by Calculated Risk on 6/08/2016 10:07:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings was little changed at 5.8 million on the last business day of April, the U.S. Bureau of Labor Statistics reported today. Hires edged down to 5.1 million while separations were little changed at 5.0 million. Within separations, the quits rate was 2.0 percent, and the layoffs and discharges rate was 1.1 percent. ...
...
The number of quits was little changed in April at 2.9 million.
emphasis added

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

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for April, the most recent employment report was for May.

Click on graph for larger image.


Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased in April to 5.788 million from 5.670 million in March.

The number of job openings (yellow) are up 4% year-over-year compared to April 2015.

Quits are up 9% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

This is another strong report, and job openings were tied with the record high set in July 2015.

by Calculated Risk on 6/08/2016 07:00:00 AM

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

Mortgage applications increased 9.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 3, 2016. This week’s results include an adjustment to account for the Memorial Day holiday.
...
The Refinance Index increased 7 percent from the previous week. The seasonally adjusted Purchase Index increased 12 percent from one week earlier. The unadjusted Purchase Index decreased 12 percent compared with the previous week and was 6 percent lower 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 3.83 percent from 3.85 percent, with points decreasing to 0.33 from 0.36 (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 since 1990.

Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000.

Refinance activity increased a little this year when rates declined.


The second graph shows the MBA mortgage purchase index.

by Calculated Risk on 6/07/2016 04:08:00 PM

From the National Center for Health Statistics: Births: Preliminary Data for 2015. The NCHS reports:

The preliminary number of births for the United States in 2015 was 3,977,745, a decrease of less than 1% (0.3%) from 2014 (3,988,076). This decline followed the increase in births from 2013 to 2014, which was the first increase since 2007 ...

The preliminary general fertility rate (GFR) for the United States also decreased less than 1% in 2015, to 62.5 births per 1,000 women aged 15–44, from 62.9 in 2014. This decline follows an increase in the rate from 2013 to 2014, the first increase since 2007.

Here is a long term graph of annual U.S. births through 2015 ...

Click on graph for larger image.

Births had declined for five consecutive years prior to increasing in 2013 and 2014.  Births are about 7.8% below the peak in 2007 (births in 2007 were at the all time high - even higher than during the "baby boom"). I suspect certain segments of the population were under stress before the recession started - like construction workers - and even more families were in distress in 2008 through 2012. And this led to fewer babies.

Notice that the number of births started declining a number of years before the Great Depression started. Many families in the 1920s were under severe stress long before the economy collapsed. By 1933 births were down by almost 23% from the early '20s levels.

Of course economic distress isn't the only reason births decline - look at the huge decline following the baby boom that was driven by demographics. But it is not surprising that the number of births slow or decline during tough economic times - but that is mostly over now.

The second graph is from the NCHS report and shows births per 1,000 women by teen age group. From the NCHS:

In 2015, the preliminary birth rates for teenagers aged 15–17 and 18–19 fell 9% and 7%, respectively, to 9.9 and 40.7 births per 1,000 women. These rates were yet another record low for both groups, from 10.9 and 43.8 in 2014. Since 2007, the rate for teenagers aged 15–17 has dropped 54%, and the rate for those aged 18–19 has dropped 43%. The number of births for teenagers aged 15–17 declined 8% from 2014 to 2015, and births to those aged 18–19 declined 7%.

Far fewer teens births is great news (and is probably related to the much higher enrollment rates).

Another key trends ... women are waiting longer to have babies:

The preliminary birth rate for women aged 20–24 was 76.9 births per 1,000 women in 2015, declining 3% from the rate in 2014 (79.0), reaching yet another record low for the country. The rate for women in this age group has declined steadily by 27% since 2007. The number of births to women in their early 20s decreased 4% from 2014 to 2015.

