by Calculated Risk on 5/04/2018 08:47:00 AM

From the BLS:

Total nonfarm payroll employment increased by 164,000 in April, and the unemployment rate edged down to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, manufacturing, health care, and mining.
...
The change in total nonfarm payroll employment for February was revised down from +326,000 to +324,000, and the change for March was revised up from +103,000 to +135,000. With these revisions, employment gains in February and March combined were 30,000 more than previously reported.
...
In April, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.84. Over the year, average hourly earnings have increased by 67 cents, or 2.6 percent.
emphasis added

Click 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 164 thousand in April (private payrolls increased 168 thousand).

Payrolls for February and March were revised up by a combined 30 thousand.

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

In April the year-over-year change was 2.280 million jobs.

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

The Labor Force Participation Rate was decreased in April to 62.8%. 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 60.3% (black line).

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

The fourth graph shows the unemployment rate.

The unemployment rate declined in April to 3.9%. 

This was below the consensus expectations of 190,000 jobs, however the previous two months combined were revised up by 30,000.

I'll have much more later ...

by Calculated Risk on 5/03/2018 05:22:00 PM

My April Employment Preview

Goldman: April Payrolls Preview

Friday:
• At 8:30 AM ET, Employment Report for April. The consensus is for an increase of 190,000 non-farm payroll jobs added in April, up from the 103,000 non-farm payroll jobs added in March. The consensus is for the unemployment rate to decrease to 4.0%.

by Calculated Risk on 5/03/2018 04:17:00 PM

Fannie and Freddie reported results for Q1. Here is some information on Real Estate Owned (REOs).

Freddie Mac reported the number of REO declined to 7,718 at the end of Q1 2017 compared to 10,938 at the end of Q1 2017.

For Freddie, this is down 90% from the 74,897 peak number of REOs in Q3 2010. For Freddie, this is the lowest since at least 2007.

Fannie Mae reported the number of REO declined to 24,063 at the end of Q1 2018 compared to 34,551 at the end of Q1 2017.

For Fannie, this is down 86% from the 166,787 peak number of REOs in Q3 2010. For Fannie, this is the lowest since at least 2007.

Click on graph for larger image.

Here is a graph of Fannie and Freddie Real Estate Owned (REO).

REO inventory decreased in Q1 for both Fannie and Freddie, and combined inventory is down 30% year-over-year.

There are still a number of properties in the foreclosure process with long time lines in judicial foreclosure states - but this is close to normal levels of REOs.

by Calculated Risk on 5/03/2018 03:35:00 PM

A few brief excerpts from a note by Goldman Sachs economists Daan Struyven and Spencer Hill:

We expect a 180k increase in nonfarm payroll employment in April, slightly below consensus expectations for a 190k gain. Most labor market indicators decelerated somewhat, and we don’t expect a meaningful weather rebound (relative to trend).

... the unemployment rate likely fell to 4.0% in April. Average hourly earnings likely rose 0.2% in April, reflecting somewhat unfavorable calendar effects, and 2.6% over the past year. ...
emphasis added

by Calculated Risk on 5/03/2018 12:34:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for April. The consensus, according to Bloomberg, is for an increase of 191,000 non-farm payroll jobs in April (with a range of estimates between 145,000 to 255,000), and for the unemployment rate to decline to 4.0%.

The BLS reported 103,000 jobs added in March.

Here is a summary of recent data:

• The ADP employment report showed an increase of 204,000 private sector payroll jobs in April. This was above consensus expectations of 193,000 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 slightly above expectations.

However, the ADP report tends to be too low in April. In 2017, the ADP report showed an increase of 177,000 jobs, and the BLS report showed an increase of 211,000 jobs.    In 2016, the ADP report showed an increase of 156,000 jobs, and the BLS report showed 160,000 jobs added.  In 2015, the ADP report showed an increase of 169,000 jobs, and the BLS report showed 223,000. And in 2014, the ADP report showed 220,000 private sector jobs added, and the BLS report showed 288,000 jobs added.

• The ISM manufacturing employment index decreased in April to 54.2%. 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 3,000 in April. The ADP report indicated manufacturing jobs increased 10,000 in April.

The ISM non-manufacturing employment index decreased in April to 53.6%. 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 170,000 in April.

Combined, the ISM indexes suggests employment gains of about 173,000.  This suggests employment growth below expectations.

• Initial weekly unemployment claims averaged 222,000 in April, down from 228,000 in March. For the BLS reference week (includes the 12th of the month), initial claims were at 233,000, up from 227,000 during the reference week in March.

The slight increase during the reference week suggests a slightly weaker employment report in April than in March.   (Note: Employment in March was negatively impacted by payback for the nice weather in February.  Excluding the weather impacts, March employment was probably close to 190,000.  So this suggests weaker than March ex-weather).

• The final April University of Michigan consumer sentiment index decreased to 98.8 from the March reading of 101.4. 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 208,000 in April, and this suggests employment growth slightly above expectations.

• Looking back at the three previous years:

In April 2017, the consensus was for 185,000 jobs, and the BLS reported 211,000 jobs added. In April 2016, the consensus was for 200,000 jobs, and the BLS reported 160,000 jobs added. In April 2015, the consensus was for 220,000 jobs, and the BLS reported 223,000 jobs added.

