by Calculated Risk on 10/01/2015 08:35:00 AM

The DOL reported:

In the week ending September 26, the advance figure for seasonally adjusted initial claims was 277,000, an increase of 10,000 from the previous week's unrevised level of 267,000. The 4-week moving average was 270,750, a decrease of 1,000 from the previous week's unrevised average of 271,750.

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

The previous week was unrevised.

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 decreased to 270,750.

This was above the consensus forecast of 272,000, and the low level of the 4-week average suggests few layoffs.

by Calculated Risk on 9/30/2015 10:10:00 PM

From the WSJ: Congress Passes Bill to Fund Government Through Dec. 11

Congress now confronts a new Dec. 11 deadline to try to strike a long-term budget deal at a time when House Republicans are losing their most experienced leader and remain split about how to negotiate with Mr. Obama and Democrats.

Moreover, the stopgap measure will end around the time when Congress also has to consider raising the debt ceiling, and one week before a key Federal Reserve meeting, at which many economists expect the central bank to raise interest rates for the first time in nearly a decade. Lawmakers also will contend with a long-term highway bill and expiring tax breaks at year’s end.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for 272 thousand initial claims, up from 267 thousand the previous week.

• At 10:00 AM, the ISM Manufacturing Index for September. The consensus is for the ISM to be at 50.5, down from 51.1 in August. The ISM manufacturing index indicated expansion at 51.1% in August. The employment index was at 51.2%, and the new orders index was at 51.6%.

• Also at 10:00 AM, Construction Spending for August. The consensus is for a 0.7% increase in construction spending.

• All day: Light vehicle sales for September. The consensus is for light vehicle sales to decrease to 17.5 million SAAR in September from 17.7 million in August (Seasonally Adjusted Annual Rate).

by Calculated Risk on 9/30/2015 05:27:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined slightly in August to 1.62% from 1.63% in July. The serious delinquency rate is down from 1.99% in August 2014, and this is the lowest level since August 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

The Fannie Mae serious delinquency rate has only fallen 0.37 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will not be below 1% until 2017.

The "normal" serious delinquency rate is under 1%, so maybe Fannie Mae serious delinquencies will be close to normal some time in 2017.  This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog.

by Calculated Risk on 9/30/2015 12:51:00 PM

Here is a minor indicator I follow from the National Restaurant Association: Restaurant Performance Index Declined in August

As a result of softer same-store sales and customer traffic levels, the National Restaurant Association’s Restaurant Performance Index (RPI) declined in August. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.5 in August, down 1.2 percent from July and the lowest level in 11 months. Despite the decline, August represented the 30th consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators.
...
“The RPI's August decline was the result of broad-based declines in the current situation indicators,” said Hudson Riehle, Senior Vice President, Research and Knowledge Group, National Restaurant Association. “Same-store sales and customer traffic softened from July’s strong levels, while the labor and capital spending indicators also dipped.

“Despite the declines, each of the current situation indicators were in expansion territory above 100, which indicates the restaurant industry remains on a positive growth trajectory,” Riehle added.
emphasis added

Click on graph for larger image.

The index decreased to 101.5 in August, up from 102.7 in July. (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month. Even with the decline in the index, this is a solid reading.

Even with this decline, the index is indicating expansion, and it appears restaurants are benefiting from lower gasoline prices.

by Calculated Risk on 9/30/2015 09:58:00 AM

Chicago PMI: Sep Chicago Business Barometer Down 5.7 Points to 48.7

The Chicago Business Barometer declined 5.7 points to 48.7 in September as Production growth collapsed and New Orders fell sharply.

The drop in the Barometer to below 50 was its fifth time in contraction this year and comes amid downgrades to global economic growth and intense volatility in financial markets which have slowed activity in some industries. The latest decline followed two months of moderate expansion, and while growth in Q3 accelerated a little from Q2, the speed of the September descent is a source of concern.
...
Chief Economist of MNI Indicators Philip Uglow said, “While activity between Q2 and Q3 actually picked up, the scale of the downturn in September following the recent global financial fallout is concerning. Disinflationary pressures intensified and output was down very sharply. We await the October data to better judge whether this was a knee jerk reaction and there is a bounceback, or whether it represents a more fundamental slowdown.“
emphasis added

This was well below the consensus forecast of 53.6.

by Calculated Risk on 9/30/2015 08:19:00 AM

From ADP:

Private sector employment increased by 200,000 jobs from August to September according to the September 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 12,000 jobs in September, off from 15,000 the previous month. The construction industry added 35,000 jobs in September, almost double the 18,000 gained in August. Meanwhile, manufacturing dropped into negative territory losing 15,000 jobs in September, the worst showing since December 2010.

Service-providing employment rose by 188,000 jobs in September, up from 172,000 in August. ...

Mark Zandi, chief economist of Moody’s Analytics, said, “The U.S. job machine continues to produce jobs at a strong and consistent pace. Despite job losses in the energy and manufacturing industries, the economy is creating close to 200,000 jobs per month. At this pace full employment is fast approaching.”

This was above the consensus forecast for 190,000 private sector jobs added in the ADP report. 

