by Calculated Risk on 8/31/2017 08:22:00 PM

Note: August vehicle sales might be the first economic report impacted by Hurricane Harvey. Next Thursday, weekly unemployment claims will probably be impacted.

Earlier:

My August Employment Preview

and Goldman: August Payrolls Preview

Friday:
• At 8:30 AM ET, Employment Report for August. The consensus is for an increase of 180,000 non-farm payroll jobs added in August, down from the 209,000 non-farm payroll jobs added in July. The consensus is for the unemployment rate to be unchanged at 4.3%.

• At 10:00 AM, ISM Manufacturing Index for August. The consensus is for the ISM to be at 56.6, up from 56.3 in August.

• Also at 10:00 AM, Construction Spending for July. The consensus is for a 0.6% increase in construction spending.

• Also at 10:00 AM, University of Michigan's Consumer sentiment index (final for July). The consensus is for a reading of 97.2, unchanged from the preliminary reading 97.6.

• All day: Light vehicle sales for August. The consensus is for light vehicle sales to be 16.7 million SAAR in August, unchanged from 16.7 million in  July (Seasonally Adjusted Annual Rate).

by Calculated Risk on 8/31/2017 05:09:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined to 1.00% in July, from 1.01% in June. The serious delinquency rate is down from 1.30% in July 2016.

This is the lowest serious delinquency rate since December 2007.

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

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

Click on graph for larger image

Although the rate is declining, the "normal" serious delinquency rate is somewhat under 1%. 

The Fannie Mae serious delinquency rate has fallen 0.30 percentage points over the last year, and at that rate of improvement, the serious delinquency rate should be below 1% next month.

By vintage, for loans made in 2004 or earlier (4% of portfolio), 2.63% are seriously delinquent. For loans made in 2005 through 2008 (7% of portfolio), 5.71% are seriously delinquent, For recent loans, originated in 2009 through 2017 (89% of portfolio), only 0.32% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

Note: Freddie Mac reported earlier.

by Calculated Risk on 8/31/2017 12:57:00 PM

A few brief excerpts from a note by Goldman Sachs economist Spencer Hill:

We estimate nonfarm payrolls increased by 160k in August, below consensus of +180k ... Our forecast reflects somewhat more mixed labor market fundamentals and a drag from residual seasonality, as first-reported August payroll growth has been consistently weak in recent years.

We expect household job growth will be sufficient to leave the unemployment rate unchanged at 4.3%, but due to particularly unfavorable calendar effects, we estimate a 0.1% monthly rise in average hourly earnings (+2.5% year-over-year).

by Calculated Risk on 8/31/2017 11:53:00 AM

On Friday at 8:30 AM ET, the BLS will release the employment report for August. The consensus, according to Bloomberg, is for an increase of 180,000 non-farm payroll jobs in August (with a range of estimates between 140,000 to 200,000), and for the unemployment rate to be unchanged at 4.3%.

The BLS reported 209,000 jobs added in July.

Here is a summary of recent data:

• The ADP employment report showed an increase of 237,000 private sector payroll jobs in August. This was well above consensus expectations of 182,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth above expectations. However, the ADP number has frequently been above the BLS number for August.

• The ISM manufacturing and non-manufacturing indexes have not been released yet.

• Initial weekly unemployment claims averaged 237,000 in August,  down from 242,000 in July. For the BLS reference week (includes the 12th of the month), initial claims were at 232,000, down from 234,000 during the reference week in July.

The decrease during the reference week suggests slightly fewer layoffs during the reference week in August than in July. This suggests a similar employment report in August as in July.

• The final August University of Michigan consumer sentiment index increased to 97.6 from the July reading of 93.4. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion: Unfortunately the ISM reports will be released after the employment report this month, and those reports are helpful. Also August tends to be below the ADP report (and frequently below consensus). My sense (mostly based on history) is that job gains will be below consensus in August.

by Calculated Risk on 8/31/2017 10:03:00 AM

From the NAR: Pending Home Sales Lessen 0.8 Percent in July

Pending homes sales stumbled in July for the fourth time in five months as only the West saw an increase in contract activity, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.8 percent to 109.1 in July from a downwardly revised 110.0 in June. After last month’s decline, the index is now 1.3 percent below a year ago and has fallen on an annual basis in three of the past four months.
...
The PHSI in the Northeast inched backward 0.3 percent to 97.7 in July, but is still 2.4 percent above a year ago. In the Midwest the index decreased 0.7 percent to 103.3 in July, and is now 2.8 percent lower than July 2016.

