by Calculated Risk on 9/05/2013 08:30:00 AM

The DOL reports:

In the week ending August 31, the advance figure for seasonally adjusted initial claims was 323,000, a decrease of 9,000 from the previous week's revised figure of 332,000. The 4-week moving average was 328,500, a decrease of 3,000 from the previous week's revised average of 331,500.

The previous week was revised up from 331,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

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 decreased to 330,500.

The 4-week average is at the lowest level since October 2007 (before the recession started).  Claims were below the 330,000 consensus forecast.

Here is a long term graph of the 4-week average of weekly unemployment claims back to 1971.

by Calculated Risk on 9/05/2013 08:18:00 AM

From ADP:

Private sector employment increased by 176,000 jobs from July to August, according to the August ADP National Employment Report®. ... July’s job gain was revised down slightly from 200,000 to 198,000.
...
Mark Zandi, chief economist of Moody’s Analytics, said, "It is steady as she goes in the job market. Job gains in August were consistent with increases experienced over the past two-plus years."

This was at the consensus forecast for 177,000 private sector jobs added in the ADP report. Note:  The BLS reports on Friday, and the consensus is for an increase of 175,000 payroll jobs in August, on a seasonally adjusted (SA) basis.

Note: ADP hasn't been very useful in predicting the BLS report.

by Calculated Risk on 9/04/2013 07:36:00 PM

Small business employment gains have been weak for the last few years, and it appears small business employment was slightly negative in August ... but the outlook is improving.

From NFIB: Summer Winds Down; Job Growth Does Not Wind Up

Overall, owners reported a decline in employment averaging 0.3 workers per firm. ... Rosier skies appear ahead, it seems, as plan for future job creation rose a very large 7 points, netting sixteen percent of owners with plans to increase total employment. This is the best report since January 2007 and historically a very strong reading. ... If we assume this increase is not a fluke, it signals a substantial resumption of hiring in the coming months.

From Intuit: Small Business Employment Remained Flat in August

“The slight drop of one-hundredth of 1 percent in August employment equates to about 1,300 jobs lost, which means employment was essentially flat for the month. This is the second month that small business recovery has been flat or falling,” said Susan Woodward, the economist who worked with Intuit to create the indexes.

Thursday:
• 8:15 AM ET, the ADP Employment Report for August. This report is for private payrolls only (no government). The consensus is for 177,000 payroll jobs added in August, down from 200,000 in July.

• At 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 330 thousand from 331 thousand last week.

• At 10:00 AM, the ISM non-Manufacturing Index for August. The consensus is for a reading of 55.0, down from 56.0 in July. Note: Above 50 indicates expansion, below 50 contraction.

• Also at 10:00 AM, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for July. The consensus is for a 3.4% decrease in orders.

• Also at 10:00 AM, the Trulia Price Rent Monitors for August. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

by Calculated Risk on 9/04/2013 03:01:00 PM

Based on an estimate from WardsAuto, light vehicle sales were at a 16.02 million SAAR in August. That is up 11% from August 2012, and up 2.6% from the sales rate last month.

This was above the consensus forecast of 15.8 million SAAR (seasonally adjusted annual rate).

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for August (red, light vehicle sales of 16.02 million SAAR from WardsAuto).


Click on graph for larger image.

This was the first time the sales rate has been over 16 million since November 2007.

The growth rate will probably slow in 2013 - compared to the previous three years - but this will still be another solid year for the auto industry.

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

Note: dashed line is current estimated sales rate.

Unlike residential investment, auto sales bounced back fairly quickly following the recession and are still a key driver of the recovery.    Looking forward, growth will slow for auto sales.  If sales average the recent pace for the entire year, total sales will be up about 9% from 2012, not quite double digit but still strong.

by Calculated Risk on 9/04/2013 02:00:00 PM

Fed's Beige Book "Prepared at the Federal Reserve Bank of San Francisco and based on information collected on or before August 26, 2013."

Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest to moderate pace during the reporting period of early July through late August. Eight Districts characterized growth as moderate; of the remaining four, Boston, Atlanta, and San Francisco reported modest growth, and Chicago indicated activity had improved. Consumer spending rose in most Districts, reflecting, in part, strong demand for automobiles and housing-related goods. Activity in the travel and tourism sector expanded in most areas. Demand for nonfinancial services, including professional and transportation services, increased slightly on net. Manufacturing activity expanded modestly. Residential real estate activity increased moderately in most Districts, and demand for nonresidential real estate gained overall. Lending activity was mixed. Lending standards were largely unchanged, while credit quality improved.

And on real estate:

Activity in residential real estate markets increased moderately. The pace of sales of existing single-family homes continued to increase moderately in most Districts. ... Reports from several Districts suggested that rising home prices and mortgage interest rates may have spurred a pickup in recent market activity, as many "fence sitters" were prompted to commit to purchases. Sales of new single-family homes stabilized during the past few months in the Cleveland District after accelerating earlier in the year. New home sales declined slightly in parts of the Philadelphia and Richmond Districts in July. Philadelphia conveyed that some borrowers apparently preferred to lock in a mortgage rate for an existing home rather than wait for a new home to be completed and chance higher mortgage rates. Home prices climbed in most Districts. Richmond and Boston reported that houses in some areas were staying on the market fewer days and increasingly receiving multiple offers. New York noted that bidding wars were common in the Buffalo area. Many Districts reported that limited inventories of desirable properties contributed to upward price pressures. Single-family home construction was strong in the Minneapolis and Dallas Districts, and Chicago reported that a number of builders are planning new developments to begin later this year. However, several Districts noted constraints on the construction of single-family homes. San Francisco pointed to shortages of construction workers. In the Kansas City District, some building materials, such as drywall and roofing shingles, were in short supply.

Demand for nonresidential real estate increased. Office vacancy rates and other indicators in markets for office space improved modestly in the major metropolitan markets in the New York, Richmond, and St. Louis and Districts. Rents for Class B office space in Manhattan have risen more than 10 percent over the past twelve months. Demand for commercial real estate showed strong growth in the Dallas District and moderate growth in the Minneapolis District. Both Districts reported new plans for construction of industrial space. Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Kansas City, and San Francisco reported modest growth in demand for commercial real estate. Philadelphia highlighted a shift in recent leasing activity toward larger commercial spaces. The Boston, Philadelphia, Cleveland, Atlanta, Dallas, and San Francisco Districts all reported increases in construction of multifamily residential properties.
emphasis added

Overall this was similar to the previous beige book with economic activity increasing at a "modest to moderate" pace.

by Calculated Risk on 9/04/2013 11:50:00 AM

I talked with several builders at the end of last year, and in early January I reported: "I've heard some builders might be land constrained in 2013 (not enough finished lots in the pipeline)."

Here are the results of a NAHB survey released today: Shortage of Lots Slows Housing Recovery

A shortage of buildable lots, especially in the most desirable locations, has emerged as one of the key factors holding back a more robust housing recovery, according to the latest survey on the topic conducted by the National Association of Home Builders (NAHB).

“In our August 2013 survey, 59 percent of builders reported that the supply of lots in their markets was low or very low—up from 43 percent September of last year, and the largest low supply percentage we’ve seen since we began conducting these surveys in 1997,” said NAHB Chief Economist David Crowe. “One reason is that many residential developers left the industry, abandoned certain markets or simply stopped buying land and developing lots during the downturn.”
...
The survey found that lot shortages tended to be especially acute in the most desirable, or “A,” locations. Thirty-four percent of builders said that the supply of A lots was very low, compared to 18 percent for lots in B and 12 percent for lots in C locations. The shortages have also translated into higher prices for builders who are able to obtain developed lots to build on. ...

... “Lot shortages are one of several barriers that have arisen, restraining builders from responding completely to increased demand. Other barriers include a shortage of labor in carpentry and other key building trades, limited availability of loans even for credit worthy home builders and home buyers; and, more recently, an uptick in interest rates.” [said Crowe].
emphasis added

Land developers are working to meet the demand from home builders, but it takes time to obtain all the entitlements - so this could still be an issue in 2014.  

by Calculated Risk on 9/04/2013 08:50:00 AM

The Department of Commerce reported this morning:

[T]otal July exports of $189.4 billion and imports of $228.6 billion resulted in a goods and services deficit of $39.1 billion, up from $34.5 billion in June, revised. July exports were $1.1 billion less than June exports of $190.5 billion. July imports were $3.5 billion more than June imports of $225.1 billion.

