by Calculated Risk on 6/06/2019 08:33:00 AM

The DOL reported:

In the week ending June 1, the advance figure for seasonally adjusted initial claims was 218,000, unchanged from the previous week's revised level. The previous week's level was revised up by 3,000 from 215,000 to 218,000. The 4-week moving average was 215,000, a decrease of 2,500 from the previous week's revised average. The previous week's average was revised up by 750 from 216,750 to 217,500.
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 215,000.

This was above the consensus forecast.

by Calculated Risk on 6/05/2019 07:03:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 215 thousand initial claims, unchanged from 215 thousand last week.

• At 8:30 AM, Trade Balance report for April from the Census Bureau. The consensus is the trade deficit to be $50.7 billion.  The U.S. trade deficit was at $50.0 Billion the previous month.

• At 12:00 PM, Q1 Flow of Funds Accounts of the United States from the Federal Reserve.

by Calculated Risk on 6/05/2019 02:26:00 PM

The ADP employment report was weak this month with just 27,000 jobs added. In general, the ADP report hasn't been very useful in predicting the BLS report for any one month, but this does suggest some downside risk to the May employment report to be released on Friday.

However, the ISM non-manufacturing report suggested solid employment growth in May. So I thought I'd look back at the three previous years and compare the ADP and ISM reports to the BLS report.

In May 2018, the BLS reported 223,000 jobs added (218,000 private sector jobs added).  The ADP report showed 178,000 jobs added, the ISM non-manufacturing employment index was at 54.1.

In May 2017, the BLS reported 138,000 jobs added (147,000 private sector jobs added).  The ADP report showed 253,000 jobs added, the ISM non-manufacturing employment index was at 57.8.

In May 2016, the BLS reported 38,000 jobs added (25,000 private sector jobs added).  The ADP report showed 173,000 jobs added, the ISM non-manufacturing employment index was at 49.7.

This is a very small sample, but neither the ADP or the ISM non-Mfg employment index correlates well with the BLS report, but the ISM report has probably been a little more useful.  For the previous three years, the ADP and the ISM non-Mfg employment index moved somewhat together - but this month the readings were very different.

by Calculated Risk on 6/05/2019 02:04:00 PM

Fed's Beige Book "This report was prepared at the Federal Reserve Bank of Minneapolis based on information collected on or before May 24, 2019."

Economic activity expanded at a modest pace overall from April through mid-May, a slight improvement over the previous period. Almost all Districts reported some growth, and a few saw moderate gains in activity. Manufacturing reports were generally positive, but some Districts noted signs of slowing activity and a more uncertain outlook among contacts. Residential construction and real estate both showed overall growth, but both sectors saw wide variation in sentiment across Districts. Reports on consumer spending were generally positive but tempered. Tourism activity was stronger, especially in the Southeast, but vehicle sales were lower, according to reporting Districts. Loan demand was mixed but indicated growth. Agricultural conditions remained weak overall, but a few Districts reported some improvements. The outlook for the coming months was solidly positive but modest, with little variation among reporting Districts.
...
Employment continued to increase nationwide, with most Districts reporting modest or moderate job growth and others reporting slight growth, an assessment similar to the previous reporting period. Solid hiring demand was noted for retail, business services, technical, manufacturing, and construction jobs and by staffing agencies in general. However, stronger employment growth continued to be constrained by tight labor markets, with Districts citing shortages of both high- and low-skill workers. Competition for workers reportedly applied some wage pressures across a wide range of occupations and induced improvements in benefits to attract more workers and to improve retention of existing employees, according to several Districts. However, overall wage pressures remained relatively subdued given low unemployment rates; a majority of Districts reported modest or moderate wage growth.
emphasis added