The preliminary birth rate for women aged 30–34 in 2015 was steadily by 8%, but increased slightly from 2013 to 2014 (2). The 101.4 births per 1,000 women, an increase of less than 1% from number of births to women in their late 20s increased 1% from the rate in 2014 (100.8). The rate for this 2014 to 2015. group has increased steadily by 5% since 2011. The number of births to women in their early 30s also increased in 2015 by 1%. ... The rate for women aged 35–39 was 51.7 births per 1,000 women, up 1% from 2014 (51.0). The rate for this group has increased steadily by 13% since 2010

Waiting longer to have children makes sense (see: Demographics and Behavior) and we should expect a baby boom in a few years as the largest cohorts move into the 25 to 34 years old age groups.

P.S. I expect that as families have babies, they will tend to buy homes (as opposed to rent)!   The demographics are favorable for renting now, but the demographics are becoming more positive for home ownership.

by Calculated Risk on 6/07/2016 02:32:00 PM

Note: This index is a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.

From Dodge Data & Analytics: Dodge Momentum Index Moves Higher in May

The Dodge Momentum Index rose 2.4% in May to 119.4 from its revised April reading of 116.6 (2000=100). The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The increase for the Index in May was due to a 6.5% gain for projects entering planning in the commercial sector, which more than offset a 3.4% decline for such projects in the institutional sector. May’s increase places the overall Index 3.6% higher than its year-ago level, suggesting further growth in construction activity in 2016 despite the subdued first quarter GDP report and signs that lending standards are beginning to tighten for commercial projects. The commercial portion of the Index rose in May for the second consecutive month and is at its highest level since September 2015. This recent improvement for commercial projects provides some evidence that construction plans are moving forward after the severe drop-off in planning that occurred with the financial market instability in late 2015. At the same time, institutional planning is 1.3% lower than it was in May 2015, settling back for now from the heightened activity reported in late 2015 and early 2016.

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 119.4 in May, up from 116.6 in April.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests further increases in CRE spending over the next year.

by Calculated Risk on 6/07/2016 10:59:00 AM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported Southern Nevada Home Prices Heat Up Heading Into Summer, GLVAR Housing Statistics for May 2016

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in May was 3,349, down slightly from 3,363 total sales in May of 2015. Compared to the same month one year ago, 1.6 percent fewer homes, but 4.9 percent more condos and townhomes sold in May.
...
By the end of May, GLVAR reported 7,626 single-family homes listed without any sort of offer. That’s up 6.9 percent from one year ago. For condos and townhomes, the 2,237 properties listed without offers in May represented a 1.4 percent decrease from one year ago.

GLVAR continued to report declines in distressed sales and a corresponding increase in traditional home sales, where lenders are not controlling the transaction. In May, 4.5 percent of all local sales were short sales – when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 7.3 percent of all sales one year ago. Another 6.1 percent of all May sales were bank-owned, down from 8.0 percent one year ago.
emphasis added

1) Overall sales were down 0.4% year-over-year.

2) The percent of cash sales decreased year-over-year from 29.1% in May 2015 to 28.2% in May 2016. Cash buying peaked in February 2013 at 59.5%. This has been trending down.

3) Non-contingent inventory for single-family homes was up 6.9% year-over-year.  Inventory for condos was down 1.4%.    Inventory is important to watch - and inventory is still tight, but increasing.

by Calculated Risk on 6/07/2016 09:00:00 AM

Notes: This CoreLogic House Price Index report is for April. The recent Case-Shiller index release was for March. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic US Home Price Report Shows Prices Up 6.2 Percent Year Over Year in April 2016

Home prices nationwide, including distressed sales, increased year over year by 6.2 percent in April 2016 compared with April 2015 and increased month over month by 1.8 percent in April 2016 compared with March 2016, according to the CoreLogic HPI.
...
“Low mortgage rates and a lean for-sale inventory have resulted in solid home-price growth in most markets,” said Dr. Frank Nothaft, chief economist for CoreLogic. “An expected gradual rise in interest rates and more homes offered for sale are expected to moderate appreciation in the coming year.”
emphasis added

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 1.8% in March (NSA), and is up 6.2% over the last year.

This index is not seasonally adjusted, and this was a solid month-to-month increase.

The index is still 7.9% below the bubble peak in nominal terms (not inflation adjusted).

The second graph shows the YoY change in nominal terms (not adjusted for inflation).

