News & Events

Economic Advisor: July 19, 2017
July 19, 2017


 

Retail sales continued to contract, while consumer credit saw gains, and layoffs enjoyed a slight drop.

Retail Sales

Retail and food service sales for June fell 0.2 percent from May, notching down to $473.5 billion, the Census Bureau reported last week. This marked the second straight monthly decline for retail sales, which the market had expected to grow by 0.1 percent. Compared to the same period last year, June’s sales were 2.8 percent below June 2016

Segments of the retail marketplace that saw significant declines included miscellaneous retailers — a broad category including shops such as florists, pet stores and sellers of used merchandise —which saw sales decline 3.1 percent; gas stations, which fell 1.3 percent; department stores, which dropped 0.7 percent; and sporting goods, hobby, book and music stores, which were down 0.6 percent.

Given the broad range of retail categories that turned in shrinking sales, May’s data would generally indicate continued caution on the part of American households to spend on consumer exchanges. That said, one segment of retail sales that bucked the downward trend was non-store retailers, a category which is dominated by online retailers. Those sellers saw sales increase 0.4 percent for the month, and when compared to last year, enjoyed 9.2 percent higher sales. So, it is likely that multiple consumer trends are at work.

“From everything you read you would think that retailers are dying out,” Betsy Goodman, retail program head for the University of Florida, told the Orlando Sentinel last week. “The online business has had some impact, but it doesn’t account for all the closures we’ve seen. It’s the stores that aren’t adapting that are dying.”

Consumer Credit

Consumer credit saw a decent jump for May, growing 5.8 percent to hit a total of $3.842 trillion for the month, according to last week’s report from the Federal Reserve. This was the highest rate of monthly gains in seven months.

A big contributor to May’s growth was revolving debt, such as credit cards, which grew a solid 8.7 percent to hit a total of $ 1.018 trillion. Non-revolving debt, such as car and student loans, also showed a respectable gain, growing 4.7 percent to hit $2.824 trillion.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending July 8 declined to 247,000, a drop of 3,000 claims from the prior week’s total of 250,000, according to last week’s report from the Employment and Training Administration. While down, this week’s total was slightly higher than market expectations of 245,000 claims.

The four-week moving average — considered a more stable measure of initial jobless claims — notched down up to 245,750, a gain of 2,250 claims from the preceding week’s average of 243,500claims.

This marked the 123rd week that initial claims have fallen below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Tuesday — Import and export prices for June from the Census Bureau.
  • Wednesday — Housing starts and building permits for June from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for June from The Conference Board.

Posted in Economic Advisor



Economic Advisor: July 12, 2017
July 12, 2017


 

Construction spending showed no movement, while the economy added jobs in June, and recent layoff activity slightly ticked up.

Construction Spending

Construction spending for May was flat at an annual rate of $1.2301 trillion, which was nearly identical to April’s pace of $1.2304 trillion, the Census Bureau reported last week. That said, compared to the same period last year, May’s total spending was 4.5 percent higher than May 2016’s rate of $1.177 trillion.

Spending on private construction fell 0.6 percent to an annual rate of $943.2 billion, down from April’s pace of $949.3 billion. Spending on residential construction also fell at a similar rate, dropping to a pace of $509.6 billion for May, which was 0.6 percent below April’s annual rate of $512.7 billion.

Construction has been a key indicator for housing market watchers, as supply has been a lynchpin when it comes to sales volume. Increased inventory keeps prices down, which makes increased sales activity. Unfortunately, construction hasn’t been doing that.

“Construction activity, unfortunately, continues to disappoint,” BMO Capital Markets Economist Jennifer Lee told the New York Times. “If June is flat again, that would mean a negative quarter for construction.”

Employment

In employment news, the U.S. economy added 222,000 non-farm jobs in June, putting the unemployment rate slightly up at 4.4 percent, the Bureau of Labor Statistics reported last week. Key job-growth sectors for the month included healthcare, social assistance, financial activities, and mining.

All told, there were 7 million unemployed Americans in June. The number of long-term unemployed — people without jobs for 27 weeks or longer — continued to hover at 1.7 million in June, which represented 24.3 percent of the unemployed population. Over the year, the population of long-term unemployed Americans has shrunk by 322,000 people.

The labor force participation rate—the number of employable Americans who are either looking for work or who have secured a job — was at 62.8 percent for June, which was roughly the same as May.

The number of persons involuntarily employed on a part-time basis for reasons such as having their hours cut, or that being the only work they could get was essentially unchanged at 5.3 million in June.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending July 1 hit 248,000, a gain of 4,000
claims over the preceding week’s total of 244,000, according to numbers released last week by the Employment and Training Administration.

Initial jobless claims serve as a good indicator of layoff activity, and last week’s report was close to market expectations of 244,000 claims for the week. This was the third straight week of jobless claim increases, albeit small ones.

The four-week moving average — regarded as a more reliable measure of initial jobless claims — ticked up to 243,000
claims, a slight increase of 750
claims from the prior week’s average of 242,250. This was the 122nd week in which initial claims were below the 300,000-claim level, which economists consider is an indicator of a growing job market.

This week, we can expect:

  • Monday — Consumer credit for May from the Federal Reserve.
  • Tuesday — Wholesale inventories for May from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Federal budget for June from the Treasury Department.
  • Friday — Consumer price index for June from the Bureau of Economic Analysis; retail sales for June and business inventories for May from the Census Bureau; industrial production and capacity utilization for June from the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: July 5, 2017
July 5, 2017


 

Consumer incomes and spending posted solid growth, while consumers reported positive feelings about the economy. That said, layoffs ticked up slightly.

Incomes and Spending

Personal incomes grew 0.4 for a $67.1 billion gain during May, according to last week’s report from the Bureau of Economic Analysis. This beat market expectations of a 0.3 percent gain in incomes. Disposable personal income (DPI; incomes after taxes) increased 0.5 percent for $71.7 billion.

Personal consumption expenditures (PCE; total personal spending) grew 0.1 percent for a $7.3 billion gain in May. This was in line with market predications of a 0.1 percent increase. Personal outlays (spending specifically on goods and services) grew $9.5 billion in May

Consumers’ personal savings totaled $791 billion in May which put the personal

saving rate — savings expressed as a percentage of DPI — at 5.5 percent. This was a considerable jump from April’s $728 billion.

“Real disposable personal income [DPI adjusted for inflation] has risen a whopping 4.7 percent (annualized) over the past three months, the strongest growth in nearly two years,” TD Economics Senior Economist James Marple wrote in a public statement. “This should continue to underpin healthy consumer spending through the second half of the year.”

Consumer Outlook

Consumers had better than expected feelings regarding the economy and their circumstances within it. The Conference Board’s Consumer Confidence Index hit 118.9 in June, which was up from 117.6 in May and beat market expectations of 116.7. (A baseline of 110 was set in 1985.) The University of Michigan’s Surveys of Consumers reported that its Consumer Sentiment Index dropped from May 97.1 to 95.1 in June, but that still outpaced market predictions of 94.7.

The Conference Board’s Present Situation Index, which describes how consumers feel about the current economy, grew from May’s 140.6 to 146.3 in June. The board’s Expectations Index, which indicates how consumers feel the economy is headed, dropped from May’s 102.3 to 100.6 in June.

The University of Michigan’s Surveys of Consumers saw similar results in its consumer indices for consumer opinions of current and future economic performance. The Surveys Current Economic Conditions index grew from 111.7 in May to 112.5 in June, and its Index of Consumer Expectations dropped from 87.7 in May to 83.9 in June

“… Increasing uncertainty about future prospects for the economy has thus far been offset by the resurgent strength in the personal financial situation of consumers,” noted Richard Curtin the Surveys of Consumers chief economist. “The combination of continuing improvements in personal finances and increasing concerns about the economic outlook is typical around cyclical peaks. Nonetheless, the data provide no indication of an imminent downturn nor do the data provide any indication of a resurgent boom in spending.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 24 grew to 244,000, an increase of 2,000 claims from the prior week’s total of of 242,000claims, according to last week’s report from the Employment and Training Administration. The week’s total outpaced market expectations of 241,000 claims.

The four-week moving average — considered a more stable measure of initial jobless claims — notched down up to 242,250, a drop of 2,750 claims from the preceding week’s average of 245,000 claims.

This marked the 121st week that initial claims have fallen below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Monday — Car and truck sales for June from the auto manufacturers; construction spending for May from the Census Bureau.
  • Wednesday — Factory orders for May from the Census Bureau.
  • Thursday — Balance of trade for May from the Census Bureau; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — June unemployment rate, payrolls, average workweek and hourly earnings from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: June 29, 2017
June 29, 2017


 

Existing home sales volume and price tags grew, as did sales and prices for new homes, while layoffs saw slight gains that were in line with market expectations.

Existing Home Sales

Sales of existing single-family homes, townhomes, condominiums and co-ops during May reversed April’s sales decline to grow 1.1 percent, hitting an annual rate of 5.62 million for the month, according to last week’s report from the National Association of Realtors. Compared to a year ago, May’s sales were 2.7 percent higher than May 2016’s sales volume.

A narrow supply of homes continued to push prices higher, so much so that May hit a record median price for existing homes of all times of $252,800. This beat June 2016’s previous record of $247,600, and when compared annually, was 5.8 percent higher than May 2016’s price of $238,900. This marked the 63rd consecutive month of year-over-year price gains.

Looking at inventory, the supply of existing homes for sale at the end of May grew 2.1 percent to hit 1.96 million available units, which constituted a 4.2-month supply at May’s sales pace. Compared to last year, last month’s inventory was 8.4 percent lower than May 2016’s supply of 2.14 million existing homes for sale. This marked the 24th straight month of year-over-year inventory declines.

The bottom line is that volume would be — and should be — much higher than it currently is, but prices continue to make it difficult for first-time buyers to get a toehold in the housing market.

“Home prices keep chugging along at a pace that is not sustainable in the long run,” NAR Chief Economist Lawrence Yun noted. “Current demand levels indicate sales should be stronger, but it’s clear some would-be buyers are having to delay or postpone their home search because low supply is leading to worsening affordability conditions.”

New Home Sales

Sales of new, single-family houses during May grew 2.9 percent to reach an annual rate of 610,000, the Census Bureau and the Department of Housing and Urban Development jointly reported last week. May’s sales outpaced market expectations of 599,000, and, when compared annually, were 8.9 percent higher than May 2016’s pace of 560,000.

In terms of inventory, the estimated number of new homes for sale at the end of May was 268,000, representing a 5.3-month supply at May’s sales rate. Looking at price, the median price of new homes sold during May came in at $345,800 — a new high — and the average sales price as $406,400.

“There are several things to feel good about in the May new home sales report … but ultimately this report is a disappointment for those looking to builders to meaningfully help solve the pressing supply issues in the market overall, especially for entry-level buyers,” Zillow Chief Economist Svenja Gudell wrote in a public statement. “The median price of a new home sold in May was close to $350,000, by far the highest it’s ever been and likely well beyond the budget of younger, first-time buyers that make up a sizable portion of the market right now.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 17 hit 241,000, a gain of 3,000 claims over the preceding week’s total of 238,000, according to numbers released last week by the Employment and Training Administration. Initial jobless claims serve as a good indicator of layoff activity, and last week’s report was roughly in line with market expectations of 240,000 claims for the week.

The four-week moving average — regarded as a more reliable measure of initial jobless claims — ticked up to 244,750 claims, a slight increase of 1,500 claims from the prior week’s average of 243,250. This was the 120th week in which initial claims were below the 300,000-claim level, which economists consider is an indicator of a growing job market, reinforcing remarks from NAR’s Yun.

“The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level,” he said. “Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher.”

This week, we can expect to see:

  • Monday — Durable goods orders for May from the Census Bureau.
  • Tuesday — Consumer confidence for June from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Personal incomes and spending for May from the Bureau of Economic Analysis; consumer sentiment for June from the University of Michigan’s Surveys of Consumers.

Posted in Economic Advisor



Economic Advisor: June 21, 2017
June 21, 2017


 

Housing starts and retail sales both suffered setbacks, while layoffs enjoyed a decent drop.

Housing Starts

Starts on construction of private housing in May dropped 5.5 percent to an annual rate of 1.092 million, the Census Bureau and the Department of Housing and Urban Development reported last week. This was well below market expectations of a pace of 1.227 million, and marked an eight-month low. Compared to last year, May’s starts were 2.4 percent off from May 2016’s rate of 1.119 million. Starts on single-family homes in May dropped to 3.9 percent to a rate of 794,000.

Permits issued for construction of private housing in May saw similar performance, dropping 4.9 percent to an annual rate of 1.168 million. This was well off from market expectations for permits to grow to a pace of 1.25 million. Compared to last year, May’s permits were 0.8 percent below May 2016’s rate of 1.178 million. Permits issued for construction of single-family home fell 1.9 percent for the month to a rate of 779,000.

For a housing market that has had its eye keenly fixed on housing supply as a primary mechanism for controlling price, the news wasn’t exactly welcome.

“The recent stall in homebuilding is bad news for growth,” PNC Financial Chief Economist Gus Faucher told the New York Times. “A shortage of construction workers may be weighing on the construction industry, and in some parts of the country short supply of land to build on is also a factor.”

Retail Sales

Retail sales for May fell 0.3 percent to $473.8 billion, the Census Bureau reported last week. This marked the biggest monthly drop in 16 months, and came as a surprise given that the market had expected 0.1 percent growth for the month. This was essentially a reversal of April’s 0.4 percent gain to $475 billion. That said, when compared annually, May’s sales were 3.8 percent higher than May 2016’s sales.

Gas stations were a key driver for May’s contraction, suffering a 2.4 percent drop in sales, as were electronics and appliance stores, which fell 2.8 percent. Also, department store sales fell 1 percent and sales for miscellaneous retailers dropped 1.3 percent.

“I think big-box [stores] are going to continue to struggle until they reinvent themselves,” Ron Friedman, a partner at accounting and consulting firm Marcum who co-heads the firm’s retail and consumer products, told the Los Angeles Times. “… I think the idea of just getting in the car and going shopping may not happen as much,” he added.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 10 dropped to 237,000, a decline of 8,000 claims from the prior week’s total of 245,000 claims, according to last week’s report from the Employment and Training Administration. The week’s total beat market expectations of 240,000 claims.

The four-week moving average — considered a more stable measure of initial jobless claims — ticked up to 243,000, a slight gain of 1,000 claims from the preceding week’s average of 242,000 claims.

This marked the 119th week that initial claims have fallen below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Wednesday — Existing home sales for May from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for May from The Conference Board.
  • Friday — New home sales for May from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: June 14, 2017
June 14, 2017


 

Consumer credit saw weak growth, while layoffs were down, and wholesale inventories saw a sizable drop.

Consumer Credit

Consumer borrowing grew just 2.6 percent in April, to hit a total of $3.821 trillion for the month, according to last week’s report from the Federal Reserve. April’s $8.1 billion increase over March was well below the $15 billion gain that the market had expected. This was the smallest growth in consumer credit since August 2011.

Revolving debt, such as credit cards, grew 1.8 percent for the month to hit $1.01 trillion. Non-revolving debt, such as student and car loans, increased 2.9 percent to reach $2.810 trillion, marking its smallest monthly gain since August 2011, as well.

Consumer credit is a key indicator in that it shows not only how much consumers are borrowing, but how they are borrowing. Revolving debt is more tied toward credit card transactions, and thus consumer spending, which comprises roughly 70 percent of economic activity.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 3, dropped to 245,000, a decline of 10,000 from the previous week’s total of 255,000, the Employment and Training Administration reported last week. Initial jobless claims serve as a proxy statistic for layoffs, and the market had expected initial claims to fall to 240,000 for the week.

The four-week moving average — regarded as a more reliable measure of initial jobless claims — grew to 242,000, a gain of 2,250 claims over the prior week’s average of 239,750. This was the 118th week in which initial claims were below the 300,000-claim level, which economists consider is an indicator of a growing job market.

 Wholesale Inventories

 Wholesale inventories dropped to $591.0 billion at the end of April, which was down 0.5 percent from March, according to last week’s report from the Census Bureau. This was the biggest monthly drop in more than a year. Compared to last year, April’s inventories were 1.6 percent higher than April 2016.

While declining inventories typically indicate increased purchases from retailers, sales for wholesalers dipped 0.4 percent to $462.3 billion for April. That said, compared to last year, April’s sales were 7.3 percent higher than April 2016.

This put April’s inventories-to-sales ratio for wholesalers at 1.28. For comparison, the April 2016 ratio was 1.35.

 This week, we can expect:

  • Tuesday — Producer price index for May from the Bureau of Labor Statistics.
  • Wednesday — Consumer price index for May from the Bureau of Labor Statistics; retail sales for May and business inventories for April from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; industrial production and capacity utilization for May from the Federal Reserve.
  • Friday — Housing starts and building permits for May from the Census Bureau. 

Posted in Economic Advisor



Economic Advisor: June 7, 2017
June 7, 2017


 

Construction spending turned in mixed results, while unemployment ticked down and layoffs notched up.

Construction Spending

Construction spending was a mixed bag in April, with overall spending performing well below anticipated levels for the month. April’s construction spending dropped 1.4 percent to an annual rate of $1.218 trillion, the Census Bureau reported last week, which was well off from the market expectation of a 1.1 percent gain. That said, compared to last year, April’s construction spending was 6.7 percent higher than April 2016’s pace of $1.142 trillion.

Spending on private construction dipped 0.7 percent in April to an annual rate of $943.3 billion, and spending on residential construction followed suit, dropping 0.7 percent to an annual rate of $516.7 billion.

However, while overall residential construction spending fell, it is important to note that spending on construction of single family homes actually grew 0.8 percent in April to hit an annual rate of $262.1 billion. This was good news for housing market watchers, given that inventory has been the main price control, and a key to healthy volume.

Employment Situation

The economy added 138,000 jobs in May, pushing the unemployment rate down to 4.3 percent from April’s 4.4 percent, with 6.9 million Americans out of work, according to the Bureau of Labor Statistics. The key growth sectors for jobs last month were healthcare and mining.

The labor force participation rate — the percentage of the employable population that either had work or was actively looking for work — dropped 0.2 percent to hit 62.7 percent in May.

The number of unemployed people who have been without a job for 27 weeks or longer in May — known as the long-term unemployed — hovered at 1.7 million and accounted for 24 percent of the unemployed population. The number of Americans involuntarily employed on a part-time basis for reasons such as their hours being cut or because they were unable to find full-time work, came in at 5.2 million in May, which was also essentially unchanged from April.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending May 27 hit 248,000, an increase of 13,000 claims from the preceding week’s total of 235,000, the Employment and Training Administration Reported last week.

The four-week moving average — considered a more stable measure of initial jobless claims — notched up to 238,000, an increase of 2,500 from the prior week’s average of 235,500. This marked the 117th week that initial claims have fallen below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Monday — Factory orders for April from the Census Bureau.
  • Wednesday — Consumer credit for April from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Wholesale inventories for April from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: May 31, 2017
May 31, 2017


 

Low inventory levels caused both existing and new home sales volumes to fall, while durable goods tapered off as well.

Existing Home Sales

Sales of existing single-family homes, townhomes, condominiums and co-ops, dropped 2.3 percent in April to an annual rate of 5.57 million according to last week’s report from the National Association of Realtors. Compared to the same period a year ago, sales were 1.6 percent higher than April 2016’s sales.

This big cause for April’s dip? Continuing low housing inventory, which is inflating prices, and thusly hamstringing any momentum the market might gain, according to NAR Chief Economist Lawrence Yun.

“Last month’s dip in closings was somewhat expected given that there was such a strong sales increase in March at 4.2 percent, and new and existing inventory is not keeping up with the fast pace homes are coming off the market,” he said. “Demand is easily outstripping supply in most of the country and it’s stymieing many prospective buyers from finding a home to purchase.

“…Homes in the lower- and mid-market price range are hard to find in most markets, and when one is listed for sale, interest is immediate and multiple offers are nudging the eventual sales prices higher,” he added.

April’s median price for existing homes of all types was $244,800, which was up 6 percent from April 2016’s $230,900. This marked the 62nd consecutive month of year-over-year price increases.

Looking at inventory, April’s supply of existing homes jumped 7.2 percent to 1.93 million units available for sale at the end of the month. This was 9 percent below April 2016’s supply of 2.12 million homes, and marked the 23rd straight month of year-over-year inventory declines.

New Home Sales

The same dynamic played out in new home sales, as well. Sales of new single-family homes during April tumbled to an annual rate of 569,000, which was 11.4 percent below March’s pace of 642,000, the Census Bureau and the Department of Housing and Urban Development reported last week. Again, prices elevated by low inventory were to blame.

“With the (April) supply of existing homes for sale at its lowest level since 1982, home sales will be constrained even as a strong labor market and gradual loosening in credit conditions supports housing demand,” Capital Economics Property Economist Matthew Pointon told the Reuters news service.

Looking at April’s supply and price, the number of new homes for sale at the end of April came in at 268,000, which represented a 5.7-months inventory at April’s sales rate. The median price for new houses sold during April 2017 was $309,200, and the average price was $368,300.

Durable Goods Orders

New orders for manufactured durable goods placed during April fell 0.7 percent to $231.2 billion, according to last week’s report from the Census Bureau. The drop came after four straight months of increases, including March’s 2.3 percent increase.

Transportation equipment helped drive the decline, falling 1.2 percent to $78.5 billion, with a large drop-off in the commercial aircraft category being a key reason for the drop. Excluding transportation, “core” durable goods orders fell 0.4 percent.

Durable goods orders are a key leading indicator because they indicate future growth and economic activity for the entities buying those goods.

This week, we can expect:

  • Tuesday — Consumer confidence for May from The Conference Board; personal incomes and spending for April from the Bureau of Economic Analysis.
  • Thursday — Car and truck sales for May from the auto makers; initial jobless claims for last week from the Employment and Training Administration; construction spending for April from the Census Bureau.
  • Friday — April’s balance of trade from the Census Bureau; unemployment rate, payrolls and hourly earnings for May from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: May 24, 2017
May 24, 2017


 

Housing starts declined for another month, while layoffs saw better than expected performance, and industrial production hit its highest point in three years.

Housing Starts

Building permits issued for the construction of private housing during April fell to an annual rate of 1.22 million, which was down 2.5 percent from March’s rate of 1.26 million, the Census Bureau and Department of Housing and Urban Development jointly reported last week. Permits issued for construction of single-family homes fell to a rate of 789,000, which was 4.5 percent below March’s pace of 826,000.

Construction starts on private housing in April dropped to an annual rate of 1.17 million, which was 2.6 percent below March’s rate of 1.2 million. Starts on single-family homes in April bucked the trend and rose to a rate of 835,000, which was 0.4 percent higher than March’s rate of 832,000.

While this was the second month in a row in which housing starts and building permits were down, JPMorgan Economist Daniel Silver said housing market watchers shouldn’t draw overly pessimistic conclusions.

“We should keep in mind that several other housing indicators have been upbeat lately and also that we previously have seen some temporary soft patches in the permits data that did not derail the housing recovery,” Silver told the New York Times.

Initial Jobless Claims

First time claims for unemployment benefits filed by the newly unemployed during the week ending May 13 dropped to 232,000, a decline of 4,000 claims from the preceding week’s total of 236,000, the Employment and Training Administration Reported last week. This exceeded market expectations, which had predicted claims would total 240,000.

The four-week moving average — considered a more stable measure of initial jobless claims — was 240,750 claims, a drop of 2,750 from the previous week’s average of 243,500. This marked the 115th week that initial claims have fallen below the 300,000-claim level, which economists consider an indicator of a growing job market.

Industrial Production

Industrial production, the measure of all output from mining, utilities and manufacturing, grew 1 percent in April for the third consecutive monthly gain, and its largest gain since February 2014, according to the Federal Reserve. Manufacturing output grew 1 percent, mining advanced 1.2 percent and utilities expanded 0.7 percent.

Capacity utilization — the measure of how well industrial output is performing in relation to how well it could be doing — for the industrial sector grew 0.6 percentage points in April to hit 76.7 percent. This was 3.2 percentage points down from its long-run average, which runs 1972 to 2016.

This week, we can expect:

  • Tuesday — New home sales for April from the Census Bureau.
  • Wednesday — Existing-home sales for April from the National Association of Realtors.
  • Thursday — Initial Jobless Claims for last week from the Employment and Training Administration.
  • Friday — Consumer sentiment for April from the University of Michigan Surveys of Consumers; durable goods orders for April from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: May 17, 2017
May 17, 2017


 

Retail sales rebounded, as did consumer prices, and not surprisingly consumers reported they were feeling more confident.

Retail Sales

Retail sales for April grew to $474.9 billion, an increase of 0.4 percent from March and 4.5 percent over April 2016’s retail sales, according to last week’s report from the Census Bureau.

While the gain was slightly short of retail analysts’ expectation for a 0.6 percent increase, many economists considered the gain an indicator that the consumer market was picking up pace after seeing sluggish performance over the past few months.

Key growth categories included non-store retailers, such as online stores and kiosks, which grew 1.4 percent; electronics and appliance stories, which enjoyed a 1.3 percent gain; and building material, garden and supplies stores, which saw a 1.2 percent increase.

Consumer Prices

Mirroring the gain in retail sales, consumer prices also bounced back with the Consumer Price Index for All Urban Consumers (CPI-U) growing a moderate 0.2 percent in April, according to week’s report from the Bureau of Labor Statistics. The index for all items less food and energy, also referred to as core inflation because it strips out the two most volatile categories, rose 0.1 percent.

Gains in prices for shelter, energy, tobacco, and food helped drive April’s increase in index for all items. The energy index rose 1.1 percent, with its sub categories all posting gains. The food index rose 0.2 percent, mostly thanks to a significant gain in prices for fresh vegetables.

April’s gains were a welcome change after March’s 0.3 percent loss in retail sales., and many analysts welcomed the moderate inflation as a sign of continued growth in the consumer sector.

Consumer Sentiment

That feeling was shared by consumers, with consumer sentiment growing 0.7 percent to hit 97.7 in May, from April’s 97, the University of Michigan Survey of Consumers reported last week. Consumer market watchers had expected consumer sentiment to only hit 97.2 percent. Compared to last year, May’s figures were 3.2 percent higher than May 2016’s 94.7 percent.

While consumers were feeling better about the economy, that didn’t meant they were ready to go on any shopping sprees. While confident, they were also conservative.

“The recent stability in consumer sentiment, however, masks two important underlying shifts in the components as well as in the partisan divide,” a statement from the Survey of Consumers read. “More favorable income gains and low inflation meant that consumers held the most favorable real income expectations in a dozen years. Buying plans, however, were mixed: household durables rose to a decade peak, while vehicle buying conditions slipped to a three-year low.”

This week, we can expect:

  • Tuesday — Housing starts for April from the Census Bureau; industrial production and capacity utilization for April from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for April from The Conference Board.

