by Calculated Risk on 10/06/2012 08:01:00 AM

This was a very busy week for US economic data, capped off with an encouraging employment report. Yesterday I wrote Employment: Somewhat Better (also more graphs) and I pointed out a number of positives (and a few negatives) in the September report.

Most of the other economic data was somewhat positive too (even without housing!). Both ISM surveys (manufacturing and service) were weak, but above expectations. And auto sales were at the highest level since February 2008.

Also the impact of QE3 was evident in the MBA mortgage refinance index that increased to the highest level since 2009.

Here is a summary of last week in graphs:

• September Employment Report: 114,000 Jobs, 7.8% Unemployment Rate

Even though payroll growth was weak, this was a much stronger report than the last few months, especially considering the upward revisions to the July and August reports. And that doesn't include the annual benchmark revision (that will also show more jobs).

This was slightly above expectations of 113,000 payroll jobs added.

The second graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate decreased to 7.8% (red line). This is from the household report, and that report showed strong job growth.

The Labor Force Participation Rate increased slightly to 63.6% in September (blue line. This is the percentage of the working age population in the labor force.

The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although most of the recent decline is due to demographics.

The Employment-Population ratio increased to 58.7% in September (black line). This is still very low.

The third graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions. The dotted line is ex-Census hiring.

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

The fourth graph shows the job losses from the start of the employment recession, in percentage terms compared to other financial crisis (including the Great Depression).

This is an update to a graph by economist Josh Lehner (ht Josh for the data):

[I]n the context of the Big 5 financial crises, the current U.S. cycle suddenly does not look quite as dire. Notice how the x-axis, how long it takes to return to peak levels of employment, is measured in years(!) not months like the first graph.
...
[T]he U.S. labor market has performed better than 4 of the previous Big 5 crises, as identified by Reinhart and Rogoff, in terms of job loss and the return to peak time line.

Even though payroll growth was weak and close to expectations (expected was 113,000), overall this was a much stronger report than for recent months.

• ISM Manufacturing index increases in September to 51.5

Click on graph for larger image.

The ISM index indicated expansion after three consecutive months of contraction. PMI was at 51.5% in September, up from 49.6% in August. The employment index was at 54.7%, up from 51.6%, and the new orders index was at 52.3%, up from 47.1%.

Here is a long term graph of the ISM manufacturing index.

This was above expectations of 49.7% and suggests manufacturing expanded in September. The internals were positive too with new orders and employment increasing.

• ISM Non-Manufacturing Index increases in September

The September ISM Non-manufacturing index was at 55.1%, up from 53.7% in August. The employment index decreased in September to 51.1%, down from 53.8% in August. Note: Above 50 indicates expansion, below 50 contraction.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was above the consensus forecast of 53.5% and indicates faster expansion in September than in August. The internals were mixed with the employment index down, but new orders up.

• U.S. Light Vehicle Sales at 14.94 million annual rate in September, Highest since Feb 2008

Based on an estimate from Autodata Corp, light vehicle sales were at a 14.94 million SAAR in September. That is up 14% from September 2011, and up 3% from the sales rate last month.

This was above the consensus forecast of 14.5 million SAAR (seasonally adjusted annual rate).

It looks like auto sales were up about 2.7% in Q3 compared to Q2 (over 10% annualized increase), and auto sales will probably make another small positive contribution to GDP. However it appears there is a shift to smaller cars, so total revenue might not increase much.

• Office Vacancy Rate declines slightly in Q3 to 17.1%

From Reuters: U.S. office market barely gains in third quarter

This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual).

Reis is reporting the vacancy rate declined in Q3 to 17.1%, down slightly from 17.2% in Q2, and down from 17.4% in Q3 2011. The vacancy rate peaked in this cycle at 17.6% in Q3 and Q4 2010.

This is a sluggish recovery for office space.

• Reis: Apartment Vacancy Rate declined slightly to 4.6% in Q3, More Supply coming in 2013

Reis reported that the apartment vacancy rate (82 markets) fell slightly to 4.6% in Q3, down from 4.7% in Q1 2012. The vacancy rate was at 5.6% in Q3 2011 and peaked at 8.0% at the end of 2009.

This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999).

Reis is just for large cities. It appears that the declines in vacancy rates is slowing, and rent increases might slow too. Also, as Reis economist Calanog notes, there will be a significant increase in new supply in 2013 (and in 2014).

• Reis: Regional Mall Vacancy Rate declines in Q3, Strip Mall vacancy rate unchanged

Reis reported that the vacancy rate for regional malls declined to 8.7% in Q3 from 8.9% in Q2. This is down from a cycle peak of 9.4% in Q3 of last year.

For Neighborhood and Community malls (strip malls), the vacancy rate was unchanged at 10.8% in Q3. For strip malls, the vacancy rate peaked at 11.0% in Q2 of last year.

This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). The yellow line shows mall investment as a percent of GDP. This has been increasing a little recently because this includes renovations and improvements. New mall investment has essentially stopped.

