by Calculated Risk on 6/09/2019 10:40:00 PM

Weekend:
• Schedule for Week of June 9, 2019

Monday:
• At 10:00 AM ET, Job Openings and Labor Turnover Survey for April from the BLS.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 10 and DOW futures are up 92 (fair value).

Oil prices were up over the last week with WTI futures at $54.28 per barrel and Brent at $63.45 per barrel.  A year ago, WTI was at $66, and Brent was at $75 - so oil prices are down about 15% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.73 per gallon. A year ago prices were at $2.92 per gallon, so gasoline prices are down about 6% year-over-year.

by Calculated Risk on 6/09/2019 10:30:00 AM

From Dodge Data Analytics: Dodge Momentum Index Falls in May

The Dodge Momentum Index fell 1.0% in May to 141.0 (2000=100) from the revised April reading of 142.4. The Momentum Index, issued by Dodge Data & Analytics, 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 May decline for the Momentum Index was due entirely to a 6.9% drop by its commercial component, as its institutional component rose 8.1%.

The Momentum Index continues to settle back from the most recent highs achieved last summer. On a year-over-year basis, the Momentum Index in May was 9.2% lower than a year ago, with a 16.0% drop by its commercial component outweighing a 1.8% gain by its institutional component. Although the trend for the overall Momentum Index is downward, so far the pullback has been measured, suggesting that there remains enough nonresidential building projects in the pipeline to support near term stability for construction activity.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 141.0 in May, down from 142.4 in April.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year".  This suggests a slowdown in CRE later this year.

by Calculated Risk on 6/08/2019 08:11:00 AM

The key reports this week are Retail sales and CPI.

For manufacturing, the Industrial Production report will be released this week.

----- Monday, June 10th -----
10:00 AM ET: Job Openings and Labor Turnover Survey for April from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in March to 7.488 million from 7.142 million in February.

The number of job openings (yellow) were up 9% year-over-year, and Quits were up 3% year-over-year.

----- Tuesday, June 11th -----
6:00 AM ET: NFIB Small Business Optimism Index for May.

8:30 AM: The Producer Price Index for May from the BLS. The consensus is for a 0.1% increase in PPI, and a 0.2% increase in core PPI.

----- Wednesday, June 12th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: The Consumer Price Index for May from the BLS. The consensus is for 0.1% increase in CPI, and a 0.2% increase in core CPI.

----- Thursday, June 13th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 215 thousand initial claims, down from 218 thousand last week.

----- Friday, June 14th -----
8:30 AM: Retail sales for May is scheduled to be released.  The consensus is for 0.7% increase in retail sales.

This graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales, ex-gasoline, increased by 3.0% on a YoY basis in April.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for May.

This graph shows industrial production since 1967.

The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to increase to 78.0%.

10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for June).

by Calculated Risk on 6/07/2019 04:00:00 PM

Note: This is not Mortgage Equity Withdrawal (MEW) data from the Fed. The last MEW data from Fed economist Dr. Kennedy was for Q4 2008.

The following data is calculated from the Fed's Flow of Funds data (released last week) and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity - hence the name "MEW" - and normal principal payments and debt cancellation (modifications, short sales, and foreclosures).

For Q1 2019, the Net Equity Extraction was a negative $28 billion, or a -0.7% of Disposable Personal Income (DPI) .

Click on graph for larger image.

This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.

Note: This data is impacted by debt cancellation and foreclosures, but much less than a few years ago.

MEW has been positive for 10 of the last 12 quarters. With a slower rate of debt cancellation, MEW will likely be mostly positive going forward - but nothing like during the housing bubble.

The Fed's Flow of Funds report showed that the amount of mortgage debt outstanding increased by $25 billion in Q1.

The Flow of Funds report also showed that Mortgage debt has declined by $0.34 trillion since the peak.

For reference:

Dr. James Kennedy also has a simple method for calculating equity extraction: "A Simple Method for Estimating Gross Equity Extracted from Housing Wealth". Here is a companion spread sheet (the above uses my simple method).

For those interested in the last Kennedy data included in the graph, the spreadsheet from the Fed is available here.

by Calculated Risk on 6/07/2019 02:11:00 PM

By request, here is another update of tracking employment during Presidential terms.  We frequently use Presidential terms as time markers - we could use Speaker of the House, Fed Chair, or any other marker.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I'll just stick to the beginning of each term.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (dark blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (dark red) took office.

There was a recession towards the end of President G.H.W. Bush (light purple) term, and Mr Clinton (light blue) served for eight years without a recession.

Click on graph for larger image.

The first graph is for private employment only.

Mr. Trump is in Orange (28 months).

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 821,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 382,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased by 20,979,000 under President Clinton (light blue), by 14,714,000 under President Reagan (dark red), 9,039,000 under President Carter (dashed green), 1,511,000 under President G.H.W. Bush (light purple), and 11,890,000 under President Obama (dark blue).