Posted in Economic Advisor



Economic Advisor: May 10, 2017
May 10, 2017


 

Construction spending saw an unexpected drop, while the economy enjoyed a solid jobs report, and layoffs tumbled as well.

Construction Spending

After posting five straight months of gains, construction spending saw an unexpected drop. Construction spending fell to an annual rate of $1.21 trillion in March, down 0.2 percent from February’s pace of $1.22 trillion, the Census Bureau reported last week. This was well below market expectations of a 0.4 percent gain for the month.

Compared to last year, March’s construction spending was 3.6 percent higher than March 2016’s rate of $1.17 trillion.

The factors driving construction spending downward for March were drop offs in public sector construction and commercial construction. Meanwhile, the housing component of construction spending fared better. On the whole, private sector construction hovered at a $940.1 billion annual rate, which was nearly unchanged from February’s $940.2 billion pace. However, residential construction spending hit a $503.4 billion annual rate in March, which was a solid 1.2 percent over February’s $497.4 billion pace.

Employment

The economy added 211,000 jobs in April, pushing the unemployment rate down to 4.4 percent from March’s 4.5 percent, with a total of 7.1 million Americans unemployed, the Bureau of Labor Statistics reported last week. Sectors that enjoyed strong job growth included leisure and hospitality; healthcare and social assistance; financial services; and mining.

The number of Americans unemployed on a long-term basis — 27 weeks or longer — hovered at 1.6 million in April, and accounted for 22.6 percent of the total unemployed population. The number of people involuntarily employed on a part-time basis for economic reasons — such as that being the only work they could find or their hours being cut — fell by 281,000 to 5.3 million for the month.

The labor force participation rate — the percentage of employable Americans either with a job or actively looking for one — was 62.9 percent, which was little changed from April.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly laid off during the week ending April 29 fell to 238,000, a drop of 19,000 from the preceding week’s 257,000 claims, the Employment and Training Administration reported. This was well below the 245,000 claims that job market watchers had anticipated.

The four-week moving average — considered a more stable measure of layoffs — ticked up slightly to 243,000, a gain of 750 claims from the prior week’s average of 242,250. This marked the 113th consecutive week that jobless totals have been below 300,000, a level that economists consider indicative of a growing job market.

This week, we can expect:

  • Tuesday — Wholesale inventories for March from the Census Bureau.
  • Wednesday — Import and export prices for April from the Bureau of Labor Statistics; April budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; the producer price index for April from Bureau of Labor Statistics.
  • Friday — Business inventories for March and retail sales for April from the Census Bureau; the consumer price index for April from Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: May 4, 2017
May 4, 2017


 

New home sales hit an eight-month high, layoffs saw an unexpected upturn, and durable goods orders posted moderate gains.

New Home Sales

Sales of new single-family homes grew 5.8 percent in March to reach an annual rate of 621,000, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development. March’s sales were well above market expectations of 580,000, and marked the highest monthly sales in eight months. Compared to last year, March’s sales were 15.6 percent higher than March 2016’s pace of 537,000.

Looking at price, the median sales price for new homes sold during March came in at $315,100, and the average sales price totaled $388,200. In terms of inventory, the estimated number of new homes for sale at the end of March totaled 268,000, which represented a 5.2-month supply at March’s sales rate.

“The housing market continues to look quite good,” PNC Financial Services Group Chief Economist Gus Faucher told the Reuters news service. “Consumers also have more jobs and are getting higher wages, so they will likely increase their spending this year.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly laid off during the week ending April 22 took an unexpected jump up to 257,000, a sizable increase of 14,000 claims from the preceding week’s total of 243,000, the Employment and Training Administration reported last week. The figure was a good deal higher than the 245,000 claims the market had expected.

“The weekly jobless claims suggest the labor market is tight as a drum for this cycle anyway, with further improvement unlikely, now that all those left unemployed in the wake of the recession and financial crisis have found work,” MUFG Union Bank Economist Chris Rupkey told Business Insider.

The four-week moving average — considered a more stable measure of jobless claims — ticked down to 242,250, a dip of 500 claims from the preceding week’s average of 242,750. The key is that jobless claims are in their 112th week below 300,000, a sign that economists consider an indicator of a healthy job market.

Durable Goods Orders

New orders for manufactured durable goods grew 0.7 percent in March to reach $238.7 billion, the Census Bureau reported last week. This marked the third straight month durable goods orders saw a gain. That said, the month’s performance was off the mark, following up February’s 2.3 percent increase. March’s 0.7 percent increase was also well below the 1.4 percent gain the market had anticipated.

The big driver for March’s gains was the volatile transportation category. Transportation equipment grew 2.4 percent to $83.3 billion for the month. Excluding transportation, new orders actually dropped 0.2 percent, and stripping out defense — another volatile category — new durable goods orders notched up 0.1 percent.

This week, we can expect:

  • Monday — Personal incomes and spending for March from the Bureau of Economic Analysis; construction spending for March from the Census Bureau.
  • Tuesday — Car and truck sales for April from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; factory orders and balance of trade for March from the Census Bureau.
  • Friday — Consumer credit for March from the Federal Reserve; unemployment rate, payrolls, average workweek and hourly earnings for April from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: April 26, 2017
April 26, 2017


 

Existing-home sales hit their highest point in a decade, while housing starts unexpectedly fell, and layoffs increased.

Existing-Home Sales

Existing-home sales for March hit their highest pace in over 10 years, with total transactions of existing single-family homes, townhomes, condominiums and co-ops growing 4.4 percent to hit an annual rate of 5.71 million for the month, the National Association of Realtors reported last week. Compared to last year, this was 5.9 percent higher than March 2016, and this marked the highest sales pace since February 2007’s rate of 5.79 million.

“The early returns so far this spring buying season look very promising as a rising number of households dipped their toes into the market and were successfully able to close on a home last month,” NAR Chief Economist Lawrence Yun said. “Although finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain. Sales will go up as long as inventory does.”

Bearing that in mind, the total inventory of existing homes of all types at the end of March grew 5.8 percent to 1.83 million, constituting a 3.8-month supply at March’s sales pace. That said, March’s inventory was 6.6 percent lower than the same period a year ago, marking the 22nd consecutive month of year-over-year declines.

Looking at affordability, the median price for existing homes of all types hit $236,400, which was 6.8 percent over March 2016’s price of $221,400. March’s data marked the 61st straight month of year-over-year price gains.

Housing Starts

Starts on construction of private homes beginning in March dropped to an annual rate of 1.21 million, which was 6.8 percent below February’s rate of 1.30 million, according to last week’s report form the Census Bureau. Starts on single-family homes in March dipped to a rate of 821,000, which was 6.2 percent below February’s rate of 875,000.

March’s starts were below market expectations, which has anticipated a rate of 1.25 million, but when compared annually was 9.2 percent higher than March 2016’s rate of 1.11 million.

Building permits issued for the construction of housing during March grew to an annual rate of 1.26 million, which was 3.6 percent higher than February’s rate of 1.21 million, and a whopping 17 percent over March 2016’s rate of 1.07 million. Permits issued for single-family homes ticked down to an annual rate of 823,000, which was 1.1 percent down from February’s pace of 832,000.

Initial Jobless Claims

First-time claims for unemployment benefits filed by newly laid-off individuals during the week ending April 15 grew to hit 244,000, which was 10,000 over the previous week’s level of 234,000, the Employment and Training Administration reported last week.

This put initial jobless claims at the 111th straight week of claims falling below the 300,000 mark, a level that economists consider indicative of a growing job market.

The four-week moving average — considered to be a more reliable measure of layoffs — dipped to 243,000, a decline of 4,250 claims from the preceding week’s average of 247,250.

This week, we can expect:

  • Tuesday — New home sales for March from the Census Bureau; consumer confidence for April from The Conference Board.
  • Thursday — Durable goods orders for March from the Census Bureau; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Consumer sentiment for April from the University of Michigan Surveys of Consumers; GDP (advanced) for the First Quarter from the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: April 19, 2017
April 19, 2017


 

Consumer and retail activity was a key newsmaker last week with both retail sales and consumer prices falling. Regardless, consumers reported they had a positive outlook on the economy.

Retail Sales

Retail sales for March dipped 0.2 percent to $470.8 billion, the second monthly drop in a row, according to last week’s report from the Census Bureau. This was slightly worse than the 0.1 percent loss that the market had predicted. That said, retail sales remained on an overall upward trend, with March’s performance 5.2 percent higher than March 2016’s sales.

Key performers for the month were electronics and appliance stores, which saw sales rise 2.6 percent; the catch-all miscellaneous category, which was up 1.8 percent; and clothing and accessories stores, which enjoyed a 1 percent gain. Categories that had trouble included building material and garden supply stores, which were off 1.5 percent; motor vehicle and parts dealers, which were down 1.2 percent; and gas stations, which saw sales drop 1 percent.

“Consumers have retrenched a bit in terms of their spending in recent months,” Jim Baird, chief investment officer for Plante Moran Financial Advisors, said last week in an interview with Business Insider. “With labor market conditions as tight as they are, we do expect to see some upward pressure on wages.”

Consumer Price Index

While retail sales stumbled, consumer prices dropped with the Consumer Price Index for All Urban Consumers (CPI-U) decreasing 0.3 percent in March, according to last week’s report from the Bureau of Labor Statistics. While the market had expected no change, March’s downturn was the first monthly decline since February 2016.

The bureau attributed March’s decline mainly to a decline in the gasoline index, with a drop in wireless telephone service prices also contributing. Overall, the energy index fell 3.2 percent, with gas prices dropping 6.2 percent. Meanwhile, the food index rose 0.3 percent, and the index for food at home gained 0.5 percent, its largest monthly gain since May 2014.

The index for all items less food and energy — known as core inflation — declined 0.1 percent in March, its first drop since January 2010.

Consumer Sentiment

While retail performance might have been middling, consumers appeared to have a confident outlook. The University of Michigan Surveys of Consumers reported last week that consumers had a more favorable opinion of current economic conditions, with consumer sentiment growing 1.1 percent to hit 98, which outpaced market expectations of a 96.3.

In fact, UMI’s Current Economic Conditions Index grew 1.8 percent to hit 115.2. This was its highest level since 2000, and near its all-time peak of 121.1, which was set in 1999. The Index of Consumer Expectations saw a small gain, growing 0.5 percent to hit an 86.9.

Tracking consumer’s views on the current state of the economy, as well their expectations for the economy are important as it can help predict their buying and borrowing trends.

“It can be anticipated that optimism will commingle with uncertainty, causing uneven spending patterns across months,” wrote Richard Curtin, chief economist for the Surveys of Consumers. “Moreover, differential price trends for assets, products, and imports will cause uneven trends in incomes, wealth, and spending across products as well as economic subgroups.”

This week, we can expect:

  • Monday — The National Association of Home Builders housing market index for April.
  • Tuesday — Industrial production and capacity utilization for April from the Federal Reserve; building permits and housing starts for March from the Census Bureau.
  • Thursday — Leading economic indicators for March from The Conference Board; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Existing home sales for March from the National Association of Realtors.

Posted in Economic Advisor



Economic Advisor: April 12, 2017
April 12, 2017


 

Construction spending hit a near 11-year high, monthly employment saw mixed performance but was positive overall, and layoffs saw a solid decline.

Construction Spending

Construction spending in February returned to a growth trajectory, increasing to an annual rate of $1.19 trillion, which was 0.8 percent over January’s estimate of $1.18 trillion, the Census Bureau reported. While this was slightly off from economists’ projections of 1 percent growth, it was a positive turn from the previous month’s 0.4 percent contraction, and enough to put construction spending at the highest level since April 2006.

Spending on private construction in February hit an annual rate of $917.3 billion, which was 0.8 percent higher than January’s pace of $910 billion, with residential construction surging to an annual rate of $484.7 billion, which was 1.8 percent over January’s rate of $476.1 billion. Construction of single-family homes grew 5 percent to hit an annual rate of $257.5 billion.

It is clear that builders are trying to feed a housing market that needs more inventory in order to not only keep up with demand, but to keep prices in check.

Jobs Report

The jobs report for March was a mixed bag, with the economy adding only 89,000 jobs, while the market had been expecting 175,000 jobs, according to figures released last week by the Bureau of Labor Statistics. Growth was in professional and business services and in mining, while retail trade lost jobs.

That said, the actual unemployment rate was down to 4.5 percent, while the market had expected it to continue hovering at 4.7 percent. All told, the number of unemployed persons declined by 326,000 to 7.2 million.

The number of Americans employed on a part-time basis for reasons such as their hours being cut or that being the only work they could find saw little change, hovering at 5.6 million. That said, “involuntary part-time” population was down by 567,000 over the year.

The number of people jobless for 27 weeks or longer — also known as long-term unemployed — continued to hover at 1.7 million. Over the year, the long-term unemployed population has dropped by 526,000.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the recently unemployed during the week ending April 1 dropped to 234,000, a decline of 25,000 from the prior week’s total of 259,000, the Employment and Training Administration reported last week.

The four-week moving average — considered a more stable measure of lay-off activity — dropped to 250,000, a decline of 4,500 claims from the preceding week’s revised average for 254,500.

This marked the 109th straight week of claims falling below the 300,000-claim level, a mark that economists consider a sign of a growing job market.

This week, we can expect:

  • Wednesday— Import and export prices for March from the Bureau of Labor Statistics.
  • Thursday — Consumer sentiment for April from the University of Michigan Survey of Consumers; March producer prices from the Bureau of Labor Statistics; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Business inventories for February and retail sales for March from the Census Bureau; consumer prices for March from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: April 5, 2017
April 5, 2017


 

Pending home sales enjoyed a solid upswing, while incomes grew and layoffs retreated slightly.

Pending Home Sales

Pending sales of existing homes enjoyed a healthy enough jump in February to hit a 10-month high, according to last week’s release from the National Association of Realtors. The Association’s Pending Home Sales Index, which is based on contract signings, surged 5.5 percent to hit 112.3 in February, up from January’s 106.4.

Compared to the same period last year, this was 2.6 percent higher than February 2016’s index, and is the second highest monthly score since May 2006’s 112.5. This was a strong indicator that spring should see increased demand.

“Buyers came back in force last month as a modest, seasonal uptick in listings were enough to fuel an increase in contract signings throughout the country,” said NAR Chief Economist Lawrence Yun. “The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year.

“Last month being the warmest February in decades also played a role in kick-starting prospective buyers’ house hunt,” he added.

NAR added in its report that it is projecting existing-home sales will grow approximately 2.3 percent from last year’s total of 5.45 million to hit approximately 5.57 million this year. The median existing-home price for 2017 is forecasted to rise roughly 4 percent.

Personal Incomes and Spending

Personal incomes saw a healthy increase in February, but consumer spending didn’t keep pace, according to last week’s report from the Bureau of Economic Analysis.

Personal incomes for February grew 0.4 percent, or $57.7 billion, the Bureau reported. Disposable personal income (DPI; income after taxes) also saw a solid gain, growing 0.3 percent, or $44.6 billion. The Bureau attributed February’s growth in personal incomes mainly to increases in wages and salaries, as well as rental incomes.

Meanwhile, personal consumption expenditures (PCE) notched up only 0.1 percent, or $7.4 billion, which was its smallest gain in six months. Moreover, real PCE — which strips out factors that impact prices — actually dropped 0.1 percent. The Bureau chalked up that decline to a decline in spending on services.

Looking at savings, February’s personal savings totaled $808.0 billion and the personal saving rate — which is personal savings expressed as a percentage of DPI — came in at 5.6 percent.

Initial Jobless claims

First-time claims for unemployment benefits filed by the recently laid off during the week ending March 25 dipped to 258,000, a decline of 3,000 claims from the preceding week’s total of 261,000, the Employment and Training Administration reported last week. While the market had expected initial jobless claims to drop to 245,000, the drop was welcome after the prior report’s gain.

The four-week moving average — considered a more stable measure of jobless claims — grew to 254,250, a gain of 7,750 claims from the previous week’s average of 246,500 claims.

While claims might have been up for this report, layoffs were still in safe territory. This marked the 107th consecutive week of claims falling below the 300,000-claim mark, a level that economists consider a sign of a growing job market.

This week, we can expect:

  • Monday — Car and truck sales for March from the auto manufacturers; construction spending for February from the Census Bureau.
  • Tuesday — Factory orders and balance of trade for February from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Consumer credit for February from the Federal Reserve; wholesale inventories for February from the Census Bureau; unemployment, payrolls, hourly earnings, and average workweek for March from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: March 29, 2017
March 29, 2017


 

Existing home sales retreated while new home sales advanced, and layoffs saw an unexpected jump.

Existing Home Sales

After hitting their highest point in nearly 10 years in January, existing homes dipped in February. Sales of existing single-family homes, townhomes, condominiums and co-ops fell 3.7 percent to an annual rate of 5.48 million in February from January’s rate of 5.69 million, the National Association of Realtors reported last week.

That said, a retreat from January’s strong showing was anticipated, as the market had expected sales to fall to a pace of 5.54 million. Moreover, when compared annually, February’s sales were 5.4 percent higher than February 2015.

So why the drop? National Association of Realtors Chief Economist Lawrence Yun chalked it up to one overriding factor: declining affordability.

“Realtors are reporting stronger foot traffic from a year ago, but low supply in the affordable price range continues to be the pest that’s pushing up price growth and pressuring the budgets of prospective buyers,” he explained. “Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market.”

Looking at price, February’s median price for all types of existing homes came in at $228,400, which was 7.7 percent higher than February 2016’s median price of $212,100. This marked the 60th straight month of year-over-year price gains.

In terms of housing supply (a key factor in controlling prices), the number of homes for sale at the end of February grew 4.2 percent to 1.75 million units, representing a 3.8-month supply at February’s sales pace. While that growth is encouraging, February’s inventory was 6.4 percent lower than February 2016’s 1.87 million homes, and marked the 21st consecutive month of year-over-year inventory attenuation.

New Home Sales

Meanwhile, new real estate enjoyed some good news. Sales of new, single-family houses during February grew 6.1 percent to hit an annual rate of 592,000, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development. Compared to the same period last year, February’s new home sales were 12.8 percent higher than February 2016’s pace of 525,000.

Looking at price, February’s median sales price for new homes was $296,200, and the average price was $390,400. In terms of supply, the number of new houses for sale at the end of February totaled 266,000, which represented a 5.4-month supply at February’s sales pace.

“This growth was likely spurred by several factors, including a warm winter that allowed builders to stick to construction schedules, last year’s strong home construction starts, and a gradual shift from building apartments to individual homes,” noted Joseph Kirchner, senior economist at Realtor.com. “… While this growth is encouraging, it’s important for house hunters to keep in mind that builders have been focusing on the more pricey part of the market; affordable options are still in short supply.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly jobless during the week ending March 18 saw a surprise jump to 261,000, an unexpected spike of 15,000 claims over the preceding week’s total of 246,000, the Employment and Training Administration reported last week. The market had expected claims to total 239,000.

Meanwhile, the four-week moving average — considered a more reliable measure of jobless claims than the weekly snapshot — ticked up to 246,500, a gain of 3,500 claims from the previous week’s average of 243,000.

In any case, jobless claims remained in safe territory. This marked the 106th consecutive week that initial jobless claims were below the 300,000-claim mark, a threshold that economists say indicates a growing job market.

This week, we can expect:

  • Tuesday — Wholesale inventories for February from the Census Bureau; consumer confidence for March from The Conference Board.
  • Thursday — Fourth quarter gross domestic product, third estimate, from the Bureau of Economic Analysis; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Personal incomes and spending for February from the Bureau of Economic Analysis; consumer sentiment for March from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: March 22, 2017
March 22, 2017


 

Housing starts enjoyed solid performance, while initial jobless claims dipped slightly, and retail sales saw mild improvement.

Housing Starts     

Starts on construction of private housing grew 3 percent in February to hit an annual rate of 1.28 million, according to last week’s report issued by the Census Bureau and the Department of Housing and Urban Development. Compared annually, this was 6.2 percent higher than February 2016’s rate of 1.21 million

Perhaps the biggest news from the report was that starts on single-family housing starts in February grew 6.5 percent to hit a rate of 872,000. This was the highest level for starts on single-family homes since 2007.

“This month’s gain in single-family starts is consistent with rising builder confidence in the housing market,” said National Association of Home Builders Chairman Granger MacDonald in a public statement. “We should see single-family production continue to grow throughout the year, tempered somewhat by supply-side constraints such as access to lots and labor.”  

Permits issued for the construction of private homes dipped 6.2 percent in February to an annual rate of 1.21 million. That said, compared annually, the rate was 4.4 percent higher than February 2016’s rate of 1.16 million. Permits issued in February for construction of single-family homes grew 3.1 percent to hit an annual rate of 832,000.

Initial Jobless Claims

First-time claims for unemployment benefits filed during the week ending March 11 dipped to 241,000, a decline of 2,000 claims from the prior week’s total of 243,000, the Employment and Training Administration reported last week.

The four-week moving average — which job market watchers feel is a more reliable measure of lay-off activity — notched up to 237,250, a gain of 750 claims from the preceding week’s average of 236,500.

This marked the 106th straight week that jobless claims have come in at below the 300,000-claim mark, a benchmark economists consider an indicator of a strong labor market.

Retail Sales

Retail sales for February improved, but weren’t at their best, posting their smallest gain in six months. Retail sales for February 2017 ticked up just 0.1 percent to $474 billion, the Census Bureau reported last week. Compared annually, February’s performance was 5.7 percent higher than February 2016.

Several categories had a rough month, including electronics and appliances, which fell 2.8 percent; department stores, which were down 1.1 percent; miscellaneous retailers, which shrank by 0.8 percent; gas stations, which dropped 0.6 percent. Strong performers included building material and garden stores, which were up 1.8 percent, and non-store retailers (such as online stores or kiosks), which were up 1.2 percent.

This week, we can expect:

  • Wednesday — Existing home sales for February from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; new home sales for February from the Census Bureau.
  • Friday — Durable goods orders for February from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: March 15, 2017
March 15, 2017


 

The economy continued to add jobs on the whole, but layoffs saw a sudden jump. Meanwhile, consumer credit grew, but saw a stiff setback.

Employment Situation

The U.S. economy added 235,000 non-farm jobs in February, putting the unemployment rate back at 4.7 percent, according to last week’s report from the Bureau of Labor Statistics. Job growth categories included construction, private education, manufacturing, healthcare, and mining. All told, there were 7.5 million unemployed Americans for the month.

The number of Americans without a job for 27 weeks or longer — the so-called long-term unemployed — hovered at 1.8 million for the month, accounting for 23.8 percent of the unemployed population. Over the past 12 months, the number of long-term unemployed has decreased by 358,000.

The labor force participation rate for February (the percentage of employable Americans either employed or actively looking for work) saw little change at 63 percent.

February’s average hourly earnings for all employees grew by 6 cents to $26.09, following January’s 5-cent increase. Over the year, average hourly earnings have grown by 71 cents, or 2.8 percent.

“It’s definitely a solid report,”, George Washington University Economist Tara Sinclair told the Washington Post. “This is the kind of number that the Federal Reserve was looking to receive before their meetings next week.”

Initial Jobless Claims

Turning to more recent employment news, layoffs saw a spike, with first-time claims for unemployment benefits filed by the newly unemployed during the week ending March 4 hitting 243,000, the Employment and Training Administration reported last week. This was a sizable jump of 20,000 claims over the preceding week’s total of 223,000. While job market watchers had expected an increase in initial claims, they had expected a smaller gain of 17,000 claims.

Still, initial jobless claims remained in safe territory. Last week’s report marked the 105th week of initial jobless claims totaling below 300,000 claims, a level that economists consider indicates a growing job market.

The four-week moving average — considered a more reliable measure of layoffs — notched up to 236,500 claims, a gain of 2,250 claims from the prior week’s average of 234,250.

Consumer Credit

Consumer borrowing grew by 2.8 percent during the month of January, to hit a total volume of $3.77 trillion, according to last week’s report from the Federal Reserve. The market had expected a $17 billion gain for the month, rather than January’s $8.8 billion increase. January’s tiny gain was the smallest increase for consumer credit in five years.

The big driver for the month’s growth was non-revolving debt, such as student or car loans, which grew 5.5 percent to hit a total of $2.77 trillion. Meanwhile, revolving debt, such as credit cards, fell by 4.6 percent in January, to a total of $995.1 billion, down from December 2016’s $998.9 billion. Some economists chalked up the drop in revolving debt to a post-holiday focus by consumers on paying down credit card balances after seasonal gift buying.

This week, we can expect:

  • Tuesday — Producer Price Index for February from the Bureau of Labor Statistics.
  • Wednesday — Consumer Price Index for February from the Bureau of Labor Statistics; retail sales for February and business inventories for January from the Census Bureau.
  • Thursday — Housing starts and building permits for February from the Census Bureau; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Leading economic indicators for February from The Conference Board; industrial production and capacity utilization for February from the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: March 8, 2017
March 8, 2017


 

Spending on residential construction grew despite a monthly overall drop. Meanwhile, monthly incomes and spending totals offered mixed performance, and layoffs fell to their lowest point in nearly 44 years.

Construction Spending

Construction spending for January grew to an annual rate of $1.18 trillion, marking a 1 percent dip from December’s rate of of $1.19 trillion, the Census Bureau reported last week. Compared annually, January’s overall construction spending was 3.1 percent higher than January 2016’s annual rate of $1.14 trillion.

While overall spending was down, spending on private construction was up, growing 0.2 percent over December 2016’s rate of $909.4 billion to an annual rate of $911.6 billion for the month.

Residential construction spending hit an annual rate of $476.4 billion in January, which was 0.5 percent higher than December’s pace of $474 billion. Construction spending on single-family homes grew to an annual rate of $ 253,806, which was 1.1 percent up from December 2016’s spending. Spending on construction of multi-family units grew 2.2 percent for the month to an annual rate of $63.5 billion.

Incomes and Spending

Incomes were up while spending fell behind. Personal incomes for January grew 0.4 percent for a $63 billion gain according to last week’s report from the Bureau of Economic Analysis. This beat out market predictions of a 0.3 percent gain. Disposable personal income (DPI; income after taxes) grew 0.3 percent for a gain of $40.1 billion.

Meanwhile, personal consumption expenditures (PCE) for January increased 0.2 percent for a $22.2 billion increase. This was off from predictions of a 0.3 percent increase.

All told, personal outlays (which include PCE, as well as other outlays such as interest and mortgage payments) grew $24 billion in January. This put personal savings for January at $795.7 billion, and the personal saving rate (personal saving as a percentage of PDI) at 5.5 percent.

“Bottom line, there was a decline in real spending in January as higher inflation took a greater share of spend,” Peter Boockvar of economic advisers The Lindsey Group wrote last week. “This points to the importance of quicker wage growth which hopefully we soon get even though I’ve been saying that for a while. The Fed will raise rates in two weeks but that will only bring the fed funds rate to just .875 percent with real interest rates still firmly negative.”

