by Calculated Risk on 3/08/2018 11:52:00 AM

On Friday at 8:30 AM ET, the BLS will release the employment report for February. The consensus, according to Bloomberg, is for an increase of 205,000 non-farm payroll jobs in February (with a range of estimates between 152,000 to 230,000), and for the unemployment rate to decline to 4.0%.

The BLS reported 200,000 jobs added in January.

Here is a summary of recent data:

• The ADP employment report showed an increase of 235,000 private sector payroll jobs in February. This was well above consensus expectations of 203,000 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.

• The ISM manufacturing employment index increased in February to 59.7%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased about 30,000 in February. The ADP report indicated manufacturing jobs increased 14,000 in February.

The ISM non-manufacturing employment index decreased in February to 55.0%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 200,000 in February.

Combined, the ISM indexes suggests employment gains of about 230,000.  This suggests employment growth slightly above expectations.

• Initial weekly unemployment claims averaged 222,500 in February, down from 234,500 in January. For the BLS reference week (includes the 12th of the month), initial claims were at 220,000, up from 216,000 during the reference week in January.

The slight increase during the reference week suggests a slightly weaker employment report in February than in January.

• The final February University of Michigan consumer sentiment index increased to 99.7 from the January reading of 95.7. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Merrill Lynch has introduced a new payrolls tracker based on private internal BAC data. The tracker suggests private payrolls increased by 136,000 in February, and this suggests employment growth below expectations.

• Conclusion:  In general, these reports suggest a solid employment report.  My guess - probably influenced by the new Merrill Lynch tracker, and the slight increase in unemployment claims during the reference week - is that the employment report will be below the consensus in February.

by Calculated Risk on 3/08/2018 08:34:00 AM

The DOL reported:

In the week ending March 3, the advance figure for seasonally adjusted initial claims was 231,000, an increase of 21,000 from the previous week's unrevised level of 210,000. The 4-week moving average was 222,500, an increase of 2,000 from the previous week's unrevised average of 220,500.

Claims taking procedures in Puerto Rico and in the Virgin Islands have still not returned to normal.
emphasis added

The previous week was unrevised.

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 increased to 222,500.

This was higher than the consensus forecast. The low level of claims suggest relatively few layoffs.

by Calculated Risk on 3/07/2018 07:37:00 PM

A couple of February NFP forecasts (will be released Friday), from Merrill Lynch:

[W]e look for nonfarm payrolls to increase by 160k ... We look for the unemployment rate to be unchanged at 4.1% in February ... We forecast a trend-like 0.2% mom in average hourly earnings which will allow the yoy rate to slip to 2.8%.

And from Nomura:

We expect a strong, 210k increase in nonfarm payroll employment in February ... we expect a 0.2% (0.19%) m-o-m increase in February’s average hourly earnings (AHE). ... Our forecast of 0.2% mo-m corresponds to a 2.8% y-o-y increase, a slight dip from the 2.9% reading in January. Finally, we expect the unemployment rate to decline 0.1pp to 4.0% in February...

Thursday:
• At 8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 220 thousand initial claims, up from 210 thousand the previous week.

by Calculated Risk on 3/07/2018 04:45:00 PM

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

From Dodge Data Analytics: Tepid Rise for Dodge Momentum Index in February

The Dodge Momentum Index increased 0.5% in February to 146.9 (2000=100) from the revised January reading of 146.2. 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 move higher in February was the result of an 8.2% increase in the institutional component, while the commercial component contracted 4.8%. The commercial component has declined for two consecutive months, and while this should not lead to an outright decline in construction activity, it is an additional sign that commercial building construction growth could ease in 2018 in response to rising vacancy rates for offices and warehouses. On the other hand, institutional building construction continues to feed off the massive number of state and local bonds issued for schools and other institutional buildings over the past few election cycles.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 146.9 in February, up from 146.2 in January.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests further growth in 2018.

by Calculated Risk on 3/07/2018 03:13:00 PM

Fed's Beige Book "This report was prepared at the Federal Reserve Bank of San Francisco based on information collected on or before February 26, 2018. "

Economic activity expanded at a modest to moderate pace across the 12 Federal Reserve Districts in January and February. Consumer spending was mixed, as non-auto retail sales increased in just over half of the Districts while auto sales declined or were flat in every District. Tourism activity was broadly solid, with Atlanta and Richmond recording robust growth in this sector. On balance, Districts reported modest growth in home sales and construction, with the latter constrained by shortages of labor and materials. Conditions in the nonresidential real estate market improved moderately since the previous report, with robust construction activity noted in three Districts. Commercial rents in and around New York City were up significantly, according to contacts in the area. Increases in production were broad based across manufacturing sectors, with all but one District noting at least modest growth in activity. Loan volumes were generally flat, with a handful of Districts noting a modest decrease in delinquency rates. Among reporting Districts, agricultural sector activity was mixed but flat overall. Contacts in natural resource sectors saw modestly improving industry conditions, except in the Minneapolis District, where energy and mining activity was robust.
...
On balance, employment grew at a moderate pace since the previous report. Across the country, contacts observed persistent labor market tightness and brisk demand for qualified workers, as well as increased activity at staffing placement services. Several Districts reported continued worker shortages across most sectors, with contacts often mentioning shortages in the construction, information technology, and manufacturing sectors. In many Districts, wage growth picked up to a moderate pace. Most Districts saw employers raise wages and expand benefit packages in response to tight labor market conditions. Contacts in a few Districts conveyed reports of modest increases in compensation following passage of the Tax Cuts and Jobs Act.
emphasis added

by Calculated Risk on 3/07/2018 10:59:00 AM

This is a key distressed market to follow since Las Vegas saw the largest price decline, following the housing bubble, of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported Southern Nevada home prices warming up while sales cooling down; GLVAR housing statistics for February 2018