The YoY increase had been moving sideways over the last year.

The year-over-year comparison has been positive for fifty one consecutive months.

by Calculated Risk on 6/06/2016 05:01:00 PM

From Tim Duy: Employment Report, Yellen, and More A brief excerpt:

Lot's of Fed news over the past few days that add up to a simple takeaway: June is off the table (again), the stars have to align just right for a July rate hike (not likely), and September is coming into focus as the next possible rate hike opportunity. September, however, assumes that the employment report is more of an outlier than part of a trend. that's what the Fed will be taking out of the data in the coming months.
...
Bottom Line: The May employment report killed the chances of a rate hike in June. And it was weak enough that July no longer looks likely as well. I had thought that, assuming a solid May number they would set the stage for a July hike. That seems unlikely now; they will probably need two months of good numbers to overcome the May hit. The data might bounce in the direction of July, to be sure. Hence Fed officials won't want to take July off the table just yet, so expect, in particular, the more hawkish elements of the FOMC to keep up the tough talk.

See you in September ...

by Calculated Risk on 6/06/2016 03:05:00 PM

An interesting question is why the unemployment rate fell so sharply in May, even with relatively few payroll jobs added (38,000 jobs added in May).

First, it is important to remember that there are two separate surveys for the Employment Situation Summary. The headline payroll jobs number comes from Current Employment Statistics (CES: payroll survey), a sample of "approximately 145,000 businesses and government agencies representing approximately 623,000 worksites".

The unemployment rate and the participation rate comes from the Current Population Survey (CPS: commonly called the household survey), a monthly survey of about 60,000 households.

Background: To understand how the surveys are conducted, here is an explanation from the BLS about the household survey, and an explanation about the establishment survey.

Here a few definitions from the BLS Glossary:

• Civilian noninstitutional population: Included are persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.

• Labor force: The labor force includes all persons classified as employed or unemployed in accordance with the definitions contained in this glossary.

• Labor force participation rate: The labor force as a percent of the civilian noninstitutional population.

• Unemployment rate: The unemployment rate represents the number unemployed as a percent of the labor force.

So a lower participation rate - with the same level of employment - would mean a lower unemployment rate.

The following table is based on the Household survey (all seasonally adjusted):

Household Survey (000s)
	April	May	Change
Civilian noninstitutional population (16 and over)	252,969	253,174	205
Civilian labor force	158,924	158,466	-458
Employed	151,004	151,030	26
Unemployed	7,920	7,436	-484
Participation Rate	62.82%	62.59%	-0.23%
Unemployment Rate	4.98%	4.69%	-0.29%

So the estimated number of people in the labor force declined by 458,000 in May, and the number of unemployed dropped by 484,000. A small portion of this decline was due to higher employment, but most of the decline in the unemployed was due to the decline in participation (even while the population increased).

Does this mean 458,000 people dropped out of the labor force in May?  Probably not.   There is a lot of month-to-month volatility in the household survey (the establishment survey is much better for jobs). The following table shows a comparison to May 2015 (year-over-year change).

Household Survey (000s)
	May 2015	May 2016	Change
Civilian noninstitutional population (16 and over)	250,455	253,174	2,719
Civilian labor force	157,367	158,466	1,099
Employed	148,748	151,030	2,282
Unemployed	8,619	7,436	-1,183
Participation Rate	62.83%	62.59%	-0.24%
Unemployment Rate	5.48%	4.69%	-0.78%

This makes more sense. About one third of the decline in the unemployment rate over the last year is due to the declining participation rate, and about two-thirds is due to more employment.  As I've noted before, the participation rate is expected to decline due to demographics and long term trends.

My sense is that some of the increase in the participation rate over the last few months was due to survey volatility, and that was reversed in May.  The real disappointment in the May report is the few jobs added in the establishment report over the last three months.

by Calculated Risk on 6/06/2016 12:36:00 PM

The speech may be viewed here live.