Initial Jobless Claims

Layoffs continued their long-running drop with initial jobless claims falling to their lowest point since March 1973. First-time claims for unemployment benefits filed by the newly laid off during the week ending February 25 plummeted to 223,000, a drop of 19,000 claims from the prior week’s total of 242,000. Jobless claims haven’t been this low since March 31, 1973’s total of 222,000 claims.

The four-week moving average — considered a more stable gauge of layoffs — dropped to 234,250 claims, a decline of 6,250 claims from the preceding week’s average of 240,500. This was the lowest level for the average since April 14, 1973’s average of 232,750.

All told this marked the 104th week that jobless claims have come in below the 300,000-claim mark that economists consider indicates a growing job market.

This week, we can expect:

  • Monday — Factory orders for January from the Census Bureau.
  • Tuesday — The trade balance for January from the Census Bureau; consumer credit for January from the Federal Reserve.
  • Wednesday — Revised fourth quarter productivity from the Bureau of Labor Statistics; January wholesale inventories from the Census Bureau.
  • Thursday — February import and export prices from the Census Bureau; initial jobless claims for last week from the Employment and Training Administration.
  • Friday —February budget from the Treasury Department; February unemployment, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: March 1, 2017
March 1, 2017


 

Existing home sales kicked off 2017 with a roaring start, while new home sales grew at a lower than anticipated rate, and layoffs were up.

Existing Home Sales

Sales of existing homes for January grew to their fastest pace in nearly a decade, according to data released by the National Association of Realtors last week.

Total sales of existing single-family homes, townhomes, condos and co-ops, grew 3.3 percent to reach an annual rate of 5.69 million for the month. Compared annually, January’s sales were up 3.8 percent from January 2016’s 5.48 million. This was the strongest monthly performance since February 2007’s rate of 5.79 million.

“Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home,” said NAR Chief Economist Laurence Yun. “Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions.”

January’s median price for existing homes of all types hit $228,900, which compared annually, was 7.1 percent higher than January 2016’s $213,700. This marked the 59th straight month of year-over-year price gains.

Looking at supply, the inventory of existing homes for sale at the end of January grew 2.4 percent to 1.69 million homes for sale, representing a 3.6-month inventory of homes for sale at January’s sales rate. That said, this was still down 7.1 percent from January 2016’s 1.82 million, marking the 20th straight month of year-over-year inventory contractions.

New Home Sales

Turning to new real estate, sales of new single-family homes during January grew 3.7 percent to an annual rate of 555,000, the Census Bureau and the Department of Housing and Urban Development reported last week. Compared annually, January’s sales were 5.5 percent higher than January 2016’s pace of 526,000.

While up for the month, January’s sales were below market expectations, which had anticipated a surge to a rate of 566,000. Jonathan Smoke, Chief Economist of Realtor.com, chalked up the slowdown in growth rate to various, supply-side factors impacting home builders, such as regulatory burdens, labor shortages, and a lack of capital and financing.

“Those reasons are partly why new homes cost 37 percent more than existing homes, based on differences in median prices, and that difference is keeping the new home market from growing to take advantage of strong demand,” he said. “Consumers who have the luxury of being able to wait for a new home to be built and pay a little more can avoid the cutthroat competition we’re seeing for existing homes — but lots of people don’t have that option.”

The median sales price for new houses sold in January was $312,900, and the average sales price was $360,900. Looking at inventory, the supply of new homes for sale at the end of January totaled 265,000, representing a 5.7-month supply at January’s sales pace.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the recently laid off grew more than expected. Initial claims filed during the week ending February 18 hit 244,000, a gain of of 6,000 claims over the preceding week’s total of 238,000, the Employment and Training Administration reported last week. While up, initial claims remained well below the 300,000-claim mark, a level economists consider indicative of a growing job market.

The four-week moving average — considered a more stable measure of layoffs — dipped to 241,000, a decline of 4,000 claims from the prior week’s average of 245,000. This marked the lowest average since the week of July 21, 1973’s average of 239,500.

This week, we can expect:

 

  • Monday — Durable goods orders for January from the Census Bureau.
  • Tuesday — Second estimate of fourth quarter gross domestic product from the Bureau of Economic Analysis; consumer confidence for February from The Conference Board.
  • Wednesday — Personal incomes and spending for January from the Bureau of Economic Analysis; construction spending for January from the Census Bureau; car and truck sales for February from the auto makers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.

Posted in Economic Advisor



Economic Advisor: February 22, 2017
February 22, 2017


 

The big economic headline maker last week was retail sales, which saw healthy growth. Also, housing starts saw mixed performance, while layoffs rose, but remained in safe territory.

Retail Sales

Retail sales for January 2017 enjoyed a 0.4 percent gain to hit $472.1 billion, the Census Bureau reported last week. Compared annually, January’s receipts were 5.6 percent higher than January 2016’s sales.

Gasoline stations were a key driver for January’s growth, increasing 2.3 percent. Other categories that saw solid performance were electronics and appliance stores, which grew 1.6 percent; clothing stores, which grew 1 percent; sporting goods, hobby, book and music stores, which grew 1.8 percent; department stores, which grew 1.2 percent; and food service and drinking establishments, which grew 1.4 percent.

The two notable categories that suffered declines during January were auto and other motor vehicle dealers, which saw sales drop 1.2 percent; and car and motor vehicle parts dealers, which experienced a 1.4 percent drop.

Housing Starts

Starts on construction of homes dropped 2.6 percent in January to dip to an annual rate of 1.24 million, according to last week’s figures released by the Census Bureau. That said, when compared annually, January’s housing starts were 10.5 percent higher than January 2016’s rate of 1.12 million.

The big drag on January’s housing starts was on multi-family housing, with starts on buildings with five or more units dropping 7.9 percent to an annual rate of 421,000. Meanwhile, starts on single-family homes in January saw good news, growing 1.9 percent to hit a rate of 823,000.

Permits issued in January for construction of housing units grew 4.6 percent to hit an annual rate of 1.28 million. Compared annually, this was 8.2 percent higher than January 2016’s rate of 1.18 million. Permits issued for single-family homes dipped 2.7 percent to fall to an annual rate of 808,000.

Initial Jobless Claims

First time claims for unemployment benefits filed by the newly unemployed during the week ending February 11 notched up to 239,000, a gain of 5,000 from the preceding week’s total of 234,000, the Employment and Training Administration reported last week.

The four-week moving average — considered a more stable measure of employment — also ticked up slightly to 245,250, a rise of just 500 claims from the prior week’s average of 244,750 claims.

This is the 102nd week that jobless claims have come in below the 300,000-claim mark that economists consider indicative of a growing job market.

This week, we can expect:

  • Wednesday — Existing home sales for January from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — February consumer sentiment from the University of Michigan Survey of Consumers; new home sales for January from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: February 15, 2017
February 15, 2017


 

Layoffs saw a large drop, while consumer credit growth slowed, and wholesale inventories and sales both surged.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending Feb. 4 plummeted past predictions to 234,000 claims, a tumble of 12,000 claims from the preceding week’s total of 246,000 claims, the Employment and Training Administration reported last week. The market had expected jobless claims of 250,000 for the week.

Applications for unemployment benefits have been below the 300,000-claim mark for 101 weeks now. Economists consider levels below 300,000 claims to indicate a growing job market.

The four-week moving average — considered a more stable measure of lay-off activity — dipped to 244,250 claims, a drop of 3,750 claims from the prior week’s average of 248,000. This marked the lowest total for the four-week average since Nov. 3, 1973’s average of 244,000.

Consumer Credit

Consumer borrowing continued to grow during December, but slowed its pace after November’s sizable gains. Total consumer credit increased 4.5 percent for the month to a total of $3.76 trillion, according to last week’s report from the Federal Reserve, which was down from November’s 8.1 percent gain.

Revolving debt, such as credit cards, was the big reason for December’s slowing. Revolving debt only grew 2.9 percent in December to a total of $995.5 billion, which was well down from November’s whopping 14.4 percent growth. Non-revolving debt, such as student or car loans, demonstrated much more stable performance, growing 5.1 to a total of $2.76 trillion, which was relatively in line with November’s 5.9 percent growth.

The slow-down was an unexpected turn for economists, which had expected a $19.4 billion gain, and was the slowest pace of growth since 2013.

Wholesale Inventories

Wholesale inventories followed up November’s gain by growing a solid 1 percent in December to hit $601.1 billion, the Census Bureau reported. Compared to last year, wholesale inventories were 2.6 percent higher than December 2015. Wholesale inventories are important to watch because they indicate the level of demand that wholesalers expect from their retailer customers, which hints at future increases or decreases in retail activity.

Sales for wholesalers in December hit their biggest monthly increase since 2011, growing 2.6 percent from November to hit $464.9 billion for the month. Compared to last year, December’s wholesale sales were 6.8 percent higher than December 2015’s sales.

The December inventories-to-sales ratio for wholesalers came in at 1.29. For comparison, the December 2015 inventories-to-sales ratio was 1.35.

This week, we can expect:

  • Tuesday — The Producer Price Index for January from the Bureau of Labor Statistics.
  • Wednesday — The Consumer Price Index for January from the Bureau of Labor Statistics; retail sales for January and business inventories for December from the Census Bureau; industrial production and capacity utilization from the Federal Reserve.
  • Thursday — Housing starts and building permits from the Census Bureau; initial jobless claims from the Employment and Training Administration.
  • Friday — Leading economic indicators for January from The Conference Board.

Posted in Economic Advisor



Economic Advisor: February 8, 2017
February 8, 2017


 

Construction spending was down, while unemployment ticked up slightly, and layoffs saw a sizable drop.

Construction Spending

Construction spending unexpectedly tumbled 0.2 percent to an annual rate of $1.181 trillion in December, according to last week’s report from the Census Bureau. The market had actually expected a 0.2 percent gain over November’s rate of $1.184 trillion.

That said, when compared annually, December’s performance was 4.2 percent higher than December 2015’s rate, and the total value of construction during 2016 expanded to $1.16 trillion, which was 4.5 percent higher than 2015’s total of $1.11 trillion.

While overall construction dipped in December, residential construction enjoyed good results, growing 0.5 percent to an annual rate of $466.9 billion in December. Spending on construction of single-family homes grew 0.5 percent to a pace of $250.3 billion, and spending on multi-family units grew 2.8 percent to a rate of $63.7 billion. Closing out the year, residential construction for 2016 totaled $456.2 billion, which was 5.2 percent over 2015’s total of $433.7 billion.

Unemployment

Employment for January beat expectations, with the economy adding 227,000 jobs for the month, rather than the 170,000 the market had expected, according to last week’s report from the Bureau of Labor Statistics. This put the unemployment rate at 4.8 percent — slightly up from December’s 4.7 percent — with the total number of unemployed Americans at 7.6 million.

The likely reason for the increase in the unemployment rate was that the civilian labor force grew by 584,000 people. This also pushed the labor force participation rate — the percentage of employable Americans either with jobs or actively looking for work — up by 0.2 percentage point to 62.9 percent.

“Today we have a near record number of job openings. About 5.5 million jobs are sitting open in the U.S. today,” Glassdoor Chief Economist Andrew Chamberlain told Forbes. “The biggest sectors hiring right now are retail, healthcare, leisure and hospitality and professional business services. If you want to get a job in healthcare or tech, you’ll need training.”

January’s population of individuals unemployed for 27 weeks or longer saw little change at 1.9 million, which constituted 24.4 percent of the unemployed population. During the past 12 months, the number of long-term unemployed individuals has dropped by 244,000.

Americans employed part time for reasons such as their hours being cut or that being the only work they could find — so-called “involuntary” part-time workers — hovered at 5.8 million in January.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending Jan. 28 dropped to 246,000, a fall of 14,000 claims from the prior week’s revised level of 260,000, the Employment and Training Administration reported last week.

The four-week moving average — considered a more stable measure of layoffs — came in at 248,000, a gain of 2,250 claims from the preceding week’s average of 245,750.

Initial jobless claims have now been below 300,000 claims, a level that economists consider indicative of a growing job market for 100 weeks.

This week, we can expect:

 

  • Tuesday — December balance of trade from the Census Bureau and the Bureau of Economic Analysis; consumer credit for December from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; wholesale inventories for December from the Census Bureau.
  • Friday — Import and export prices for January from the Census Bureau and the Bureau of Economic Analysis; January budget from the Treasury Department.

Posted in Economic Advisor



Economic Advisor: February 1, 2017
February 1, 2017


 

Existing home sales saw their best annual sales in 10 years, while new home sales tumbled to a 10-month low. Meanwhile, layoffs surged, but remained in safe territory.

Existing Home Sales

Sales of existing homes capped off 2016 as their best year in a decade, according to data released last week by the National Association of Realtors. Transactions of single-family homes, townhomes, condominiums and co-ops finished 2016 with 5.45 million sales, which ranked as the highest since 2006’s 6.48 million sales.

“Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” NAR Chief Economist Lawrence Yun said. “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”

Sales during December dropped 2.8 percent to an annual rate of 5.49 million after November’s pace of 5.65 million. Compared to the same period last year, sales were 0.7 percent higher than December 2015’s sales.

Looking at affordability, the median price for existing homes of all housing types during December grew to $232,200, which was 4 percent higher than December 2015’s average price tag of $223,200. This marked the 58th straight month of year-over-year price increases.  

Looking at inventory — a key influencer of price — the supply of homes at the end of December tumbled 10.8 percent to 1.65 million units for sale. This represented a 3.9-month supply of homes at December’s sales pace, and was the lowest inventory since NAR started monitoring home supply in 1999. Compared to last year, December’s inventory was 6.3 percent lower than December 2015’s 1.76 million units.

New Home Sales

Turning to new real estate, sales of new homes hit their lowest point in 10 months. Sales of new single-family homes in December fell to 536,000, which was 10.4 percent below November’s rate of 598,000 the Census Bureau and the Department of Housing and Urban Development jointly reported last week.

Housing market watchers attributed the drop not so much to any recent mortgage rate increases, since loan applications were actually up for the month, but rather chalked up the decline to cold weather or seasonal volatility.

Compared annually, December’s sales were just 0.4 percent below December 2015’s sales of 538,000. For the year, 563,000 new homes were sold during 2016, which was a substantial 12.2 percent higher than December’s 2015 sales of 501,000.

Looking at price and supply, the median sales price of a new home sold in December was $322,500, and the average sales price was $384,000. There were 259,000 new homes for sale at the end of December, which represented a 5.8-month supply at the month’s sales rate.

Initial Jobless Claims

Layoffs experienced an unexpected spike when first-time claims for unemployment benefits filed during the week ending January 21 surged to 259,000, a 22,000-claim expansion from the preceding week’s total of 237,000, the Employment and Training Administration reported last week.

The market had expected claims to only hit 246,000. Despite the unexpected jump, initial claims were well below the 300,000-claim mark that economists consider indicative of a growing job market.

The four-week moving average — considered a more stable and reliable measure of lay-off activity — skirted down to 245,500, a decline of 2,000 claims from the prior week’s average of 247,500. This is the lowest average since November 3, 1973’s 244,000. Many economists concluded the relatively stable average spoke to a larger trend than the wide swings in the weekly figure.

“Claims have been volatile in recent weeks, but through the volatility they continue to show no sign of an uptrend,” High Frequency Economics Chief U.S. Economist Jim O’Sullivan told the Wall Street Journal.

This week, we can expect:

 

  • Monday — Personal incomes and spending for December from the Bureau of Economic Analysis.
  • Tuesday — Consumer confidence for January from The Conference Board.
  • Wednesday — Construction spending for December from the Census Bureau; car and truck sales for Wednesday from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Fourth Quarter productivity from the Bureau of Labor Statistics.
  • Friday — December factory orders from the Census Bureau; January unemployment rate, payrolls, average workweek and hourly earnings from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: January 25, 2017
January 25, 2017


 

Starts on new home construction shot up, while layoffs tumbled, and consumer prices increased.

Housing Starts

Housing shot up, ending what has been the best year for construction starts since the housing boom year of 2007. Construction starts on housing in December rocketed to an annual rate of 1.226 million, which was 11.3 percent over November’s rate of 1.102 million, and was 5.7 percent higher than December 2015’s rate of 1.160 million, according to last week’s data released by the Census Bureau.

However, it’s important to note that the main growth area for housing was multi-family units. Starts on single-family homes dipped to an annual rate of 795,000 in December, which was 4 percent below November’s rate of 828,000. Meanwhile, starts on buildings with five or more housing units hit a rate of 417,000, which was a whopping 53.9 percent higher than November’s rate of 271,000.

The overall thrust from analysts is that the momentum was welcome, but in an inventory-starved housing market, more is needed.

“Despite the modest bump, starts in new housing construction was at its highest since 2007,” Trulia Chief Economist Ralph McLaughlin noted in a public statement. “… When controlling for the number of households in the U.S., housing starts are still only 62 percent of its 50-year average, but this is up from 55 percent last month.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending January 14 tumbled to 234,000, a drop of 15,000 claims from the preceding week’s total of 249,000, the Employment and Training Administration reported last week.

The four-week moving average — considered a more stable gauge of lay-off activity — also saw a considerable drop to 246,750 claims, a fall of 10,250 claims from the prior week’s average 257,000.

This is the lowest mark for the average since November 3, 1973’s average of 244,000. This marks the 98th straight week of initial jobless claims falling below 300,000, a mark that economists consider indicative of a growing job market.

“We believe the trend in employment growth remains quite strong — more than strong enough to keep the unemployment rate trending down,” High Frequency Economics Economist Jim O’Sullivan stated in a client note.

Consumer Prices

In line with market expectations, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent during December, the Bureau of Labor Statistics reported last week. Over the past 12 months, the CPI-U increased 2.1 percent. The main drivers for December’s gain were the shelter and gasoline indexes, which rose 0.3 percent and 3 percent, respectively, during the month.

The index for all items minus food and energy — otherwise known as core inflation, because it negates the two items most subject to large, monetary swings — increased 0.2 percent in December, which was the same percentage gain in November. In addition to the shelter index, other key contributors to core inflation increases were prices for motor vehicle insurance, medical care, education, airline fares, used cars and trucks, and new vehicles.

This week, we can expect:

  • Tuesday — Existing home sales for December from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for December from The Conference Board; new home sales for December from the Census Bureau.
  • Friday — Advanced fourth quarter GDP from the Bureau of Economic Analysis; durable goods orders for December from the Census Bureau; and January consumer sentiment from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: January 18, 2017
January 18, 2017


 

Consumer credit exceeded market expectations, and retail sales saw solid growth, but initial jobless claims also increased.

Consumer Credit

Consumer credit for November grew well beyond what credit market watchers had anticipated. Borrowing for the month expanded 7.9 percent or $24.6 billion, as opposed to the $18 billion the market expected, according to figures released last week by the Federal Reserve.

Total consumer borrowing expanded to $3.75 trillion for November from October’s $3.72 trillion. Non-revolving debt, such as student and car loans, represented the lion’s share of the increase, growing 5.9 percent to $2.75 trillion. That said, revolving debt, which is predominantly comprised of credit card debt, shot up a whopping 13.5 percent to $992.4 billion in November.

Consumer borrowing, especially credit card spending, is an indicator of increased consumer spending which fuels roughly 70 percent of the economy.

Retail Sales

And when it comes to consumer activity, retail sales for December hit $469.1 billion, which was 6 percent higher than November’s sales, the Census Bureau reported last week. Compared to the same period a year ago, December’s performance was 4.1 percent higher than December 2015’s sales.

“American consumers remain remarkably resilient, and after a slow start to the holiday season, retail sales picked up momentum,” Customer Growth Partners President Craig Johnson told the Wall Street Journal. “[Consumers] are shopping at a rate not seen since the mid-2000s — just not so much at the mall.”

The open road was calling consumers last month, with automobile dealer and auto parts sales growing 2.4 percent, and gas station sales growing 2 percent. Other key retail growth sectors were non-store retailers, such as online and kiosk sales, which grew 1.3 percent; retail food services, which saw sales increase 0.6 percent; and sales at furniture stores and building material and garden supply stores, which notched up 0.5 percent.

Initial Jobless Claims

Turning to employment, layoffs continued to perform in yo-yo-like fashion. After taking a sizable drop in the last report, first-time claims for unemployment benefits filed by the recently unemployed took a jump.

Initial jobless claims for the week ending January 7 hit 247,000, a jump of 10,000 claims over the preceding week’s level of 237,000, the Employment and Training Administration reported last week. The four-week moving average — considered a more stable measure of layoffs — dipped to 256,500, a drop of 1,750 claims from the prior week’s average of 258,250.

This marked the 97th straight week of first-time claims falling below 300,000, which is a level economists consider an indicator of a growing job market. This is the longest such streak since 1970.

This week, we can expect:

  • Wednesday — Consumer price index for December from the Bureau of Labor Statistics; industrial production and capacity utilization for December from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; housing starts and building permits for December from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: January 11, 2017
January 11, 2017


 

Construction spending saw its best growth in more than 10 years, taking the market by surprise. Meanwhile, unemployment ticked up slightly, with wages seeing solid gains, and layoffs enjoyed an unexpected tumble.

Construction Spending

Construction spending surged past market expectations in November to hit a 10-and-a-half-year high. Construction spending grew 0.9 percent for the month to hit an annual rate of $1.182 trillion, according to last week’s figures released by the Census Bureau. This was well over the 0.5 percent real estate market watchers had anticipated. Compared to last year, November’s performance was 4.1 percent better than November 2015’s $1.135 trillion pace.

Private construction grew a solid 1 percent in November to hit a rate of $892.8 billion, and the residential construction segment hit an annual rate of $462.9 billion in November, which was 1 percent higher than October’s rate of $458.2 billion. Over the past 12 months, overall residential construction spending has grown 3 percent. Construction spending for single-family homes grew 1.8 percent during November, but had dipped 0.9 percent when compared to November 2015. Construction spending on multi-family units was down 2.7 percent for the month, but compared to last year multi-family spending was up a whopping 10 percent over November 2015.

“These numbers confirm what contractors have been reporting — that there was no let-up in demand last year,” Ken Simonson, chief economist for the Associated General Contractors of America, noted in a public statement. “Most contractors expect to remain busy in 2017, as well, although there will be a shift in the types of projects that are most active. Office construction is especially hot, while manufacturing and apartment construction are slowing sharply, and public investment is a major question mark.”

Unemployment

The U.S. economy added 156,000 non-farm jobs in December, with the unemployment rate ticking up by one-tenth of a percent to 4.7 percent, according to last week’s report from the Bureau of Labor Statistics reported. Key growth sectors for jobs included healthcare and social assistance.

All told, there were 7.5 million unemployed Americans in December, according to the Bureau’s report. The number of people unemployed for 27 weeks or longer hovered at 1.8 million for the month, and comprised 24.2 percent of the unemployed population. The number of Americans employed part time for reasons such as their hours being cut or that was the only work they could find, was essentially unchanged from December at 5.6 million, but was down 459,000 over the past 12 months.

The labor force participation rate — the percentage of employable Americans either holding a job or actively looking for work — was essentially unchanged at 62.7 percent, the rate at which it has more or less been sitting for the past year.

While many employment metrics saw little change in December, an encouraging detail arose from the month’s data: average hourly earnings grew by 10 cents to $26.00. Moreover, average hourly earnings rose 2.9 percent for the year, which has been the biggest yearly increase for the past eight years. This could be a sign that employers are starting to pay more to keep good employees.

“This is a turning point for the overall economy,” Diane Swonk, an independent economist, told the New York Times.

Initial Jobless Claims

First time claims for unemployment benefits filed by the newly unemployed during the week ending December 31 plummeted well past market predictions. Initial jobless claims filed during the week tumbled to 235,000, a decline of 28,000 from the preceding week’s total of 263,000 claims, the Employment and Training Administration reported last week. Market expectations had actually anticipated that initial jobless claims would come in at 265,000 for the week.

The four-week moving average — considered a more stable measure of layoffs — dipped to 256,750 claims, a drop of 5,750 claims from the prior week’s average of 262,500. This marked the 96th straight week of initial claims falling below the 300,000-claim mark, a point that economists consider an indicator of a growing job market. This has been the longest such streak since 1970.

This week we can expect:

  • Monday — Consumer credit for November from the Federal Reserve.
  • Tuesday — Wholesale inventories for November from the Census Bureau.
  • Thursday — Import and export prices for December from the Census Bureau and the Bureau of Economic Analysis; initial jobless claims for last week from the Employment and Training Administration; the Treasury Department’s budget for December.
  • Friday — The producer price index for December from the Bureau of Labor Statistics; retail sales for December and business inventories for November from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: January 5, 2017
January 5, 2017


 

Despite a light slate of economic releases due to many reporting agencies being closed for the holidays, there were two key announcements: lay-offs tumbled while consumer confidence kept growing.

Initial Jobless Claims

Following a sharp increase over the previous week, first-time claims for unemployment benefits filed by the recently laid off during the week ending Dec. 24 dropped to 265,000, a decline of 10,000 claims from the prior week’s total of 275,000, the Employment and Training Administration reported.

The four-week moving average — considered a steadier gauge of lay-offs — notched down to 263,000, a slight drop of 750 claims from the preceding week’s average of 263,750.

This marked the 95th straight week of initial jobless claims remaining below 300,000 claims, a level that economists consider to be an indicator of a growing job market. This is the longest such streak since 1970.

“On the whole, we continue to expect further improvement in labor market conditions,” Barclays economist Michael Gapen told the Wall Street Journal.

Consumer Confidence

Consumer confidence repeated its November increase with another gain in December. The Consumer Confidence Index grew from November’s 109.4 to 113.7 in December, The Conference Board reported last week. (A baseline of 100 was set in 1985.)

The Expectations Index, which measures consumers’ outlook on the economy’s prospects over the next six months, surged from 94.4 to 105.5. That said the Present Situation Index, which measures consumer’s outlook on current economic conditions, dropped from November’s 132 to 126.1 in December.

“Consumer Confidence improved further in December, due solely to increasing Expectations which hit a 13-year high (Dec. 2003, 107.4),” noted Lynn Franco, The Conference Board’s director of economic indicators. “The post-election surge in optimism for the economy, jobs and income prospects, as well as for stock prices which reached a 13-year high, was most pronounced among older consumers.

“Consumers’ assessment of current conditions, which declined, still suggests that economic growth continued through the final months of 2016,” she added. “Looking ahead to 2017, consumers’ continued optimism will depend on whether or not their expectations are realized.”

In terms of the overall economy, the portion of consumers reporting in December that they expected business conditions to advance during the next six months, grew from 16.4 percent to 23.6 percent, while the share of consumers saying they anticipated that business conditions would worsen dipped from 9.9 percent to 8.7 percent.

Looking at jobs, the number of consumers saying they predicted there would be an increase in jobs during coming months expanded from 16.1 to 21 percent. That said, consumers saying they anticipated jobs would shrink also increased, growing from 13.5 percent to 14 percent. Where incomes were concerned, the population of consumers saying they predicted their incomes would grow rose from 17.4 percent to 21 percent, while the percentage of consumers that said they were expecting a drop in salary fell from 9.2 percent to 8.6 percent.