Local home prices rose again in February while sales slowed down amid a shrinking housing supply, according to a report released today by the Greater Las Vegas Association of REALTORS®(GLVAR).
...
Meanwhile, the total number of existing local homes, condos and townhomes sold during February fell to 2,704. Compared to one year ago, February sales were down 5.4 percent for homes, but up 1.8 percent for condos and townhomes.

“Our shrinking housing supply may finally be catching up to us and slowing down our home sales,” said 2018 GLVAR President Chris Bishop, a longtime local REALTOR®. “Sales have continued to go up over the last few years, even as our inventory has been going down. But with fewer homes on the market each month, it seems like it was only a matter of time before it started to affect sales.”

He said Southern Nevada still has less than a two-month supply of existing homes available for sale when a six-month supply is considered a balanced market.

By the end of February, GLVAR reported 3,653 single-family homes listed for sale without any sort of offer. That’s down 34.3 percent from one year ago. For condos and townhomes, the 679 properties listed without offers in February represented a 10.4 percent drop from one year ago. The inventory of condos and townhomes listed for sale is as low as it has been since 2004, Bishop added.
...
GLVAR reported that 32.4 percent of all local properties sold in February were purchased with cash, compared to 31.4 percent one year ago. That’s well below the February 2013 peak of 59.5 percent, indicating that cash buyers and investors are still active, but are playing a much smaller role in the local housing market than they were five years ago.

At the same time, the number of so-called distressed sales continues to decline. GLVAR reported that short sales and foreclosures combined accounted for 3.8 percent of all existing local home sales in February, compared to 10.6 percent of all sales one year ago.
emphasis added

1) Overall sales were down 4% year-over-year from 2,815 in February 2017 to 2,704 in February 2018.

2) Active inventory (single-family and condos) is down sharply from a year ago, from a total of 6,322 in February 2017 to 4,352 in February 2018.

3) Fewer distressed sales.

by Calculated Risk on 3/07/2018 08:46:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $56.6 billion in January, up $2.7 billion from $53.9 billion in December, revised. ... January exports were $200.9 billion, $2.7 billion less than December exports. January imports were $257.5 billion, down less than $0.1 billion from December imports.

Click on graph for larger image.

Both exports and imports decreased in January.

Exports are 21% above the pre-recession peak and up 5% compared to January 2017; imports are 11% above the pre-recession peak, and up 7% compared to January 2017.

In general, trade has been picking up.

The second graph shows the U.S. trade deficit, with and without petroleum.

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.

Oil imports averaged $54.76 in January, up from $52.10 in December, and up from $43.94 in January 2016.

The petroleum deficit increased in January, and this is the main reason the overall trade deficit increased in January.

The trade deficit with China increased to $36.0 billion in January, from $31.3 billion in January 2016.

by Calculated Risk on 3/07/2018 08:21:00 AM

From ADP:

Private sector employment increased by 235,000 jobs from January to February according to the February ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
“The labor market continues to experience uninterrupted growth,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We see persistent gains across most industries with leisure and hospitality and retail leading the way as consumer spending kicked up. At this pace of job growth employers will soon become hard-pressed to find qualified workers.”

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market is red hot and threatens to overheat. With government spending increases and tax cuts, growth is set to accelerate.”

This was above the consensus forecast for 203,000 private sector jobs added in the ADP report. 

The BLS report for February will be released Friday, and the consensus is for 205,000 non-farm payroll jobs added in February.

by Calculated Risk on 3/07/2018 07:00:00 AM

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

Mortgage applications increased 0.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 2, 2018. The previous week’s results included an adjustment for the Washington’s Birthday (Presidents’ Day) holiday.

... The Refinance Index increased 2 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index increased 13 percent compared with the previous week and was 1 percent higher than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest level since January 2014, 4.65 percent, from 4.64 percent, with points decreasing to 0.58 from 0.63 (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 50 bps or more from the recent level.



The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 1% year-over-year.

by Calculated Risk on 3/06/2018 06:33:00 PM

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

• At 8:15 AM, The ADP Employment Report for February. This report is for private payrolls only (no government). The consensus is for 203,000 payroll jobs added in February, down from 234,000 added in January.

• At 8:30 AM, Trade Balance report for January from the Census Bureau. The consensus is for the U.S. trade deficit to be at $55.1 billion in January from $53.1 billion in December.

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

• At 3:00 PM, Consumer Credit from the Federal Reserve. The consensus is for consumer credit to increase $17.8 billion in January.