by Calculated Risk on 8/09/2015 10:36:00 AM

Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs.

The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand).

In 2015, even with the pickup in U.S. housing starts, prices are down year-over-year.  Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts.

Overall the decline in prices is probably due to more supply, and less demand from China.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through July 2015 (via NAHB), and 2) CME framing futures.

Right now Random Lengths prices are down about 14% from a year ago, and CME futures are down around 24% year-over-year.

by Calculated Risk on 8/08/2015 08:11:00 AM

The key economic report this week is July Retail sales on Thursday.

For manufacturing, the July Industrial Production and Capacity Utilization report will be released this week.

For prices, PPI will be released on Friday.

----- Monday, August 10th -----
10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

----- Tuesday, August 11th -----
9:00 AM: NFIB Small Business Optimism Index for July.

----- Wednesday, August 12th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Job Openings and Labor Turnover Survey for June from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in May to 5.363 million from 5.334 million in April.

The number of job openings (yellow) were up 16% year-over-year, and Quits were up 8% year-over-year.

2:00 PM ET: The Monthly Treasury Budget Statement for July.

----- Thursday, August 13th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to be unchanged at 270 thousand.

8:30 AM ET: Retail sales for July will be released.

This graph shows retail sales since 1992 through June 2015. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). On a monthly basis, retail sales were down 0.3% from May to June (seasonally adjusted), and sales were up 1.4% from June 2014.

The consensus is for retail sales to increase 0.5% in July, and to increase 0.4% ex-autos.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for June.  The consensus is for a 0.3% increase in inventories.

11:00 AM: the New York Fed will Release the Q2 2015 Household Debt and Credit Report

----- Friday, August 14th -----
8:30 AM ET: The Producer Price Index for July from the BLS. The consensus is for a 0.1% increase in prices, and a 0.1% increase in core PPI.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for July.

This graph shows industrial production since 1967.

The consensus is for a 0.4% increase in Industrial Production, and for Capacity Utilization to increase to 78.1%.

10:00 AM: University of Michigan's Consumer sentiment index (preliminary for August). The consensus is for a reading of 93.5, up from 93.1 in July.

by Calculated Risk on 8/07/2015 09:19:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Surprisingly Calm After Jobs Report

Most lenders continue to quote conventional 30yr fixed rates of 4.0% on top tier scenarios, but with slightly lower closing costs today. The more aggressive lenders are increasingly able to quote 3.875% after these sorts of moves, though others are still stuck at 4.125% unless bond markets improve a bit further.

As of today, rates have improved for 3 straight weeks. ...
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 8/07/2015 06:05:00 PM

An excerpt from a research piece by Merrill Lynch economist Micheal Hanson:

After the July employment report largely matched expectations, we anticipate that the FOMC should see enough cumulative progress to start the hiking cycle at the September meeting — the chance that liftoff occurs then continues to creep up, in our view. That said, there are still another five weeks until that meeting. With data dependence as the focus of the Fed, unexpected shocks or a broad-based slowdown in the data could still lead the Committee to delay hiking. The bigger question for some Fed officials and market participants is low inflation. We expect continued labor market gains to leave the FOMC “reasonably confident” on the inflation outlook come September — something they should communicate in upcoming speeches.
emphasis added

It seems more and more likely that the Fed will hike in September.

by Calculated Risk on 8/07/2015 01:03:00 PM

By request, here is another update of an earlier post through the July employment report.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I'll just stick to the beginning of each term.

Note: We frequently use Presidential terms as time markers - we could use Speaker of the House, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.  Reagan's 2nd term saw about the same job growth as during Carter's term.  Note: There was a severe recession at the beginning of Reagan's first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter's term (gas prices increased sharply and there was an oil embargo).

Term	Private Sector Jobs Added (000s)
Carter	9,041
Reagan 1	5,360
Reagan 2	9,357
GHW Bush	1,510
Clinton 1	10,884
Clinton 2	10,073
GW Bush 1	-844
GW Bush 2	381
Obama 1	2,018
Obama 2	6,7321
130 months into 2nd term: 10,771 pace.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). President George H.W. Bush only served one term, and President Obama is in the third year of his second term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (yellow) took office.

There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.

Click on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 844,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 463,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,955,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 2,018,000 more private sector jobs at the end of Mr. Obama's first term.  Thirty months into Mr. Obama's second term, there are now 8,750,000 more private sector jobs than when he initially took office.

 A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 656,000 jobs). These job losses have mostly been at the state and local level, but more recently at the Federal level.  This has been a significant drag on overall employment.

And a table for public sector jobs. Public sector jobs declined the most during Obama's first term, and increased the most during Reagan's 2nd term.

Term	Public Sector Jobs Added (000s)
Carter	1,304
Reagan 1	-24
Reagan 2	1,438
GHW Bush	1,127
Clinton 1	692
Clinton 2	1,242
GW Bush 1	900
GW Bush 2	844
Obama 1	-702
Obama 2	461
130 months into 2nd term, 74 pace

Looking forward, I expect the economy to continue to expand through 2016 (at least), so I don't expect a sharp decline in private employment as happened at the end of Mr. Bush's 2nd term (In 2005 and 2006 I was warning of a coming recession due to the bursting of the housing bubble).

For the public sector, the cutbacks are clearly over at the state and local levels, and it appears cutbacks at the Federal level might also be over.  Right now I'm expecting some increase in public employment during Obama's 2nd term, but nothing like what happened during Reagan's second term.

Here is a table of the top three presidential terms for private job creation (they also happen to be the three best terms for total non-farm job creation).

Clinton's two terms were the best for both private and total non-farm job creation, followed by Reagan's 2nd term.

Currently Obama's 2nd term is on pace to be the 2nd best ever for private job creation.  However, with very few public sector jobs added, Obama's 2nd term is only on pace to be the third best for total job creation.

Note: Only 46 thousand public sector jobs have been added during the first thirty months of Obama's 2nd term (following a record loss of 702 thousand public sector jobs during Obama's 1st term).  This is about 5% of the public sector jobs added during Reagan's 2nd term!

Top Employment Gains per Presidential Terms (000s)
Rank	Term	Private	Public	Total Non-Farm
1	Clinton 1	10,884	692	11,576
2	Clinton 2	10,073	1,242	11,315
3	Reagan 2	9,357	1,438	10,795
	Obama 21	6,732	46	6,778
	Pace2	10,771	74	10,845
130 Months into 2nd Term 2Current Pace for Obama's 2nd Term

The last table shows the jobs needed per month for Obama's 2nd term to be in the top three presidential terms.

Average Jobs needed per month (000s) for remainder of Obama's 2nd Term
to Rank	Private	Total
#1	231	267
#2	186	252
#3	146	223