This week will see the return of a normal slate of economic announcements. We can expect:

  • Tuesday — November construction spending from the Census Bureau.
  • Wednesday — Car and truck sales for December from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Factory orders for November from the Census Bureau; November balance of trade from the Census Bureau and the Bureau of Economic Analysis; December payrolls, unemployment rate, hourly earnings, and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: December 28, 2016
December 28, 2016


 

Retail sales saw slight gains ahead of the holidays, while housing starts experienced a predictable drop after hitting a nine-year high, and layoffs were down.

Retail Sales

Retail sales for November notched up to $465.5 billion, a slight gain of 0.1 percent over October, and 3.8 percent higher than November 2015, the Census Bureau reported last week. While posting a gain, November’s sales were slightly below market expectations of a 0.3 percent gain for the start of the holiday shopping season.

Key retail growth segments included food services and drinking establishments, which grew 0.8 percent; furniture and home furnishing stores, which gained 0.7 percent; gas stations, which notched up 0.3 percent; and building material and garden equipment and supplies stores, which increased 0.3 percent.

Main economists commented that December could see a larger holiday spike, and particularly among non-store retailers.

“On a year-ago basis, total retail sales were up 3.8 percent in November, indicating that this will be a good year for holiday sales,” PNC Financial Services Group Deputy Chief Economist Gus Faucher wrote in a public statement. “However, gains for traditional retailers will be much weaker due to the increasing reach of online sales.”

Housing Starts

After seeing a nine-year high in October, starts on construction of private housing in November dropped to an annual rate of 1.09 million, which was a whopping 18.7 percent below October’s rate of 1.34 million, which was the highest monthly rate in nine years, according to last week’s report from the Census Bureau.

Compared annually, November’s pace was 6.9 percent below November 2015’s rate of 1.17 million. While the overall monthly figure was a sizable drop, starts on single-family homes fell 4.1 percent from October to a rate of 828,000 in November.

Construction permits for home construction issued in November dropped to an annual rate of 1.2 million, which was 4.7 percent below October’s rate of 1.26 million, and was 6.6 percent below the November 2015’s pace of 1.28 million. Meanwhile, permits issued for single-family homes in November notched up to a rate of 778,000, which was 0.5 percent higher than October’s rate of 774,000.

“The trends in the single-family data still appear to be moving higher over time, which is a favorable signal regarding upcoming single-family construction activity,” JPMorgan Economist Daniel Silver told the Reuters news service.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending December 10 dropped to 254,000, a decline of 4,000 claims from the preceding week’s total of 258,000, the Employment and Training Administration reported last week.

This was slightly below market expectations of 256,000 initial claims, and marked the 93rd straight week that initial claims have fallen below 300,000, a mark that economists consider indicative of a growing job market. This has been the longest such streak since 1970.

The four-week moving average — considered a more accurate gauge of layoffs — totaled 257,750 claims, a gain of 5,250 from the prior week’s average of 252,500.

This week we can expect:

  • Wednesday — Existing home sales for November from the National Association of Realtors.
  • Thursday — Third quarter GDP, third estimate, and personal incomes and spending for November from the Bureau of Economic Analysis; initial jobless claims for last week from the Employment and Training Administration; durable goods orders for November from the Census Bureau; leading economic indicators for November from The Conference Board.
  • Friday — New home sales for November from the Census Bureau; consumer sentiment for December from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: December 22, 2016
December 22, 2016


 

Retail sales saw slight gains ahead of the holidays, while housing starts experienced a predictable drop after hitting a nine-year high, and layoffs were down.

Retail Sales

Retail sales for November notched up to $465.5 billion, a slight gain of 0.1 percent over October, and 3.8 percent higher than November 2015, the Census Bureau reported last week. While posting a gain, November’s sales were slightly below market expectations of a 0.3 percent gain for the start of the holiday shopping season.

Key retail growth segments included food services and drinking establishments, which grew 0.8 percent; furniture and home furnishing stores, which gained 0.7 percent; gas stations, which notched up 0.3 percent; and building material and garden equipment and supplies stores, which increased 0.3 percent.

Main economists commented that December could see a larger holiday spike, and particularly among non-store retailers.

“On a year-ago basis, total retail sales were up 3.8 percent in November, indicating that this will be a good year for holiday sales,” PNC Financial Services Group Deputy Chief Economist Gus Faucher wrote in a public statement. “However, gains for traditional retailers will be much weaker due to the increasing reach of online sales.”

Housing Starts

After seeing a nine-year high in October, starts on construction of private housing in November dropped to an annual rate of 1.09 million, which was a whopping 18.7 percent below October’s rate of 1.34 million, which was the highest monthly rate in nine years, according to last week’s report from the Census Bureau.

Compared annually, November’s pace was 6.9 percent below November 2015’s rate of 1.17 million. While the overall monthly figure was a sizable drop, starts on single-family homes fell 4.1 percent from October to a rate of 828,000 in November.

Construction permits for home construction issued in November dropped to an annual rate of 1.2 million, which was 4.7 percent below October’s rate of 1.26 million, and was 6.6 percent below the November 2015’s pace of 1.28 million. Meanwhile, permits issued for single-family homes in November notched up to a rate of 778,000, which was 0.5 percent higher than October’s rate of 774,000.

“The trends in the single-family data still appear to be moving higher over time, which is a favorable signal regarding upcoming single-family construction activity,” JPMorgan Economist Daniel Silver told the Reuters news service.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending December 10 dropped to 254,000, a decline of 4,000 claims from the preceding week’s total of 258,000, the Employment and Training Administration reported last week.

This was slightly below market expectations of 256,000 initial claims, and marked the 93rd straight week that initial claims have fallen below 300,000, a mark that economists consider indicative of a growing job market. This has been the longest such streak since 1970.

The four-week moving average — considered a more accurate gauge of layoffs — totaled 257,750 claims, a gain of 5,250 from the prior week’s average of 252,500.

This week we can expect:

  • Wednesday — Existing home sales for November from the National Association of Realtors.
  • Thursday — Third quarter GDP, third estimate, and personal incomes and spending for November from the Bureau of Economic Analysis; initial jobless claims for last week from the Employment and Training Administration; durable goods orders for November from the Census Bureau; leading economic indicators for November from The Conference Board.
  • Friday — New home sales for November from the Census Bureau; consumer sentiment for December from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: December 14, 2016
December 14, 2016


 

Consumer borrowing grew as reports indicated interest rates would increase. Meanwhile, layoffs shrank and wholesalers appeared to be preparing for increased orders.

Consumer Credit

Total consumer credit for October increased 5.2 percent from the previous month to hit $3.72 trillion, the Federal Reserve reported last week. The $16 billion gain over September was smaller than the $18.7 billion gain that the market had expected.

Revolving debt, such as credit cards, increased 2.9 percent to hit $981.3 billion in October. Non-revolving debt, such as student and car loans, increased 6 percent during the month, to reach $2.74 trillion for the month.

The news comes as the Federal Reserve was reported by many news outlets to be preparing to raise interest rates. The Federal Reserve’s monetary policy meeting runs through Wednesday, and is expected to yield a 0.25 percent gain.

Initial Jobless Claims

First time claims for unemployment benefits filed by the newly laid off during the week ending December 3 fell to 258,000, a sizable drop of 10,000 claims from the prior week’s total of 268,000, the Employment and Training Administration reported last week.

The four-week moving average — considered a more stable measure of layoffs — notched up to 252,500, a gain of 1,000 claims from the previous week’s average of 251,500.

This marked the 92nd straight week of initial jobless claims staying below 300,000, a threshold that economists consider indicative of a growing job market. This is the longest such streak since 1970.

Wholesale Sales and Inventories

Wholesalers’ inventories ticked down to $587.7 billion in October, which was 0.4 percent below September’s level, according to last week’s report from the Census Bureau. Compared to last year, total inventories for October were down 0.4 percent from October 2015.

Wholesale inventories are important because they indicate demand for goods from the retail market. Given that October’s decline in inventory was paired with a 1.4 percent increase in sales, with total sales hitting $452.2 billion for the month, most wholesale market watchers took this as a indicator that wholesalers were freeing up warehouse space for more orders.

Key sales categories included durable goods, which were up 1.1 percent in October; electrical and electronics, which grew 2.2 percent; sales of metals and minerals, except petroleum, which gained 2 percent; nondurable goods, which rose 1.6 percent; farm product raw materials, which shot up 8.3 percent; and petroleum and petroleum products, which gained 6.6 percent.

This week we can expect:

  • Monday — November budget from the Treasury Department.
  • Tuesday — Import and export prices for November from the Census Bureau.
  • Wednesday — Retail sales and business inventories for November from the Census Bureau; producer price index for November from the Bureau of Labor Statistics; industrial production and capacity utilization for November from the Federal Reserve.
  • Thursday —Consumer price index for November from the Bureau of Labor Statistics; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Housing starts and building permits for November from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: December 8, 2016
December 8, 2016


 

Unemployment enjoyed an unexpected drop, while layoffs increased, but remained in safe territory. Meanwhile, construction spending grew, particularly in the residential category.

Unemployment

The U.S economy added 178,000 jobs in November, pushing the unemployment rate down to 4.6 percent, according to last week’s report from the Bureau of Labor Statistics. This marked a 0.3 percent drop from the 4.9 percent unemployment rate of October, which the market had expected to continue into last month. The number of unemployed Americans declined from 387,000 to 7.4 million.

The number of people unemployed for 27 weeks or longer — the so-called long-term unemployed — saw barely any change, totaling 1.9 million, which accounted for 24.8 percent of the unemployed population. Over the past 12 months, long-term unemployment has ticked down by 198,000 people. November’s civilian labor force participation rate — the percentage of employable Americans either employed or looking for a job — saw little change at 62.7 percent.

The number of people involuntarily employed on a part-time basis in November for reasons such as that was the only work they could find or their hours had been cut totaled 5.7 million, which was similar to October. That said, the population of involuntary part-time workers was down by 416,000 for the year.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the recently laid off during the week ending November 26 jumped to 268,000, a gain of 17,000 claims from the previous week’s total of 251,000, the Employment and Training Administration reported.

The four-week moving average — considered a more stable measure of layoffs — ticked up to 251,500, a slight increase of 500 from the previous week’s average of 251,000.

This marked the 91st consecutive week of initial jobless claims below 300,000, a level that economists consider an indicator of a growing job market. That’s the longest streak since 1970.

Construction Spending

Construction spending for October notched up to an annual rate of $1.17 trillion, which was 0.5 percent over September’s pace of $1.16 trillion, the Census Bureau reported last week. Compared to last year, October’s total was 3.4 percent higher than October 2015’s rate of $1.13 trillion.

Spending on private construction for October dipped to an annual rate of $885.9 billion, which was 0.2 percent below September’s revised rate of $887.4 billion. However, spending on residential construction grew to an annual rate of $466.2 billion in October, which was 1.6 percent over September’s pace of $458.8 billion.

This week we can expect:

  • Tuesday — Third quarter productivity from the Bureau of Labor Statistics; October trade balance and October factory orders from the Census Bureau.
  • Wednesday — Consumer credit for October from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Wholesale inventories for October from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: November 30, 2016
November 30, 2016


 

Sales of existing homes grew to their highest point since 2007, while new home sales ticked down, and layoffs rebounded from a considerable decline, but remained low overall.

Existing Home Sales

Existing home sales grew for the second straight month in October to hit their highest level since February 2007, with transactions of single-family homes, townhomes, condominiums and co-ops growing 2 percent to an annual rate of 5.6 million, the National Association of Realtors reported. Compared to last year, October’s performance was 5.9 percent higher than October 2015’s pace of 5.29 million.

“October’s strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply,” NAR Chief Economist Lawrence Yun said. “Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes.

“The good news is that the tightening labor market is beginning to push up wages and the economy has lately shown signs of greater expansion,” he continued. “These two factors and low mortgage rates have kept buyer interest at an elevated level so far this fall.”

Looking at prices and supply, October’s median price for existing homes of all types was $232,200, which was 6 percent higher than October 2015’s price of $219,100. (As proof of continued price increases, October’s price gains marked the 56th straight month of year-over-year gains.) Housing inventory at the end of October notched down 0.5 percent to 2.02 million homes for sale, which was 4.3 percent lower than October 2015’s supply of 2.11 million. October’s unsold inventory represented a 4.3-month supply of existing homes for sale at October’s sales pace, which was down from September’s 4.4-month supply.

Yun said he was hopeful that October’s sizable increase in housing starts (see last week’s Economic Advisor) will help temper prices.

“A prolonged continuation of the robust single-family starts pace seen last month (869,000) would go a long way in giving homeowners much-needed assurance that they can list their home for sale and find a new home to buy within a reasonable timeframe,” he said.

New Home Sales

While existing home sales surged, new home sales took a hit. Transactions of new, single-family homes in October dropped 1.9 percent from September to an annual rate of 563,000, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development. Still, compared to the same period last year, October’s sales were 17.8 percent higher than October 2015’s pace of 478,000.

Looking at prices and supply, the median price for new homes sold in October was $304,500 and the average price came in at $354,900. The inventory of new homes for sale at the end of October totaled 246,000, which represented a 5.2-month supply at October’s sales rate.

“Home sales are well-positioned for sustained growth in the year ahead,” TD Securities Inc. Macro Strategist Brittany Baumann told the Wall Street Journal. “While the recent jump in mortgage rates may dampen sales activity in the near term, rates remain near historically low levels and barring a significant move higher, sales activity should remain supported by ongoing job growth, rising incomes and a further pickup in single-family residential construction.”

Initial Jobless Claims

After hitting a 43-year low, lay-offs bounced back, but still remained well within safe territory. First-time claims for unemployment benefits filed during the week ending November 19 surged to 251,000, a large step up of 18,000 claims from the preceding week’s total of 233,000, the Employment and Training Administration reported. Still this kept claims well below the 300,000 mark, which economists consider an indicator of a growing job market.

Why the large jump? Economists had actually expected the sizable increase. Why did it happen? Last week’s surge was near Veteran’s Day, and floating holidays can often skew initial jobless claims data.

Meanwhile, the four-week moving average — considered a more stable measure of lay-off activity — dipped to 251,000, a decline of 2,000 claims from the prior week’s average of 253,000. This was the 90th straight week of initial claims below 300,000, and the longest such streak since 1970.

This week, we can expect:

  • Tuesday — Consumer confidence for November from The Conference Board.
  • Wednesday — Personal incomes and spending for October from the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; construction spending for October from the Census Bureau; car and truck sales for November from the auto manufacturers.
  • Friday — Unemployment rate, payrolls, hourly earnings and average workweek for November from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: November 23, 2016
November 23, 2016


 

Housing starts rocketed to a nine-year high, while retail sales exceeded market expectations and layoffs dropped to their lowest point in 43 years.

Housing Starts

Starts on new housing construction hit their highest point since the height of the housing boom in 2007. Starts on private housing in October shot up 25.5 percent, to reach an annual rate of 1.32 million, according to last week’s joint release from the Census Bureau and the Department of Housing and Urban Development.

Compared to the same period last year, October’s rate for overall housing starts was 23.3 percent higher than October 2015’s rate of 1.07 million. Starts on single-family homes grew 10.7 percent to hit a rate of 869,000.

“Housing starts are being driven higher by improved household growth as the economy promotes further job and income gains,” Nationwide Mutual Insurance Co. Chief Economist David Berson told U.S. News & World Report. “With improved employment and income prospects, millennials are an expanding portion of housing demand as they move out of their parents’ homes — increasingly to form families.”

Construction permits issued for private housing ticked up 0.3 percent in October to an annual rate of 1.22 million, which was 4.6 percent over October 2015’s rate of 1.17 million. Permits for single-family homes grew 2.7 percent in October to a rate of 762,000, which was 2.7 percent higher than September’s 742,000 permits.

Retail Sales

Retail sales for October grew 0.8 percent to hit $465.9 billion, beating marketing expectations of 0.6 percent, and sales for the August-through-October period increased 3.3 percent, the Census Bureau reported last week. Compared annually, October’s sales were 4.3 percent higher than October 2015’s and notably sales in October for non-store retailers (such as online businesses or kiosks) jumped up 12.9 percent over their October 2015 sales.

Key performers were sales for gasoline stations, which grew 2.2 percent; sporting goods, hobby, book and music stores, which increased 1.3 percent; building material and garden stores, which gained 1.1 percent; and food and beverage retailers, which enjoyed a 0.9 percent gain.

“The consumer is in very good shape and is poised to continue to lead the economy forward based on rising wages, low unemployment and clean balance sheets,” Amherst Pierpont Chief Economist Stephen Stanley told the Wall Street Journal.

Initial Jobless Claims

First-time claims filed for unemployment benefits by the recently laid off during the week ending November 12 tumbled to 235,000, a decline of 19,000 claims from the preceding week’s total of 254,000, the Employment and Training Administration reported last week. This is the lowest level for lay-offs since November 24, 1973’s total of 233,000.

The four-week moving average — considered a more stable measure of layoffs — fell to 253,500, a drop of 6,500 claims from the prior week’s average of 260,000.

This marked the 89th straight week of initial jobless claims below 300,000 — a level that economists say indicates a growing job market — and the longest streak since 1970.

This week, we can expect:

  • Tuesday — Existing home sales for October from the National Association of Realtors.
  • Wednesday — New home sales and durable goods orders for October from the Census Bureau; initial jobless claims for last week from the Employment and Training Administration; consumer sentiment for November from the University of Michigan’s Survey of Consumers.
  • Friday — Wholesale inventories for October from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: November 17, 2016
November 17, 2016


 

Consumer credit saw solid growth, while wholesalers’ inventories grew, and layoffs remained at historic lows.

Consumer Credit

Consumer borrowing grew 6.3 percent in September, according to the Federal Reserve’s report from last week. Total consumer borrowing amounted to $3.7 trillion.

Growth was seen as relatively split between the two main types of consumer borrowing: revolving debt and non-revolving debt. Revolving debt, such as credit cards, grew at 5.2 percent in September to a total of $978.8 billion. Non-revolving debt, such as student or car loans, grew 6.7 percent to a total of $2.72 trillion.

“The consumer credit market is performing well, as more consumers are gaining access to loans and paying them off in a timely fashion,” said Nidhi Verma, senior director of research and consulting for the Financial Services Business Unit of TransUnion, told DSnews.com. “We continue to see strong participation rates from the youngest consumer group, coupled with low delinquency levels — a promising sign for the industry.”

Wholesale Inventories

Total inventories for wholesalers, except manufacturers’ sales branches and offices, notched up to $590.2 billion in September, a 0.1 percent increase over August, the Census Bureau reported last week. That said, when compared annually, inventories fell 0.1 percent in comparison to September 2015’s total. Key drivers for September’s growth were inventories of nondurable goods, which grew 0.9 percent and inventories of petroleum and petroleum products, which gained 3.8 percent.

Wholesale inventories are an important indicator because they represent wholesalers’ outlook on demands from their retailer customers. Increased inventories indicate increased retail sales, which drive roughly 70 percent of the U.S. economy.

Sales for merchant wholesalers grew to $444.9 billion, up 0.2 percent from August’s total and were up 0.4 percent from September 2015’s sales. This put the inventories/sales ratio for merchant wholesalers at 1.33, which was unchanged from September 2015’s ratio of 1.33.

Initial Jobless Claims

First-time claims filed by the newly unemployed during the week ending November 5 plummeted to 254,000, a drop of 11,000 claims from the preceding week’s total of 265,000, the Employment and Training Administration reported last week.

The four-week moving average — considered the most stable measurement of initial jobless claims — ticked up to 259,750, a gain of 1,750 claims from the prior week’s average of 258,000.

This marked the 88th straight week of initial jobless claims coming in below 300,000, a threshold that economists consider an indicator of a growing job market. This is the longest such streak since 1970.

This week, we can expect:

  • Tuesday — Retail sales for October and business inventories for September from the Census Bureau; import and export prices for October from the Census Bureau and the Bureau of Economic Analysis.
  • Wednesday — Producer price index for October from the Bureau of Labor Statistics; industrial product and capacity utilization for October from the Federal Reserve.
  • Thursday — Consumer price index for October from the Bureau of Labor Statistics; housing starts and building permits for October from the Census Bureau; initial jobless claims for last week from the Employment and Training Administration.

Posted in Economic Advisor



Economic Advisor: November 10, 2016
November 10, 2016


 

New home construction bucked a downturn in overall construction, while the monthly unemployment rate was essentially unchanged and layoffs saw a small spike.

Construction

Construction spending in September dipped to an annual rate of $1.15 trillion, which was 0.4 percent below August’s pace of $1.154 trillion, according to the Census Bureau. Compared annually, September’s rate was 0.2 percent below September 2015’s estimate of $1,152.1 billion, marking the first year-over-year drop in five years.

Spending on private construction dipped to an annual rate of $879.7 billion, which was 0.2 percent below the revised August estimate of $881.6 billion. But, residential construction rose to an annual rate of $453.7 billion in September, which was 0.5 percent over the August pace of $451.3 billion. Nonresidential private construction was dropped 1 percent to an annual rate of $426 billion.

So what was the key driver for the overall downward trend? Public construction spending fell 0.9 percent to an annual rate of $270.3 billion.

“There is still plenty of oomph in private demand for construction and growing support for school construction, but public infrastructure investment is crumbling just when it is needed most,” Associated General Contractors of America Chief Economist Ken Simonson told National Mortgage Professional Magazine. “These conflicting trends have left total construction spending nearly flat for the past 15 months.”

Unemployment

The U.S. economy added 161,000 non-farm jobs in October, which kept the unemployment rate at 4.9 percent, with 7.8 Million people out of work, the Bureau of Labor Statistics reported last week. Key sectors that added jobs were healthcare, professional and business services, and financial activities.

The number of Americans involuntarily employed on a part-time basis for economic reasons, such as their hours getting cut or that being the only work they could find, essentially hovered at 5.9 million. The number of people without a job for 27 weeks or longer, referred to as the long-term unemployed, was unchanged at 2 million in October, which represented 25.2 percent of the unemployed population.

Average hourly earnings for all employees on non-farm payrolls grew by 10 cents in October to $25.92, following an 8 cent increase in September. Compared to October 2015, average hourly earnings rose by 2.8 percent.

“We’re increasingly seeing evidence that the labor market is tight enough to put some upward pressure on wages and inflation generally as well,” High Frequency Economics’ Chief U.S. Economist Jim O’Sullivan told the Washington Post. “The message generally from this is that the Fed probably won’t want the unemployment rate to go a lot lower.”

Initial Jobless Claims

First-time claims for unemployment benefits filed during the week ending October 29 hit their highest point in three months, according to last week’s report from the Employment and Training Administration. Initial jobless claims filed during that week hit 265,000, a gain of 7,000 claims from the preceding week’s total of 258,000.

Most economists chalked up the surge partially to Hurricane Matthew, which allowed some employees eligible to claim unemployment benefits after the storm temporarily closed some businesses starting October 8. State-level data did indicate upswings in those states. Others said the rise was a bit of a statistical “reset.”

“The snapback in the number of new filers may be a garden variety makeup for two readings below 250,000, rather than a result driven specifically by the storm,” Amherst Pierpont Securities Economist Stephen Stanley told the Wall Street Journal.

The four-week moving average — considered a more stable measure of layoffs — notched up to 257,750, an upturn of 4,750 claims from the prior week’s average of 253,000. The week was the 87th consecutive week of first-time claims under 300,000, which is a level economists consider indicative of a growing job market. This is the longest such streak since 1970.

This week, we can expect:

  • Monday — Consumer credit for September from the Federal Reserve.
  • Wednesday — Wholesale inventories for September from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; October budget from the Treasury Department.

Posted in Economic Advisor



Economic Advisor: October 31, 2016
November 4, 2016


 

Sales of new homes rose, while gross domestic product saw better-than-expected growth, and layoffs remained at historic lows.

New Home Sales

While sales of new homes didn’t meet predictions, they did continue to post gains in September. Sales of new single-family homes for the month hit an annual rate of 593,000, the Census Bureau and the Department of Housing and Urban Development reported last week. Sales were off from expectations of a 610,000-unit pace, but September’s transactions still marked a 3.1 percent increase over August’s sales, and were a whopping 29.8 percent higher than September 2015’s sales rate.

Looking at price and supply, the median sales price of new homes sold during September was $313,500 and the average sales price was $377,700. The inventory of new homes for sale at the end of the month was 235,000, which represented a 4.8-month supply at September’s sales rate.

“The housing market may not be booming but it is clearly moving forward at a steady pace,” Joel Naroff, chief economist at Naroff Economic Advisors told the Reuters news service. “But the big problem is still the lack of inventory.”

Third Quarter GDP

Real gross domestic product increased at an annual rate of 2.9 percent during the third quarter of 2016 marking the fastest quarterly GDP growth in two years, according to last week’s advance release from Bureau of Economic Analysis. This showed solid improvement over the second quarter’s real GDP growth of 1.4 percent.

The third quarter’s increase in real GDP was driven by good performance in personal consumption expenditures (PCE); exports; private inventory investment; federal government spending; and nonresidential fixed investment. Consumer spending was up just 2.1 percent, but incomes grew $153.6 billion in the third quarter, compared to the second quarter’s gain of $153.1 billion.

“The U.S. economy is finally showing its strength. Following a weak first half of the year, the 2.9 percent pace of growth in Q3 will let markets breathe a sigh of relief,” Royce Mendes of CIBC Economics told MarketWatch. “The increase was largely driving by another increase in consumption, which even though it was below consensus and last month’s figure, continues to be supported by gains in the labor market.”

Initial Jobless Claims

Layoffs continued to drop, with first-time claims for unemployment benefits filed by the newly unemployed during the week ending October 22 dipping to 258,000, a drop of 3,000 claims from the preceding week’s total of 261,000, the Employment and Training Administration reported last week.

That said, the four-week moving average— considered a more stable measure of jobless claims — actually ticked up to 253,000 claims, a rise of 1,000 from the prior week’s average of 252,000.

Claims for the week ending October 22 marked the 86th straight week of initial jobless claims staying below 300,000, a mark economists consider an indicator of a growing job market. This is the longest such streak since 1970.

This week, we can expect:

  • Monday — Personal incomes and spending for September from the Bureau of Economic Analysis.
  • Tuesday — Construction spending for September from the Census Bureau; car and truck sales for October from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; factory orders for September from the Census Bureau.
  • Friday — September balance of trade from the Census Bureau and the Bureau of Economic Analysis; October unemployment rate, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistics.

 

Posted in Economic Advisor



Economic Advisor: October 27, 2016
October 27, 2016


 

First-time buyers helped fire up existing home sales, while building permits and housing starts were a mixed bag. Layoffs increased, but remained in safe territory.