• Weekly Initial Unemployment Claims increase to 367,000

The DOL reports:

In the week ending September 29, the advance figure for seasonally adjusted initial claims was 367,000, an increase of 4,000 from the previous week's revised figure of 363,000. The 4-week moving average was 375,000, unchanged from the previous week's revised average.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims was unchanged at 375,000.

This was lower than the consensus forecast of 370,000. Mostly moving sideways this year ...

All current Employment Graphs
• Construction Spending decreased in August

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 60% below the peak in early 2006, and up 23% from the post-bubble low. Non-residential spending is 30% below the peak in January 2008, and up about 27% from the recent low.

Public construction spending is now 16% below the peak in March 2009 and near the post-bubble low.

Note: Spending in August would have been up compared to July without the upward revision to July spending. With both June and July revised up, this report was decent. Residential construction spending was up in August, and the solid year-over-year increase in private residential investment is a positive for the economy (the increase in 2010 was related to the tax credit).
All Housing Investment and Construction Graphs
• Other Economic Stories ...
• LPS: Mortgage prepayment rates highest since 2005
• MBA: Mortgage Refinance Applications increases sharply, Highest Since 2009
• U.S. Births Decline for the fourth consecutive year in 2011
• Trulia: Asking House Prices increased in September
• FOMC Minutes: "Most participants agreed numerical thresholds could be useful"
• ADP: Private Employment increased 162,000 in September

by Calculated Risk on 10/05/2012 05:56:00 PM

Earlier on employment:
• September Employment Report: 114,000 Jobs, 7.8% Unemployment Rate
• Employment: Somewhat Better (also more graphs)
• All Employment Graphs

Last night I mentioned the soaring gasoline prices in California, here is an update from the LA Times: California facing new record high for gasoline prices

The average price for a gallon of regular gasoline in California jumped a whopping 17.1 cents overnight. That makes it almost certain that the state's motorists will see a new all-time record high for gas sometime this weekend.

Friday's average price for a gallon of unleaded regular in California is $4.486 a gallon, which is by far the highest in the nation.
...
Analysts have blamed the sudden increase on a recent spate of refinery problems.

The following graph shows the recent decrease in gasoline prices. Gasoline prices have been on a roller coaster all year.

Add Los Angeles or San Francisco, and you'll see the graph go straight up!

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 10/05/2012 02:35:00 PM

Once again rail traffic was "mixed". However all of the decline in rail carloads was due to fewer coal shipments.

From the Association of American Railroads (AAR): AAR Reports Mixed Weekly Rail Traffic for September

The Association of American Railroads (AAR) today reported U.S. rail carloads originated in September 2012 totaled 1,152,174 carloads, down 3.7 percent (43,746 carloads) compared with September 2011. Intermodal traffic in September totaled 973,715 containers and trailers, up 2.5 percent (24,126 units) compared with September 2011. September 2012 represents the 34th straight month of intermodal gains.
...
“September rail traffic is again a mix of good news and bad news,” said AAR Senior Vice President John T. Gray. “The primary bad news is that coal carloads continue to struggle, due to the various economic and regulatory constraints faced by coal-fired power plants. The good news is that many other key rail traffic categories are offsetting coal’s decline, including petroleum and petroleum products, motor vehicles, crushed stone and sand, and lumber. Intermodal volume has risen for 34 straight months and could very well set a new record this year.”

Click on graph for larger image.

This graph shows U.S. average weekly rail carloads (NSA).

On a non-seasonally adjusted basis, total U.S. rail carload traffic fell 3.7% (43,746 carloads) in September 2012 from September 2011 ... As has been the case for many months, coal was largely to blame for the decline in total carloads. Coal carloads were down 12.1% (65,867 carloads) in September 2012 from September 2011, more than accounting for the total carload decline for the month. Excluding coal, U.S. carloads were up 3.4% (22,121 carloads) in September 2012

Carloads of crushed stone, sand, and gravel were up 9,044 carloads, or 12.3%, in September 2012. Much, if not most, of the increase in this category is probably attributable to higher frac sand movements.

The second graph is for intermodal traffic (using intermodal or shipping containers):

Graphs reprinted with permission.

Intermodal traffic is near peak levels.

U.S. rail intermodal traffic rose in September for the 34th straight month too, rising 2.5% (24,126 containers and trailers) over September 2011. Intermodal volume averaged 243,429 units per week in September 2012, the third-highest monthly average so far this year. September is usually the second- or third-highest volume intermodal month of the year, but it will probably be no better than fourth in 2012, since October is usually the top intermodal month. In the last week of September 2012, volume was 257,225 containers and trailers, the best intermodal week of the year and the third highest of all time.

The top months for intermodal are usually in the fall, and it looks like intermodal traffic will be at or near record levels this year.

This is more evidence of sluggish growth.

Earlier on employment:
• September Employment Report: 114,000 Jobs, 7.8% Unemployment Rate
• Employment: Somewhat Better (also more graphs)
• All Employment Graphs

by Calculated Risk on 10/05/2012 11:15:00 AM

The payroll job growth was still weak, but there was some encouraging news in the employment report. This is just one report, but it was great to see the employment-population ratio increase for the key working age demographic of 25 to 54 years old (first graph below).

