by Calculated Risk on 11/05/2014 03:01:00 PM

Friday at 8:30 AM ET, the BLS will release the employment report for October. The consensus, according to Bloomberg, is for an increase of 240,000 non-farm payroll jobs in October (range of estimates between 200,000 and 282,000), and for the unemployment rate to be unchanged at 5.9%.

The BLS reported 248,000 jobs added in September.

Here is a summary of recent data:

• The ADP employment report showed an increase of 230,000 private sector payroll jobs in October. This was above expectations of 212,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth slightly above expectations.

• The ISM manufacturing employment index increased in October to 55.5%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs increased about 10,000 in October. The ADP report indicated a 15,000 increase for manufacturing jobs in October.

The ISM non-manufacturing employment index increased in October to 59.6%. A historical correlation (linear) between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 330,000 in October.  Note: There are only a couple of previous readings this high for the ISM non-manufacturing employment index - so this might be high.

Combined, the ISM indexes suggests employment gains of 340,000.

• Initial weekly unemployment claims averaged close to 287,000 in October, down from 295,000 in September. For the BLS reference week (includes the 12th of the month), initial claims were at 284,000; this was up from 281,000 during the reference week in September.

This suggests about the same low level of layoffs in October as in September.

• The final October Reuters / University of Michigan consumer sentiment index increased to 86,9 from the September reading of 84.6. This is frequently coincident with changes in the labor market, but there are other factors too - like sharply lower gasoline prices.

• On small business hiring: The small business index from Intuit showed a 15,000 increase in small business employment in October (up from 10,000 in September).

• Trim Tabs reported:

TrimTabs Investment Research estimates that the U.S. economy added 314,000 jobs in October, up from 206,000 in September. ... TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 140 million U.S. workers subject to withholding.

• Conclusion: Below is a table showing several employment indicators and the initial BLS report (the first column is the revised employment). A few key points:

1) All but one of the revisions this year have been up (average about 21,000).

2) Unfortunately none of the indicators below is very good at predicting the initial BLS employment report.  

3) In general it looks like this should be another 200+ month (based on ADP, ISM, unemployment claims, and small business hiring).

There is always some randomness to the employment report.  And we have to remember that September employment was boosted by a one time factor (returning workers from a strike in August).
The consensus forecast is pretty strong, but I'll take the over again (above 240,000).

Employment Indicators (000s)
	BLS Revised	BLS Initial	ADP Initial	ISM	Weekly Claims Reference Week1	Intuit Small Business
Jan	144	113	175	236	329	10
Feb	222	175	139	-6	334	0
Mar	203	192	191	153	323	0
Apr	304	288	220	NA	320	25
May	229	217	179	130	327	35
Jun	267	288	281	NA	314	20
Jul	243	209	218	NA	303	15
Aug	180	142	204	285	299	0
Sep		248	213	NA	281	10
Oct		Friday	230	340	284	15
1Lower is better for Unemployment Claims

by Calculated Risk on 11/05/2014 12:23:00 PM

From the US Court: Fiscal Year Bankruptcy Filings Lowest in Seven Years

Bankruptcy cases filed in federal courts for the fiscal year 2014—the 12-month period ending September 30, 2014—totaled 963,739, down 13 percent from the 1.1 million bankruptcy filings in FY 2013, according to statistics released today by the Administrative Office of the U.S. Courts. This is the lowest number of bankruptcy filings for any 12-month period since 2007.

The number of filings for the fiscal year ending Sept 2014 were the lowest since 2007.

Click on graph for larger image.

This graph shows the business and non-business bankruptcy filings by year since 1987.

The sharp decline in 2006 and 2007 was due to the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". (a good example of Orwellian named legislation since this was more a "Lender Protection Act").

Other than 2007, this was the lowest level for filings since 1995. This is another indicator of an economy mostly recovered from the housing bust and financial crisis.

by Calculated Risk on 11/05/2014 10:00:00 AM

The October ISM Non-manufacturing index was at 57.1%, down from 58.6% in September. The employment index increased in October to 59.6%, up from 58.5% in September. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: October 2014 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in October for the 57th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 57.1 percent in October, 1.5 percentage points lower than the September reading of 58.6 percent. This represents continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased to 60 percent, which is 2.9 percentage points lower than the September reading of 62.9 percent, reflecting growth for the 63rd consecutive month at a slower rate. The New Orders Index registered 59.1 percent, 1.9 percentage points lower than the reading of 61 percent registered in September. The Employment Index increased 1.1 percentage points to 59.6 percent from the September reading of 58.5 percent and indicates growth for the eighth consecutive month. The Prices Index decreased 3.1 percentage points from the September reading of 55.2 percent to 52.1 percent, indicating prices increased at a slower rate in October when compared to September. According to the NMI®, 16 non-manufacturing industries reported growth in October. The majority of the respondents’ comments reflect favorable business conditions; however, there is an indication that there continues to be a leveling off from the strong rate of growth of the preceding months."
emphasis added

Click on graph for larger image.

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

This was below the consensus forecast of 58.0% and suggests slightly slower expansion in October than in September.

However a reading of 57.1 still suggests solid expansion in October, and the employment index, at 59.6, was especially strong.

by Calculated Risk on 11/05/2014 08:10:00 AM

From ADP:

Private sector employment increased by 230,000 jobs from September to October according to the October ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “The job market is steadily picking up pace. Job growth is strong and broad-based across industries and company sizes. At this pace of job growth unemployment and underemployment is quickly declining. The job market will soon be tight enough to support a meaningful acceleration in wage growth.”

This was above the consensus forecast for 212,000 private sector jobs added in the ADP report. 

The BLS report for October will be released on Friday.

by Calculated Risk on 11/05/2014 07:00:00 AM

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

Mortgage applications decreased 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 31, 2014. ...

The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.17 percent from 4.13 percent, with points increasing to 0.22 from 0.21 (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.

The refinance index is down 70% from the levels in May 2013.

Even with the recent slight increase in activity - as people who purchased in the last year or so refinance - refinance activity is very low this year and 2014 will be the lowest since year 2000.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is down about 13% from a year ago.