Existing Home Sales

Sales of existing single-family homes, townhomes, condominiums and co-ops grew 3.2 percent in September to hit an annual rate of 5.47 million, pushing sales to their highest pace since June, according to last week’s report from the National Association of Realtors. Compared to last year, September’s sales were 0.6 percent over December 2015’s pace of 5.44 million.

September’s gains marked the end of a two-month slump, said NAR Chief Economist Lawrence Yun, who added the major driver for the increase was first-time buyers, which represented a 34 percent share of the September’s homebuyers.

“The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual because of the competition for the minimal amount of homes for sale,” Yun explained. “Most families and move-up buyers look to close before the new school year starts. Their diminishing presence from the market towards the end of summer created more opportunities for aspiring first-time homeowners to buy last month.”

Looking at affordability, September’s median price for existing homes of all types grew 5.6 percent to hit $234,200, marking the 55th straight month of year-over-year price gains. In terms of supply, the total number of homes for sale at the end of September rose 1.5 percent to 2.04 million existing homes available for sale, representing a 4.5-month inventory of homes for sale. Inventory has been an ongoing concern according to Yun.

“Inventory has been extremely tight all year and is unlikely to improve now that the seasonal decline in listings is about to kick in,” he said. “Unfortunately, there won’t be much relief from new home construction, which continues to be grossly inadequate in relation to demand.”

Building Permits & Housing Starts

Looking at recent inventory activity, permits issued for construction of private homes in September grew to an annual rate of 1.22 million, which was 6.3 percent over August’s rate of 1.15 million, and is 8.5 percent higher than the September 2015’s pace of 1.12 million, according to The U.S. Census Bureau and the Department of Housing and Urban Development. Permits issued for single-family homes grew 0.4 percent to an annual rate of 739,000.

Construction starts on private housing in September dropped to an annual rate of 1.04 million, marking a 9 percent decline from August’s estimate of 1.15 million, and an 11.9 percent drop from September 2015’s rate of 1.18 million. That said, starts on single-family homes in September hit a rate of 783,000, which marked an 8.1 percent gain over August’s pace of 724,000.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the recently laid off during the week ending October 15 hit 260,000, a gain of 13,000 claims from the preceding week’s total of 247,000 claims, the Employment and Training Administration reported.

The four-week moving average — considered a more reliable measurement of layoffs — notched up to 251,750, an increase of 2,250 claims from the prior week’s average of 249,500.

Last week’s performance marked 85 straight weeks of initial jobless claims staying below 300,000, which economists consider indicative of a growing job market. This is the longest such streak since 1970.

This week, we can expect:

  • Tuesday — Consumer confidence for October from The Conference Board.
  • Wednesday — New homes sales for September from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods order for September from the Census Bureau.
  • Friday — Third quarter GDP from the Bureau of Economic Analysis; consumer sentiment for October from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: October 19, 2016
October 19, 2016


 

Retail sales enjoyed decent growth, while layoffs continued to hit historic lows and producer prices increased more than expected.

Retail Sales

Retail sales were in line with market projections, growing 0.6 percent in September to hit $459.8 billion for the month, the Census Bureau reported last week. Gains in the automotive market was a big contributor to September’s growth, with sales of motor vehicles and parts increasing 1.1 percent and gasoline stations seeing a 2.4 percent increase.

Additionally, there were other various strong segments across the retail spectrum: furniture and home furnishing were up 1 percent; building material and garden supply stores gained 1.4 percent; sporting good, hobby, book and music stores grew 1.4 percent; and miscellaneous retailers grew 1.8 percent.

The retail numbers, mixed with other indicators, led many economists to conclude that rates would likely increase by the end of the year. While some stated that position more strongly than others, TD Securities Economist Brittany Baumann took a measured tone.

“Overall, the details of the report are more positive than what the modest print on core sales suggests,” Baumann told Reuters. “Together with healthy levels of consumer sentiment and continued improvement in labor market conditions, today’s report is enough to keep a December Fed rate hike firmly on the table.”

Producer Price Index

The Producer Price Index for final demand goods rose 0.3 percent in September after seeing no change in August, the Bureau of Labor Statistics reported last week. This was ahead of the market expectation for a 0.2 percent gain, and overall, the index is up 0.7 percent from the same period a year ago, which marks the largest annual rise since December 2014.

Final demand goods are the wholesale goods that are sold to retailers, who ultimately sell those goods to customers. Prices for final demand goods are important to track, because they indicate where consumer prices, and thusly inflation, are headed. That information is important to the housing market, because the Fed typically increases interest rates as a response to increased inflation. 

In September’s case, the gains were “consistent with the notion that price pressures are beginning to accumulate and suggest that the consumer-price readings may continue to be firm going forward,” Amherst Pierpont Securities Economist Stephen Stanley told the Wall Street Journal.

Initial Jobless Claims

Layoffs fell to their lowest point in more than 40 years. First-time claims filed by the newly unemployed during the week ending October 8 were down to 246,000 claims, according to last week’s report from the Employment and Training Administration.

That total was well below the 255,000 claims the market had expected, and made it the 84th straight week that claims have been below 300,000 claims, a threshold that economists generally consider an indicator that the job market is growing. Layoffs haven’t seen that long of a streak of initial claims staying below 300,000 since 1970.

The four-week moving average — considered a more stable measure of layoffs — dropped 3,500 claims from the previous week’s average to 249,250 claims. The economy hasn’t seen the average reach that low since November 3, 1973, when claims dipped to 244,000.

This week, we can expect:

  • Monday — September industrial production and capacity utilization from the Federal Reserve.
  • Tuesday — September consumer price index for September from the Bureau of Labor Statistics.
  • Wednesday — September housing starts and building permits from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; September leading economic indicators from The Conference Board; existing home sales for September from the National Association of Realtors.

Posted in Economic Advisor



Economic Advisor: October 12, 2016
October 12, 2016


 

Construction spending shrank again, while the unemployment rate ticked up, and initial jobless claims fell yet again.

Construction Spending

Construction spending fell for the second month in a row in August. While the market had expected a 0.2 percent gain in construction spending for August, it actually dropped 0.7 percent to an annual rate of $1.142 trillion, the Census Bureau reported last week. August’s performance marked construction spending’s lowest level in eight months, and when compared annually, it was 0.3 percent below August 2015’s pace of $1.145 trillion.

“While demand for construction remains robust, it is no longer growing like it was earlier this year,” Associated General Contractors of America Chief Economist Ken Simonson told the New York Times.

Spending on private construction dropped 0.3 percent in August to an annual rate of $871.6 billion, with residential construction following suit, also dropping 0.3 percent to an annual rate of $449.2 billion.

Unemployment

The economy added 156,000 non-farm jobs in September, with the unemployment rate skirting up to 5 percent from August’s 4.9 percent, and the total unemployed population totaling 7.9 million, according to last week’s update from the Bureau of Labor Statistics. Key sectors that added jobs were professional and business services, as well as healthcare.

Part of the reason why the rate might have crept up slightly is because more people are involved in the job market. The labor force participation rate — the percent of employable Americans either employed or actively looking for work — crept up from 62.8 in August to 62.9 percent in September.

The number of Americans involuntarily employed part-time for economic reasons such as that was the only work they could find or their hours were cut was essentially unchanged at 5.9 million people in September. The number of people unemployed for 27 weeks or longer — the long-term unemployed — hovered at 2 million people and accounted for 24.9 percent of the unemployed population.

Employment has been a key sector for mortgage rate watchers, and unfortunately it doesn’t look like this month’s jobs report will result in rate increases at the Federal Reserve.

“Come back again next month,” said Michael Gapen, chief U.S. economist for Barclays Plc. Gapen added that the latest report “has something for everybody, and therefore it is unlikely to move the market thinking or Fed thinking about a December rate hike.”

Initial Jobless Claims

Looking at more recent employment numbers, first-time claims for unemployment benefits filed by the newly laid off during the week ending October 1 fell to 249,000, a decline of 5,000 claims from the prior week’s total of 254,000, the Employment and Training Administration reported last week.

This was the 83rd straight week of first time claims coming in below 300,000, the longest streak since 1970. Economists generally consider initial claims below the 300,000 as an indicator of a growing job market.

The four-week moving average — considered a more stable measure of lay-off activity — dipped to 253,500, a decline of 2,500 claims from the preceding week’s average of 256,000. This marked the lowest level for the four-week average since December 8, 1973’s average of 252,250.

This week, we can expect:

  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; import and export prices for September from the Census Bureau and the Bureau of Economic Analysis; September budget from the Treasury.
  • Friday — Producer price index for September from the Bureau of Labor Statistics; August business inventories and retail sales for September from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: October 5, 2016
October 10, 2016


 

New home sales were down but outpaced market expectations, while lay-offs crept up but remained well inside safe territory, and personal incomes were up.

New Home Sales

The big news last week was new home sales for August, which hit an annual rate of 609,000, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development.

This marked a 7.6 percent drop from July’s rate of 659,000, but was 13,000 units higher than the 585,000-unit pace the market had expected. Compared to last year’s sales for the same time period, August’s sales were 20.6 percent over August 2015’s rate of 505,000.

Looking at price and supply, August’s median sales price for new homes was $284,000, and the average price was $353,600. The inventory of new home for sales at the end of August was 235,000, which represented a 4.6-month supply at August’s sales rate. Once again, many economists pointed at narrow inventory as a cause of inflated prices, which ultimately cut into sales volume.

“After a solid July, new home sales came back to earth a little bit in August, though last month’s data still offer some decent news for the market,” Zillow Chief Economist Svenja Gudell told Housingwire. “… Builders have been focused on the higher end of the market for much of the past few years, but there are concrete signs emerging that more attention is now being paid to the lower end — new homes priced in the $200,000-$299,000 range, just below the median price, saw the biggest jump in sales activity.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending Sept. 24 hit 254,000, a gain of 3,000 claims over the preceding week’s total of 251,000, the Employment and Training Administration reported last week. The gain was much lower than the increase to 259,000 claims that job market watchers had expected.

The four-week moving average — considered a more stable measure of lay-offs — actually dipped to 256,000 claims, a loss of 2,250 claims from the prior week’s average of 258,250.

This marked the 82nd straight week that claims have been below the 300,000-claim mark that economists consider indicative of a growing job market. This is the longest such streak since 1970.

“It is difficult to communicate just how extraordinary these data have been over the past year,” Stephen Stanley chief economist of Amherst Pierpont Securities wrote in a public client statement.

Personal Incomes and Spending

Personal incomes grew 0.2 percent, or $39.3 billion, in August, the Bureau of Economic Analysis reported last week, which was in line with market expectations of 0.2 percent growth. Disposable personal income (DPI; income after taxes) grew by 0.2 percent, or $31.9 billion.

Personal consumption expenditures (PCE) increased $6.2 billion (less than 0.1 percent). Personal outlays — purchases of durable and non-durable goods — increased $6.1 billion in August. Personal saving grew to $807.6 billion in August from July’s $781.9 billion and the personal saving rate —savings as a percentage of DPI — ticked up to 5.7 percent from 5.6 percent in July.

This week, we can expect:

  • Monday — Construction spending for August from the Census Bureau; car and truck sales for August from the auto manufacturers.
  • Wednesday — Balance of trade for August from the Census Bureau and the Bureau of Economic Analysis; August factory orders from the Census Bureau.
  • Thursday — Initial jobless claims for last week form the Employment and Training Administration.
  • Friday — Consumer credit for August from the Federal Reserve; wholesale inventories for August from the Census Bureau; September payrolls, unemployment rate, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: September 28, 2016
September 28, 2016


 

The pace of existing home sales fell, while housing starts were down, and lay-offs continued to decline.

Existing Home Sales

Existing home sales slowed for the second month in a row, falling 0.9 percent to an annual rate of 5.33 million in August, according to last week’s report from the National Association of Realtors.

August’s decline put transactions of single-family homes, townhomes, and condominiums and co-ops at their second-lowest pace of 2016. When compared annually, existing home sales are 0.8 percent higher than August 2015’s 5.29 million pace.

So why were sales slipping? NAR Chief Economist Lawrence Yun chalked it up to poor inventory pumping up prices beyond small gains in the labor market and incomes.

“Healthy labor markets in most of the country should be creating a sustained demand for home purchases,” Yun said. “However, there’s no question that after peaking in June, sales in a majority of the country have inched backwards because inventory isn’t picking up to tame price growth and replace what’s being quickly sold.”

Where inventory is concerned, the supply of homes available at the end of August dropped 3.3 percent from July to 2.04 million units for sale, representing a 4.6-month supply at the August sales pace. August’s inventory was 10.1 percent lower than the 2.27 million-unit inventory from the same period a year ago.

Not surprisingly, that shrinking inventory continues to push prices upward. August’s median price for existing homes of all types hit $240,200, which was 5.1 percent higher than August 2015’s $228,500.

Housing Starts

And looking at real estate inventory, starts on construction of new homes during August fell 5.8 percent to an annual rate of 1.142 million, the Census Bureau reported last week.

That said, when compared annually, housing starts were 0.9 percent higher than August 2015’s pace of 1.132 million. Starts on single-family homes in August fell 6 percent to an annual a rate of 722,000.

Building permits issued in August for the construction of homes fell 0.4 percent to an annual rate of 1.139 million. Compared annually, August’s permits were 2.3 percent below August 2015’s rate of 1.166 million.

Permits issued in August for building single-family homes hit a rate of 737,000; this was actually 3.7 percent over July’s figure of 711,000.

Initial Jobless Claims

Switching to the job market, lay-offs were down. First-time claims for unemployment benefits filed during the week ending September 17 fell to 252,000, a decline of 8,000 claims from the preceding week’s total of 260,000, the Employment and Training Administration reported last week.

The four-week moving average — considered a more stable measure of lay-offs — dropped to 258,500 claims, a fall of 2,250 claims from the prior week’s average of 260,750. All told, this marked the 81st straight week of jobless claims falling below 300,000, a level that most economists consider indicative of a growing job market.

This week, we can expect:

  • Monday — New home sales for August from the Census Bureau.
  • Tuesday — Consumer confidence for September from The Conference Board.
  • Wednesday — Durable goods orders for August from the Census Bureau; second quarter GDP, third estimate, from the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Personal incomes and spending for August from the Bureau of Economic Analysis; consumer sentiment for September from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: September 21, 2016
September 21, 2016


 

Retail sales fell further than anticipated, while consumer prices crept up, and still-low layoffs notched up slightly.

Retail Sales

Retail sales for August fell 0.3 percent to $456.3 billion, according to last week’s report from the Census Bureau. The fall-off in performance was greater than market expectations, which had anticipated a 0.1 percent decline. Compared to last year, August’s sales were 1.9 percent higher than August 2015’s sales.

August’s poor sales performance was shared across nearly every major retail sales category. Notable losses included miscellaneous store retailers, which dropped 2.4 percent; sporting goods, music, hobby and book stores, which fell 1.4 percent; building material and garden supply stores, which also declined 1.4 percent; and auto and other vehicle dealers, which saw sales contract 1 percent.

Why did retail sales taper off? Jim Baird, chief investment officer at Plante Moran Financial Advisors, chalked it up to a conservative financial outlook on the part of consumers.

“Stronger income growth should put consumers in a position to be able to spend more,” Baird told the Wall Street Journal. “But budget-conscious households appear content to balance their spending habits with a greater commitment to their long-term financial health.”

Consumer Price Index

The Consumer Price Index for All Urban Consumers (CPI-U) grew 0.2 percent in August, the Bureau of Labor Statistics reported last week. Over the past 12 months, the all items index rose 1.1 percent.

The driver for last month’s price increase was largely due to core inflation, which constitutes all retail sales items except the usually volatile categories of food and energy. The Bureau’s index for all items less food and energy increased 0.3 percent in August, while the energy and food indexes were both unchanged for the month.

The 0.3-percent growth in the index for all items less food and energy was the largest gain since February. Key drivers for that gain in core inflation included prices for shelter; medical care; motor vehicle insurance; apparel; and communication.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly laid off during the week ending September 10 ticked up to 260,000, a slight gain of 1,000 claims over the prior week’s total of 259,000, the Employment and Training Administration reported. The gain was lower than market expectations, which had predicted a rise to 263,000.

Economists consider lay-off levels below 300,000 jobless claims indicative of a growing job market. Last week’s report marked the 80th straight week of sub-300,000 claims, which is the longest such stretch since 1970.

“Claims remain low, consistent with a still-strong trend in employment growth,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics, in a note to clients.

The four-week moving average — considered a more stable measure of lay-offs — skirted down to 260,750 claims, a slight drop of 500 claims from the preceding week’s average of 261,250.

There were no special factors impacting this week’s initial claims.

This week, we can expect:

  • Tuesday — Housing starts and building permits for August from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; existing home sales for August from the National Association for Realtors.

 

Posted in Economic Advisor



Economic Advisor: September 14, 2016
September 14, 2016


 

Consumer borrowing exceeded expectations, while wholesale inventories essentially hovered and lay offs fell.

Consumer Credit

Consumer borrowing grew 5.8 percent in July to hit a total of $3.66 trillion, according to last week’s release from the Federal Reserve. The $17.7 billion gain was well above the $16 billion increase that the market had been expecting, and was a good showing after June noted weak growth in consumer credit.

The main driver for July’s gains was non-revolving debt, such as car and student loans, which grew 6.7 percent to hit a total of $2.69 trillion. Meanwhile, revolving debt, such as credit cards, came of a series of strong monthly gains to only increase 3.4 percent, reaching a total of $969 billion.

Coming off the previous week’s gains in consumer spending, the increase in consumer credit was encouraging, because it indicates continued consumer activity. Given that consumer spending drives 70 percent of the U.S. economy, consumer credit is a key indicator to monitor.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending September 3 dropped to 259,000 claims, a decline of 4,000 from the prior week’s total of 263,000, the Employment and Training Administration.

The total marked a two-month low, which surprised many economists as the market had actually expected claims to notch up to 265,000. The week’s total marked the 79th consecutive week of first-time claims below 300,000 — which economists consider indicative of a growing job market — since 1970.

The four-week moving average — considered a more stable measure jobless claims — declined to 261,250, a drop of 1,750 claims from the prior week’s average of 263,000.

Wholesale Inventories

Wholesale inventories — a key indicator because they show manufacturers’ and distributors’ anticipated retailer demand — grew a slight 0.1 percent in July to $591.3 billion, which was virtually unchanged from June. Compared annually, total inventories were up 0.5 percent in comparison to July 2015 totals.

Meanwhile, sales for wholesalers during July dropped 0.4 percent to $441.9 billion. Compared annually, July’s sales were down 1 percent from July 2015’s total. July’s inventories-to-sales ratio for wholesalers was 1.34. Compared against last year, the July 2015 ratio was 1.32.

This week, we can expect:

  • Tuesday — August budget from the Treasury Department.
  • Wednesday — Import and export prices for August from the Census Bureau and the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; producer price index for August from the Bureau of Labor Statistics; industrial production and capacity utilization for August from the Federal Reserve; July business inventories from the Census Bureau.
  • Friday — Consumer price index for August from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: September 7, 2016
September 7, 2016


 

Unemployment

The economy added 151,000 jobs in August, keeping the unemployment rate hovering at 4.9 percent, with the total unemployed population essentially unchanged at 7.8 million people, Bureau of Labor Statistics reported last week. This was slightly off from market expectations of 180,000 added jobs and an unemployment rate of 4.8 percent.

“At this point in the business cycle, adding 100,000 jobs a month is not bad at all,” Carl Tannenbaum, chief economist at Northern Trust, told the Wall Street Journal. “It confirms that the economy is performing well, but does not provide the threat of overheating that might have caused an interest-rate increase sooner rather than later,” he added, in another interview with the New York Times.

The number of people involuntarily employed on a part-time basis in August, for reasons such as their hours being cut or that being the only work they could find, saw little change at 6.1 million workers for the month. The number of people without work for 27 weeks or longer — the long-term unemployed — was also essentially unchanged at 2 million in August.

Initial Jobless Claims

Turning to more recent economic news, layoffs ticked up slightly, according to last week’s report from the Employment and Training Administration. First-time claims for unemployment benefits filed by the newly unemployed during the week ending August 27, hit 263,000, a gain of 2,000 claims from the preceding week’s total of 261,000 claims.

The four-week moving average — considered a more reliable gauge of lay-offs — actually dipped to 263,000 claims, a drop of 1,000 claims from the preceding week’s average of 264,000 claims.

The total was still well below the 300,000-claim mark that economists consider indicative of a growing job market. Moreover, the report marked the 78th straight week of initial jobless claims totaling less than 300,000 claims, the longest such streak since 1970.

Construction Spending

Shifting to housing market news, overall construction spending during July was essentially flat, hovering at an annual rate of $1.153 trillion the Census Bureau reported last week. The market had expected that construction spending would grow by at least 0.6 percent. Compared annually, July’s performance was 1.5 percent higher than the July 2015 estimate of $1.135 trillion.

While overall spending was flat, spending on private construction grew 1 percent to hit an annual rate of $875 billion, and residential construction spending grew 0.3 percent to hit an annual rate of $445.5 billion

This week, we can expect a light calendar of economic releases due to the Labor Day holiday:

  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; consumer credit for July from the Federal Reserve.
  • Friday — Wholesale inventories for July from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: August 31, 2016
September 6, 2016


 

Existing home sales slowed, while new home sales enjoyed solid enough growth to hit a record high, and lay-offs saw a small, unanticipated decline.

Existing Home Sales

After two months of gains caused by increased purchases by first-time buyers, tight inventory finally caught up with existing home sales. Transactions of existing single-family homes, townhomes, condominiums and co-ops fell 3.2 percent to an annual rate of 5.39 million in July, the National Association of Realtors reported last week.

“Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” NAR Chief Economist Lawrence Yun said. “Realtors are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.”

Total housing inventory at the end of July rose just 0.9 percent to 2.13 million existing homes of all types available for sale, representing a 4.7-month supply at July’s sales pace. Compared to last year, July’s inventory was 5.8 percent down from July 2015.

That narrowing supply pushed prices higher, with July’s median existing-home price for all home types hitting $244,100, which is 5.3 percent higher than July 2015’s $231,800 median price.

New Home Sales

Meanwhile, new home sales fared much better, with transactions of new single-family homes in July shooting up to an annual rate of 654,000, a whopping 12.4 percent higher than June’s rate of 582,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. This marked a nine-year high, and when compared annually, July’s sales were 31.3 percent higher than July 2015’s pace of 498,000.

Looking at price and supply, the median sales price of new homes sold in July came in at $294,600, and the average sales price was $355,800. The estimated number of new homes for sale at the end of the month was 233,000, representing a 4.3-month supply at July’s sales rate.

“This is a continued sign that demand for new homes remains solid in a low interest rate, low unemployment environment,” said Ralph McLaughlin, economist at real estate site Trulia.com.

Initial Jobless Claims

Turning to employment news, new claims for unemployment benefits filed by the recently laid off during the week ending August 20 notched down to 261,000, a small decline of 1,000 claims from the prior week’s total of 262,000, according to last week’s report from the Employment and Training Administration.

That total was well below the 265,000 claims that the market had expected, and kept lay-offs well below the 300,000-claim mark that economists consider indicative of a growing job market. So far, this is the 77th straight week of claims below 300,000, which is the longest such streak since 1970.

The four-week moving average — considered a more reliable measure of jobless claims — fell to 264,000, a 1,240-claim drop from the previous week’s average of 265,250.

This week, we can expect:

  • Monday — Personal incomes and spending for July from the Bureau of Economic Analysis.
  • Tuesday — Consumer confidence for August from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; workforce productivity and costs for the second quarter from the Bureau of Labor Statistics; July construction spending from the Census Bureau.
  • Friday — August car and truck sales from the auto manufacturers; July balance of trade from the Census Bureau and the Bureau of Economic Analysis; July factory orders from the Census Bureau; August payrolls, unemployment, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: August 22, 2016
August 24, 2016


 

Housing starts showed encouraging performance, while consumer prices were flat, and lay-offs remained low.

Housing Starts

New housing construction had a solid story to tell last week, with starts on housing construction in July rising to more than any point since the beginning of 2008.

Starts on housing construction in July hit an annual rate of 1.21 million, which was 2.1 percent over June’s revised rate of 1.18, and was 5.6 percent higher than July 2015’s pace of 1.14 million, the Census Bureau reported last week. While starts on single-family homes rose 0.5 percent to a rate of 770,000 in July, starts on units in buildings with five units or more rebounded a whopping 8.3 percent to an annual rate of 433,000.

While construction starts were up, permits were down. Permits issued in July for the construction of private housing dipped slightly to an annual rate of 1.152 million, which was 0.1 percent below June’s revised June rate of 1.153 million. Permits issued of single-family homes dropped 3.7 percent to an annual rate of 711,000.

Regardless of permit activity, the sizable leap for housing starts gave many housing market watchers some optimism.

“What we’re seeing is quite encouraging,” Millan Mulraine, deputy head of U.S. research and strategy for TD Securities, told Bloomberg. “It suggests that the housing sector recovery is building on the strong momentum we’ve had in the past few months.”

Consumer Prices

Consumer prices for last month were flat, with the Consumer Price Index for All Urban Consumers unchanged in July, the Bureau of Labor Statistics reported last week.

The energy index declined 1.6 percent in July and the food index was unchanged for the month, while the index for all items less food and energy rose, but only barely, posting its smallest increase since March. As a result, the all items index was unchanged after four straight months of gains. The index for all items less food and energy — typically considered core inflation — grew just 0.1 percent in July.

The lack of movement in consumer prices made many economists conclude that the Fed will be taking a pass on increasing interest rates for the near future.

“Inflation is very likely to remain tame at best,” Ameriprise Financial Inc. Senior Economist Russell Price told Bloomberg. “Other than housing and medical care, vast sectors of the economy are still seeing negative price pressures. It softens the outlook for a Fed hike.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the recently unemployed during the week ending August 13, dropped to 262,000, a decline of 4,000 from the preceding week’s total of 266,000, according to last week’s report from the Employment and Training Administration.

The four-week moving average — considered a more stable measure of lay-offs — notched up to 265,250, a gain of 2,500 claims from the prior week’s average of 262,750. Once again, the total was in historically low territory not seen since the 1970s, marking the 76th straight week of initial claims coming in below 300,000.

This week, we can expect:

  • Tuesday — New home sales for July from the Census Bureau.
  • Wednesday — Existing home sales for July from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for July from the Census Bureau.
  • Friday — Gross domestic product for the second quarter, second estimate, from the Bureau of Economic Analysis; and August consumer sentiment from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: August 17, 2016
August 18, 2016


 

Retail sales were flat and producer prices tumbled, which indicated the odds were against interest rates rising anytime soon. Meanwhile, layoffs saw little change.

Retail Sales

Retail sales for July were virtually unchanged from June, totaling $457.7 billion, according to last week’s report from the Census Bureau. While this was 2.3 percent higher than July 2015’s performance when compared annually, the market had expected at least 0.4 percent growth over June.

“The July retail sales report was a disappointment,” JPMorgan Economist Michael Feroli told Business Insider. “These disappointing July figures came after a strong run for the data over the prior three months.”