From Fed Chair Janet Yellen: Current Conditions and the Outlook for the U.S. Economy Excerpts:

[T]he overall labor market situation has been quite positive. In that context, this past Friday's labor market report was disappointing. Payroll gains were reported to have been much smaller in April and May than earlier in the year, averaging only about 80,000 per month.2 And while the unemployment rate was reported to have fallen further in May, that decline occurred not because more people had jobs but because fewer people reported that they were actively seeking work. A broader measure of labor market slack that includes workers marginally attached to the workforce and those working part-time who would prefer full-time work was unchanged. An encouraging aspect of the report, however, was that average hourly earnings for all employees in the nonfarm private sector increased 2-1/2 percent over the past 12 months--a bit faster than in recent years and a welcome indication that wage growth may finally be picking up.

Although this recent labor market report was, on balance, concerning, let me emphasize that one should never attach too much significance to any single monthly report. Other timely indicators from the labor market have been more positive. For example, the number of people filing new claims for unemployment insurance--which can be a good early indicator of changes in labor market conditions--remains quite low, and the public's perceptions of the health of the labor market, as reported in various consumer surveys, remain positive. That said, the monthly labor market report is an important economic indicator, and so we will need to watch labor market developments carefully.

Yellen remains cautiously optimistic, but no indication of a rate increase in June.

by Calculated Risk on 6/06/2016 09:44:00 AM

Black Knight Financial Services (BKFS) released their Mortgage Monitor report for April today. According to BKFS, 4.24% of mortgages were delinquent in April, down from 4.72% in April 2015. BKFS also reported that 1.17% of mortgages were in the foreclosure process, down from 1.63% a year ago.

This gives a total of 5.41% delinquent or in foreclosure.

Press Release: Black Knight’s April Mortgage Monitor: Cash Transactions Account for Over 60 Percent of Low-Priced Home Sales

Today, the Data and Analytics division of Black Knight Financial Services, Inc. released its latest Mortgage Monitor Report, based on data as of the end of April 2016. This month, Black Knight looked at the cash share of residential real estate transactions by core-based statistical areas (CBSAs), breaking each CBSA into five equal price tiers. While the data showed that overall cash sales are slowing, they still account for the bulk of transactions on homes in the lowest 20 percent of property values. As Black Knight Data & Analytics Senior Vice President Ben Graboske explained, there is significant disparity between high- and low-end markets nationwide in this regard.

“As the inventory of distressed properties has dried up nationwide, the overall share of cash sales has been on the decline as well,” said Graboske. “From a peak of 45 percent of all real estate transactions back in Q1 2011, cash sales accounted for just 35 percent of home purchases in the first quarter of 2016. What’s striking though, is the disparity between the high and low ends of the market. At the national level, cash sales made up approximately 30 percent of transactions on properties in the top 20 percent by value of their respective markets. For those in the lowest 20 percent of property values, over 60 percent of sales were cash transactions. While down significantly from its peak of 75 percent of all transactions at the bottom of the housing market, this is still quite high for cash sales, historically. The prevalence of cash sales at the low end of the market can likely be chalked up to two primary factors. First, negative equity is still higher than average among this segment of the market, resulting in increased distressed discounts for buyers. Second, lower-priced homes simply require less capital to purchase outright, making cash sales possible for more people.”
emphasis added

Click on graph for larger image.

These graphs from Black Knight shows 90 day defaults vs. foreclosure starts.

From Black Knight:

• While total foreclosure starts are the lowest they’ve been since April 2005, at just 25,800, first time foreclosure starts are the lowest on record, dating back to at least 2000

• Reduced foreclosure starts in April are due in part to the seasonality of 90-day default activity. 90-day defaults typically hit their calendar year low in March leading to a month-over-month reduction in foreclosure starts in the month of April – observed in 10 of the past 12 years.

• Improved mortgage performance has also led to a reduction in foreclosure starts. March saw the lowest one month volume of 90-day defaults in 11 years, down 11 percent from last year and down 82 percent from the January 2009 peak

• Additionally, the ratio of new foreclosure starts to 90-day defaults is lower than pre-crisis norms, likely due to an increased focus on pre-foreclosure loss mitigation

There is much more in the mortgage monitor.