• Conclusion:  In general, these reports suggest a solid employment report, and probably close to expectations.  The ADP report tends to be lower than the BLS report in April, but the ISM surveys and the reference week for unemployment claims suggests a weaker report.   My guess is that the employment report will be close to the consensus in April.

by Calculated Risk on 5/03/2018 10:03:00 AM

The April ISM Non-manufacturing index was at 56.8%, down from 58.8% in March. The employment index decreased in April to 53.6%, from 56.6%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: April 2018 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in April for the 99th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: "The NMI® registered 56.8 percent, which is 2 percentage points lower than the March reading of 58.8 percent. This represents continued growth in the non-manufacturing sector at a slower rate. The Non-Manufacturing Business Activity Index decreased to 59.1 percent, 1.5 percentage points lower than the March reading of 60.6 percent, reflecting growth for the 105th consecutive month, at a slower rate in April. The New Orders Index registered 60 percent, 0.5 percentage point higher than the reading of 59.5 percent in March. The Employment Index decreased 3 percentage points in April to 53.6 percent from the March reading of 56.6 percent. The Prices Index increased by 0.3 percentage point from the March reading of 61.5 percent to 61.8 percent, indicating that prices increased in April for the 26th consecutive month. According to the NMI®, all 18 non-manufacturing industries reported growth. There was a slowing in the rate of growth that was mostly attributed to the decline in the Employment and Supplier Deliveries indexes. The respondents have expressed concern regarding the uncertainty about tariffs and the effect on the cost of goods. Overall, the respondents remain positive about business conditions and the economy."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This suggests slower expansion in April than in March.

by Calculated Risk on 5/03/2018 08:53:00 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 $49.0 billion in March, down $8.8 billion from $57.7 billion in February, revised. ... March exports were $208.5 billion, $4.2 billion more than February exports. March imports were $257.5 billion, $4.6 billion less than February imports.

Click on graph for larger image.

Exports increased and imports decreased in March.

Exports are 26% above the pre-recession peak and up 9% compared to March 2017; imports are 11% above the pre-recession peak, and up 9% compared to March 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 $54.00 in March, down slightly from $54.61 in February, and up from $46.26 in March 2017.

The trade deficit with China increased to $25.8 billion in February, from $24.6 billion in March 2017.  Note: The timing of the Chinese New Year pushed up the trade deficit with China in February, and probably reduced the deficit slightly in March.

by Calculated Risk on 5/03/2018 08:33:00 AM

The DOL reported:

In the week ending April 28, the advance figure for seasonally adjusted initial claims was 211,000, an increase of 2,000 from the previous week's unrevised level of 209,000. The 4-week moving average was 221,500, a decrease of 7,750 from the previous week's unrevised average of 229,250. This is the lowest level for this average since March 3, 1973 when it was 221,250.

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 decreased to 221,500.

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

by Calculated Risk on 5/02/2018 07:04:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Uninspired by Fed or Economic Data

Mortgage rates were flat to slightly higher today, depending on the lender. The average lender was quoting the same rates as yesterday, but with slightly higher upfront costs (or a lower credit, depending on your scenario). That said, if you could only choose one word to describe the movement, it would be "flat." [30YR FIXED - 4.625%-4.75%]
emphasis added

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 209 thousand the previous week.

• Also at 8:30 AM, Trade Balance report for March from the Census Bureau. The consensus is for the U.S. trade deficit to be at $50.0 billion in March from $57.6 billion in February.

• At 10:00 AM, the ISM non-Manufacturing Index for April. The consensus is for index to decrease to 58.5 from 58.8 in March.

by Calculated Risk on 5/02/2018 03:54:00 PM

A few excerpts from Tim Duy at Fed Watch: Fed Holds Rates Steady

The most important news from the FOMC statement was the hint that the Fed would not overreact with substantial policy changes in response to inflation readings modestly above 2 percent. ...

... Most notable was the addition of “symmetric” in this line:

Inflation on a 12-month basis is expected to run near the Committee’s symmetric 2 percent objective over the medium term.

Inflation is now very near the Fed’s target and it is reasonable to expect some overshooting of that target. Central bankers are reminding market participants that the inflation target is symmetric such that they will tolerate reasonable short-run deviations from target in the near term. In other words, don’t freak out if inflation exceeds 2 percent as that alone will not drive the Fed to change policy.

And from Merrill Lynch:

As was widely expected, the FOMC kept the fed funds target range unchanged at 1.50-1.75%. The most significant change in the statement came in the second paragraph where the Committee included the word "symmetric" in characterizing its inflation target. This is consistent with the March SEP which showed that the median forecast was expecting core inflation to hit 2.1% in 2019-2020, allowing for inflation to rise slightly above its target in the medium run. The inclusion of the word "symmetric" helped offset the more hawkish tone in the prior paragraph which highlighted that core inflation is moving closer to 2%. In our view, the FOMC's balanced tone reemphasizes its expectations to adjust the path of policy gradually throughout the current hiking cycle.
emphasis added