by Calculated Risk on 9/13/2017 03:21:00 PM

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was up 0.7% compared to the rolling 12 months ending in July.   Outbound traffic was down 1.0% compared to the rolling 12 months ending in July.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March depending on the timing of the Chinese New Year.  

In general imports have been increasing, and exports are mostly moving sideways to down recently.

by Calculated Risk on 9/13/2017 12:17:00 PM

From housing economist Tom Lawler: CPS-Based Household Growth Slowed Significantly in 2017, though Not as Much as Raw Numbers Suggest

The Census Bureau yesterday released its “Income and Poverty in the United States” report for 2016, which is based on the results from the 2017 Current Population Survey (CPS) Annual Social and Economic (ASEC). While the report focuses mainly on household and individual incomes and poverty rates, it also shows estimates of the number of US households based on the CPS/ASEC results.

According to the report, the CPS/ASEC-based estimates of the number of US households in March 2017 was 126.224 million, just 405,000 above the 125.819 million estimate from the previous year’s report. This meager gain, if “accurate,” would reflect a sharp slowdown in household growth.

As folks who regularly read my report know, however, part of this sharp slowdown in growth reflects the substantial downward revisions in US population estimates that were released at the end of last year. The 2017 CPS/ASEC estimates reflect these downward revisions, but the 2016 estimates do not.

To remind folks, late last year Census released its ‘2016 vintage” population estimates, which incorporated an improved methodology for estimating net international migration that resulted in material downward revisions of the US resident population, as shown in the table below.

U.S. Resident Population, Vintage 2015 vs. Vintage 2016
	Vintage 2015	Vintage 2016	Change
7/1/2010	309,346,863	309,348,193	1,330
7/1/2011	311,718,857	311,663,358	-55,499
7/1/2012	314,102,623	313,998,379	-104,244
7/1/2013	316,427,395	316,204,908	-222,487
7/1/2014	318,907,401	318,563,456	-343,945
7/1/2015	321,418,820	320,896,618	-522,202
7/1/2016	323,889,854	323,127,513	-762,341

Historical estimates of households from the CPS/ASEC do NOT reflect these downward revisions in population estimates. Indeed, the “time series” of CPS/ASEC household estimates available from various Census websites does not reflect the most up-to-date estimates of historical US population estimates, and as such is not a good time series. (There are other issues with CPS/ASEC household estimates, which I have discussed before).

With respect to a comparison of the 2017 CPS/ASEC household estimate to the 2016 estimate, the US population estimate assumed in the March 2016 CPS/ASEC was about 700,000 high than the latest population estimate for that date. While it is a little tricky to “guesstimate” what the CPS/ASEC household estimate for March 2016 would have been if the latest population estimates for that date had been available (there were significant revisions in the characteristics of the population as well), my “best guess” is that the CPS/ASEC household estimate for March 2016 would have been about 300,000 lower. If that were the case, then an “adjusted” CPS/ASEC-based household increase from March 2016 to March 2017 would be about 705,000 – above that shown in the latest report, but well below what most analysts were expecting, and well below the average annual increase so far this decade.

Another CPS-based household estimate, one derived on the Housing Vacancy Survey supplement, also showed a recent sharp slowdown in estimated household growth, though that slowdown showed up in the second quarter. According to the latest HVS-based results (which are “controlled” to housing unit estimates and assume that estimate vacancy rates are accurate), the number of US households in the second quarter of 2017 averaged 118.899 million, up just 558,000 from the comparable quarter of 2016. (In contrast to the HVS, the ASEC household estimate is “controlled” to population estimates, and assumes that the characteristics of households derived from the survey are correct.)

While there is a lot of “noise” in CPS-based household estimates – reflecting in part though not solely the relatively small sample size – the latest estimates are a bit disheartening to those who have projected a strong housing recovery based on “demographics” and “pent-up demand.

Tomorrow Census is set to release the results of the 2016 American Community Survey, which will include (among a lot of other things) estimates of the average number of US households during 2016. These estimates are controlled “jointly” to population and housing unit estimates, though effectively they are “controlled” to housing unit estimates. As with the CPS/ASEC, historical ACS estimates are not revised to reflect revisions either in population estimates of housing unit estimates, which limits the usefulness of some of its “time series.”

I will have much more on this topic later this month.

by Calculated Risk on 9/13/2017 09:52:00 AM

A few excerpts from a note by Merrill Lynch economists:

A net drag from Harvey in August Retail sales ex-autos, as measured by BAC aggregated credit and debit card data, declined 0.1% mom seasonally adjusted in August. After controlling for the increase in gasoline spending, retail sales ex-autos and gasoline declined 0.4%. ... Bottom line: the weakness in retail sales in August is likely exaggerated by the hurricane and July prime-day. While Hurricane Irma may depress spending in September, we typically see retail sales bounce back after a natural disaster, suggesting upside into 4Q.

CR Note: We will see weakness in several indicators over the next couple of months due to the hurricanes, and then a bounce back later in the year. Retail sales for August will be released on Friday.  The consensus is for a 0.1% increase in retail sales.

by Calculated Risk on 9/13/2017 07:00:00 AM

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

Mortgage applications increased 9.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 8, 2017. This week’s results included an adjustment for the Labor Day holiday.

... The Refinance Index increased 9 percent from the previous week. The seasonally adjusted Purchase Index increased 11 percent from one week earlier. The unadjusted Purchase Index decreased 13 percent compared with the previous week and was 7 percent higher than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.03 percent from 4.06 percent, with points increasing to 0.40 from 0.38 (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 will not pick up significantly unless mortgage rates fall well below 4%.


