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Monday, September 04, 2017

August Employment Revisions

by Calculated Risk on 9/04/2017 11:13:00 AM

Last week, in my employment preview, I noted "My sense (mostly based on history) is that job gains will be below consensus in August." Sure enough.

Here is a table of revisions for August since 2005.  Note that most of the revisions have been up.   This doesn't mean that the August 2017 revision will be up, but it does seem likely.   I'm not sure why the BLS has underestimated job growth in August (possibly because of the timing of seasonal teacher hiring and the end of the summer jobs).


August Employment Report (000s)
YearInitialRevisedRevision
2005169196+27
200612818355
2007-4-20-16
2008-84-267-183
2009-216-2133
2010-54-3618
20110110110
20129617781
201316926192
201414223088
2015173157-16
2016151176 25 
2017156--- ---

Note: In 2008, the BLS significantly under reported job losses. That wasn't surprising since the initial models the BLS used missed turning points (something I wrote about in 2007). The BLS has since improved this model.

Sunday, September 03, 2017

Sunday Night Futures

by Calculated Risk on 9/03/2017 07:20:00 PM

On Monday, all US markets will be closed in observance of the Labor Day holiday.

Weekend:
Schedule for Week of Sept 3, 2017

An update on Q3 GDP forecasts, from the Altanta Fed: GDPNow

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 3.2 percent on September 1, down from 3.3 percent on August 31.
From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 2.2% for 2017:Q3.
From Merrill Lynch:
[Recent] data chopped 0.4pp from our 3Q GDP tracking estimate, bringing it down to 2.7% qoq saar.
From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 10, and DOW futures are down 60 (fair value).

Oil prices were down slightly over the last week with WTI futures at $47.38 per barrel and Brent at $52.45 per barrel.  A year ago, WTI was at $45, and Brent was at $47 - so oil prices are up year-over-year.

Note: When refineries shut down, oil prices tend to decline - since demand for oil falls - and gasoline prices increase - since the supply of gasoline falls.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.63 per gallon - up sharply due the Hurricane Harvey - a year ago prices were at $2.21 per gallon - so gasoline prices are up 41 cents per gallon year-over-year.

Hotel Occupancy and Hurricane Harvey

by Calculated Risk on 9/03/2017 10:17:00 AM

Note: Hotel occupancy rates increased noticeably following Hurricanes Katrina and Rita in 2005. I expect the overall occupancy rate will also increase following Hurricane Harvey - and stay elevated for several months. This might even push 2017 into record territory.

From HotelNewsNow.com: How Hurricane Harvey could affect US hotel industry

We expect that the room supply number of Texas will decline for at least a year. After Katrina, Louisiana room supply dropped by roughly 25% between September 2005 and August 2006. This equated to a supply loss for the U.S. of 0.5%, in fact negating the slow U.S. supply growth we had reported so that—for the first time in history—the annualized supply growth for the U.S. was negative.

It is still too early to tell which hotels are closed for business. We hope that the number is relatively small, and current industry commentary gives us reason for optimism. But it is not a stretch to assume that the supply decline in and around Houston will affect the national numbers.
...
If a hotel makes it through the storm unscathed or can be re-opened pretty quickly after the event, there is a high likelihood that it will post very strong demand numbers in the months to come. Demand will be generated by multiple sources: displaced residents, FEMA and other federal personnel, insurance adjusters and contractors. Most of these will stay for months in the area keeping room demand numbers artificially high.
...
If the room supply declines, but room demand remains steady, then occupancy is increasing. This could imply that our STR forecast of 0% occupancy growth for 2017 is too low and that we may be able to report a slight occupancy increase this year and through the second half of next year.
And on a happier note: Hotels in path of total eclipse see unprecedented boon

From HotelNewsNow.com: STR: US hotel results for week ending 26 August
The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 20-26 August 2017, according to data from STR.

In comparison with the week of 21-27 August 2016, the industry recorded the following:

Occupancy: +3.0% to 69.5%
• Average daily rate (ADR): +3.2% to US$125.57
• Revenue per available room (RevPAR): +6.3% to US$87.28

Among the Top 25 Markets, Nashville, Tennessee, reported the largest year-over-year increases in ADR (+21.7% to US$155.04) and RevPAR (+39.4% to US$126.48). Occupancy in Nashville, a key market in the Great American Eclipse path of totality, was up 14.6% to 81.6%. ... St. Louis, another key market in the band of totality, recorded the largest increase in occupancy (+18.9% to 80.6%).
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotel Occupancy RateThe red line is for 2017, dash light blue is 2016, dashed orange is 2015 (best year on record), blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels).