The BLS report for September will be released Friday, and the consensus is for 203,000 non-farm payroll jobs added in September.

by Calculated Risk on 9/30/2015 07:03:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Surve

Mortgage applications decreased 6.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 25, 2015. ...

The Refinance Index decreased 8 percent from the previous week. The seasonally adjusted Purchase Index decreased 6 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 20 percent higher than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.08 percent from 4.09 percent, with points remaining unchanged from 0.45 (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.

Refinance activity remains low.

2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015 (after the increase earlier this year).


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 20% higher than a year ago.

by Calculated Risk on 9/29/2015 07:54:00 PM

It seems likely a shutdown tomorrow will be avoided, but the votes will be at the last minute. Of course there might be a shutdown later this year.

From the WSJ: GOP leaders are negotiating with Obama on two-year budget deal; a stopgap measure is expected to be passed this week

Republican leaders, seeking to avoid repeated fiscal crises, have opened discussions with President Barack Obama about a two-year budget deal, aiming to avoid a spending fight in the middle of an election year.
...
The House and Senate are expected Wednesday to pass a stopgap spending measure to keep the government running through Dec. 11.

A shutdown in October 2016 would be a disaster for the GOP - one month before the election - so naturally they want a two year deal.

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 September. This report is for private payrolls only (no government). The consensus is for 190,000 payroll jobs added in September, the same as in August.

• At 9:45 AM, Chicago Purchasing Managers Index for September. The consensus is for a reading of 53.6, down from 54.4 in August.

by Calculated Risk on 9/29/2015 05:14:00 PM

The Case-Shiller house price indexes for July were released this morning. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Zillow: Case-Shiller Forecast: Expect August's Data to Look a Lot Like July's

The July S&P/Case-Shiller (SPCS) data published today showed home prices dipping on a seasonally-adjusted monthly basis, with both the 10- and 20-city indices falling 0.2 percent from June to July.

On an annual basis, the 10-city index was up 4.5 percent from July 2014, while the 20-city index increased 5 percent over the past year. The U.S. National Index was up 4.7 percent year-over-year. We expect the August SPCS to show a second consecutive monthly decline in the 10-city index, down 0.1 percent from July to August, and the 20-city index to be flat over the same period (seasonally adjusted). The National Index is expected to grow 0.4 percent (seasonally adjusted) in August from July. We expect all three indices to show annual appreciation of less than 5 percent when August data is released next month.

All SPCS forecasts are shown in the table below. These forecasts are based on today’s July SPCS data release and the August 2015 Zillow Home Value Index (ZHVI), released September 21. The SPCS Composite Home Price Indices for July will not be officially released until Tuesday, October 27.

This suggests the year-over-year change for the August Case-Shiller National index will be about the same as in the July report.

Zillow Case-Shiller Forecast
	Case-Shiller Composite 10		Case-Shiller Composite 20		Case-Shiller National
	NSA	SA	NSA	SA	NSA	SA
July Actual YoY	4.5%	4.5%	5.0%	5.0%	4.7%	4.7%
August Forecast YoY	4.5%	4.5%	4.9%	4.9%	4.8%	4.8%
August Forecast MoM	0.1%	-0.1%	0.1%	0.0%	0.3%	0.4%

by Calculated Risk on 9/29/2015 02:14:00 PM

From the LA Times: Congress moves closer to averting government shutdown with Senate vote

With Wednesday's funding deadline looming, the Senate overwhelmingly advanced the government funding bill by a 77-19 vote. More than half the Republicans in the Senate joined Democrats to break the filibuster by conservative Republicans, led by Sen. Ted Cruz of Texas ...

Final passage in the Senate is likely to come Tuesday. The House is expected to vote Wednesday.

If it doesn't pass the House by Wednesday night, the Government will shutdown.  It seems likely this will pass.

However, there is growing concern about a shutdown later this year - that might include Congress threatening (once again) to not pay the bills.

From Dara Lind at Vox: The next government shutdown fight, explained

The next funding bill is currently working its way through the Senate, and will come to the House sometime Wednesday. Congress was supposed to fund the government for the entire 2016 fiscal year, which begins on October 1. But instead, the Senate bill only funds the government through December 11.

The so-called "debt ceiling" will probably be reached in November, so both of these issues will be tied together (the "debt ceiling" is misleading - it sounds fiscally responsible, but it is actually about paying the bills - and not paying the bills would be irresponsible).

John Schoen at CNBC discusses this: How the government shutdown may be averted, for now

The debt issued by the Treasury is used to pay for spending that Congress has already authorized for goods and services the government has already provided. It would be like trying to control your household spending by not paying a credit card charge for a meal you've already eaten.

Freezing the debt ceiling does nothing to better manage future spending or make government do more with less money.

If anything, forcing the Treasury to default on its debt would only increase government spending because it would raise future borrowing costs. Just as a deadbeat consumer who doesn't pay legitimate credit card charges has to pay higher interest rates, investors in U.S. Treasurys would demand higher returns to offset the risk of Congress pulling this stunt again.

Right now it looks like there won't be a shutdown this week.