by Calculated Risk on 6/04/2015 04:21:00 PM

From Housing economist Tom Lawler:

Earlier this week the Census Bureau released its annual report on the Characteristics of New Housing Units Completed/Sold for 2014. The report, based on data collected from the Survey of Construction, includes (among a lot of other things) estimates for the number of housing units completed or sold by square feet of floor area, number of bath rooms, and number of bedrooms. On the single-family home front, one of the most striking statistics for the last few years (including 2014) is the incredibly small number of moderately-sized (and priced) homes built. Here is a table from the report showing the number of single-family homes completed by square feet of floor area from 1999 to 2014.

Compared to 2000, the number of single-family homes completed in 2014 was down by 50%. The number of homes completed in 2014 with square footage below 1,800 was down by a staggering 70%, while the number of homes completed with square footage of 4,000 or more last year was unchanged from 2000! And the number of single family homes completed with square footage below 1,800 last year showed no increase from 2013’s record low.

Square Feet of Floor Area in New Single-Family Houses Completed1
(Components may not add to totals because of rounding)
	Number of houses (in thousands) by square feet
Year	Total	Under 1,400	1,400 to 1,799	1,800 to 2,399	2,400 to 2,999	3,000 to 3,999	4,000 or more
1999	1,270	197	276	370	211	157	59
2000	1,242	178	268	363	208	158	66
2001	1,256	167	261	359	222	172	75
2002	1,325	172	283	375	240	180	76
2003	1,386	179	279	401	251	199	77
2004	1,532	186	311	433	291	219	92
2005	1,636	165	317	467	306	262	119
2006	1,654	164	312	452	326	263	137
2007	1,218	120	220	335	227	202	115
2008	819	104	146	219	138	127	84
2009	520	66	106	139	89	72	48
2010	496	66	96	135	87	75	37
2011	447	57	84	111	79	76	40
2012	483	53	83	126	93	88	40
2013	569	46	89	154	115	110	56
2014	620	48	87	162	131	127	66
1Includes houses built for rent, not shown separately

Below is a longer-run chart showing the median square footage of single-family homes completed. (I can’t show a longer-run chart by similar square-footage ranges, as Census changed its ranges.)

During most of the 1970’s and the first half of the 1980’s, over half of new single-family homes completed had square footage at or below 1,600.

While the de minimus production of moderately sized and priced new single-family home production over the past few years almost certainly reflects extremely low purchase volumes from entry-level buyers, there is some debate regarding how much of this weak production/sales reflects weak demand, and how much reflects “supply” issues (e.g., an inability of many builders in many markets to produce small, moderately-priced homes at high enough profit margins to make it worth there while.)

Those looking for an eventual rebound in single-family housing production to more “normal” unit levels should realize that such a rebound is extremely unlikely without a major increase in the production of smaller, more moderately priced homes.

by Calculated Risk on 6/04/2015 02:19:00 PM

Some readers have wondered about the accuracy of the monthly BLS employment report. The report is based on a survey of households, and reports from businesses - for differences see: Household vs. Establishment Series - and the establishment report is benchmarked annually to state unemployment insurance tax reports.

On a monthly basis, the establishment report may have a large margin of error, but - with the annual benchmarks - the report should track payroll employment very well over time.

Another public source of employment related data is the initial and continuing weekly unemployment reports.  The initial weekly unemployment claims report shows unemployment claims are near all time lows.

The good news is private sources of employment data are suggesting similar gains in employment (for those who doubt the accuracy of government data).

The most followed private source is from ADP.  However, ADP makes some adjustment based on data from the BLS report and from the Philadelphia Federal Reserve’s Aruoba-Diebold-Scotti Business Conditions Index. So this isn't entirely independent series.

Another private source is the ISM surveys of manufacturing and non-manufacturing companies.   Although these surveys are based on the number of companies hiring (or laying off workers), the index has tracked changes in private BLS employment over time.

For small business, the Intuit index is very useful - and the NFIB monthly surveys also provides information on hiring.  From NFIB: Small Business Hiring Strong for 5th Consecutive Month

“May continued to show solid, but not spectacular hiring, continuing the trend of previous months in 2015. For the second time this year, a high of 29 percent had openings they couldn’t fill; a high we hadn’t seen since April 2006. This is a strong indication that the unemployment rate will decline further.

“Small employers are starting to feel the economy picking up and they are working hard to meet this demand."

