by Calculated Risk on 6/20/2014 10:00:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were generally little changed in May. Twenty states had unemployment rate decreases from April, 16 states had increases, and 14 states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today.
...
Rhode Island again had the highest unemployment rate among the states in May, 8.2 percent. North Dakota again had the lowest jobless rate, 2.6 percent.

Click on graph for larger image.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement. 

The states are ranked by the highest current unemployment rate. No state has double digit or even a 9% unemployment rate.  Only Rhode Island (8.2%) is at or above 8%.  

The second graph shows the number of states with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 10 states with an unemployment rate at or above 11% (red).

Currently no state has an unemployment rate at or above 9% (purple), 1 state is at or above 8% (light blue), and 9 states are at or above 7% (dark blue).

by Calculated Risk on 6/19/2014 06:55:00 PM

There are some key questions about inflation right now. Will the recent pickup in inflation continue? Or was it just "noise" (As Fed Chair Janet Yellen said)? This will be important to watch.

Here are some excerpts from an article by Merrill Lynch Global Economist Ethan Harris Inflation: bump up or bust out?

One of the great ironies this year is that even as growth has disappointed to the downside, inflation has surprised to the upside. Most important, in the past three months, core CPI inflation has risen at the fastest rate since before the crisis. Moreover, the pick-up is fairly broad-based. Both goods and services inflation is higher and there appear to be only a couple anomalies—strong apparel price inflation and a huge 41.6% annualized jump in airfares.

Despite the strong numbers, we are reluctant to make significant changes in our inflation call. ... we have incorporated the spring surprises and have raised our sequential forecasts slightly, but that only raises our annual numbers by a few tenths. Why the limited response? To put it simply, the fundamentals don’t support a strong sustained increase. Let’s take a look at the main inflation stories.

Reserved money growth
Since the beginning of the economic recovery, monetarists have argued that with the Fed’s massive balance sheet strong inflation could be just around the corner. Our response has always been: reserves are not money, and unless those reserves stimulate a surge in bank lending and spending, they are not inflationary. ... even with the recent pick up in business lending, overall bank lending is still growing at half the normal pace of a business expansion. ...

Medical mal-pricing?
Another key inflation concern is that special factors have temporarily held inflation in check and are now reversing. There seems to be an element of this in medical inflation. Inflation dipped last year as government payment rates were reduced and as key drugs became generic. Thus the medical PCE price index fell 0.45% in April 2013 and then rose 0.20% this April. That swing alone added more than a tenth to year-over-year core PCE inflation. However, we are reluctant to extrapolate the recent strength going forward. ...

It’s a small world after all
In our view, one of the most underrated factors in recent inflation movements is the impact of global markets. ... In recent months, there have been some signs of a bottoming out of consumer import prices. However, a significant acceleration seems unlikely. The conditions that created the low inflation are still in place: emerging market growth remains low, there is abundant spare capacity in the global economy, the dollar is trending higher and Europe is at risk of sliding into deflation. The main upside risk comes from commodity prices, but usually that takes some time to develop.

Weak wages
While there is a lot of talk about higher wage growth, there is very little evidence. .... In our view, there is still some slack in the labor market; when slack disappears, the rise in wage growth will be very slow, and as Yellen made clear at the press conference, the Fed will welcome the initial rise in wage inflation as a sign of normalization rather than inflation.

... Put it all together, we continue to expect a slow rise in inflation, allowing an equally slow Fed exit.

by Calculated Risk on 6/19/2014 12:55:00 PM

From Freddie Mac: Fixed Mortgage Rates Down Slightly

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates reversing course and moving slightly lower for the week.

30-year fixed-rate mortgage (FRM) averaged 4.17 percent with an average 0.6 point for the week ending June 19, 2014, down from last week when it averaged 4.20 percent. A year ago at this time, the 30-year FRM averaged 3.93 percent.

Click on graph for larger image.

Here is a graph of 30 year fixed mortgage rates - according to the PMMS® - for 2013 (blue) and 2014 (red).

Mortgage rates jumped to 4.46% in late June 2013, and it is possible that rates will be lower year-over-year soon (currently 4.17%).

Note: Looking at daily rates from Mortgage News Daily, it is likely mortgage rates will be down year-over-year tomorrow. The MND data is based on actual lender rate sheets, and is mostly "the average no-point, no-origination rate for top-tier borrowers with flawless scenarios". (this tracks the Freddie Mac series very well).

by Calculated Risk on 6/19/2014 10:00:00 AM

From the Philly Fed: June Manufacturing Survey

The diffusion index of current general activity increased from a reading of 15.4 in May to 17.8 this month. The index has remained positive for four consecutive months and is at its highest reading since last September. The current new orders and shipments indexes also moved higher this month, increasing 6 points and 1 point, respectively.
...
Indicators also suggest improved labor market conditions this month. The employment index remained positive for the 12th consecutive month and increased 4 points. [to 11.9].
emphasis added

This was above the consensus forecast of a reading of 13.0 for June.

Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through June. The ISM and total Fed surveys are through May.

The average of the Empire State and Philly Fed surveys is at the highest level since 2011, and this suggests stronger expansion in the ISM report for June.

by Calculated Risk on 6/19/2014 08:30:00 AM

The DOL reports:

n the week ending June 14, the advance figure for seasonally adjusted initial claims was 312,000, a decrease of 6,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 317,000 to 318,000. The 4-week moving average was 311,750, a decrease of 3,750 from the previous week's revised average. The previous week's average was revised up by 250 from 315,250 to 315,500.

There were no special factors impacting this week's initial claims.

The previous week was revised up from 317,000.

The following graph shows the 4-week moving average of weekly claims since January 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 311,750.

This was close to the consensus forecast of 313,000.  The 4-week average is now at normal levels for an expansion.