by Calculated Risk on 2/12/2020 10:13:00 AM

Note: Back in early 2016, I noted that energy expenditures as a percentage of PCE had hit an all time low. Here is an update through the December 2019 PCE report released last week.

Below is a graph of expenditures on energy goods and services as a percent of total personal consumption expenditures through December 2019.

This is one of the measures that Professor Hamilton at Econbrowser looks at to evaluate any drag on GDP from energy prices.


Click on graph for larger image.

Data source: BEA.

The huge spikes in energy prices during the oil crisis of 1973 and 1979 are obvious. As is the increase in energy prices during the 2001 through 2008 period.

In December 2019, energy expenditures as a percentage of PCE was at 4.05% of PCE, up somewhat from the all time low of 3.65% in February 2016.

Energy as a percent of GDP has been generally trending down, and historically this is a low percentage of PCE for energy expenditures.

by Calculated Risk on 2/12/2020 07:00:00 AM

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

Mortgage applications increased 1.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 7, 2020.

... The Refinance Index increased 5 percent from the previous week and was 207 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 6 percent from one week earlier. The unadjusted Purchase Index increased 0.3 percent compared with the previous week and was 16 percent higher than the same week one year ago.
...
“The mortgage market continues to be active in early 2020, as applications increased for the third straight week. Rates also rose, but still remained close to their lowest levels since October 2016,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The refinance index climbed to its highest level since June 2013, and refinance loan sizes also increased as a result of an active jumbo lending market.”

Added Kan, “Last month was the strongest January for purchase applications since 2009, which is perhaps a sign that mild weather brought out prospective buyers earlier than normal. Despite a decline last week, purchase activity was still up almost 16 percent from a year ago.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.72 percent from 3.71 percent, with points remaining unchanged at 0.28 (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.

With lower rates, we saw a sharp increase in refinance activity, but mortgage rates would have to decline further to see a 2012 size refinance boom.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 16% year-over-year.

by Calculated Risk on 2/11/2020 06:58:00 PM

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

• At 10:00 AM, Testimony, Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate

by Calculated Risk on 2/11/2020 01:20:00 PM

From the MBA: Mortgage Delinquencies Decrease in Fourth Quarter of 2019

The delinquency rate for mortgage loans on one-to-four unit residential properties decreased to a seasonally adjusted rate of 3.77 percent of all loans outstanding at the end of the fourth quarter of 2019, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.

The delinquency rate was down 20 basis points from the third quarter of 2019 and 29 basis points from one year ago. The percentage of loans on which foreclosure actions were started in the fourth quarter remained unchanged at 0.21 percent.

"The mortgage delinquency rate in the final three months of 2019 fell to its lowest level since the current survey series began in 1979," said Marina Walsh, MBA's Vice President of Industry Analysis. "Mortgage delinquencies track closely to the U.S. unemployment rate, and with unemployment at historic lows, it's no surprise to see so many households paying their mortgage on time."

Added Walsh, "Signs of healthy conditions were seen in other parts of the survey. The foreclosure inventory rate - the percentage of loans in the foreclosure process - was at its lowest level since 1985. Furthermore, states with lengthier judicial processes continued to chip away at their foreclosure inventories, and it also appears that with home-price appreciation and equity accumulation, distressed borrowers have had alternative options to foreclosure."
...
Compared to last quarter, the seasonally adjusted mortgage delinquency rate decreased for all loans outstanding. By stage, the 30-day delinquency rate decreased 3 basis points to 2.17 percent, the 60-day delinquency rate decreased 5 basis points to 0.70 percent, and the 90-day delinquency bucket decreased 12 basis points to 0.90 percent.
...
The delinquency rate includes loans that are at least one payment past due, but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.78 percent, down 6 basis points from the third quarter of 2019 and 17 basis points lower than one year ago. This was the lowest foreclosure inventory rate since the third quarter of 1985.
...
The seriously delinquent rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 1.76 percent - a decrease of 5 basis points from last quarter - and a decrease of 30 basis points from last year. This is the lowest rate since the third quarter of 2000.
emphasis added

Click on graph for larger image.

This graph shows the percent of loans delinquent by days past due.  Delinquencies decreased in Q4.

The percent of loans in the foreclosure process continues to decline, and is now at the lowest level since 1985.

by Calculated Risk on 2/11/2020 11:14:00 AM

From the NY Fed: Household Debt Tops $14 Trillion as Mortgage Originations Reach Highest Volume since 2005

The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit, which shows that total household debt increased by $193 billion (1.4%) to $14.15 trillion in the fourth quarter of 2019. This marks the 22nd consecutive quarter with an increase, and the total is now $1.5 trillion higher, in nominal terms, than the previous peak of $12.68 trillion in the third quarter of 2008. The Report is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.
...
Transitions into delinquency among credit card borrowers deteriorated in the fourth quarter compared to Q3 2019.

“Mortgage originations, including refinances, increased significantly in the final quarter of 2019, with auto loan originations also remaining at the brisk pace seen throughout the year,” said Wilbert Van Der Klaauw, senior vice president at the New York Fed. “The data also show that transitions into delinquency among credit card borrowers have steadily risen since 2016, notably among younger borrowers.”
emphasis added

Click on graph for larger image.

Here are two graphs from the report:

The first graph shows aggregate consumer debt increased in Q4.  Household debt previously peaked in 2008, and bottomed in Q2 2013.