Pending home sales in the South declined 1.7 percent to an index of 123.1 in July and are now 0.2 percent below last July. The index in the West expanded 0.6 percent in July to 102.3, but is still 4.0 percent below a year ago.
emphasis added

This was below expectations of a 0.8% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in August and September.

by Calculated Risk on 8/31/2017 08:39:00 AM

The BEA released the Personal Income and Outlays report for July:

Personal income increased $65.6 billion (0.4 percent) in July according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $39.6 billion (0.3 percent) and personal consumption expenditures (PCE) increased $44.7 billion (0.3 percent).
...
Real PCE increased 0.2 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

The July PCE price index increased 1.4 percent year-over-year and the July PCE price index, excluding food and energy, also increased 1.4 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through July 2017 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was at expectations,  and the increase in PCE was slightly below expectations.

by Calculated Risk on 8/31/2017 08:33:00 AM

The DOL reported:

In the week ending August 26, the advance figure for seasonally adjusted initial claims was 236,000, an increase of 1,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 234,000 to 235,000. The 4-week moving average was 236,750, a decrease of 1,250 from the previous week's revised average. The previous week's average was revised up by 250 from 237,750 to 238,000.
emphasis added

The previous week was revised up.

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 236,750.

This was close to the consensus forecast.

The low level of claims suggests relatively few layoffs.

Note: Claims will increase over the next few weeks due to Hurricane Harvey.

by Calculated Risk on 8/30/2017 07:46:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 237 thousand initial claims, up from 234 thousand the previous week. Note: The report tomorrow will be for the week ending Aug 26th. Unemployment claims will increase over the next few weeks due to Hurricane Harvey.

• Also at 8:30 AM, Personal Income and Outlays for July. The consensus is for a 0.4% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• At 9:45 AM, Chicago Purchasing Managers Index for August. The consensus is for a reading of 58.0, down from 58.9 in July.

• At 10:00 AM, Pending Home Sales Index for June. The consensus is for a 0.8% increase in the index.

by Calculated Risk on 8/30/2017 04:05:00 PM

CR Note: This is a repeat of a previous post with updated graphs.

A few key points:
1) There is a clear seasonal pattern for house prices.
2) The surge in distressed sales during the housing bust distorted the seasonal pattern.
3) Even though distressed sales are down significantly, the seasonal factor is based on several years of data - and the factor is now overstating the seasonal change (second graph below).
4) Still the seasonal index is probably a better indicator of actual price movements than the Not Seasonally Adjusted (NSA) index.

For in depth description of these issues, see Trulia chief economist Jed Kolko's article "Let’s Improve, Not Ignore, Seasonal Adjustment of Housing Data"

Note: I was one of several people to question the change in the seasonal factor (here is a post in 2009) - and this led to S&P Case-Shiller questioning the seasonal factor too (from April 2010).  I still use the seasonal factor (I think it is better than using the NSA data).

Click on graph for larger image.

This graph shows the month-to-month change in the NSA Case-Shiller National index since 1987 (through June 2017).   The seasonal pattern was smaller back in the '90s and early '00s, and once the bubble burst.

The seasonal swings have declined since the bubble.

The second graph shows the seasonal factors for the Case-Shiller National index since 1987. The factors started to change near the peak of the bubble, and really increased during the bust.

The swings in the seasonal factors has started to decrease, and I expect that over the next several years - as the percent of distressed sales declines further and recent history is included in the factors - the seasonal factors will move back towards more normal levels.

However, as Kolko noted, there will be a lag with the seasonal factor since it is based on several years of recent data.

by Calculated Risk on 8/30/2017 12:13:00 PM

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

From Svenja Gudell at Zillow: July Case-Shiller Forecast: Slowdown Coming in Home Prices

Following months of record highs in the Case-Shiller U.S. National Index for home prices, July is expected to bring a slowdown — to 5.6 percent from June’s 5.8 percent year-over-year, non-seasonally adjusted gain. The monthly gain for July is forecast at 0.2 percent, which is half the 0.4 percent growth that index posted for June.

The 10- and 20-month indices are expected to drop 0.1 percent from June to July, with the 10-city index gaining 4.8 percent in July over the previous year, down from June’s 4.9 percent annual growth, and the 20-city index climbing 5.4 percent annually, down from 5.7 percent in June.

Zillow’s full forecast for July Case-Shiller data is shown below. These forecasts are based on today’s June Case-Shiller data release and the July 2017 Zillow Home Value Index. The July S&P CoreLogic Case-Shiller Indices will not be released officially until Tuesday, September 26.

The year-over-year change for the Case-Shiller National index will probably be smaller in July than in June.