Other sources of private data include:
• TrimTabs (based on analysis of daily income tax deposits)

• The Conference Board's labor differential (a spread between the share of households reporting jobs are plentiful versus hard to get).

• The Chicago PMI (a regional survey).

• The Challenger, Gray & Christmas report on planned layoffs. From Reuters today: US job cuts plunged 33% to 41,034 in May: Challenger

Job cuts announced by U.S.-based companies declined sharply in May as the energy sector took another pause following successive rounds of big payroll reductions.

Employers laid off 33 percent fewer workers in May from the previous month, global outsourcing firm Challenger, Gray & Christmas reported Thursday. Companies announced 41,034 cuts in the last four weeks, compared with 61,582 in April.

There are other sources too. The bottom line is all of the data - both private and public - is telling a similar story on employment.

by Calculated Risk on 6/04/2015 10:42:00 AM

Yesterday I discussed several indicators: Preview: Employment Report for May

Some excerpts from a research piece by Goldman Sachs economist Kris Dawsey:

We forecast a 210k gain in nonfarm payrolls in May, a bit below consensus of 226k and down slightly from April's pace of increase. ... the trend in payroll job growth seems to have softened a bit since reaching a high-water mark in late-2014 / early-2015.
...
We expect the unemployment rate to remain unchanged at 5.4%. ...

Average hourly earnings (AHE) for all employees will probably increase 0.3%, in our view. As we have noted in the past, the monthly earnings estimates appear to be influenced by calendar effects. The smaller number of working days in May, combined with relatively late timing of the survey reference week within the month, would historically be consistent with a firm AHE print. Including base effects, we think that the year-on-year change in all-employee AHE is likely to remain stable at 2.2% (with upside risk), while year-on-year growth in production and nonsupervisory AHE will probably rise one-tenth to 2.0%.

And from economists at Nomura:

[W]e forecast a 185k increase in private payrolls, with a 5k increase in government jobs, implying that total nonfarm payrolls will gain 190k. ... We forecast that average hourly earnings for private employees rose by 0.28% m-o-m in May, indicative of our expectation for a gradual pickup in wage growth as a result of the tightening labor market and a rebound after a slight 0.1% increase in April. Last, we expect the household survey to show that the unemployment rate remained unchanged at 5.4%.

by Calculated Risk on 6/04/2015 08:34:00 AM

The DOL reported:

In the week ending May 30, the advance figure for seasonally adjusted initial claims was 276,000, a decrease of 8,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 282,000 to 284,000. The 4-week moving average was 274,750, an increase of 2,750 from the previous week's revised average. The previous week's average was revised up by 500 from 271,500 to 272,000.

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

The previous week was revised to 284,000.

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 274,750.

This was at the consensus forecast of 276,000, and the low level of the 4-week average suggests few layoffs.

by Calculated Risk on 6/03/2015 07:18:00 PM

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 276 thousand from 282 thousand.

• Also at 8:30 AM, Productivity and Costs for Q1. The consensus is for a 6.0% increase in unit labor costs.

From Matthew Graham: MBS RECAP: The Real Drama is in Europe, but Little to do with Greece

If you missed it, or are otherwise looking for a recap on why bond markets got crushed today, here it is. Nothing materially changed from that update, and that's no surprise considering the source of the drama was Europe.

For those of you who don't click links, suffice it to say that the European Central Bank is not the Federal Reserve. ...

It's actually not too complicated. Europe fought tooth and nail for several years to roll out a QE program. They finally launched it in early 2015 and specified the amount and timing. When markets began speculating that the amount might be less or the timing might be cut short, the head of the European Central Bank provided reassurance that the timing and amounts were predetermined. And now today, he said they weren't. It's really that simple.

For the sake of perspective, he did say that the European economy requires the full program for the full amount of time (Sep 2016). The problem is that he also said that the program could end early if there was a sustained adjustment toward inflation targets. Jeez... To reiterate some of my incredulity from this morning, this is dirty pool. The Fed has been widely criticized, to be sure, but I couldn't imagine the backlash if they pulled a similar move with one of our QE iterations that had a predetermined amount of bond-buying.

It's a surefire way to cause chaos. And that's exactly what it did. German Bunds sold off 20bps today (vs 10bps in US Treasuries).

Here is a table of mortgage rates from Mortgage News Daily:

Home Loan Rates

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