From the NY Fed:

Mortgage balances shown on consumer credit reports on December 31 stood at $9.56 trillion, a $120 billion increase from 2019Q3. Balances on home equity lines of credit (HELOC) saw a $6 billion decline, bringing the outstanding balance to $390 billion and continuing the 10 year downward trend. Non-housing balances increased by $79 billion in the fourth quarter, with increases across the board, including $16 billion in auto loans, $46 billion in credit card balances, and $10 billion in student loans. Note that the large increase in credit card balances reflects, in part, a shifting of balances across debt types as portfolios have shifted by among lender.

New extensions of credit were strong in the fourth quarter. Auto loan originations, which include both newly opened loans and leases, at $159 billion, were about flat with the previous quarter’s high level. Mortgage originations, which we measure as appearances of new mortgage balances on consumer credit reports and which include refinances, were at $752 billion, a large increase from the $528 billion in the third quarter and the highest volume in originations since the end of 2005. Aggregate credit limits on credit cards also increased, by $96 billion, continuing a 10-year upward trend.

The second graph shows the percent of debt in delinquency.

The overall delinquency rate was mostly unchanged in Q4.  From the NY Fed:

Aggregate delinquency rates were mostly unchanged in the fourth quarter of 2019. As of December 31, 4.7% of outstanding debt was in some stage of delinquency, a 0.1 percentage point decrease from the third quarter due to a decrease in the 30 to 59 days late bucket. Of the $669 billion of debt that is delinquent, $444 billion is seriously delinquent (at least 90 days late or “severely derogatory”, which includes some debts that have been removed from lenders books but upon which they continue to attempt collection).

There is much more in the report.

by Calculated Risk on 2/11/2020 10:06:00 AM

Notes: In December there were 6.423 million job openings, and, according to the December Employment report, there were 5.753 million unemployed. So, for the twenty-second consecutive month, there were more job openings than people unemployed. Also note that the number of job openings has exceeded the number of hires since January 2015 (almost 5 years).

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings fell to 6.4 million (-364,000) on the last business day of December, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were little changed at 5.9 million and 5.7 million, respectively. Within separations, the quits rate and layoffs and discharges rate were unchanged at 2.3 percent and 1.2 percent respectively. ...

The number of quits was little changed in December at 3.5 million and the rate was unchanged at 2.3 percent. Quits decreased in retail trade (-111,000) and arts, entertainment, and recreation (-20,000).
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 December, the most recent employment report was for January.

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 decreased in December to 6.423 million from 6.787 million in November.

The number of job openings (yellow) are down 14% year-over-year.

Quits are up 2.9% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Job openings are at a solid level, but have been declining - and are down 14% year-over-year.  Quits are still increasing year-over-year.

by Calculated Risk on 2/11/2020 08:56:00 AM

From Fed Chair Jerome Powell: Semiannual Monetary Policy Report to the Congress. A few excerpts:

"Some of the uncertainties around trade have diminished recently, but risks to the outlook remain. In particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy."
emphasis added

This suggests the Fed might cut rates if the economic impact from 2019-nCov is significant.

"The FOMC believes that the current stance of monetary policy will support continued economic growth, a strong labor market, and inflation returning to the Committee's symmetric 2 percent objective. As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate. Of course, policy is not on a preset course. If developments emerge that cause a material reassessment of our outlook, we would respond accordingly. …

The current low interest rate environment also means that it would be important for fiscal policy to help support the economy if it weakens. Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn. A more sustainable federal budget could also support the economy's growth over the long term."

by Calculated Risk on 2/11/2020 08:47:00 AM

Most of this survey is noise, but there is some information, especially on the labor market and the "Single Most Important Problem".

From the National Federation of Independent Business (NFIB): January 2020 Report

The small business Optimism Index started the New Year ... rising 1.6 points to 104.3 in the month of January.
..
New job creation jumped in January, with an average addition of 0.49 workers per firm, the highest level since March 2019, rebounding back into strong territory. Finding qualified workers remains the top issue for 26 percent reporting this as their number one problem, 1 point below August’s record high.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 104.3 in January.

Note: Usually small business owners complain about taxes and regulations (currently 2nd and 3rd on the "Single Most Important Problem" list). However, during the recession, "poor sales" was the top problem. Now the difficulty of finding qualified workers is the top problem.

by Calculated Risk on 2/10/2020 07:22:00 PM

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

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

• At 10:00 AM, Testimony, Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives

• At 11:00 AM, NY Fed: Q4 Quarterly Report on Household Debt and Credit

by Calculated Risk on 2/10/2020 02:36:00 PM

This might be a good time to review the seasonal pattern for employment.

Even in the best of years there are a significant number of jobs lost in the months of January and July. In 1994, when the economy added almost 3.9 million jobs, there were 2.25 million lost in January 1994 (not seasonally adjusted, NSA), and almost 1 million payroll jobs lost in July of that year.

This year, in January 2020, 2.83 million total jobs were lost (NSA).   On a seasonally adjusted basis, the BLS reported 225 thousand jobs (SA) added in January.

A clear example of the a seasonal pattern is that teachers leave the workforce every year in July.  And then those teachers return to the payrolls in September and early October. Since this happens every year, the BLS applies a seasonal adjustment before reporting the headline number.   

For the private sector, there are always a large number of jobs lost in January (retailers and others cutting jobs) and in September (summer hires let go).

Click on graph for larger image.

This graph shows the seasonal pattern since 2002 for both total nonfarm jobs and private sector only payroll jobs. Notice the large spike down every January.

Also notice the spike down in July (red) that is related to teachers leaving the labor force.

The key point is this is a series that NEEDS a seasonal adjustment.  There is significant, but predictable, seasonal variation in employment.