by Calculated Risk on 5/10/2016 08:54:00 AM

From the National Federation of Independent Business (NFIB): Small Business Optimism Increases One Point in April

The Index of Small Business Optimism rose 1 point in April to 93.6 ... according to the National Federation of Independent Business’ (NFIB) monthly economic survey released today. ...

Fifty-three percent reported hiring or trying to hire (up 5 points), but 46 percent reported few or no qualified applicants for the positions they were trying to fill. Hiring activity increased substantially ... Twenty-nine percent of all owners reported job openings they could not fill in the current period, up 4 points, revisiting the highest level for this expansion.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 93.6 in April.

by Calculated Risk on 5/09/2016 08:18:00 PM

Tuesday:
• At 9:00 AM, NFIB Small Business Optimism Index for April.

• At 10:00 AM, Job Openings and Labor Turnover Survey for March from the BLS. Job openings decreased in February to 5.445 million from 5.604 million in January. The number of job openings were up 6% year-over-year, and Quits were up 9% year-over-year.

• Also at 10:00 AM, Monthly Wholesale Trade: Sales and Inventories for March. The consensus is for a 0.3% increase in inventories.

From Matthew Graham at Mortgage News Daily: Mortgage Rates Steady Near 3-Year Lows

Mortgage rates moved sideways today, taking them one step closer to officially claiming the title of "3 year lows." Tomorrow marks the three year anniversary of the Wall Street Journal article that began the early days of the 'taper tantrum'--the jarring move higher in rates that resulted from markets coming to terms with the end of the Fed's asset purchases.

While rates aren't as low today as they had been before the taper tantrum, the current rate environment is excellent in its own right. Apart from being fairly close to the all-time lows seen in 2012-2013, today's low rates exist without any Fed asset purchases and without any risk that the Fed will surprise the world with a shift toward stricter monetary policy. In fact, if there's any risk for financial markets, it's that the Fed will continue to back away from their rate-hike campaign that began with the first and only hike in nearly a decade this past December.

Most lenders are right in line with rates seen on Friday. The most prevalent conventional 30yr fixed quote continues hovering around 3.625% with more than a few lenders already back down to 3.5%.
emphasis added

by Calculated Risk on 5/09/2016 02:53:00 PM

This is a key distressed market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

Inventory was up year-over-year in April.  This is the second consecutive months with a YoY increase in inventory, following fifteen consecutive months of YoY declines in Phoenix.  This could be a significant change.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in April were up 0.8% year-over-year.

2) Cash Sales (frequently investors) were down to 23.8% of total sales.

3) Active inventory is now up 4.9% year-over-year.  

More inventory (a theme in 2014) - and less investor buying - suggested price increases would slow sharply in 2014.  And prices increases did slow in 2014, only increasing 2.4% according to Case-Shiller.

In 2015, with falling inventory, prices increased a little faster -  Prices were up 6.3% in 2015 according to Case-Shiller.

Now inventory is increasing a little again, and - if this trend continues in Phoenix - price increases will probably slow.

April Residential Sales and Inventory, Greater Phoenix Area, ARMLS
	Sales	YoY Change Sales	Cash	Percent Cash	Inventory	YoY Change
Apr-08	4,8751	---	986	20.2%	55,7261	---
Apr-09	8,564	75.7%	3,464	40.4%	44,165	-20.7%
Apr-10	9,261	8.1%	3,641	39.3%	41,756	-5.5%
Apr-11	9,328	0.7%	4,489	48.1%	34,515	-17.3%
Apr-12	8,438	-9.5%	4,013	47.6%	21,125	-38.8%
Apr-13	8,744	3.6%	3,670	42.0%	20,083	-4.9%
Apr-14	7,656	-12.4%	2,469	32.2%	29,889	48.8%
Apr-15	8,368	9.3%	2,120	25.3%	25,950	-13.2%
Apr-16	8,437	0.8%	2,008	23.8%	27,232	4.9%
1 April 2008 does not include manufactured homes, ~100 more

by Calculated Risk on 5/09/2016 12:19:00 PM

By request, a few more employment graphs ...

Here are the previous posts on the employment report:

• April Employment Report: 160,000 Jobs, 5.0% Unemployment Rate
• Comments: A Decent Employment Report
• Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama
• Update: "Scariest jobs chart ever"

Duration of Unemployment
This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

The general trend has been down for all categories, and the "less than 5 weeks", "6 to 14 weeks" and "15 to 26 weeks" are all close to normal levels. 

