rent fell $12 to $1,382, and we’re likely to see that number dip one more time before the year ends. ...

Realtor.com: 15th Consecutive Month with Year-over-year Decline in Rents

In October 2024, the U.S. median rent continued to decline year-over-year for the fifteenth month in a row, down $14 or -0.8% year-over-year for 0-2 bedroom properties across the top 50 metros, faster than the rate of -0.5% seen in September 2024.

by Calculated Risk on 12/05/2024 08:50:00 AM

The Census Bureau and the Bureau of Economic Analysis reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $73.8 billion in October, down $10.0 billion from $83.8 billion in September, revised.

October exports were $265.7 billion, $4.3 billion less than September exports. October imports were $339.6 billion, $14.3 billion less than September imports.
emphasis added

Click on graph for larger image.

Exports and imports decreased in October.

Exports are up 1.9% year-over-year; imports are up 4.4% year-over-year.

Both imports and exports decreased sharply due to COVID-19 and then bounced back - imports and exports have generally increased recently.

The second graph shows the U.S. trade deficit, with and without petroleum.

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.

Note that net, exports of petroleum products are positive and have been increasing.

The trade deficit with China increased to $28.0 billion from $25.7 billion a year ago.

It is possible some importers are trying to beat potential tariffs.

by Calculated Risk on 12/05/2024 08:30:00 AM

The DOL reported:

In the week ending November 30, the advance figure for seasonally adjusted initial claims was 224,000, an increase of 9,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 213,000 to 215,000. The 4-week moving average was 218,250, an increase of 750 from the previous week's revised average. The previous week's average was revised up by 500 from 217,000 to 217,500.
emphasis added

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 218,250.

The previous week was revised up.

Weekly claims were close to the consensus forecast.

by Calculated Risk on 12/04/2024 08:00:00 PM

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

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 220 thousand initial claims, up from 213 thousand last week.

• Also at 8:30 AM: Trade Balance report for October from the Census Bureau. The consensus is the trade deficit to be $78.8 billion.  The U.S. trade deficit was at $84.4 billion in September.

by Calculated Risk on 12/04/2024 02:09:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the November 2024 seasonally adjusted annual sales rate (SAAR) of 507 thousand.

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new record high of 570 thousand SAAR in April 2019.

Click on graph for larger image.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 288 thousand SAAR in May 2020.  

Heavy truck sales were at 507 thousand SAAR in November, up from a revised 463 thousand in October, and up 3.7% from 489 thousand SAAR in November 2023.  

Usually, heavy truck sales decline sharply prior to a recession.  Sales were solid in November, and sales for October were revised up significantly.

As I mentioned yesterday, light vehicle sales increased in November.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.  Vehicle sales were at 16.50 million SAAR in November, up from 16.25 million in October, and up 6.7% from 15.46 million in November 2023.

by Calculated Risk on 12/04/2024 02:00:00 PM

Fed's Beige Book

Economic activity rose slightly in most Districts. Three regions exhibited modest or moderate growth that offset flat or slightly declining activity in two others. Though growth in economic activity was generally small, expectations for growth rose moderately across most geographies and sectors. Business contacts expressed optimism that demand will rise in coming months. Consumer spending was generally stable. Many consumer-oriented businesses across Districts noted further increases in price sensitivity among consumers, as well as several reports of increased sensitivity to quality. Spending on home furnishings was down, which contacts attributed to limited household mobility. Demand for mortgages was low overall, though reports on recent changes in home loan demand were mixed due to volatility in rates. Commercial real estate lending was similarly subdued. Still, contacts generally reported financing remained available. Capital spending and purchases of raw materials were flat or declining in most Districts. Sales of farm equipment were a notable headwind to overall investment activity, and several contacts expressed concerns about the future prices of equipment given ongoing weakness in the farm economy. Energy activity in the oil and gas sector was flat but demand for electricity generation continued to grow at a robust rate. The rise in electricity demand was driven by rapid expansions in data centers and was reportedly planned to be met by investments in renewable generation capacity in coming years.

Labor Markets

Employment levels were flat or up only slightly across Districts. Hiring activity was subdued as worker turnover remained low and few firms reported increasing their headcount. The level of layoffs was also reportedly low. Contacts indicated they expected employment to remain steady or rise slightly over the next year, but many were cautious in their optimism about any pickup in hiring activity.
...
Prices

Prices rose only at a modest pace across Federal Reserve Districts. Both consumer-oriented and business-oriented contacts reported greater difficulty passing costs on to customers.
emphasis added

by Calculated Risk on 12/04/2024 10:05:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 1.4% Below 2022 Peak

Excerpt:

It has been over 18 years since the bubble peak. In the September Case-Shiller house price index released last week, the seasonally adjusted National Index (SA), was reported as being 75% 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 $434,000 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 1.4% below the recent peak, and the Composite 20 index is 1.6% below the recent peak in 2022. The real National index increased in September, however, the Composite 20 index decreased slightly in real terms.

It has now been 28 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)

by Calculated Risk on 12/04/2024 10:00:00 AM

(Posted with permission). The ISM® Services index was at 52.1%, down from 56.0% last month. The employment index decreased to 51.5%, from 53.0%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 52.1% November 2024 Services ISM® Report On Business®

conomic activity in the services sector expanded for the fifth consecutive month in November, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 52.1 percent, indicating expansion for the 51st time in 54 months since recovery from the coronavirus pandemic-induced recession began in June 2020.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In November, the Services PMI® registered 52.1 percent, 3.9 percentage points lower than October’s figure of 56 percent. The reading in November marked the ninth time the composite index has been in expansion territory this year. The Business Activity Index registered 53.7 percent in November, 3.5 percentage points lower than the 57.2 percent recorded in October, indicating a fifth month of expansion after a contraction in June. The New Orders Index also recorded a reading of 53.7 percent in November, 3.7 percentage points lower than October’s figure of 57.4 percent. The Employment Index landed in expansion territory for the fourth time in five months; the reading of 51.5 percent is a 1.5-percentage point decrease compared to the 53 percent recorded in October.
emphasis added

The PMI was below expectations.