by Calculated Risk on 7/02/2015 08:33:00 AM

From the BLS:

Total nonfarm payroll employment increased by 223,000 in June, and the unemployment rate declined to 5.3 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, retail trade, financial activities, and in transportation and warehousing.
...
The change in total nonfarm payroll employment for April was revised from +221,000 to +187,000, and the change for May was revised from +280,000 to +254,000. With these revisions, employment gains in April and May combined were 60,000 lower than previously reported.
...
In June, average hourly earnings for all employees on private nonfarm payrolls were unchanged at $24.95. Over the year, average hourly earnings have risen by 2.0 percent.
emphasis added

Click on graph for larger image.

The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes).

Total payrolls increased by 223 thousand in June (private payrolls also increased 223 thousand).

Payrolls for April and May were revised down by a combined 60 thousand.

This graph shows the year-over-year change in total non-farm employment since 1968.

In June, the year-over-year change was over 2.9 million jobs.

That is a solid year-over-year gain.


The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate decreased in June to 62.6%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics.

The Employment-Population ratio decreased to 59.3% (black line).

I'll post the 25 to 54 age group employment-population ratio graph later.

The fourth graph shows the unemployment rate.

The unemployment rate decreased in June to 5.3%.

This was below expectations of 228,000 jobs, and revisions were down, and no wage growth (some wage weakness is seasonal)  ... still a decent report.

I'll have much more later ...

by Calculated Risk on 7/01/2015 08:14:00 PM

Here is the employment preview I posted earlier: Preview: Employment Report for June

Goldman Sachs is forecasting:

We forecast nonfarm payroll growth of 220k in June, a bit below consensus expectations. Labor market indicators were mixed in June, suggesting a print roughly in line with the 217k monthly average seen so far in 2015. We expect the unemployment rate to decline by one-tenth to 5.4%. Finally, average hourly earnings are likely to rise a softer 0.1% in June as a result of calendar effects.

Merrill Lynch is forecasting:

We look for job growth of 220,000, a slowdown from the 280,000 pace in May but consistent with the recent trend. As a result, the unemployment rate will likely lower to 5.4% from 5.5%. With the continued tightening in the labor market, we think average hourly earnings (AHE) will increase a “strong” 0.2%, allowing the yoy rate to hold at 2.3%.

Nomura is forecasting:

[W]e forecast a 230k increase in private payrolls, with a 5k increase in government jobs, implying that total nonfarm payrolls will gain 235k. ... We forecast that average hourly earnings for private employees rose by 0.17% m-o-m in June, a slower pace than trend due to a calendar quirk. Last, we expect the household survey to show that the unemployment rate ticked down to 5.4% from 5.5%, previously.

Thursday:
• At 8:30 AM ET, the Employment Report for June. The consensus is for an increase of 228,000 non-farm payroll jobs added in June, down from the 280,000 non-farm payroll jobs added in May. The consensus is for the unemployment rate to decrease to 5.4%.

• At 8:30 AM, initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 270 thousand from 271 thousand.

• At 10:00 AM, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for May. The consensus is a 0.3% decrease in orders.

by Calculated Risk on 7/01/2015 05:49:00 PM

Bold prediction: Tomorrow will feel like a Friday!

On Thursday at 8:30 AM ET, the BLS will release the employment report for June. The consensus, according to Bloomberg, is for an increase of 230,000 non-farm payroll jobs in June (with a range of estimates between 202,000 to 252,000), and for the unemployment rate to decline to 5.4%.

The BLS reported 280,000 jobs added in May.

Here is a summary of recent data:

• The ADP employment report showed an increase of 237,000 private sector payroll jobs in June. This was above expectations of 220,000 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 June 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 June. The ADP report indicated a 7,000 increase for manufacturing jobs.

The ISM non-manufacturing index for June will be released next Monday.

• Initial weekly unemployment claims averaged close to 271,000 in June, about the same as in May - and the lowest monthly average since early 2001. For the BLS reference week (includes the 12th of the month), initial claims were at 268,000; down from 275,000 during the reference week in May.

This suggests a lower level of layoffs in June.

• The final June University of Michigan consumer sentiment index increased to 96.1 from the May reading of 90.0. Sentiment is frequently coincident with changes in the labor market, but there are other factors too - like gasoline prices.