The only bright spots in the Bureau’s July data were sales at vehicle and parts dealers, which increased 1.1 percent, and non-store retailers (such as market stands, online stores, and any locations outside traditional brick-and-mortar stores), which grew 1.3 percent. Meanwhile nearly every other retail segment was down, with sizable losses seen by gas stations, which fell 2.7 percent; sporting goods, hobby, book, and music stores, which dropped 2.2 percent; and grocery stores, which were down 0.9 percent.

Retail sales are a closely watched indicator, because consumer spending drives roughly 70 percent of the U.S. economy.

Producer Prices

Producer prices recorded their biggest drop in nearly a year, with the Producer Price Index for final demand (items destined for consumers) falling 0.4 percent in July, the Bureau of Labor Statistics reported last week. The drop was a surprising turn given that final demand prices grew 0.4 percent in May and 0.5 percent in June.

July’s decline in the final demand index was led by prices for final demand services, which shrank 0.3 percent. Also, final demand goods dropped 0.4 percent.

Shrinking producer prices point to little change in consumer prices. Paired with July’s flat retail receipts, it’s a good chance that the Federal Reserve will hold off on raising for the near term.

Initial Jobless Claims

Finally, lay-offs essentially held steady, with new claims for unemployment benefits filed by the recently unemployed during the week ending August 6 notching down to 266,000, a decline of 1,000 claims from the prior week’s total of 267,000, the Employment and Training Administration reported last week.

This marked the 75th straight week of initial claims sitting below the 300,000-claim mark — a level that economists consider indicative of a growing job market.

The four-week moving average, which is considered a more reliable measure of initial jobless claims, ticked up to 262,750, a gain of 3,000 claims from the preceding week’s average of 259,750.

This week, we can expect:

  • Tuesday — July building permits and housing starts from the Census Bureau; July consumer price index from the Bureau of Labor Statistics; capacity utilization and industrial production for July from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for July from The Conference Board.

Posted in Economic Advisor



Economic Advisor: August 10, 2016
August 10, 2016


 

Construction spending fell, but residential construction was unaffected. Meanwhile, the U.S. economy added solid job numbers, but consumer credit saw weak growth.

Construction Spending

Construction spending for June fell 0.6 percent to an annual rate of $1.133 trillion, marking the third straight month of declines, according to data released last week by the Census Bureau. While down for the month, when compared annually, June’s rate was 0.3 percent higher than June 2015’s pace of $1.130 trillion.

Spending on private construction reflected the monthly trend, falling 0.6 percent in June to an annual rate of $851 billion, but residential construction for the month held its own, coming in at an annual rate of $445.8 billion, which was nearly unchanged from May’s rate of $445.9 billion. Meanwhile, nonresidential construction dropped a significant 1.3 percent to an annual rate of $405.2 billion for the month.

“The drop in construction spending over the past three months is probably more a reflection of the very strong gains posted early in the year than of cooling demand for construction,” Ken Simonson, chief economist for the Associated General Contractors of America, noted in a public statement. “Nearly every major segment had first-half gains of more than 5 percent compared with a year ago. Contractors, surveys and the media all continue to report plenty of projects are starting or will soon.”

Unemployment

The U.S. economy enjoyed strong job numbers for the second month in a row, with the workforce adding 255,000 jobs in July, the Bureau of Labor Statistics reported last week. This was well ahead of market expectations for only 185,000 new jobs. Key sectors for job growth included professional and business services, healthcare and financial services.

The unemployment rate held steady at 4.9 percent with the total number of unemployed Americans also hovering at 7.8 million. The number of people unemployed for 27 weeks or longer (referred to as the long-term unemployed) was also unchanged in July, accounting for 26.6 percent of the total unemployed population. Also, the number of Americans involuntarily employed part-time for economic reasons, such as their hours being cut or that being the only work they could find, had little change at 5.9 million in July.

But, turning to wages, average hourly earnings for all employees grew by 8 cents in July to $25.69, and over the year, average hourly earnings rose by 2.6 percent. So, while many metrics saw no movement, the wage increases along with the job growth were reason enough for many economists to see the numbers as encouraging.

“This is a validator,” Barclays’ Chief U.S. Economist Michael Gapen told the New York Times. “This is a report that indicates that the slowdown in hiring earlier in the year has been reversed.”

Consumer Credit

Total consumer credit for June increased 4.1 percent to hit $3.633 trillion for the month, according to the Federal Reserve’s report from last week. The $12.3 billion gain for the month was the slowest pace of increase in four years and well below the $16.2 billion increase that the market had expected.

Revolving debt, such as credit card purchases, saw the biggest gains for the month, growing 9.7 percent to hit $960.8 billion. Meanwhile, non-revolving debt, such as car and student loans, notched up by 2.1 percent to hit $2.673 trillion.

Many economists chalked up the decline in revolving debt — which drove the overall debt slowdown for June — to lagging auto sales, which of course translated to fewer car loans. To put things in perspective, car sales in the first half of 2015 grew by 4 percent, and 2015 saw a record 17.5 million new vehicles sold. Meanwhile, car sales in the first half of this year have only grown 1.5 percent.

This week, we can expect:

  • Tuesday — Preliminary second quarter productivity from the Bureau of Labor Statistics; June wholesale inventories from the Census Bureau.
  • Wednesday — July budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; July import and export prices from the Census Bureau.
  • Friday — Producer price index for July from the Bureau of Labor Statistics; July retail sales and June business inventories from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: August 3, 2016
August 3, 2016


 

New home sales once again turned in a solid monthly performance, while initial jobless claims were on the rise, and durable goods orders fell.

New Home Sales

Sales of new, single-family homes in June grew to an annual rate of 592,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. This marked a 3.5 percent increase over May’s revised rate of 572,000, and when compared annually was 25.4 percent higher than June 2015’s pace of 472,000.

In terms of prices, the median sales price for a new home in June was $306,700, and the average sales price was $358,200. In terms of inventory, the number of new homes for sale at the end of June totaled 244,000, which constituted a 4.9-month supply at June’s sales pace.

All told, new home sales have enjoyed solid performance for the first half of this year and the trend looks like it will continue.

“We expect housing to continue to firm, on average, over the medium term, with a buoyant household sector supporting both prices and volumes,” Barclays Economist Rob Martin told the Wall Street Journal.

Initial Jobless Claims

While first-time claims for unemployment benefits filed by the newly unemployed were at a three-month low, the week before last saw them on an upswing, according to last week’s report from the Employment and Training Administration. Initial jobless claims placed during the week ending July 23 hit 266,000, an increase of 14,000 from the preceding week’s total of 252,000.

The four-week moving average — considered a more reliable gauge of lay-offs — actually fell to 256,500, a decline of 1,000 claims from the previous week’s total of 257,500.

While the gain was sizable, economists generally did not raise an alarm given how low claims are when compared to the 300,000-claim mark that generally indicates a growing job market.

“Claims at this point are telling you that you’re really near full employment,” Deutsche Bank Securities Inc. Economist Brett Ryan told Bloomberg. “… The labor market’s chugging along.”

Durable Goods Orders

Orders for manufactured durable goods placed in June dropped by 4 percent ($9.3 billion) to $219.8 billion, the Census Bureau reported last week. This marked the second straight monthly decline, after May’s 2.8 percent decline, and marked the largest monthly decrease for durable goods orders in the past two years.

Transportation equipment — also down two months in a row — was the main driver for June’s woes, falling 10.5 percent ($8.5 billion) to $72.2 billion. Excluding transportation, durable goods orders only fell 0.5 percent.

Durable goods orders are considered a good indicator of business investment, and given the lackluster report, companies will mostly likely avoid new equipment purchases until the end of the year, according to Michael Montgomery, U.S. economist at IHS Global Insight.

“Everything conspiring against the durables sector in 2015 will remain working against it for at least the balance of 2016,” Montgomery wrote in a note to clients.
“The hope for 2017 is that the adjustment processes start to wind down and produce less drag and token recovery.”

This week, we can expect:

  • Monday — Construction spending for June from the Census Bureau.
  • Tuesday — Personal incomes and spending for June from the Bureau of Economic Analysis; car and truck sales for July from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; June factory orders from the Census Bureau.
  • Friday — July payrolls, unemployment rate, hourly earnings and average workweek from the Bureau of Labor Statistics; June balance of trade from the Census Bureau; and consumer credit for June from the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: July 27, 2016
July 27, 2016


 

An increase in first-time buyers helped boost existing home sales, while housing starts and permits on new homes saw encouraging growth, and lay-offs continued to drop.

Existing Home Sales

A welcome influx of first-time homebuyers helped boost sales of existing single-family homes, townhomes, condominiums and co-ops by 1.1 percent in June, to hit an annual rate of 5.57 million, the National Association of Realtors reported last week. Compared annually, June’s existing home sales were 3 percent higher than June 2015’s rate, and were at their highest pace since February 2007.

While sales to investors fell to their lowest share since July 2009, first-time buyers represented 33 percent of June’s sales, up from May’s 30 percent, and was the highest percentage since July 2012’s 34 percent.

“Existing sales rose again last month as more traditional buyers and fewer investors were able to close on a home despite many competitive areas with unrelenting supply and demand imbalances,” said NAR Chief Economist Lawrence Yun. “Sustained job growth as well as this year’s descent in mortgage rates is undoubtedly driving the appetite for home purchases.

“The modest bump in June sales to first-time buyers can be attributed to mortgage rates near all-time lows and perhaps a hopeful indication that more affordable, lower-priced homes are beginning to make their way onto the market,” Yun added. “The odds of closing on a home are definitely higher right now for first-time buyers living in metro areas with tamer price growth and greater entry-level supply — particularly areas in the Midwest and parts of the South.”

Looking at price, the median price for all types of existing homes hit $247,700, which was up 4.8 percent from June 2015, and marked the 52nd straight month of year-over-year sales increases. In terms of inventory, the number of existing homes for sale dropped 0.9 percent to 2.12 million units, which represented a 4.6-month supply of homes for sale.

New Home Construction

In new home construction, building permits issued for the construction of private housing of all types grew 1.5 percent in June to hit an annual rate of 1.15 million, according to last week’s report from the Census Bureau. That said, when compared annually, this was 13.6 percent below June 2015’s pace of 1.33 million. Permits issued for single-family homes grew 1 percent in June to hit an annual rate of 738,000.

Starts on construction of private homes of all types expanded a healthy 4.8 percent to hit an annual rate of 1.18 million for the month, but like permits, were still down from 2015, falling 2 percent below June 2015’s rate of 1.21 million. Starts on single-family homes grew 4.4 percent to hit an annual rate of 778,000.

“Homebuilding continues to gradually recover from the housing bust that accompanied the Great Recession,” PNC chief economist Stuart Hoffman told the Wall Street Journal. “Demand for new single-family homes is slowly but steadily improving.”

Initial Jobless Claims

First-time claims for unemployment benefits filed during the week ending July 16 continued to beat market expectations. Initial claims for the week dropped to 253,000, a decline of 1,000 claims from the preceding week’s unrevised total of 254,000, the Employment and Training Administration reported last week.

The 1,000-claim drop bucked the market, which had expected claims to hit 265,000. The week marked the 72nd consecutive week of first-time claims below 300,000, which economists consider a level that indicates a growing job market. This has been the longest such streak since 1973.

The four-week moving average — regarded as a more stable measure of lay-offs — fell to 257,750 claims, a decline of 1,250 claims from the prior week’s average of 259,000.

This week, we can expect:

  • Tuesday — Consumer confidence for July from The Conference Board; new home sales for June from the Census Bureau.
  • Wednesday — Durable goods orders for June from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Advance second quarter gross domestic product from the Bureau of Economic Analysis; July consumer sentiment from the University of Michigan.

Posted in Economic Advisor



Economic Advisor: July 18, 2016
July 20, 2016


 

Both the demand and producer side of the economy showed strong performance with retail sales and industrial production exceeding market predictions. Meanwhile, lay-offs remained in safe territory.

Retail Sales

Retail sales for June outpaced market expectations, with sales for the month growing 0.6 percent to hit $457.0 billion, instead of the 0.3 percent the market had expected, according to the Census Bureau’s report from last week. Compared to last year, June’s sales were 2.6 percent higher than June 2015’s total receipts.

Major drivers for June’s increase were sales at building material and garden supply retailers, which enjoyed a 3.9 percent increase; gas stations, which saw a 1.2 percent gain; non-store retailers (retailers who sell outside a traditional retail establishment), which saw their sales go up 1.1 percent; and sporting goods, hobby, book and music stores, which grew 0.8 percent. In fact, the only two retail segments that saw any sales contraction were clothing and accessories stores, which were down 1 percent, and food service and drinking establishments, which were off by 0.3 percent.

Given that consumer spending drives 70 percent of the U.S. economy, the sales growth was a welcome sign that the retail sector of the economy was rebounding after seeing a so-so spring.

“Consumers continue to push the U.S. economy forward,” Gus Faucher, deputy chief economist for PNC Financial Services Group, wrote in an update.

Industrial Production

Retail sales weren’t the only segment of the economy to outpace market expectations. Industrial production – the monthly measure output by U.S. factories, mines, and utilities – also grew 0.6 percent for the month of June, compared to 0.2 percent anticipated by the market, the Federal Reserve reported last week. This was the fastest rate of growth for industrial production in 11 months.

In detail, manufacturing output grew 0.4 percent in June, mainly thanks to an increase in motor vehicle production. The output of other manufactured goods was unchanged. Utilities increased 2.4 percent thanks to warmer weather spurring increased use of air conditioning. Mining notched up 0.2 percent for the second month in a row following eight consecutive months of decline.

Despite the good news, many economists warned that this was not the time to get over-optimistic, because while the increases were welcome, they were due to fluctuations that were benefitting only specific elements of industrial production. The challenges that caused mediocre performance in previous months still remain.

“The bulk of manufacturing faces the same problems today that it faced a year ago — too much inventory in the system at home and too strong of a dollar to not face significant drag from higher import shares and lower export shares in the world market,” Michael Montgomery, U.S. economist at IHS Global Insight, wrote in a statement to clients.

Initial Jobless Claims

Turning to jobs, the total number of first-time claims for unemployment benefits filed during the week ending July 9 by the recently laid off were unchanged from the previous week, according to last week’s report from the Employment and Training Administration. Initial claims for the week ending July 9 hovered at 254,000, which was the same as the previous week’s total.

The four-week moving average — considered a more stable measure of lay-off activity — notched down to 259,000, a decline of 5,750 claims from the prior week’s average of 264,750.

All told, this was the 71st straight week of claims below the 300,000-claim mark, which economists consider a sign of a growing job market. This has been the longest such streak since 1973.

This week, we can expect:

  • Tuesday — Building permits and housing starts for June from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; existing home sales for June from the National Association of Realtors; and leading economic indicators for June from The Conference Board.

Posted in Economic Advisor



Economic Advisor: July 13, 2016
July 13, 2016


 

U.S. employment enjoyed some unexpected and sizable growth, while lay-offs saw an equally large and unforeseen decline. Meanwhile, consumer credit outpaced market expectations.

Unemployment

The nation’s employment situation got a serious shot in the arm with the economy adding 287,000 jobs in June, according to last week’s report from the Bureau of Labor Statistics. Key growth sectors for the job market were the leisure and hospitality industries, healthcare and social assistance, and financial services.

Despite the job gains, the unemployment rate actually increased 0.2 percent from May’s 4.7 percent to 4.9 percent for June, with the number of unemployed people increasing by 347,000 to 7.8 million. However, the reason for the percentage gain was the fact that more people joined the workforce.

“This report should ease any fears that a persistent slowdown or recession is coming soon in the U.S.,” Dean Maki, chief economist with Point72 Asset Management, told the New York Times. “The service sector is where the real strength is, with 256,000 hires. But the gains were widespread across sectors.”

The number of people involuntarily employed on a part-time basis due to reasons such as their hours being cut, or that being the only work they could find, decreased by 587,000 people in June to 5.8 million. The number of people unemployed for 27 weeks or longer — the long-term unemployed — saw little change, accounting for 25.8 percent of the total unemployed population.

Also essentially unchanged was the labor force participation rate — the percentage of the employable portion of the population that was either employed or actively looking for work — which hovered at 62.7 percent for the month.

Initial Jobless Claims

In a further sign that the economy was perhaps more robust than expected, first-time claims for unemployment insurance filed by the recently laid off fell to 254,000 claims, the Employment and Training Administration reported last week.

This marked a 16,000-claim decline from the previous week’s total of 270,000 claims, and was well below the 300,000-claim mark that economists consider indicative of a growing job market. In fact, this report marked the 70th consecutive week of initial claims below 300,000 claims, the longest streak since 1973.

The four-week moving average — considered to be a more stable measure of lay-offs — dipped to 264,750 claims, a decline of 2,500 claims from the preceding week’s average of 267,250.

Consumer Credit

Consumer borrowing for May increased 6.2 percent to a total of $3.62 trillion, according to last week’s report from the Federal Reserve. The increase outpaced market expectations of a $15.3 billion gain, instead of the $18.6 billion increase the month actually saw.

As in previous months, the big driver for May’s increase was non-revolving debt, such as student and car loans. That segment of consumer credit grew 7.3 percent to $2.67 trillion. Revolving debt, such as credit cards, increased an even 3 percent to hit $953.3 billion.

This week, we can expect:

  • Tuesday — Wholesale inventories for May from the Census Bureau and the Bureau of Economic Analysis.
  • Wednesday — June import and export prices from the Census Bureau; June budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; June producer price index from the Bureau of Labor Statistics.
  • Friday — Retail sales for June and business inventories for May from the Census Bureau; June consumer price index from the Bureau of Labor Statistics; June industrial production and capacity utilization from the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: July 4, 2016
July 6, 2016


 

Construction spending underwhelmed market expectations, while incomes and spending notched up, and lay-offs increased, but remained in safe territory.

Construction Spending

Construction spending for May surprised many housing market watchers by declining to an annual rate of $1.14 trillion, which was 0.8 percent below April’s rate of $1.15 trillion, the Census Bureau reported last week.

This was completely off from market expectations, which had predicted a 0.5 percent gain for May’s construction spending. While down on a monthly basis, when compared annually, May’s performance was 2.8 percent higher than May 2015’s annual rate of $1.11 trillion.

Despite construction spending as a whole declining, residential construction in May was more robust, hovering at an annual rate of $451.9 billion, which was nearly unchanged from April’s pace of $451.7 billion.

With the previous week’s Brexit already impacting interest rates, the housing market is a bit unpredictable at the moment

“Net-net it is certainly a bit of a mixed picture, a mixed bag, but I think in terms of direction, what is evidenced here, is that growth momentum has rebounded,” TD Securities Deputy Chief Economist Millan Mulraine told Reuters.

Personal Incomes and Spending

Personal incomes grew by $37.1 billion, or 0.2 percent, in May, and disposable personal income (DPI; incomes after taxes) also expanded by $33.9 billion, or 0.2 percent, according to last week’s report from the Bureau of Economic Analysis.

Personal consumption expenditures (PCE) also increased in May, growing by $53.5 billion, or 0.4 percent. Personal outlays — PCE, plus interest payments, and transfer payments — increased $57 billion in May.

This put personal savings — DPI less personal outlays — at $730.6 billion in May, compared with $753.7 billion in April. May’s personal saving rate — personal saving expressed as a percentage of DPI — was 5.3 percent, slightly down from April’s 5.4 percent.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly laid off during the week ending June 25 hit 268,000, a gain of 10,000 claims from the preceding week’s total of 258,000, the Employment and Training Administration reported last week.

The total number of jobless claims was still well below the 300,000-claim mark, which economists consider indicative of a growing job market.

“We’re not seeing any huge increase in job losses out there,” Raymond James Financial Inc. Chief Economist Scott Brown told Bloomberg. “It’s consistent with further improvement in the labor market.”

The four-week moving average — considered a more stable measure of lay-offs — hovered at 266,750 claims, which was unchanged from the preceding week’s average of 266,750.

This week, we can expect:

  • Tuesday — May factory orders from the Census Bureau.
  • Wednesday — May balance of trade from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — May consumer credit from the Federal Reserve; unemployment rate, payrolls, earnings and average workweek for June from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: June 27, 2016
June 29, 2016


 

Britain’s Brexit vote likely nixed any near-term increases in mortgage rates, while existing home sales grew, and new home sales fell.

Brexit Impact

Of course the biggest economic news from last week was Friday’s Brexit vote, in which the citizens of Britain voted to leave the European Union. While the actual process to leave the EU could take as long as two years, the economic impact was felt almost instantly. By the day’s end the Dow closed 611 points down, marking its worst day since 2011. Also, the pound fell to a 30-year low against the dollar, ending the week at $1.32.

This left U.S. housing market watchers wondering about how the uncertainty resulting from the Brexit vote could impact interest rates in the near term. Six months after the Fed’s December 0.25 percent increase on its benchmark rate, there had been signs that the Fed might be considering another small increase. But given the Fed’s sensitivity to market uncertainty and the stronger position of the dollar, any upward change to rates by the Fed appears to be on the backburner.

“It is unclear whether this will just be a short-term disruption, or whether it will have a longer-term impact,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, told Forbes. “Our best guess at this point is that the impact on the mortgage market will be to keep rates lower for longer.”

Existing Home Sales

Low interest rates have been one of the key factors that have helped drive home sales despite high prices. Sales of existing single-family homes, townhomes, condominiums and co-ops increased 1.8 percent to an annual rate of 5.53 million in May, according to last week’s report from the National Association of Realtors. Compared to last year, sales are 4.5 percent higher than May 2015, and they are at their highest annual rate since February 2007.

“This spring’s sustained period of ultra-low mortgage rates has certainly been a worthy incentive to buy a home, but the primary driver in the increase in sales is more homeowners realizing the equity they’ve accumulated in recent years and finally deciding to trade-up or downsize,” NAR Chief Economist Lawrence Yun commented in a public statement. “With first-time buyers still struggling to enter the market, repeat buyers using the proceeds from the sale of their previous home as their down payment are making up the bulk of home purchases right now.”

In terms of price, May’s sales surpassed last June’s peak median sales price to hit $239,700, which was 4.7 percent higher than May 2015. In terms of supply, the inventory of existing homes at the end of May grew 1.4 percent to hit 2.15 million homes for sale, representing a 4.7-month supply at May’s sales rate. Notably, this supply was down 5.7 percent from May 2015.

New Home Sales

While existing homes were up, sales of new single-family homes dropped a considerable 6 percent in May to an annual rate of 551,000, the Census Bureau and the Department of Housing and Urban Development reported last week. That said, when compared annually, May’s sales were 8.7 percent higher than May 2015’s rate of 507,000.

Looking at price, average sales price of new homes sold in May was $358,900 and the median sales price was $290,400. In terms of inventory, the estimated number of new homes for sale at the end of May totaled 244,000, which represented a 5.3-month supply at May’s sales pace.

This week, we can expect:

  • Tuesday — First quarter GDP, third estimate, from the Bureau of Economic Analysis; June consumer confidence from The Conference Board.
  • Wednesday — May personal incomes and spending from the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — May construction spending from the Census Bureau; June car and truck sales from the auto manufacturers.

Posted in Economic Advisor



Economic Advisor: June 20, 2016
June 22, 2016


 

Retail sales enjoyed healthy growth, while housing starts and building permits saw mixed performance, and lay-offs increased.

Retail Sales

Retail sales for May performed solidly, with sales growing 0.5 percent to hit $455.6 billion, the Census Bureau reported last week. Compared annually, last month’s sales were 2.5 percent higher than May 2015, and sales for the March 2016 through May 2016 period were 2.4 percent higher than the same period from last year.

Gas stations posted the largest sales increase for May, growing 2.1 percent over April. Music store sales grew 1.3 percent, as did non-store retailers; food service and drinking establishment sales increased 0.8 percent; and health and personal care stores grew 0.6 percent. Some trouble spots included building and garden supply store sales, which dropped 1.8 percent; miscellaneous retailers, which fell 1.2 percent; and department stores, which shrank 0.9 percent.

If anything, many economists welcomed the report after the recent weak jobs report for May, as it showed that this key segment of the economy (consumer spending drives 70 percent of the U.S. economy) was growing.

“The strength of the May retail sales report should provide plenty of comfort to those concerned that the recent slump in payrolls would be followed by a downturn in activity,” Capital Economics’ U.S. Economist Steve Murphy told the New York Times.

Housing Starts

Home construction in May saw inconsistent performance. Construction starts on all types of housing during the month dropped 0.3 percent to an annual rate of 1.16 million, the Census Bureau’s reported last week.

The main contributor to the drop was the multi-family housing category, which is subject to greater swings. Starts on multi-family units dipped 1.2 percent to hit an annual rate of 400,000. Meanwhile, starts on single-family homes actually increased 0.3 percent to an annual rate of 764,000.

On the positive side, building permits issued in May for the construction of private housing grew 0.7 percent to an annual rate of 1.13 million. That said, the performance for permits was inverse to housing starts. Permits issued for single-family homes dropped 2 percent to a pace of 726,000, while permits for multi-family dwellings increased 5.9 percent to an annual rate of 412,000.

Initial Jobless Claims

Followers of the job market are riding a bit of a roller coaster, as lay-offs increased after dipping the previous week. First-time claims for unemployment benefits filed during the week ending June 11 shot up to 277,000, a sizable jump of 13,000 claims over the prior week’s total of 264,000, the Employment and Training Administration reported last week.

Why are job market analysts watching lay-offs so closely? The Department of Labor’s employment report from three weeks ago showed weaker than expected job creation. When that happens, experts worry that any subsequent near-term spikes in lay-offs could be an indicator of a recession.

Bearing that in mind, the Administration’s report was considerably higher than the anticipated 269,000 claims. However, HSBC Securities USA Economist Ryan Wang said job market watchers shouldn’t get worried quite yet.

“As long as the trend for jobless claims remains low, that suggests that businesses are still relatively confident about the economic outlook,” he told the Bloomberg news service. “We need to see claims above the 300,000 level before we would be concerned about a genuine deterioration in the labor market.”

To Wang’s point, the four-week moving average — considered a more stable measure of lay-off activity — actually notched down to 269,250, a dip of 250 claims from the preceding week’s average of 269,500 claims.

This week, we can expect:

  • Wednesday — Existing home sales for May from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; new home sales for May from the Census Bureau.
  • Friday — Durable goods orders for May from the Census Bureau; consumer sentiment for June from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: March 28, 2016
June 22, 2016


 

Real estate saw mixed results, with existing home sales down and sales of new homes increasing, while layoffs experienced slight growth but remained in encouraging territory.

Existing Home Sales

After hitting a six-month high in January, February’s existing home sales suffered a drop. Sales of single-family homes, townhomes, condominiums and co-ops, fell 7.1 percent in February to an annual rate of 5.08 million, the National Association of Realtors reported last week. That said, when compared annually, February’s sales are still 2.2 percent higher than February 2015’s performance.  