The long term unemployed is below 1.3% of the labor force, however the number (and percent) of long term unemployed remains elevated.

Unemployment by Education
This graph shows the unemployment rate by four levels of education (all groups are 25 years and older).

Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and all four groups were generally trending down - although the rate has somewhat flattened out recently.

Although education matters for the unemployment rate, it doesn't appear to matter as far as finding new employment.

Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".

Construction Employment
This graph shows total construction employment as reported by the BLS (not just residential).

Since construction employment bottomed in January 2011, construction payrolls have increased by 1.24 million.

Construction employment is still below the bubble peak, but close to the level in the late '90s.

Diffusion Indexes
 The BLS diffusion index for total private employment was at 56.3 in April, down from 58.6 in March.

For manufacturing, the diffusion index was at 47.5, up from 36.7 in March.

Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS.  Above 60 is very good.  From the BLS:

Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.

Overall private job growth was somewhat widespread in April, but manufacturing employment is struggling.

by Calculated Risk on 5/09/2016 09:01:00 AM

During and following the 2007 recession, every month I posted a graph showing the percent jobs lost during the recession compared to previous post-WWII recessions.

Some people started calling this the "scariest jobs chart ever".

I retired the graph in May 2014 when employment finally exceeded the pre-recession peak.

I was asked if I could post an update to the graph, and here it is through the May 2016 report.


This graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions.  Since exceeding the pre-recession peak in May 2014, employment is now 4.0% above the previous peak.

Note: I ended the lines for most previous recessions when employment reached a new peak, although I continued the 2001 recession too on this graph.  The downturn at the end of the 2001 recession is the beginning of the 2007 recession.  I don't expect a downturn for employment any time soon (unlike in 2007 when I was forecasting a recession).

by Calculated Risk on 5/08/2016 07:31:00 PM

From the WSJ: Greece Passes Austerity Measures As Creditors Remain Deadlocked Over Bailout Terms

The legislation that Greek lawmakers passed late on Sunday covers the bulk of a package of austerity measures worth around €5.4 billion ($6.16 billion), or 3% of gross domestic product, that creditors have requested.
...
Greece’s most influential creditors, Germany and the International Monetary Fund, remain deadlocked over the terms of Greece’s bailout plan, which the IMF thinks is badly flawed but Germany says can’t be changed.

The beatings will continue until morale improves.

Weekend:
• Schedule for Week of May 8, 2016

Monday:
• At 10:00 AM ET, the Fed will release the monthly Labor Market Conditions Index (LMCI).

From CNBC: Pre-Market Data and Bloomberg futures: S&P are up 11 and DOW futures are up 120 (fair value).

Oil prices were up over the last week with WTI futures at $45.79 per barrel and Brent at $45.37 per barrel.  A year ago, WTI was at $59, and Brent was at $64 - so prices are down about 25% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.21 per gallon (down about $0.40 per gallon from a year ago).

by Calculated Risk on 5/08/2016 09:28:00 AM

A few excerpts from a research piece by Michael Hanson at Merrill Lynch: See you in September

Earlier this year we had expected that the Fed would shift away from risk management toward a more straight-forward data-dependent policy stance, and that the US macro data would improve enough to support a rate hike this summer. Following the soft April jobs report we have reassessed both parts of that view. Despite some Fed officials making the case for a “live” June FOMC meeting, we have been struck since early this year by Fed Chair Yellen’s strongly dovish tone. ... Thus we now expect the Fed will hike one more time this year, in September. This very gradual hiking pace continues in our view with two hikes for 2017, in March and September.

Notably, we still see a greater chance for a hike at the June or July meeting than current market pricing. ... We don’t think the threshold for another 25bp hike is nearly as high as market pricing implies, but the Fed does need to see signs that continued progress is being made toward its dual mandate objectives. ... While September is now most likely in our view, the probability distribution for the timing of hikes remains fairly flat overall.
emphasis added

CR Note: I think a June rate hike is still possible, and that the main focus will be on inflation - not employment.

by Calculated Risk on 5/07/2016 05:31:00 AM

The key economic report this week is April retail sales on Friday.

----- Monday, May 9th -----
10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

----- Tuesday, May 10th -----
9:00 AM ET: NFIB Small Business Optimism Index for April.

10:00 AM: Job Openings and Labor Turnover Survey for March 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 decreased in February to 5.445 million from 5.604 million in January.

The number of job openings (yellow) were up 6% year-over-year, and Quits were up 9% year-over-year.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for March. The consensus is for a 0.3% increase in inventories.
----- Wednesday, May 11th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

2:00 PM: The Monthly Treasury Budget Statement for April.