The second graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 7% year-over-year.

by Calculated Risk on 9/12/2017 07:08:00 PM

From Matthew Graham at Mortgage News Daily: Worst 2 Days For Rates Since June

Mortgage rates continued higher at a reasonably abrupt pace today as last week's themes have been completely reversed.  What themes are those?  Generally speaking, markets were undergoing a risk-aversion trade given the rising geopolitical tension surrounding North Korea and the economic uncertainty associated with back-to-back hurricanes.  ...

In the bigger picture, the damage is still far from severe.  The best 30yr fixed scenarios are still under 4% for many lenders.  But the past 2 days have constituted the most abrupt move higher in rates since at least late June, 2017. [3.875% fixed on top tier scenarios].
emphasis added

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

• At 8:30 AM, The Producer Price Index for August from the BLS. The consensus is a 0.3% increase in PPI, and a 0.2% increase in core PPI.

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

The Census Bureau released the Income, Poverty and Health Insurance Coverage in the United States: 2016 this morning. The report showed a significant increase in the real median household income and a decline in poverty:

The U.S. Census Bureau announced today that real median household income increased by 3.2 percent between 2015 and 2016, while the official poverty rate decreased 0.8 percentage points. At the same time, the percentage of people without health insurance coverage decreased.

Median household income in the United States in 2016 was $59,039, an increase in real terms of 3.2 percent from the 2015 median income of $57,230. This is the second consecutive annual increase in median household income.

The nation’s official poverty rate in 2016 was 12.7 percent, with 40.6 million people in poverty, 2.5 million fewer than in 2015. The 0.8 percentage point decrease from 2015 to 2016 represents the second consecutive annual decline in poverty.

One of the metrics to follow is a ratio of house prices to incomes.   The following graphs use annual averages of the Case-Shiller house price index - and the nominal median household income (and the mean for the fourth fifth income) through 2016.

Click on graph for larger image.

This graph shows the ratio of house price indexes divided by the Median Household Income through 2016 (the HPI is first multiplied by 1000).

This uses the annual average National Case-Shiller index since 1976.

As of 2016, house prices were above the median historical ratio - but far below the bubble peak.

The second graph is similar but uses the mean of the fourth fifth household income (if we separate households into fifths, this is the second highest income group).

These are key households since they are more likely to be homeowners (and home buyers).

Using this group, prices are well below the bubble peak.

Going forward, I think it would be a positive if incomes outpaced house prices, or at least kept pace with house prices increases for a few years.

by Calculated Risk on 9/12/2017 10:07:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings was little changed at 6.2 million on the last business day of July, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were also little changed at 5.5 million and 5.3 million, respectively. Within separations, the quits rate and the layoffs and discharges rate were little changed at 2.2 percent and 1.2 percent, respectively. ...

The number of quits was little changed at 3.2 million in July. The quits rate was 2.2 percent. The number of quits was little changed for total private and for government. Quits decreased in educational services (-16,000). The number of quits was little changed in all four regions.
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 July, the most recent employment report was for August.

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 July to 6.170 million from 6.116 in June.  This is the highest number of job openings since this series started in December 2000.

The number of job openings (yellow) are up 3% year-over-year.

Quits are up 4% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Job openings are mostly moving sideways at a high level, and quits are increasing.  This is another strong report.

by Calculated Risk on 9/12/2017 08:42:00 AM

From the National Federation of Independent Business (NFIB): August 2017 Report:Small Business Optimism Holds its Altitude in August

The Index of Small Business Optimism rose 0.1 points to 105.3 in August, basically unchanged from July. Five of the 10 Index components posted a gain and five declined. The Index peaked for this recovery at 105.9 in January, just 0.6 points above the August reading.
...
Small business owners reported a seasonally adjusted average employment change per firm of 0.18 workers per firm over the past three months, virtually unchanged from July. Fourteen percent (up 1 point) reported increasing employment an average of 4.4 workers per firm and 12 percent (up 1 point) reported reducing employment an average of 2.4 workers per firm (seasonally adjusted). Fifty-nine percent reported hiring or trying to hire (down 1 point), but 52 percent (88 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Nineteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (unchanged), second only to taxes.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 105.3 in August.

by Calculated Risk on 9/11/2017 08:31:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Jolted Higher, Relatively

Mortgage rates finally had a bad day, but everything's relative.  This sort of bad day leaves the average lender quoting rates that would have been the best of 2017 any other time before last week.  It's only when compared to last week that we'd consider them to be moderately higher.

  How much higher are we talking about?  Let's put it this way: most borrowers will still be quoted the same interest rates seen on Friday with the weakness being seen in the form of slightly higher upfront costs. [30YR FIXED - 3.875% Top Tier scenarios]

Tuesday:
• At 6:00 AM ET, NFIB Small Business Optimism Index for August.

• At 10:00 AM, Job Openings and Labor Turnover Survey for July from the BLS. Jobs openings increased in June to 6.163 million from 5.702 in May.  This was the highest number of job openings since this series started in December 2000. The number of job openings were up 11% year-over-year, and Quits were up 5% year-over-year.

by Calculated Risk on 9/11/2017 03:00:00 PM

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

From Dodge Data Analytics: Dodge Momentum Index Slips in August

The Dodge Momentum Index moved lower in August, falling 2.4% to 129.1 (2000=100) from its revised July reading of 132.2. 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 decline in August can be attributed to an 8.7% drop in the commercial component of the Momentum Index, while the institutional component rose 7.3%. The commercial component has seen a steep rise over the past year as large projects – particularly office buildings – entered the planning cycle. The August retreat for the commercial component brings planning activity back to a level more consistent with a sustainable pace of development.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 129.1 in August, down from 132.2 in July.

The index is only up 1.4% year-over-year.

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