“The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February’s lack of closings,” noted NAR Chief Economist Lawrence Yun. “However, the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers.”

And where affordability was concerned, prices were still on the rise. February’s median existing-home price for all types of existing homes grew to $210,800, which was 4.4 percent higher than February 2015’s $201,900. This marked the 48th consecutive monthly year-over-year price increase.

Looking at the supply of homes, the inventory of existing homes for sale at the end of February grew 3.3 percent to hit 1.88 million units, representing a 4.4-month supply at February’s sales pace. This was up from January’s 4-month supply but was still 1.1 percent lower than February 2015’s 1.9 million-unit supply.

New Home Sales

Sales of new, single-family homes grew 2 percent in February to hit an annual rate of 512,000, according to last week’s report from the Census Bureau. This beat market expectations for a rate of 511,000, but when compared annually, was down 6.1 percent from February 2015’s pace of 545,000. Still, the upward movement was generally considered a positive sign after January’s 9.2 percent drop.

“This reflects a slow but steady increase in demand from homebuyers as well as increasing confidence of homebuilders,” Ralph McLaughlin, chief economist for real estate website Trulia, told the Wall Street Journal. “It is also a positive sign for the U.S. economy headed into 2016, as new-home sales lead to new construction and consumer demand for housing-related goods and services.”

Looking at price and supply of new homes, the median price for new homes sold in February hit $301,400 and the average price was $348,900. Reassuringly, the inventory of new homes was on the rise, with the number of new homes for sale hitting 240,000 units at the end of February, which represented a 5.6-month supply. This is just shy of a 6-month supply, which economists consider a balanced market.

Initial Jobless Claims

Layoffs were up, but well below market expectations. First-time claims for unemployment benefits filed by the newly unemployed during the week ending March 19 grew to 265,000, a gain of 6,000 claims from the preceding week’s total of 259,000, the Employment and Training Administration reported last week. This was under market expectations of 268,000 claims, and still well below the 300,000-claim mark that economists consider representative of a growing job market.

“There’s a cautious optimism,” David Sloan, senior economist at 4Cast Inc., told the Bloomberg news service in regard to sentiment among hiring managers. “Things may slow a little as the year goes, but we’ve got a pretty healthy picture in the labor market.”

The four-week moving average — considered a more stable measure of lay-off activity — was slightly notched up to 259,750, an increase of just 250 claims from the prior week’s average of 259,500.

This week, we can expect:

  • Monday — Personal incomes and spending for February from the Bureau of Economic Analysis.
  • Tuesday — Consumer confidence for March from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — March unemployment, payrolls, average workweek and hourly earnings from the Bureau of Labor Statistics; car and truck sales for March from the auto manufacturers; consumer sentiment for March from the University of Michigan and Thomson-Reuters Survey of Consumers; construction spending for February from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: March 21, 2016
June 22, 2016


 

Retail sales took a fall, as did consumer prices, while housing starts posted solid gains.

Retail Sales

Retail sales fell 0.1 percent in February to hit $447.3 billion, according to last week’s report from the Census Bureau. February’s performance was slightly below projections of a 0.2 percent decline and not as large as January’s 0.4 percent tumble.

The big driver for February’s poor retail showing was gas station sales, which dropped 4.4 percent. Other notable drops included miscellaneous retailers, which were down 1.1 percent; furniture and home furnishings, which fell 0.5 percent; and department stores, which were down 0.4 percent.

For retail sales watchers, February’s sales results were reason for concern, as this followed the Bureau’s downgrading of January’s performance to a 0.4 percent drop after initially reporting January enjoyed a 0.2 percent increase.

“The state of the retail sector is now starting to look altogether shakier,” Chris Williamson, chief economist for financial information firm Markit, noted in a client statement.

Consumer Price Index

In related news, consumer prices for February also fell with the Consumer Price Index for All Urban Consumers (CPI-U) for the month declining 0.2 percent, the Bureau of Labor Statistics reported last week.

Once again, energy was a dominant factor. The energy index fell 6 percent in February, marking its third consecutive decline. And once again, prices at the pump skewed the energy sector with the gasoline index falling 13 percent for the month.

Take away energy from the equation, and core inflation, as captured in the index for all items less food and energy, actually increased 0.3 percent. Compared to a year ago, core inflation was up 2.3 percent over February 2015, the largest year-over-year gain since May 2012.

“The rise in underlying inflation implies lower real interest rates, which boosts household and consumer spending,” Neil Dutta, head of U.S. Economics for investment firm Renaissance Macro, explained in a statement to clients. “Firmer core prices also suggests corporate pricing power is offsetting the squeeze on margins from a tighter labor market. The Fed will welcome this inflation news and continue to pursue a gradual course of action.”

Permits and Housing Starts

In real estate, building permits issued for the construction of private housing in February dropped 3.1 percent to an annual rate of 1,167,000, the Census Bureau reported. That said, permits issued for single-family homes grew 0.4 percent to hit an annual rate of 731,000. Compared annually, February’s housing construction permits were 6.3 percent higher than February 2015.

Starts on construction of private housing in February grew 5.2 percent, reaching an annual rate of 1,178,000. Compared to last year, this was a whopping 30.9 percent higher than February 2015’s rate of 900,000. Starts on single-family homes grew 7.2 percent in February to hit a rate of 822,000.

This week, we can expect:

  • Monday — Existing home sales for February from the National Association of Realtors.
  • Wednesday — New home sales for February from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for February from the Census Bureau.
  • Friday — Third estimate for fourth quarter gross domestic product from the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: March 14, 2016
June 22, 2016


 

Consumer credit saw limited growth, while lay-offs continued to fall, and wholesale inventories beat market expectations.

Consumer Credit

Consumer borrowing for January increased at 3.6 percent to hit $3.54 trillion according to last week’s news from the Federal Reserve. This was the smallest gain in consumer borrowing since 2013, with the market expecting January’s consumer credit to grow by at least $16.5 billion, rather than the month’s smaller $10.5 billion gain.

January’s growth was driven by non-revolving debt, such as car and student loans, which increased 5.4 percent to $2.6 trillion. Meanwhile, revolving debt, such as credit card transactions, declined 1.3 percent to drop to $935 billion. The drop in credit card use caused some concern among analysts about how this would impact consumer spending, which drives roughly 70 percent of the economy.

Initial Jobless Claims

Layoffs continued to slide, with first-time claims for jobless benefits filed by the newly unemployed during the week ending March 5, falling to 259,000, a solid drop of 18,000 claims from the prior week’s total of 277,000, the Employment and Training Administration reported last week. This was the lowest level since October.

“The labor market continues to be the light shining through the foggy state of the global economy … the recent improvement in a host of economic data should provide a bit of relief that the expansion still has legs,” Jim Baird, chief investment officer at Plante Moran Financial Advisors, told the Reuters news service. 

The four-week moving average — considered a more stable measure of lay-off activity — also declined, falling to 267,500, a decrease of 2,500 claims from the preceding week’s total of 270,000.

Wholesale Inventories

Inventories for wholesalers increased 0.3 percent to $584.2 billion in January, and were up 2 percent when compared to January 2015’s inventories, according to last week’s report from the Census Bureau. This outpaced market expectations, which had predicted that wholesale inventories would drop by 0.2 percent.

Wholesale inventories are a key indicator in that they hint at whether wholesalers anticipate increased demand from their retail customers. Greater inventories point to an anticipation that consumer spending will increase. January’s growth was driven largely by motor vehicle and car parts, non-durable goods, and especially paper products and inventories of drugs and pharmacy sundries.

Meanwhile, wholesale sales for January dropped a solid 1.3 percent to $433.1 billion, and were down 3.1 percent from January 2015’s sales levels. This put the January inventory-to-sales ratio for wholesalers at 1.35, meaning it would take 1.35 months for wholesalers to sell off their inventory.

“Wholesale inventory growth has beaten sales growth since mid-2014 to leave a steep inventory-to-sales ratio spike that is usually only seen in recessions,” Action Economics Chief Economist Michael Englund told the New York Times.

This week, we can expect:

  • Tuesday — Retail sales for February and business inventories for January from the Census Bureau; producer price index for February from the Bureau of Labor Statistics.
  • Wednesday — The consumer price index for February from the Bureau of Labor Statistics; housing starts and building permits for February from the Census Bureau; industrial production and capacity utilization for February from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; February leading economic indicators from The Conference Board.

Posted in Economic Advisor



Economic Advisor: March 7, 2016
June 22, 2016


 

The economy added more jobs than expected, while lay-offs grew slightly, and construction spending enjoyed a healthy gain.

Unemployment

The unemployment rate held steady at 4.9 percent in February, with the economy adding 242,000 non-farm jobs, which was well beyond market expectation of 180,00 jobs, according to last week’s report from the Bureau of Labor Statistics. Key industries that were drivers for last month’s job growth included healthcare and social assistance, retail, food services and drinking places, and private educational services.

While jobs were up, wages declined. Average hourly earnings for all employees notched down 3 cents to $25.35, in February following an increase of 12 cents

in January.

“Today’s jobs report revealed strong gains for the U.S. workforce, but more importantly, the data shows there’s room for this labor market to grow,” Tara Sinclair, chief economist for job site Indeed, told Forbes. “Employers added a robust 242,000 jobs, but with essentially zero wage gains amid strong demand. In this environment, there’s definitely potential to bring more people off the sidelines if wages increase more.”

Looking at long-term unemployment, Americans who have remained jobless for 27 weeks or longer remained essentially unchanged at 2.2 million in February. These individuals accounted for 27.7 percent of the unemployed population. The labor force participation rate — the number of employable individuals either with work or actively looking for work — increased slightly to 62.9 percent.

Initial Jobless Claims

In related news, first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending Feb. 27, notched up to 278,000, which was an increase of 6,000 claims from the prior week’s unrevised level of 272,000, the Employment and Training Administration reported last week.

While the increase ran counter to market expectations of initial jobless claims falling by 2,000 to 270,000 claims, the total was still well below the 300,000-claim mark that economists consider representative of a growing job market.

“There will be some volatility but that’s normal,” Jim O’Sullivan, chief U.S. economist for High Frequency Economics, told Bloomberg. “Claims will more or less stay at low levels. The job market remains strong.”

The four-week moving average, which is considered to be a more stable measure of lay-off activity, ticked down to 270,250, a decline of 1,750 claims from the preceding week’s average of 272,000.

Construction Spending

Meanwhile, construction spending grew by a healthy 1.5 percent in January to hit and annual rate of $1.14 trillion, the Census Bureau reported last week. Compared annually, January’s rate was 10.4 percent higher than January 2015’s pace of $1.03 trillion.

Private construction spending grew 0.5 percent to hit an adjusted annual rate of $831.4 billion, and residential construction in January stayed relatively even, hovering at an annual rate of $433.2 billion.

While the housing component saw no change, which was disappointing for a real estate market hungry for increased inventory, the overall report was still welcome news, because it was indicative of economic growth

“The very good construction report for January is further proof that concerns about recession in the U.S. are far overblown,” PNC Financial Deputy Chief Economist Gus Faucher told the New York Times.

This week, we can expect:

  • Monday — Consumer credit for January from the Federal Reserve.
  • Wednesday — January wholesale inventories from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; the February budget from the Treasury Department.
  • Friday — Import and export prices for February from the Census Bureau and the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: February 29, 2016
June 22, 2016


 

Existing home sales shot up, while new home sales quizzically declined. Meanwhile, lay-offs saw a spike, but remained in safe territory.

Existing Homes Sales

Sales of existing homes in January outpaced market expectations to hit a six-month high. Completed transactions of single-family homes, townhomes, condominiums and co-ops notched up 0.4 percent to an annual rate of 5.47 million in January, the National Association of Realtors reported last week. January’s sales beat expectations of a 5.3 million pace, and were 11 percent higher than January 2015, which marks the largest year-over-year gain since July 2013’s 16.3 percent gain.

Looking at price, January’s median price of existing homes of all types grew 8.2 percent from January 2015 to hit $213,800. In terms of inventory, the supply of homes at the end of January grew 3.4 percent to hit 1.82 million homes available for sale. This was 2.2 percent lower than January 2015’s 1.86 million units, and marks a four-month supply at January’s sales. That short supply prompted NAR Chief Economist Lawrence Yun to voice concerns.

“The spring buying season is right around the corner and current supply levels aren’t even close to what’s needed to accommodate the subsequent growth in housing demand,” Yun noted in a public statement. “Home prices ascending near or above double-digit appreciation aren’t healthy — especially considering the fact that household income and wages are barely rising.”

New Home Sales

While existing home sales were up, new real estate saw less than stellar performance. Sales of new single-family homes in January dropped 9.2 percent to an annual rate of 494,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. Compared annually, this was 5.2 percent under January 2015’s rate of 521,000.

Looking at price, the median sales price of new homes sold in January 2016 was $278,800, and the average price was $365,700. In terms of supply, the estimate of new homes for sale at the end of January was 238,000, which represented a 5.8-month supply.

“Through some of the noise in the data, it appears that home sales are continuing to trend higher over time off of historically low levels,” JPMorgan Economist Daniel Silver told Reuters. “We maintain our view that the housing market will continue to recover.”

Initial Jobless Claims

Lay-offs increased a bit, but were in line with economists’ expectations. Initial claims for unemployment benefits filed by the recently laid off during the week ending February 20 hit 272,000, a gain of 10,000 claims from the prior week’s total of 262,000, the Employment and Training Administration reported last week.

Meanwhile the four-week moving average — considered a more stable measure of lay-offs — ticked down to 272,000, a decline of 1,250 claims from the preceding week’s average of 273,250.

Both totals were well below the 300,000-claim mark that indicates to economists that the job market is growing.

This week, we can expect:

  • Tuesday — Construction spending for January from the Census Bureau; February car and truck sales from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; fourth quarter productivity from the Bureau of Labor Statistics; January factory orders from the Census Bureau.
  • Friday — January trade balance from the Census Bureau; February unemployment rate, payrolls, average workweek and hourly earnings from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: February 22, 2016
June 22, 2016


 

Winter slowed the pace of housing construction, while lay-offs continued to drop and core inflation saw a sizable gain.

Housing Starts

January’s cold snap had its impact on real estate as housing starts and building permits both contracted during the month.

Permits issued for housing units of all types dipped to an annual rate of 1,202,000 for the month, marking a 0.2 percent decline from the December rate of 1,204,000, according to last week’s report from the Census Bureau. Similarly, permits issued for single-family homes in January notched down to a rate of 720,000, which was a 1.6 percent decline from December’s pace of 732,000.

Actual starts on housing units of all types in January dropped to an annual rate of 1,099,000, which was 3.8 percent down from December’s rate of 1,143,000. Starts on single-family homes fell to a rate of 731,000, which was 3.9 percent off from December’s rate of 761,000.

“Despite the modest dip in starts this month, we expect to see ongoing, gradual growth in housing production in 2016,” National Association of Home Builders’ Chief Economist David Crowe wrote in a public statement. “An improving economy, solid job creation and pent-up demand for housing should keep the market moving forward.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly laid off during the week ending February 13 fell to 262,000, a decline of 7,000 claims from the prior week’s level of 269,000, the Employment and Training Administration reported last week. This followed the preceding report’s 16,000-claim drop and completely ran contrary to analysts’ expectations that initial jobless claims would hit 274,000.

“Even though it gives us only one side of the labor-market ledger, jobless claims are effectively a gauge on overall business sentiment,” Millan Mulraine, deputy head of U.S. research and strategy for TD Securities USA LLC, told Bloomberg. “[The Administration’s report is] a good indication that businesses are more inclined to hold on to what they have and add to that, as opposed to reduce their payrolls.”

The four-week moving average — considered a more stable measure of lay-offs — saw a similarly sized drop, falling to 273,250, a drop of 8,000 claims from the previous week’s average of 281,250.

Consumer Price Index

Meanwhile, core consumer prices for January saw their biggest increase since 2011, according to last week’s report from the Bureau of Labor Statistics.

While overall consumer prices, known as the Consumer Price Index for All Urban Consumers (CPI-U), was flat for the month, the index for all items less food and energy, otherwise known as core inflation, rose 0.3 percent in January. This offset a 2.8 percent decline in the energy index.

Compared annually, the index for all items less food and energy gradually increased 2.2 percent since January 2015.

This week, we can expect:

  • Tuesday — Consumer confidence for February from The Conference Board; existing home sales for January from the National Association of Realtors.
  • Wednesday — New home sales for January from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for January from the Census Bureau.
  • Friday — Second estimate of Fourth Quarter gross domestic product and personal incomes and expenditures for January from the Bureau of Economic Analysis; consumer sentiment for February from the University of Michigan and Thomson-Reuters Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: February 16, 2016
June 22, 2016


 

Retail sales enjoyed solid gains, while lay-offs plummeted and wholesale inventories notched down.

Retail Sales

Retail and food services sales rallied in January growing 0.2 percent to hit $449.9 billion, the Census Bureau reported last week. Compared to last year, this was 3.4 percent higher than January 2015.

Non-store retailers were a key driver for last month’s retail performance, growing 1.6 percent. Other notable performers were miscellaneous retailers, which were up 1.2 percent; general merchandise and grocery stores, which both grew 0.8 percent; and vehicle and parts dealers and home and garden stores, which both increased 0.6 percent.

Meanwhile, gas stations saw a 3.1 percent drop in sales, and that could be the key to January’s retail percent. With gas prices so low, consumers might have been willing to spend elsewhere.

“Consumers are now beginning to believe that these gas prices could stay low for longer, which would suggest that they may feel better about spending some of those savings,” Visa Inc. CFO Vasant Prabhu told the Wall Street Journal.

Wholesale Inventories

While retail sales were up for January, wholesale inventories dipped to $582 billion in December, down 0.1 percent from November’s level, according to the Census Bureau. That said, compared annually, December’s level was up 1.9 percent over December 2014 level.

While down, December’s performance was not as bad November’s wholesale inventories, which dropped 0.4 percent. Wholesale inventories typically indicate future retail performance, but January’s aforementioned solid retail sales showing seems to have bucked that trend.

Notable categories for December inventories were durable goods, which were down 0.3 percent; metals and minerals, except petroleum, which fell 4.4 percent; inventories of petroleum and petroleum products, which were down 7.8 percent; and nondurable goods, which notched up 0.1 percent.

Sales for wholesalers fell to $440 billion, a decline of 0.3 percent from November. This put the inventories to sales ratio for the month at 1.32.

Initial Jobless Claims

Lay-offs enjoyed a considerable drop during the week ending February 6, according to last week’s report from the Employment and Training Administration. First-time claims for unemployment benefits filed by the newly unemployed dropped to 269,000, a free fall of 16,000 claims from the prior week’s total of 285,000.

The four-week moving average — considered a more stable measure of jobless claims — fell to 281,250, a decline of 3,500 claims from the preceding week’s average of 284,750.

After weeks of hovering at 40-year lows, jobless claims had been creeping up to the 300,000-claim mark that economists consider the demarcation between a growing job market and a stagnant one. The rebound allayed fears that the job market’s recovery might have been flagging.

“Notwithstanding the meltdown in financial markets, the labor market remains just fine for the moment,” Amherst Pierpont Securities Chief Economist Stephen Stanley told MarketWatch.

This week, we can expect:

  • Wednesday — The producer price index for January from the Bureau of Labor Statistics; January’s housing starts and building permits from the Census Bureau; and January industrial production and capacity utilization from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — The consumer price index for January from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: February 8, 2016
June 22, 2016


 

Unemployment fell to an eight-year low, while lay-offs saw a jump, and consumer credit enjoyed better-than-expected performance.

Unemployment

The unemployment rate dropped to 4.9 percent in January, as the economy added 151,000 jobs, the Bureau of Labor Statistics reported last week. This was the lowest unemployment rate in eight years. Key sectors for job growth were retail trade, food services, drinking establishments, healthcare, and manufacturing.

All told, there were 7.8 million unemployed Americans, with the number of people unemployed for 27 weeks or longer, totaling 2.1 million people, or 26.9 percent of the total. The number of Americans involuntarily employed on part-time basis due to reasons such as their hours being cut or that being the only work they could find, hovered at 6 million Americans. That said, January’s part-time figure was down by 796,000 people over January 2014.

While the continued decline in overall unemployment was encouraging, another positive sign was that earnings were up. Average hourly earnings for nonfarm employees increased by 12 cents to $25.39. Over the past 12 months, average hourly earnings have risen by 2.5 percent.

“That gain in average hourly earnings is significant,” Economist Diane Swonk, told the New York Times. “… It’s a move in the right direction, and that’s reassuring.”

Initial Jobless Claims

Looking at more recent job activity, lay-offs notched up with first-time claims for unemployment benefits filed by the newly unemployed hitting 285,000, a gain of 8,000 claims over the prior week’s total of 277,000, the Employment and Training Administration reported.

The gain pushed lay-offs closer to the 300,000-claim mark that economists say delineates a growing job market from a contracting one. In this case, the gain could be weather-related, due to the tough winter weather the east endured at the end of January.

“Typically, this sort of weather event tends to cause a brief increase in claims, as business closures and disruptions lead to a flow of filings,” Amherst Pierpont Securities Chief Economist Stephen Stanley wrote in a public statement.

The four-week moving average — considered a more stable measure of lay-off activity — ticked up to 284,750, an upturn of 2,000 claims from the preceding week’s average of 282,750.

Consumer Credit

Consumer borrowing grew by a solid 7.2 percent in December to hit $3.54 trillion, according to last week’s report from the Federal Reserve. A $21.3 billion increase, this was well about the $16.5 billion gain that the market had expected.

Many credit watchers chalked up the gain to increased consumer spending during December, but that didn’t tell the whole story. December’s growth was pretty evenly split between the two main types of consumer credit: Revolving debt, such as credit cards, increased 7.5 percent for the month to hit $935.6 billion, while non-revolving debt, such as car and student loans, grew by 7.1 percent to hit $2.61 trillion.

This week, we can expect:

  • Tuesday — Wholesale inventories for December from the Census Bureau.
  • Wednesday — The January budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Import and export prices and retail sales for January from the Census Bureau and the Bureau of Economic Analysis; December business inventories from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: January 25, 2016
June 22, 2016


 

Existing home sales bounced back while new home construction fell off, and lay-offs took an unexpected jump.

Existing Home Sales

Sales of existing homes enjoyed a rebound in December, with completed transactions of single-family homes, townhomes, condominiums and co-ops, growing a solid 14.7 percent to hit an annual rate of 5.46 million for the month, the National Association of Realtors reported last week. December’s existing home sales were 7.7 percent higher than a year ago, and capped off the best year of existing home sales since 2006.

“While the carryover of November’s delayed transactions into December contributed greatly to the sharp increase, the overall pace taken together indicates sales these last two months maintained the healthy level of activity seen in most of 2015,” NAR Chief Economist Lawrence Yun said. “Additionally, the prospect of higher mortgage rates in coming months and warm November and December weather allowed more homes to close before the end of the year.”

Prices continued to rise, with December’s median existing-home price for all housing types hitting $224,100, a 7.6 percent increase over December 2014’s $208,200. This marked the 46th consecutive month of year-over-year gains.

Looking at supply, December’s housing inventory fell 12.3 percent to 1.79 million existing homes for sale, which was 3.8 percent lower than December 2014’s 1.86 million. This put December’s housing inventory at a 3.9-month supply, which was down from November’s 5.1-month supply, and the lowest since January 2005’s 3.6-month supply.

New Home Construction

In related news, construction permits for housing units issued in December fell 3.9 percent to an annual rate of 1.23 million, according to last week’s report from the Census Bureau. That said, permits for the month were still 14.4 percent higher than December 2014. Also, permits issued for single-family homes grew 1.8 percent for December to hit a rate of 740,000.

Similarly, starts on construction of private housing dropped 2.5 percent in December to an annual rate of 1.14 million, but were still 6.4 percent higher than December 2014. Construction starts on single-family homes dropped 3.3 percent to a rate of 794,000.

“Builders are extremely cautious to increase spending for fear of over-extending themselves in case there’s an economic downturn,” Chief Fixed-Income Strategist for Janney Montgomery Scott LLC Guy LeBas told Bloomberg. “We’ll see continued demand for new housing and prices will move higher, but builders aren’t accelerating new construction.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending January 16 hit 293,000, the Employment and Training Administration reported last week. This marked a 10,000-claim increase over the previous week’s total of 283,000 and was the exact opposite of what the market expected, which was a 3,000-claim drop.

The four-week moving average — considered a more stable measure of lay-offs — hit 285,000 claims, an increase of 6,500 claims over the previous week’s average of 278,500.

“The recent uptick in jobless claims is a negative at the margins,” Chief Investment Officer at Plante Moran Financial Advisors Jim Baird told the Wall Street Journal. “But even at this modestly elevated level, claims remain in a range that is still consistent with moderate growth.”

This week, we can expect:

  • Tuesday — Consumer confidence for January from The Conference Board.
  • Wednesday — New home sales for December from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for December from the Census Bureau.
  • Friday — Fourth quarter gross domestic product (advance) from the Bureau of Economic Analysis; consumer sentiment for January from the Thompson-Reuters/University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: January 18, 2016
June 22, 2016


 

Retail sales ended a lack-luster year for growth, while overall producer prices notched down (but “core” prices gained), and lay-offs increased.

Retail Sales

Retail and food service sales had a down month in December, according to figures released last week by the Census Bureau. December’s receipts fell 0.1 percent to $448.1 billion. Compared annually, this was 2.2 percent higher than December 2014. All in all, this was the smallest yearly gain in retail sales since 2009.

Key areas of growth were furniture and home furnishings, which were up 0.9 percent; sporting goods, hobby and book stores; which gained 0.9 percent; bars and restaurants grew 0.8 percent; and building material and garden centers, which were up 0.7 percent. Poor performers for the month were miscellaneous retailers, which were down 2 percent; gas stations, which dropped 1.1 percent; clothing stores fell 0.9 percent; and food and beverage stores notched down 0.3 percent.

“There isn’t anything encouraging in this report,” Thomas Simons, a money-market economist at Jefferies Group LLC, told Bloomberg. “It’s very disappointing. The labor market is in good shape, which suggests the outlook is probably better than this.”

Producer Price Index

The Producer Price Index for final demand goods for December declined 0.2 percent, according to last week’s report from the Bureau of Labor Statistics. Final demand prices are the most closely watched of the various PPI indexes, as they are closest to consumer prices.

Final demand prices have been yo-yoing, ticking up 0.3 percent in November, and falling 0.4 percent in October. Overall, the final demand index for 2015 fell 1 percent, after rising 0.9 percent in 2014.

That said, it is important to note that the prices for final demand goods less foods and energy — the so-called “core” index because it isn’t subject to the volatility of food and energy prices — inched up 0.1 percent in December.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending January 9th, rose to 284,000, an increase of 7,000 claims from the prior week’s total of 277,000, the Employment and Training Administration reported last week.