----- Thursday, May 12th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 267 thousand initial claims, down from 274 thousand the previous week.

----- Friday, May 13th -----
8:30 AM ET: Retail sales for April will be released.  The consensus is for retail sales to increase 0.9% in April.

This graph shows retail sales since 1992 through March 2016. 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 February to March (seasonally adjusted), and sales were up 1.7% from March 2015.

8:30 AM: The Producer Price Index for April from the BLS. The consensus is for a 0.3% increase in prices, and a 0.1% increase in core PPI.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for March.  The consensus is for a 0.2% increase in inventories.

10:00 AM: University of Michigan's Consumer sentiment index (preliminary for May). The consensus is for a reading of 89.7, up from 89.0 in April.

by Calculated Risk on 5/06/2016 06:03:00 PM

From housing economist Tom Lawler:

Below is a table showing some selected operating statistics from large, publicly-traded home builders for the quarter ending March 31, 2016.

Here a few (of what could be many) points.

1. In terms of units, 27% of D.R. Horton’s net orders last quarter were from its “entry level” Express brand, up from 18% in the first quarter of last year. Express comprised 23% of Horton’s deliveries last quarter, up from 8% a year earlier.

2. Both Meritage Homes and MDC Holdings said that they either had or were to planning to increase production of lower priced homes (“entry-level-plus” in Mertigage’s case, and their “new, more affordable product line” in MDC’s case.

3. Meritage Homes said that its margins were in “a handful” of communities in Southern California and Arizona that it acquired in 2013 were adversely impacted by the reduction in FHA loan limits in those markets effective at the beginning of 2014. Specifically, the company said that “(w)hen those loan limits were reduced, we weren’t able to get the prices we were expecting ...”

	Net Orders			Settlements			Average Closing  Price ($000s)
Qtr. Ended:	3/16	3/15	% Chg	3/16	3/15	% Chg	3/16	3/15	% Chg
D.R. Horton	12,292	11,135	10.4%	9,262	8,243	12.4%	290	281	3.1%
Pulte Group	5,652	5,139	10.0%	3,945	3,365	17.2%	353	323	9.3%
NVR	4,137	3,926	5.4%	3,006	2,534	18.6%	369	371	-0.4%
Cal Atlantic	4,135	3,960	4.4%	2,727	2,435	12.0%	432	398	8.5%
Beazer Homes	1,538	1,698	-9.4%	1,150	936	22.9%	328	306	7.3%
Meritage Homes	1,987	1,979	0.4%	1,488	1,335	11.5%	400	387	3.4%
MDC Holdings	1,646	1,593	3.3%	907	909	-0.2%	435	420	3.6%
M/I Homes	1,314	1,108	18.6%	876	717	22.2%	353	325	8.6%
Sub Total	32,701	30,538	7.1%	23,361	20,474	14.1%	344	329	4.7%
LGI Homes				844	671	25.8%
Total	32,701	30,538	7.1%	24,205	21,145	14.5%	332	318	4.4%

by Calculated Risk on 5/06/2016 01:41:00 PM

By request, here is another update of an earlier post through the April 2016 employment report including all revisions.

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	10,082
GW Bush 1	-811
GW Bush 2	415
Obama 1	1,921
Obama 2	8,4431
139 months into 2nd term: 10,391 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). Presidents Carter and George H.W. Bush only served one term, and President Obama is in the fourth 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 811,000 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 396,000 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 20,966,000 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 1,921,000 more private sector jobs at the end of Mr. Obama's first term.  Thirty nine months into Mr. Obama's second term, there are now 10,364,000 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 502,000 jobs). 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	-708
Obama 2	2061
139 months into 2nd term, 254 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 down turn due to the bursting of the housing bubble - and I predicted a recession in 2007).

For the public sector, the cutbacks are clearly 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.

Below 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 fourth best for total job creation.

Note: Only 202 thousand public sector jobs have been added during the first thirty nine months of Obama's 2nd term (following a record loss of 708 thousand public sector jobs during Obama's 1st term).  This is about 15% 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	10,082	1,242	11,312
3	Reagan 2	9,357	1,438	10,795
	Obama 21	8,297	211	7,871
	Pace2	10,480	267	10,747
139 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. Right now it looks like Obama's 2nd term will be in the top 3 for private employment, but not for total employment gains.

Average Jobs needed per month (000s) for remainder of Obama's 2nd Term
to Rank	Private	Total
#1	271	325
#2	182	297
#3	102	238