Currently the occupancy rate is slightly ahead of last year, and behind the record year in 2015.

Seasonally, the occupancy rate has peaked and will decline into the Fall.

Data Source: STR, Courtesy of HotelNewsNow.com

Saturday, September 02, 2017

Schedule for Week of Sept 3, 2017

by Calculated Risk on 9/02/2017 08:11:00 AM

The key economic report this week is the trade deficit.

The preliminary annual benchmark revision for the employment report will be released on Wednesday.

----- Monday, Sept 4th -----

All US markets will be closed in observance of the Labor Day holiday.

----- Tuesday, Sept 5th -----

10:00 AM ET: The CoreLogic House Price index for July.

----- Wednesday, Sept 6th -----

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

U.S. Trade Deficit8:30 AM: Trade Balance report for July from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through June. 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.

The consensus is for the U.S. trade deficit to be at $44.6 billion in July from $43.6 billion in June.

10:00 AM: 2017 Current Employment Statistics (CES) Preliminary Benchmark Revision. From the BLS:
"Each year, the Current Employment Statistics (CES) survey estimates are benchmarked to comprehensive counts of employment from the Quarterly Census of Employment and Wages (QCEW) for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. On September 6, 2017 at 10:00 a.m. the Bureau of Labor Statistics (BLS) will release the preliminary estimate of the upcoming annual benchmark revision to the establishment survey employment series. ... The final benchmark revision will be issued with the publication of the January 2018 Employment Situation news release in February. "
10:00 AM: the ISM non-Manufacturing Index for August. The consensus is for index to increase to 55.4 from 53.9 in July.

----- Thursday, Sept 7th -----

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 239 thousand initial claims, up from 236 thousand the previous week.

10:00 AM: The Q2 Quarterly Services Report from the Census Bureau.

----- Friday, Sept 8th -----

3:00 PM: Consumer Credit for July from the Federal Reserve.  The consensus is for credit to increase $15.7 billion.

Friday, September 01, 2017

Oil Rigs "Horizontal rig counts continue to fall"

by Calculated Risk on 9/01/2017 07:33:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on Sept 1, 2017:

• Continued decline in horizontal rig counts

• Total US oil rigs were flat at 759

• Horizontal oil rigs were down 3 at 644
...
• Drilling Info continues to show a widening disparity to Baker Hughes

• Thesis is unchanged: Expect rigs counts to roll off for the next two months or so, with oil prices languishing in the $46-49 range typically
Oil Rig CountClick on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

U.S. Light Vehicle Sales at 16 million annual rate in August

by Calculated Risk on 9/01/2017 03:23:00 PM

Based on an estimate from WardsAuto, light vehicle sales were at a 16.03 million SAAR in August.

That is down 6% from August 2016, and down 3.9% from last month.

Vehicle Sales
Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for August (red, light vehicle sales of 16.03 million SAAR mostly from WardsAuto).

This was well below the consensus forecast of 16.7 million for August (However Hurricane Harvey pushed down sales over the last week - and there will be some bounce back).

After two consecutive years of record sales, vehicle sales will be down in 2017.

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

Note: dashed line is current estimated sales rate.

Comment: A Disappointing Employment Report

by Calculated Risk on 9/01/2017 12:31:00 PM

The headline jobs number was below expectations, and there were downward revisions to the previous two months.  And the unemployment increased slightly.   Overall a disappointing report.

Earlier: August Employment Report: 156,000 Jobs, 4.4% Unemployment Rate

In August, the year-over-year change was 2.097 million jobs. This is still decent year-over-year job growth, but this is the lowest year-over-year growth since early 2013.

Note that August has been the second weakest month for job growth over the previous three years; only January has been weaker.  This is the 3rd consecutive August report below 200 thousand jobs:  157 thousand in August 2015, 176 thousand in August 2016, and now 156 thousand in August 2017.   This recent history was a key reason I took the under versus the consensus view.

On the impact of Hurricane Harvey from the BLS:

Hurricane Harvey had no discernable effect on the employment and unemployment data for August. Household survey data collection was completed before the storm. Establishment survey data collection for this news release was largely completed prior to the storm, and collection rates were within normal ranges nationally and for the affected areas.
So the impact from the hurricane on employment will be in the September, and probably October, reports.

Average Hourly Earnings

Wages CES, Nominal and RealClick on graph for larger image.

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.5% YoY in August.

Wage growth has generally been trending up.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 5.3 million in August and has shown little movement in recent months. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.
The number of persons working part time for economic reasons decreased slightly in August. The number working part time for economic reasons suggests a little slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 8.6% in August.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.74 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.79 million in July.