by Calculated Risk on 6/05/2019 10:04:00 AM

The May ISM Non-manufacturing index was at 56.9%, up from 55.5% in April. The employment index increased to 58.1%, from 53.7%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: May 2019 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in May for the 112th 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 56.9 percent, which is 1.4 percentage points higher than the April reading of 55.5 percent. This represents continued growth in the non-manufacturing sector, at a slightly faster rate. The Non-Manufacturing Business Activity Index increased to 61.2 percent, 1.7 percentage points higher than the April reading of 59.5 percent, reflecting growth for the 118th consecutive month, at a faster rate in May. The New Orders Index registered 58.6 percent; 0.5 percentage point higher than the reading of 58.1 percent in April. The Employment Index increased 4.4 percentage points in May to 58.1 percent from the April reading of 53.7 percent. The Prices Index decreased 0.3 percentage point from the April reading of 55.7 percent to 55.4 percent, indicating that prices increased in May for the 24th consecutive month. According to the NMI®, 16 non-manufacturing industries reported growth. The non-manufacturing sector continues to experience a slight uptick in business activity, but it is still leveling off overall. Respondents are mostly optimistic about overall business conditions, but concerns remain about tariffs and employment resources.”
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 faster expansion in May than in April.

by Calculated Risk on 6/05/2019 08:19:00 AM

From ADP:

Private sector employment increased by 27,000 jobs from April to May according to the May 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.
...
“Following an overly strong April, May marked the smallest gain since the expansion began,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Large companies continue to remain strong as they are better equipped to compete for labor in a tight labor market.”

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is moderating. Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting.”

This was well below the consensus forecast for 175,000 private sector jobs added in the ADP report. 

The BLS report will be released Friday, and the consensus is for 180,000 non-farm payroll jobs added in May.

by Calculated Risk on 6/05/2019 07:00:00 AM

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

Mortgage applications increased 1.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 31, 2019. This week’s results included an adjustment for the Memorial Day holiday.

... The Refinance Index increased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 14 percent compared with the previous week and was 0.5 percent higher than the same week one year ago.
...
“Mortgage rates dropped to their lowest level since the first week of 2018, driven by increasing concerns regarding the ongoing trade tensions with China and Mexico,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Some borrowers, particularly those with larger loans, jumped on the opportunity to refinance, bringing the index and average refinance loan size to their highest levels since early April. Additionally, refinances for FHA and VA loans jumped by 11 percent.”

Added Fratantoni, “Coming out of the Memorial Day holiday, and likely impacted by the financial market volatility caused by the trade tensions, purchase application volume declined for the week. Potential homebuyers may be more cautious given the heightened economic uncertainty.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.23 percent from 4.33 percent, with points decreasing to 0.33 from 0.42 (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.

Once mortgage rates fell more than 50 bps from the highs of last year, a number of recent buyers were able to refinance.  But it would take a further decrease in rates to see a further increase in refinance activity.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 0.5% year-over-year.

by Calculated Risk on 6/04/2019 07:53:00 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 May. This report is for private payrolls only (no government). The consensus is for 175,000 payroll jobs added in May, down from 175,000 added in April.

• At 10:00 AM, the ISM non-Manufacturing Index for May.   The consensus is for a reading of 55.7, up from 55.5.

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

by Calculated Risk on 6/04/2019 04:08:00 PM

Way back in 2005, I posted a graph of the Real Estate Agent Boom. Here is another update to the graph.

The graph shows the number of real estate licensees in California.

The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).

The number of salesperson's licenses is off 27% from the peak, and is increasing again (up 9.7% from low). The number of salesperson's licenses has increased to October 2004 levels.

Brokers' licenses are off 14.3% from the peak and have fallen to December 2005 levels, and are still slowly declining (down 1% year-over-year).

Click on graph for larger image.

We are seeing a pickup in Real Estate licensees in California, although the number of Brokers is still declining.

by Calculated Risk on 6/04/2019 02:04:00 PM

The BEA released their estimate of May vehicle sales this morning. The BEA estimated sales of 17.31 million SAAR in May 2019 (Seasonally Adjusted Annual Rate), up 5.9% from the April sales rate, and up slightly from May 2018.

Sales in 2019 are averaging 16.8 million (average of seasonally adjusted rate), down 1.9% compared to the same period in 2018.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and an estimate for May (red).

This was below the consensus forecast for April.

A small decline in sales to date this year isn't a concern - I think sales will move mostly sideways at near record levels.

This means the economic boost from increasing auto sales is over (from the bottom in 2009, auto sales boosted growth every year through 2016).

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

Note: dashed line is current estimated sales rate of 17.31 million SAAR.