Also the unemployment rate is now at the lowest level since January 2009 (when the economy was collapsing), and it was encouraging to see the number of long term unemployed drop below 5 million for the first time since early 2009.

In a recent post, I highlighted Two Reasons to expect Economic Growth to Increase. The first reason was that we are nearing the end of the state and local government layoffs. This report suggests we may be near the bottom (last graph).

The second reason was a pickup in residential investment. This report showed an increase of just 5 thousand construction jobs, however I think the BLS is under counting construction jobs at the turn. The preliminary benchmark revision showed an upward revision of 386,000 payroll jobs as of March (this is an annual revision bench marked to state tax records). A fairly large portion of the upward revision was for construction workers (85,000 more jobs added), and I suspect that the BLS statistical model that estimates new company formation (the Birth/Death model) is currently underestimating the formation of small construction companies.

All that said, the economy has only added 1.3 million payroll jobs over the first nine months of the year. At this pace, the economy would only add around 1.8 million private sector jobs in 2012; less than the 2.1 million added in 2011.

Also U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, was unchanged at 14.7%. A key reason this didn't decline in September was because of an increase in part time workers (see 3rd graph below).

More positive news: The change in payroll employment for July was revised up from +141,000 to +181,000, and the August was revised up from +96,000 to +142,000.

The average workweek and average hourly earnings both increased. "The average workweek for all employees on private nonfarm payrolls edged up by 0.1 hour to 34.5 hours in September. ... In September, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $23.58. Over the past 12 months, average hourly earnings have risen by 1.8 percent." This is sluggish earnings growth, but it appears to be picking up.

Even though payroll growth was sluggish, this employment report was an improvement over recent reports, especially with the upward revisions, the increase in hourly earnings, and the increase in the 25 to 54 employment-population ratio. Here are a few more graphs...

Employment-Population Ratio, 25 to 54 years old

Click on graph for larger image.

Since the participation rate has declined recently due to cyclical (recession) and demographic (aging population) reasons, an important graph is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the employment-population ratio for this group was trending up as women joined the labor force. The ratio has been mostly moving sideways since the early '90s, with ups and downs related to the business cycle.

This ratio should probably move back to or above 80% as the economy recovers. The ratio increased in September to 76.0%, the highest level since early 2009 - but there is still a long ways to go.

Percent Job Losses During Recessions


This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at maximum job losses.

In the earlier post, the graph showed the job losses aligned at the start of the employment recession.


Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.0 million in August to 8.6 million in September. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of part time workers increased in September to 8.6 millon from 8.03 million in August.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged in September at 14.7%.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 4.84 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 5.03 million in August. This is generally trending down and is at the lowest level since early 2009. Long term unemployment remains one of the key labor problems in the US.

State and Local Government

This graph shows total state and government payroll employment since January 2007. State and local governments lost 129,000 jobs in 2009, 262,000 in 2010, and 230,000 in 2011.

Note: The dashed line shows an estimate including the benchmark revision.

It appears most of the state and local government layoffs are over.

Overall this was a somewhat more encouraging report.
All Employment Graphs

by Calculated Risk on 10/05/2012 08:30:00 AM

From the BLS:

The unemployment rate decreased to 7.8 percent in September, and total nonfarm payroll employment rose by 114,000, the U.S. Bureau of Labor Statistics reported today.
...
[Household survey] Total employment rose by 873,000 in September, following 3 months of little change. The employment-population ratio increased by 0.4 percentage point to 58.7 percent, after edging down in the prior 2 months. The overall trend in the employment-population ratio for this year has been flat. The civilian labor force rose by 418,000 to 155.1 million in September, while the labor force participation rate was little changed at 63.6 percent.
...
The change in total nonfarm payroll employment for July was revised from +141,000 to +181,000, and the change for August was revised from +96,000 to +142,000.

Click on graph for larger image.

Even though payroll growth was weak, this was a much stronger report than the last few months, especially considering the upward revisions to the July and August reports. And that doesn't include the annual benchmark revision (that will also show more jobs).

This was slightly above expectations of 113,000 payroll jobs added.

The second graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate decreased to 7.8% (red line). This is from the household report, and that report showed strong job growth.

The Labor Force Participation Rate increased slightly to 63.6% in September (blue line. This is the percentage of the working age population in the labor force.

The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although most of the recent decline is due to demographics.

The Employment-Population ratio increased to 58.7% in September (black line). This is still very low.

The third graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions. The dotted line is ex-Census hiring.

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

The fourth graph shows the job losses from the start of the employment recession, in percentage terms compared to other financial crisis (including the Great Depression).

This is an update to a graph by economist Josh Lehner (ht Josh for the data):

[I]n the context of the Big 5 financial crises, the current U.S. cycle suddenly does not look quite as dire. Notice how the x-axis, how long it takes to return to peak levels of employment, is measured in years(!) not months like the first graph.
...
[T]he U.S. labor market has performed better than 4 of the previous Big 5 crises, as identified by Reinhart and Rogoff, in terms of job loss and the return to peak time line.

Even though payroll growth was weak and close to expectations (expected was 113,000), overall this was a much stronger report than for recent months. I'll have much more later ...