• On small business hiring: The small business index from Intuit showed a 25,000 increase in small business employment in June, the same as in May.  From Intuit: Small Businesses Employment Increases in June

Small business employment rose by 25,000 jobs in June, an increase of 0.13 percent, matching the gains seen in May. Although the hiring rate fell slightly, it should not be regarded as a reversal of the upward trend that began in June 2009.

“Small business employment remains 500,000 below the peak of 21.2 million people employed by small businesses in March 2007,” said Woodward. “Part of this continuing shortfall is because housing construction has failed to return to pre-crisis or even normal levels.”

“A sign of stronger small business activity is the hiring rate, which has been rising slowly but steadily since September 2009. The hiring rate always exceeds the employment increase because hiring reflects replacing workers who leave, as well as added workers,” Woodward said.

• Trim Tabs reported that the U.S. economy added 190,000 jobs in June. From  TrimTabs:

TrimTabs Investment Research estimates that the U.S. economy added 190,000 jobs in June, the lowest level in 12 months.

“Job growth last month broke a streak of eleven consecutive monthly gains exceeding 200,000,” said David Santschi, chief executive officer of TrimTabs. “The economy seems to have lost some momentum heading into the dog days of summer.”

TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 142 million U.S. workers subject to withholding.

• Conclusion: Unfortunately none of the indicators above is very good at predicting the initial BLS employment report. However it looks like this should be another 200+ month (based on ADP, ISM manufacturing, unemployment claims, and small business hiring). There is always some randomness to the employment report, but my guess is in the low 200s.

by Calculated Risk on 7/01/2015 02:51:00 PM

Based on an AutoData estimate, light vehicle sales were at a 17.1 million SAAR in June. That is up 1.5% from June 2014, and down 3.5% from the 17.7 million annual sales rate last month.


Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for June (red, light vehicle sales of 17.1 million SAAR from WardsAuto).

This was close to the consensus forecast of 17.2 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.

This was below the consensus forecast, but another strong month. It appears 2015 will be the best year for light vehicle sales since 2001.

by Calculated Risk on 7/01/2015 01:45:00 PM

Reis released their Q2 2015 Office Vacancy survey this morning. Reis reported that the office vacancy rate was unchanged compared to Q1 at 16.6%. This is down from 16.9% in Q2 2014, and down from the cycle peak of 17.6%.

From Reis:

The national vacancy rate remained unchanged at 16.6% during the second quarter. Vacancy compression stalled this quarter because net absorption was slightly outpaced by new construction. This appears to be just a pause as vacancy compression has been more consistent in recent quarters. With the economy and labor market continuing to improve, demand should outpace new construction by a wider margin over time, resulting in more rapid vacancy compression than has occurred up to this point.
...
Occupied stock increased by 8.154 million square feet during the second quarter. This was an increase versus last quarter. However, more heartening data can be found in the year‐to‐date net absorption figure of 15.607 million SF. This is a 22% increase over 2014’s year‐to‐date absorption and the best midyear performance since before the recession. This provides the strongest evidence yet that greater demand is returning to the office market. Although the pace of improvement has been slower than in previous recoveries, it appears that this recovery is finally gaining momentum. We expect this to continue going forward as ongoing increases in hiring translate into greater space needs for office users.

New construction of 8.303 million SF is a bounce back from the first quarter. Most of the new inventory coming online is preleased. Although it is slowly increasing, there remains little new purely speculative development in the market. This will likely persist until vacancy is far lower – with such an elevated vacancy rate, investors and lenders remain cautious about green lighting construction that does not have a pre‐leased component. When this stringent pre‐leasing prerequisite is finally dropped it will be a clear sign to the market that the recovery is in full swing. However, we have not yet arrived at that juncture.
...
Asking and effective rents both grew by 0.7% during the second quarter, marking the nineteenth consecutive quarter of asking and effective rent growth. These growth rates are a decrease from last quarter when both grew by roughly 1.0%. As we mentioned last quarter, annualized rent growth of closer to 4%, which was observed during the two previous quarters, was going to be difficult to maintain in such a high‐vacancy environment.

Click on graph for larger image.

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

Reis reported the vacancy rate was at 16.6% in Q2.

Office vacancy data courtesy of Reis.