The trade deficit was close to the consensus forecast of $39.0 billion.

The first graph shows the monthly U.S. exports and imports in dollars through July 2013.

Click on graph for larger image.

Imports increased in July, and exports decreased.  

Exports are 14% above the pre-recession peak and up 3% compared to July 2012; imports are 1% below the pre-recession peak, and up 1% compared to July 2012 (mostly moving sideways).

The second graph shows the U.S. trade deficit, with and without petroleum, through July.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil averaged $97.07 in July, up slightly from $96.93 in June, and up from $93.71 in July 2012. 

The trade deficit with the euro area was $11.0 billion in July, up slightly from $10.8 billion in July 2012.

The trade deficit with China increased to $30.1 billion in July, up from $29.4 billion in July 2012.  Most of the trade deficit is related to China and oil. And most of the recent improvement in the trade deficit is related to a decline in the volume of imported petroleum.

by Calculated Risk on 9/04/2013 07:03:00 AM

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

Mortgage applications increased 1.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 30, 2013. ...

The Refinance Index increased 2 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.4 percent from one week earlier.
...
The refinance share of mortgage activity increased to 61 percent of total applications from 60 percent the previous week. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.73 percent from 4.80 percent, with points decreasing to 0.33 from 0.41 (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 63.4% over the last 17 weeks.  

The last time the index declined this far was in late 2010 and early 2011 when mortgage increased sharply with the Ten Year Treasury rising from 2.5% to 3.5%.  We've seen a similar increase over the last few months with the Ten Year Treasury yield up from 1.6% to over 2.85% today.

The second graph shows the MBA mortgage purchase index.  

The 4-week average of the purchase index has generally been trending up over the last year (but down over the last few months), and the 4-week average of the purchase index is up about 6.1% from a year ago. 

by Calculated Risk on 9/03/2013 09:04:00 PM

Josh Barro at Business Insider writes: ECONOMISTS: Summers As Fed Chair Would Shave 0.5% Off GDP And Cost Us 350,000 Jobs

Julia Coronado, Chief Economist for North America at BNP, and her colleagues Bricklin Dwyer and Laura Rosner estimated in a note last week that picking Summers over Fed Vice Chair Janet Yellen would shave 0.5 to 0.75 points off GDP growth over two years and cut job creation by 350,000 to 500,000 jobs.

Barro has some excerpts from the note with the author's conclusion:

[T]he efficacy of monetary policy does not seem to be the driving force in this nomination process and the forces in Washington seem to be moving in the direction of a Summers nomination.
emphasis added

Ouch!

Based on merit, I believe Yellen would be the nominee. 

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

• At 8:30 AM, the Trade Balance report for July from the Census Bureau. The consensus is for the U.S. trade deficit to increase to $39.0 billion in July from $34.2 billion in June.

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

• Around 4:00 PM, total Light vehicle sales for August. The consensus is for light vehicle sales to increase to 15.8 million SAAR in August (Seasonally Adjusted Annual Rate) from 15.7 million SAAR in July.

by Calculated Risk on 9/03/2013 05:41:00 PM

Here is another weekly update on housing inventory: One of key questions for 2013 is Will Housing inventory bottom this year? Since this is a very important question, I'm tracking inventory weekly in 2013. 

There is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for July).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years. This is displayed on the graph below as a percentage change from the first week of the year (to normalize the data).

In 2010 (blue), inventory increased more than the normal seasonal pattern, and finished the year up 7%. However in 2011 and 2012, there was only a small increase in inventory early in the year, followed by a sharp decline for the rest of the year.

Click on graph for larger image.

Note: the data is a little weird for early 2011 (spikes down briefly).

So far in 2013, inventory is up 19.5%.  There might be some further increases over the next few weeks, but then inventory should start declining seasonally.  

It is important to remember that inventory is still very low, and is down 4.7% from the same week last year according to Housing Tracker.

This strongly suggests inventory bottomed early this year, and I expect inventory to be up year-over-year very soon (maybe later this month), and I also expect the seasonal decline to be less than usual at the end of the year.  This increase in inventory should mean price increases will slow.