by Calculated Risk on 3/04/2015 08:19:00 AM

From ADP:

Private sector employment increased by 212,000 jobs from January to February according to the February 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.
...
Goods-producing employment rose by 31,000 jobs in February, down from 45,000 jobs gained in January. The construction industry added 31,000 jobs, the same number as last month. Meanwhile, manufacturing added 3,000 jobs in February, well below January’s 15,000.

Service-providing employment rose by 181,000 jobs in February, down from 206,000 in January. ...

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is strong, but slowing from the torrid pace of recent months. Job gains remain broad-based, although the collapse in oil prices has begun to weigh on energy-related employment. At the current pace of growth, the economy will return to full employment by mid-2016.”

This was below the consensus forecast for 220,000 private sector jobs added in the ADP report. 

The BLS report for February will be released on Friday and the consensus is for 230,000 non-farm payroll jobs added in February.

by Calculated Risk on 3/04/2015 07:00:00 AM

From the MBA: Mortgage Applications Little Changed in Latest MBA Weekly Survey

Mortgage applications increased 0.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 27, 2015. ...

The Refinance Index increased 1 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.2 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.96 percent from 3.99 percent, with points decreasing to 0.30 from 0.33 (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.

2014 was the lowest year for refinance activity since year 2000.

2015 will probably see more refinance activity than in 2014, but not a large refinance boom.

The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is essentially unchanged from a year ago.

by Calculated Risk on 3/03/2015 07:11:00 PM

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:15 AM, the ADP Employment Report for February. This report is for private payrolls only (no government). The consensus is for 220,000 payroll jobs added in February, up from 213,000 in January.

• At 10:00 AM, the ISM non-Manufacturing Index for February. The consensus is for a reading of 56.5, down from 56.7 in January. Note: Above 50 indicates expansion.

• At 2:00 PM, Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

by Calculated Risk on 3/03/2015 02:36:00 PM

Based on a WardsAuto estimate, light vehicle sales were at a 16.16 million SAAR in February. That is up 5.4% from February 2014, and down 2.4% from the 16.55 million annual sales rate last month.  The comparison to February 2014 was easy (sales were impacted by the severe weather last year).

From John Sousanis at Wards Auto: February 2015 U.S. LV Sales Thread: SAAR Falls to 10-Month Low

U.S. automakers sold 1.252 million light vehicles in February, a 5.4% increase in daily sales that left the seasonally adjusted annual sales rate (SAAR) at a 10-month low of just 16.16 million-units.
...
Historic cold in parts of the country likely played a role in the shortfall, along with lower than expected fleet sales and some inventory shortages of key models.

GM was the No.1 auto seller in February, accounting for 18.5% of sales, followed by Toyota (14.4%) and Ford (14.1%).

Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for February (red, light vehicle sales of 16.16 million SAAR from WardsAuto).

This was below the consensus forecast of 16.7 million SAAR (seasonally adjusted annual rate).

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

Note: dashed line is current estimated sales rate.

Although below consensus, this was the tenth consecutive month with a sales rate over 16 million.

by Calculated Risk on 3/03/2015 12:29:00 PM

CR Note: The following is a post I wrote in January 2007 that is hopefully worth repeating.  I warned about always being short term bearish, even though most of my posts were very bearish back then!  I was predicting a recession would start in 2007 (the Great Recession started in December 2007), however I was still optimistic about the future.

In the comments, and occasionally via email, people have expressed surprise at my positive long term outlook. This reaction is probably understandable since most of my posts have a bearish economic tone.

In my view, both history and logic suggest that the economic future will be brighter. Economic growth has been the norm, and in the long term, the markets almost always reward the bullish investor.

It's human nature to be concerned about specific events, but historically the economy has recovered quickly from trauma. Concerned about the bird flu? Look at the 1918 flu pandemic that was followed by the Roaring '20s. Concerned about an economic Depression? The Great Depression was the worst economic event in recent times, and the economy was fine after WWII.

These are serious, but relatively short term events for the general economy.

Logically this makes sense. Economic growth is dependent on innovation and population growth. And innovation will almost certainly continue. In fact, the only real threats to the long term economy are massively destructive events (like a major meteor strike) and impediments to innovation.

It's not worth worrying about very low probability events like super volcanoes or meteor strikes. However higher probability events, like the potential impact from global warming, is probably a concern. But once again, even with global warming, innovation will most likely (hopefully) save the day.

I'll discuss possible impediments to innovation in a future post.

So why are my posts generally bearish? Simple - because I am writing about the short term. And in the short term I'm concerned about the impact of the housing bust on the general economy. And a short term aberration (a recession) to the long term trend is interesting and worth discussing. Clearly I'm bearish in the short term, and I feel the "odds of a recession" in 2007 "are at least a coin flip".

But we have to guard against always being short term bearish and long term bullish. That doesn't work from an investment perspective, since we will always be cautious in each successive short term - and the sum of many short terms is the long term. Intelligent people can always make a strong short term bearish argument, so a pattern of always being short term bearish is a serious risk - just something to consider.

Luckily, as I've been noting for some time, we will probably know by mid-2007 if the housing bust is going to significantly impact the general economy. I believe it will, so the next few months should be interesting.

Best to all.