During the first 28 months of Mr. Trump's term, the economy has added 5,196,000 private sector jobs.

 A big difference between the presidencies has been public sector employment.  Note: the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).  However the public sector declined significantly while Mr. Obama was in office (down 269,000 jobs).

During the first 28 months of Mr. Trump's term, the economy has added 204,000 public sector jobs.

The third graph shows the progress towards the Trump goal of adding 10 million jobs over his 4 year term.

After 28 months of Mr. Trump's presidency, the economy has added 5,400,000 jobs, about 433,000 behind the projection.

by Calculated Risk on 6/07/2019 12:59:00 PM

From Merrill Lynch:

The data added 0.2pp to 2Q GDP tracking up to 2.1% qoq saar, while 1Q remained at 3.2% [June 6 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 1.0% for 2019:Q2 and 1.3% for 2019:Q3. [June 7 estimate].

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2019 is 1.4 percent on June 7, down from 1.5 percent on June 6. The nowcast of second-quarter real government expenditures growth decreased from 2.0 percent to 1.7 percent after this morning's employment report from the U.S. Bureau of Labor Statistics. [June 7 estimate]

CR Note: These early estimates suggest real GDP growth will be in the 1% to 2% range annualized in Q2.

by Calculated Risk on 6/07/2019 10:11:00 AM

The headline jobs number at 75 thousand for May was well below consensus expectations of 180 thousand, and the previous two months were revised down 75 thousand, combined. The unemployment rate was unchanged at 3.6%. Overall this was a weak report.

Earlier: May Employment Report: 75,000 Jobs Added, 3.6% Unemployment Rate

In May, the year-over-year employment change was 2.350 million jobs. That is decent year-over-year growth.

Average Hourly Earnings

Wage growth was below expectations. From the BLS:

"In May, average hourly earnings for all employees on private nonfarm payrolls increased by 6 cents to $27.83. Over the year, average hourly earnings have increased by 3.1 percent."

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 3.1% YoY in May.

Wage growth has generally been trending up, but has weakened recently.

Prime (25 to 54 Years Old) Participation

Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate was declined in May to 82.1% from 82.2% in April, and the 25 to 54 employment population ratio was unchanged at 79.7%.

Part Time for Economic Reasons

From the BLS report:

"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 299,000 in May to 4.4 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."

The number of persons working part time for economic reasons decreased in May to 4.355 million from 4.654 million in April.   The number of persons working part time for economic reason has been generally trending down.

These workers are included in the alternate measure of labor underutilization (U-6) that declined to 7.1% in May. This is the lowest level for U-6 since the year 2000.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.230 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.305 million in March.

Summary:

The headline jobs number was well below expectations, and the previous two months were revised down.  The headline unemployment rate was unchanged at 3.6%, although U-6 declined to the lowest level since the year 2000.

Wage growth was also a little disappointing.

Overall this was a weak jobs report.   The economy added 820 thousand jobs through May 2019, down from 1,149 thousand jobs during the same period in 2018.   So job growth has slowed.

by Calculated Risk on 6/07/2019 08:41:00 AM

From the BLS:

Total nonfarm payroll employment edged up in May (+75,000), and the unemployment rate remained at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in professional and business services and in health care.
...
The change in total nonfarm payroll employment for March was revised down from +189,000 to +153,000, and the change for April was revised down from +263,000 to +224,000. With these revisions, employment gains in March and April combined were 75,000 less than previously reported.
...
In May, average hourly earnings for all employees on private nonfarm payrolls increased by 6 cents to $27.83. Over the year, average hourly earnings have increased by 3.1 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 75 thousand in May (private payrolls increased 90 thousand).

Payrolls for March and April were revised down 75 thousand combined.

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

In May, the year-over-year change was 2.350 million jobs.

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

The Labor Force Participation Rate was unchanged in May at 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 and long term trends.

The Employment-Population ratio was unchanged at 60.6% (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 was unchanged in May at 3.6%.

This was well below the consensus expectations of 180,000 jobs added, and March and April were revised down by 75,000 combined.  A weak report.

I'll have much more later ...

by Calculated Risk on 6/06/2019 09:10:00 PM

My May Employment Preview

Goldman: May Payrolls Preview

Friday:
• At 8:30 AM, Employment Report for May.   The consensus is for 180,000 jobs added, and for the unemployment rate to increase to 3.7%.

by Calculated Risk on 6/06/2019 04:02:00 PM

A few brief excerpts from a note by Goldman Sachs economist Spencer Hill:

We estimate nonfarm payrolls increased 195k in May (vs. consensus of 178k), as employment surveys remain at healthy levels and the payroll survey period largely preceded the recent trade war escalation. …

We expect an unchanged unemployment rate in tomorrow’s report (3.6%) … We estimate a 0.2% rise in average hourly earnings (mom sa) that lowers the year-over-year rate a tenth to 3.1%
emphasis added