This is generally trending down, but still a little elevated.

Overall this was a disappointing report.

Construction Spending decreased in July

by Calculated Risk on 9/01/2017 11:08:00 AM

Earlier today, the Census Bureau reported that overall construction spending decreased in July:

Construction spending during July 2017 was estimated at a seasonally adjusted annual rate of $1,211.5 billion, 0.6 percent below the revised June estimate of $1,219.2 billion. The July figure is 1.8 percent above the July 2016 estimate of $1,189.8 billion.
Private and public spending both decreased in July:
Spending on private construction was at a seasonally adjusted annual rate of $945.5 billion, 0.4 percent below the revised June estimate of $949.4 billion. ...

In July, the estimated seasonally adjusted annual rate of public construction spending was $266.0 billion, 1.4 percent below the revised June estimate of $269.8 billion.
emphasis added
Construction Spending Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending has been increasing, but is still 24% below the bubble peak.

Non-residential spending is now 3% above the previous peak in January 2008 (nominal dollars).

Public construction spending is now 18% below the peak in March 2009, and only slightly above the austerity low in February 2014.

Year-over-year Construction SpendingThe second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 12%. Non-residential spending is down 4% year-over-year. Public spending is down 6% year-over-year.

This was  well below the consensus forecast of a 0.6% increase for July, however spending for previous months were revised up. Still a disappointing report.

ISM Manufacturing index increased to 58.8 in August

by Calculated Risk on 9/01/2017 10:05:00 AM

The ISM manufacturing index indicated expansion in August. The PMI was at 58.8% in August, up from 56.3% in July. The employment index was at 59.9%, up from 55.2% last month, and the new orders index was at 60.3%, down from 60.4%.

From the Institute for Supply Management: August 2017 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded in August, and the overall economy grew for the 99th consecutive month, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: "The August PMI® registered 58.8 percent, an increase of 2.5 percentage points from the July reading of 56.3 percent. The New Orders Index registered 60.3 percent, a decrease of 0.1 percentage point from the July reading of 60.4 percent. The Production Index registered 61 percent, a 0.4 percentage point increase compared to the July reading of 60.6 percent. The Employment Index registered 59.9 percent, an increase of 4.7 percentage points from the July reading of 55.2 percent. The Supplier Deliveries Index registered 57.1 percent, a 1.7 percentage point increase from the July reading of 55.4 percent. The Inventories Index registered 55.5 percent, an increase of 5.5 percentage points from the July reading of 50 percent. The Prices Index registered 62 percent in August, the same reading as July, indicating higher raw materials’ prices for the 18th consecutive month. Comments from the panel reflect expanding business conditions, with new orders, production, employment, backlog and exports all growing in August, as well as supplier deliveries slowing (improving) and inventories increasing during the period. The Customers’ Inventories Index experienced a sharp decline in August compared to July."
emphasis added
ISM PMIClick on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was above expectations of 56.6%, and suggests manufacturing expanded at a faster pace in August than in July.

A solid report.

August Employment Report: 156,000 Jobs, 4.4% Unemployment Rate

by Calculated Risk on 9/01/2017 08:42:00 AM

From the BLS:

Total nonfarm payroll employment increased by 156,000 in August, and the unemployment rate was little changed at 4.4 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, construction, professional and technical services, health care, and mining.
...
The change in total nonfarm payroll employment for June was revised down from +231,000 to +210,000, and the change for July was revised down from +209,000 to +189,000. With these revisions, employment gains in June and July combined were 41,000 less than previously reported.
...
In August, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $26.39, after rising by 9 cents in July. Over the past 12 months, average hourly earnings have increased by 65 cents, or 2.5 percent.
emphasis added
Payroll jobs added per monthClick on graph for larger image.

The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes).

Total payrolls increased by 156 thousand in August (private payrolls increased 165 thousand).

Payrolls for June and July were revised down by a combined 41 thousand.

Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In August the year-over-year change was 2.10 million jobs.  This is a decent year-over-year gain.


The third graph shows the employment population ratio and the participation rate.

Employment Pop Ratio, participation and unemployment rates The Labor Force Participation Rate was unchanged in August at 62.9%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics.

The Employment-Population ratio decreased to 60.1% (black line).

I'll post the 25 to 54 age group employment-population ratio graph later.

unemployment rateThe fourth graph shows the unemployment rate.

The unemployment rate increased in August to 4.4%. 

This was below expectations of 180,000 jobs, and the previous two months were revised down.  A somewhat disappointing report.

I'll have much more later ...