The rise was somewhat big, but kept jobless claims well within the 300,000-claim mark economists say indicate a growing job market. The upswing was likely the result of the lingering impact of holiday season job market volatility.

“This time of the year claims are pretty volatile given the difficulty of trying to adjust for the various holidays and the start of the quarter,” RBS Securities Economist Kevin Cummins told Bloomberg. “Our assumption is the labor market is going to remain healthy, just at a somewhat more moderate pace of job growth.”

The four-week moving average — considered a more stable measure of layoff trends — notched up to 278,750, a 3,000-claim gain over the
preceding week’s unrevised average of 275,750.

This week, we can expect:

  • Wednesday — The consumer price index for December from the Bureau of Labor Statistics; December housing starts and building permits from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — December existing home sales from the National Association of Realtors; leading economic indicators for December from The Conference Board.

Posted in Economic Advisor



Economic Advisor: June 15, 2016
June 16, 2016


 

Initial jobless claims enjoyed an unexpected drop, which reassured some economists about the job market, while consumer credit failed to impress and wholesale inventories grew.

Initial Jobless Claims

Job market watchers were breathing a sigh of relief when it came to layoffs last week. While the various experts and economists had expected layoffs to slightly increase, first-time claims for unemployment benefits filed during the week ending June 4 actually dipped to 264,000, a decline of 4,000 claims from the previous week’s level total of 268,000, the Employment and Training Administration reported last week.

Why was there relief over a relatively small drop in first-time claims? The Department of Labor’s employment report from two weeks ago showed weaker than expected job creation, which in turn caused various experts to advise paying closer attention to initial jobless claims, as a spike could indicate a recession.

“In the approach to several recessions, initial claims spiked in the months in which non-farm payrolls (NFP) fell sharply and that spike was followed by a subsequent spike in claims (we look at four-week averages),” Steven Englander, Citigroup Inc.’s Global Head of G10 FX Strategy, told Bloomberg. “In the approach to several recessions, initial claims spiked in the months in which NFP fell sharply and that spike was followed by a subsequent spike in claims.”

Similarly, the four-week moving average — considered a more stable measure of employment — dropped to 269,500, a decline of 7,500 claims from the preceding week’s average of 277,000. This too, allayed job market-related jitters.

Consumer Credit

Consumer credit for April performed well under market expectations. While consumer credit grew by a total of 4.5 percent for the month, according to figures released last week by the Federal Reserve, it was not as high as market watchers had expected. The market had expected a gain of $18.5 billion in April, the month actually only increased by $13.4 billion, putting total outstanding consumer credit at $3.6 trillion.

Revolving debt, such as credit cards, grew by 2.1 percent to hit a total of $951.5 billion. Non-revolving debt, such as car loans and student loans, increased by 5.4 percent in April to reach a total of $2.65 trillion.

J.P. Morgan Chase’s Daniel Silver told the Wall Street Journal that the slowing pace of growth could be related to “cooling in auto sales,” and added that “We see some moderation in the consumer credit data.”

Wholesale Inventories

Wholesale inventories, a good indicator of wholesalers anticipation of demand from their retailer customers, grew to $587.9 billion in April, marking a 0.6 percent increase over March level and were 0.9 percent higher than April 2015’s level, the Census Bureau reported last week.

Some notable growth areas were inventories of durable goods, which notched up 0.2 percent over March; inventories of lumber and other construction materials increased 1.3 percent; nondurable goods gained 1.3 percent; inventories of farm product raw materials were up 7.5 percent; and drugs and druggists’ sundries grew 2.2 percent.

Sales for wholesalers saw middling performance, growing 1 percent in April to hit $434.2 billion, but that level was 2.6 percent below April 2015’s total. In any case April’s wholesale inventories-to-sales ratio was 1.35, compared to April 2015’s ratio of 1.31.

This week we can expect:

  • Tuesday — Import and export prices for May from the Census Bureau and the Bureau of Economic Analysis; retail sales for May and business inventories for April from the Census Bureau.
  • Wednesday — May producer price index from the Bureau of Labor Statistics; industrial production and capacity utilization for May from the Federal Reserve.
  • Thursday — May consumer price index from the Bureau of Labor Statistics; initial jobless claims for last week from the Employment and Training Administration.

Friday — Housing starts and building permits for May from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: June 13, 2016
June 13, 2016


 

Initial jobless claims enjoyed an unexpected drop, which reassured some economists about the job market, while consumer credit failed to impress and wholesale inventories grew.

Initial Jobless Claims

Job market watchers were breathing a sigh of relief when it came to layoffs last week. While the various experts and economists had expected layoffs to slightly increase, first-time claims for unemployment benefits filed during the week ending June 4 actually dipped to 264,000, a decline of 4,000 claims from the previous week’s level total of 268,000, the Employment and Training Administration reported last week.

Why was there relief over a relatively small drop in first-time claims? The Department of Labor’s employment report from two weeks ago showed weaker than expected job creation, which in turn caused various experts to advise paying closer attention to initial jobless claims, as a spike could indicate a recession.

“In the approach to several recessions, initial claims spiked in the months in which non-farm payrolls (NFP) fell sharply and that spike was followed by a subsequent spike in claims (we look at four-week averages),” Steven Englander, Citigroup Inc.’s Global Head of G10 FX Strategy, told Bloomberg. “In the approach to several recessions, initial claims spiked in the months in which NFP fell sharply and that spike was followed by a subsequent spike in claims.”

Similarly, the four-week moving average — considered a more stable measure of employment — dropped to 269,500, a decline of 7,500 claims from the preceding week’s average of 277,000. This too, allayed job market-related jitters.

Consumer Credit

Consumer credit for April performed well under market expectations. While consumer credit grew by a total of 4.5 percent for the month, according to figures released last week by the Federal Reserve, it was not as high as market watchers had expected. The market had expected a gain of $18.5 billion in April, the month actually only increased by $13.4 billion, putting total outstanding consumer credit at $3.6 trillion.

Revolving debt, such as credit cards, grew by 2.1 percent to hit a total of $951.5 billion. Non-revolving debt, such as car loans and student loans, increased by 5.4 percent in April to reach a total of $2.65 trillion.

J.P. Morgan Chase’s Daniel Silver told the Wall Street Journal that the slowing pace of growth could be related to “cooling in auto sales,” and added that “We see some moderation in the consumer credit data.”

Wholesale Inventories

Wholesale inventories, a good indicator of wholesalers anticipation of demand from their retailer customers, grew to $587.9 billion in April, marking a 0.6 percent increase over March level and were 0.9 percent higher than April 2015’s level, the Census Bureau reported last week.

Some notable growth areas were inventories of durable goods, which notched up 0.2 percent over March; inventories of lumber and other construction materials increased 1.3 percent; nondurable goods gained 1.3 percent; inventories of farm product raw materials were up 7.5 percent; and drugs and druggists’ sundries grew 2.2 percent.

Sales for wholesalers saw middling performance, growing 1 percent in April to hit $434.2 billion, but that level was 2.6 percent below April 2015’s total. In any case April’s wholesale inventories-to-sales ratio was 1.35, compared to April 2015’s ratio of 1.31.

This week, we can expect:

  • Tuesday — Import and export prices for May from the Census Bureau and the Bureau of Economic Analysis; retail sales for May and business inventories for April from the Census Bureau.
  • Wednesday — May producer price index from the Bureau of Labor Statistics; industrial production and capacity utilization for May from the Federal Reserve.
  • Thursday — May consumer price index from the Bureau of Labor Statistics; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Housing starts and building permits for May from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: June 6, 2016
June 6, 2016


 

Last week’s jobs report was lackluster, while layoffs fell, and construction spending was down.

Unemployment

The economy had its worst monthly jobs performance in six years, with the economy adding only 38,000 jobs in May, the Bureau of Labor Statistics reported last week. That said, the number of unemployed Americans dropped by 484,000 to 7.4 million people out of work, and the overall unemployment rate fell by 0.3 percent to reach 4.7 percent.

The reason for a decline in the unemployment rate in a month that saw weak job growth was because the labor force is shrinking. May’s labor force participation rate — the percentage of employable Americans who either have jobs or trying to get jobs — fell by 0.2 percent to 62.6 percent. This is part of a trend that has seen the rate fall by 0.4 percent over two months.

“This just does not square with all the other things we’re seeing in the economy,” PNC Financial Services Group Chief Economist Gus Faucher told the Washington Post. “This is no reason to panic, and I still think the fundamentals remain solid.”

The number of people unemployed for 27 weeks or longer fell by 178,000 to 1.9 million in May, accounting for 25.1 percent of the total unemployed population. The number of Americans involuntarily employed on a part-time basis for reasons such as only being able to find those hours or because their hours were cut grew by 468,000 to 6.4 million in May.

Initial Jobless Claims

In more recent employment news, first time claims for unemployment benefits filed by the recently laid off during the week ending May 28 notched down to 267,000, a decline of 1,000 claims from the preceding week’s total of 268,000, the Employment and Training Administration reported last week. The four-week moving average, considered a more stable measure of layoffs, dipped to 276,750, a drop of 1,750 claims from the prior week’s unrevised average of 278,500.

For the 65th week in a row, first-time claims were below the 300,000-claim mark that economists consider an indication of a growing job market. This is the first time since 1973 that the job market has had such a streak.

Construction Spending

Construction spending in April saw its largest monthly drop since January 2011, with spending for the month declining 1.8 percent to hit an annual rate of $1.13 trillion, according to last week’s Census Bureau report. That said, compared annually, April’s spending was still 4.5 percent better than April 2015’s pace of $1.08 trillion.

The drop was felt across all segments of construction. Spending on private construction fell 1.5 percent to an annual rate of $843.1 billion, with residential construction also dropping 1.5 percent to an annual rate of $439.7 billion.

This week, we can expect:

  • Tuesday — First quarter productivity from the Bureau of Labor Statistics; consumer credit for April from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; wholesale inventories for April from the Census Bureau.
  • Friday — May budget from the Treasury Department.

Posted in Economic Advisor



Economic Advisor: May 30, 2016
May 30, 2016


 

New home sales rallied to hit an eight-year high, while layoffs enjoyed continued declines, and orders for durable goods surged past market expectations.

New Home Sales

Sales of new single-family homes jumped a solid 16.6 percent in April to hit an annual rate of 619,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. April’s new home sales not only beat market expectations of a 521,000 annual rate, but marked the highest pace in eight years. Compared to last year, last month’s performance was 23.8 percent higher than April 2015’s rate off 500,000.

“The fundamentals for new home sales are good, and getting better: more jobs, rising wages, more household formations, and very low mortgage rates,” PNC Financial Services Deputy Chief Economist Gus Faucher told the Wall Street Journal.

Looking at affordability and availability of new homes, the median sales price of new houses sold in April 2016 hit $321,100, and the average sales price came in at $379,800. In terms of supply, the inventory of new homes for sale at the end of April totaled 243,000, representing a 4.7-month supply of at April’s sales rate.

Initial Jobless Claims

Layoffs fell for the second straight week, with first-time claims for unemployment benefits filed during the week ending May 21 falling to 268,000, a drop of 10,000 from the preceding week’s total of 278,000, the Employment and Training Administration reported last week.

This marked the 64th straight week that jobless claims were below the 300,000-claim mark that economists consider an indicator of a growing job market. The country hasn’t seen that long a streak in low layoffs since the 1970s.

The four-week moving average — usually considered a more stable measure of layoffs — actually grew a bit to hit 278,500 claims, which marked an increase of 2,750 claims over the prior week’s unrevised average of 275,750.

Durable Goods Orders

New orders for manufactured durable goods increased 3.4 percent in April to hit $235.9 billion, which was well past the 0.6 percent increase the market had expected, according to figures released last week by the Census Bureau. Orders for transportation equipment were a key driver for April’s gain, enjoying an 8.9 percent increase to reach $87.1 billion.

Durable goods orders represent an important indicator, because they can signal an anticipated increase in the manufacturing sector. April’s performance was part of an upward trend, as the month’s increase in orders followed a 1.9 percent increase in March.

This week, we can expect:

  • Tuesday — Personal incomes and spending for April from the Bureau of Economic Analysis; May consumer confidence from The Conference Board.
  • Wednesday — April construction spending from the Census Bureau; May car and truck sales from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — April factory orders from the Census Bureau; April trade balance from the Bureau of Economic Analysis and the Census Bureau; May unemployment, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: May 23, 2016
May 23, 2016


 

Existing home sales continued growing, while housing starts bounced back, and lay-offs reversed an earlier sharp increase with a sizable fall.

Existing Home Sales

Sales of existing homes kept their momentum in April with completed transactions of single-family homes, townhomes, condominiums and co-ops, rising 1.7 percent to an annual rate of 5.45 million for the month, the National Association of Realtors reported last week. Compared annually, April’s performance was 6 percent higher than April 2015.

That said, both prices and inventory were not ideally suited to driving increased sales volume. The median existing-home price for all existing homes in April grew a solid 6.3 percent from April 2015 to hit $232,500. Moreover, while housing inventory increased by 9.2 percent from March to hit 2.14 million existing homes available for sale at the end of April, this was still 3.6 percent lower than April 2015’s 2.22 million-unit supply. So what’s pushing volume up despite the price and supply barriers?

“Primarily driven by a convincing jump in the Midwest, where home prices are most affordable, sales activity overall was at a healthy pace last month as very low mortgage rates and modest seasonal inventory gains encouraged more households to search for and close on a home,” said NAR Chief Economist Lawrence Yun. “Except for in the West — where supply shortages and stark price growth are hampering buyers the most — sales are meaningfully higher than a year ago in much of the country.”

Housing Starts

In new real estate, home construction bounced back with building permits issued in April for construction of private housing or all types growing a solid 3.6 percent to hit an annual rate of 1.11 million, according to last week’s report from the Census Bureau. That said, when compared annually, permits were 5.3 percent lower than April 2015’s rate. Permits issued in April for single-family homes grew 1.5 percent to hit a rate of 736,000.

Construction starts on private homes of all types in April grew 6.6 percent to an annual rate of 1.17 million. Compared to last year, this was 1.7 percent below April 2015’s pace. Starts on single-family homes in April grew 3.3 percent to a rate of 778,000.

While the news is encouraging, Steven Blitz, chief economist for ITG Investment Research LLC, warned that growth in new housing sector will likely be modest.

“We embrace the steady growth story, with single-family starts getting above the 800,000 level at some point this year, but not the myth of starts returning to the promised land of pre-recession levels of construction,” he told the Wall Street Journal.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending May 14 dropped to 278,000, a decline of 16,000 claims from the preceding week’s total of 294,000, the Employment and Training Administration reported last week. The market had expected claims to drop further to 275,000 claims, after a momentary trend of striking Verizon workers was to resolve itself.

“The bulk of the swings in the last two weeks reflected a one-off bump in claims in the state of New York,” Amherst Pierpont Securities Chief Economist Stephen Stanley told MarketWatch.

The four-week moving average — considered a more stable measure of layoff activity — grew to 275,750 claims, an increase of 7,500 claims from the prior week’s average of 268,250 claims. In any case, the week’s lay-offs marked the 63rd consecutive week of total initial jobless claims falling below 300,000, an indicator that economists consider representative of a growing job market.

This week, we can expect:

  • Tuesday — New home sales for April from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for April from the Census Bureau.
  • Friday — First quarter GDP, second estimate from the Bureau of Economic Analysis; May consumer sentiment from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: May 16, 2016
May 16, 2016


 

Retail sales bounced back, while layoffs saw a surge, and wholesale inventories grew, but not at the pace the market had hoped.

Retail Sales

Retail and food services sales saw better than expected performance in April, growing 1.3 percent to hit $453.4 billion, the Census Bureau reported last week. April’s performance outpaced market expectations of 8 percent growth, and when compared annually, were 3 percent higher than April 2015’s sales.

“This is all part and parcel of the consumption numbers coming more in line with the income numbers we’ve been seeing,” RBC Capital Markets LLC Senior U.S. Economist Jacob Oubina told Reuters. “The breadth of this report was extremely constructive.”

Key drivers for April’s sales resurgence were motor vehicle and parts dealers, which grew 3.2 percent; gasoline stations, which were up 2.2 percent; non-store retailers, which gained 2.1 percent; miscellaneous retailers, which saw a 1.5 percent increase; and grocery stores, which gained 1.1 percent.

Initial Jobless Claims

First time claims for unemployment benefits filed by the recently laid off raised eyebrows last week, hitting a 14-month high after months of lows not seen for 40 years. Initial jobless claims filed during the week ending May 7 hit 294,000, a massive gain of 20,000 claims over the preceding week’s total of 274,000, according to last week’s report form the Employment and Training Administration.

The four-week moving average – considered a more stable read of layoffs – grew to 268,250, a gain of 10,250 from the previous week’s average of 258,000.

The likely cause for the substantial increase in lay-offs was a combination of striking Verizon Communications workers in New York, as well as spring break. Economists were not ready to consider the report indicative of a trend.

“Outside of the isolated increase in New York, initial claims remain at historically low levels,” Barclays economist Jesse Hurwitz told MarketWatch.

Wholesale Inventories

Wholesale inventories, a key indicator because they show wholesalers’ expectations of their retail clients’ sales grew, but at a slower rate than expected. Total wholesale inventories for March were $583.6 billion, which was up 0.1 percent over February, according to last week’s report from the Census Bureau. The market had expected a 0.2 percent increase.

Total sales for wholesalers in March hit $430.7 billion, which as 0.7 percent over February’s sales, but were down 2 percent March 2015’s sales. The March inventories/sales ratio was 1.36, up slightly from the March 2015 ratio of 1.32.

This week, we can expect:

  • Tuesday – The April consumer price index from the Bureau of Labor Statistics; building permits and housing starts for April from the Census Bureau; and April industrial product and capacity utilization from the Federal Reserve.
  • Thursday – Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for April from The Conference Board.
  • Friday – Existing home sales for April from the National Association of Realtors.

Posted in Economic Advisor



Economic Advisor: May 9, 2016
May 9, 2016


 

Construction spending got a shot in the arm, while unemployment was essentially flat, and layoffs stayed at historic lows.

Construction Spending

Construction spending during March rose 0.3 percent to hit an annual rate of $1.13 trillion, the Census Bureau reported last week. This marked the highest rate since 2007, and when compared annually, March’s rate was 8 percent higher than March 2015’s rate.

Spending on private construction and home building were big contributors to March’s construction gains. Private construction as a whole grew 1.1 percent to an annual rate of $842.3 billion. Residential construction in particular saw solid performance, growing 1.6 percent in March to hit an annual rate of $435.5 billion in March.

The continued push for more housing inventory should help to keep prices in check, which should in turn help bolster sales volume.

Unemployment

The economy added just 160,000 jobs during April, keeping the unemployment rate unchanged at 5 percent and the number of out-of-work Americans at 7.9 million, the Bureau of Labor Statistic reported last week. Key areas of job growth were professional and business services, health care, and financial activities.

The number of long-term unemployed those out of work for 27 weeks or longer — dropped by 150,000 in April to 2.1 million people. The number of Americans involuntarily employed on a part-time basis for reasons such as their hours being cut or that being the only work they could find was essentially unchanged in April at 6 million.

“It’s a soft report but it doesn’t portend a turn in the labor market,” Chief U.S. Economist at Barclays Michael Gapen told the New York Times. “I’d be more concerned if there were weakness across the board, but there wasn’t.”

Initial Jobless Claims

In more recent employment news, first-time claims for unemployment benefits filed by the newly unemployed during the week ending April 30 hit 274,000, a gain of 17,000 from the preceding week’s total of 257,000, according to last week report from the Employment and Training Administration.

This marked the 61st straight week of initial claims below 300,000, a threshold that economists consider indicative of a growing job market — the longest such streak since 1973.

The four-week moving average — considered a more stable read on layoff activity — notched up to 258,000 claims, a 2,000-claim gain from the prior week’s average of 256,000.

This week, we can expect:

  • Tuesday Wholesale inventories for March from the Census Bureau.
  • Wednesday Budget for April from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; import and export prices for April from the Census Bureau and the Bureau of Economic Analysis.
  • Friday — April producer price index from the Bureau of Labor Statistics; April retail sales and March business inventories from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: May 2, 2016
May 2, 2016


 

New home sales continued to turn in disappointing performance, while lay-offs were at historic lows, and incomes were on the rise.

New Home Sales

New home sales took a plunge in March, with completed transactions of new, single-family homes dropping 1.5 percent to an annual rate of 511,000, according to a joint report from the Census Bureau and the Department of Housing and Urban Development. That said, compared annually, March’s new home sales marked a 5.4 percent increase over March 2015’s rate of 485,000.

Looking at price and supply, the median sales price of new homes sold in March was $288,000, and the average sales price was $356,200. The estimated number of new homes for sale at the end of March totaled 246,000, which represented a 5.8-month supply of homes at March’s sales rate.

The big hope was that seasonal sales increases will help turn around new home sales’ recent disappointments.

“While new home sales have lost some luster in recent months, we believe they will reaccelerate as we head into [the] spring season,” noted Gregory Daco, head of U.S. macroeconomics at Oxford Economics, in a public statement.

Initial Jobless Claims

Lay-offs ticked up, but remained at lows not seen since the 1970s. First-time claims for unemployment benefits filed by the newly unemployed during the week ending April 23 hit 257,000, a gain of 9,000 claims over the preceding week’s level of 248,000, the Employment and Training Administration reported. This marked the 60th straight week of initial claims below 300,000 — a level that economists associate with a growing job market — which is the longest streak at that level since 1973.

The four-week moving average — which is regarded as a more reliable measure of job losses — dropped to 256,000, a decline of 4,750 claims from the previous week’s average of 260,750 claims.

“We’re seeing things in the labor market hold up well,” Wells Fargo Securities LLC Economist Sarah House told Bloomberg. “Businesses are feeling pretty comfortable with where the economy is going, so they don’t feel like they have to make those cuts.”

Incomes and Spending

Personal incomes saw welcome news in March: a 0.4 percent increase to $57.4 billion for the month, with disposable personal income (DPI; income after taxes) also growing 0.4 percent to $50.4 billion, according to last week’s report from the Bureau of Economic Analysis.

Personal consumption expenditures (PCE) grew 0.1 percent to hit $12.8 billion. Personal outlays — which combine PCE, personal interest payments, and personal current transfer payments — grew $11.2 billion in March.

Wages and salaries rose to $29.2 billion in March, with private wages and salaries growing $26.3 billion. Supplements to wages and salaries grew by $5.4 billion in March.

Personal saving — which is DPI less personal outlays — grew to $735.5 billion in March, with the personal saving rate — which describes personal saving as a percentage of DPI — increased to 5.4 percent.

This week, we can expect:

  • Monday — Construction spending for March from the Census Bureau.
  • Tuesday — Car and truck sales for April from the auto makers.
  • Wednesday — First quarter productivity from the Bureau of Labor Statistics; March factory orders from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — March consumer credit from the Federal Reserve; April payrolls, unemployment, average workweek and hourly earnings from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: April 25, 2016
April 25, 2016


 

Existing home sales rebounded, while new housing construction retreated, and layoffs continued to fall to historic lows.

Existing Home Sales

Existing home sales bounced back in April with transactions of single-family homes, townhomes, condominiums, and co-ops growing 5.1 percent to an annual rate of 5.33 million in March, the National Association of Realtors reported last week.

“Closings came back in force last month as a greater number of buyers — mostly in the Northeast and Midwest — overcame depressed inventory levels and steady price growth to close on a home,” NAR Chief Economist Lawrence Yun said. “Buyer demand remains sturdy in most areas this spring and the mid-priced market is doing quite well. However, sales are softer both at the very low and very high ends of the market because of supply limitations and affordability pressures.”

The median price for existing homes of all types in March grew to $222,700, which marked a 5.7 percent increase over March 2015’s $210,700. Looking at inventory, March’s supply of existing homes increased 5.9 percent to 1.98 million units for sale, marking a 4.5-month supply, but when compared annually was down 1.5 percent from March 2015. Price and supply will continue to be key influences on overall sales volume.

Housing Starts

Housing starts dropped to their lowest level since October, with construction starts on private housing in March falling to an annual rate of 1,089,000, an 8.8 percent decline from February’s rate of 1,194,000, according to last week’s report from the Census Bureau. That said, March’s starts were 14.2 percent over March 2015’s rate of 954,000. Starts on single-family homes in March dipped to a rate of 764,000, which was 9.2 percent below February’s pace of 841,000.

Building permits issued in March for construction of private housing dropped to an annual rate of 1,086,000, which was 7.7 percent below February’s rate of 1,177,000, but was 4.6 percent over March 2015’s rate of 1,038,000. Permits for single-family homes in March dipped to a rate of 727,000, which was 1.2 percent below February’s pace of 736,000. That decreasing pace of permits worried Joel Naroff of Naroff Economic Advisors Inc.

“That is somewhat more worrisome as the permit demand has lagged starts for the last two months,” Naroff told the Wall Street Journal, adding that declining permits “could signal continued softness in the market.”

Initial Jobless Claims

Layoffs continued to fall with first-time claims for unemployment benefits filed during the week ending April 16 dropping to 247,000, a decline of 6,000 from the preceding week’s level of 253,000, the Employment and Training Administration reported last week.

This marked the lowest level for initial claims since November 24, 1973’s 233,000, and was the 58th straight week of initial claims being below 300,000, a level economists consider indicative of a growing job market.

The four-week moving average — considered a more stable measure of unemployment activity — dropped to 260,500, a decrease of 4,500 from the prior week’s average of 265,000.

This week, we can expect:

  • Monday — New home sales for March from the Census Bureau.
  • Tuesday — Durable goods orders for March from the Census Bureau; April consumer confidence from The Conference Board.
  • Thursday — First quarter GDP from the Bureau of Economic Analysis; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Personal incomes and spending for March from the Bureau of Economic Analysis; consumer sentiment for April from the University of Michigan.

Posted in Economic Advisor



Economic Advisor: April 18, 2016
April 18, 2016


 

Retail sales took a tumble and consumer prices were up, but not as far as expected. Meanwhile, layoffs enjoyed a nice drop.

Retail Sales

Retail sales for March dropped 0.3 percent to $446.9 billion, according to last week’s report from the Census Bureau. That said, compared annually, March’s retail sales were up 1.7 percent from March 2015.

Some key drivers for March’s downward performance were auto dealers, which saw a 2.3 percent drop; clothing and accessory stores, which fell 0.8 percent; food and drinking establishments, which were off by 0.8 percent; and department stores, which were down 0.6 percent.

“We’re having a little bit of a soft patch here for the consumer, with no obvious rationale,” Michael Feroli, JPMorgan Chase & Co.’s chief U.S. economist, told Bloomberg. “It’s definitely a softer start to the year. Provided job gains remain as strong as they’ve been, we expect consumer spending should be okay.”

Some encouraging retail categories were building supply and garden stores, which were up 1.4 percent; health and personal care stores, which grew 1 percent; and gas stations, which posted a 0.9 percent gain.

Consumer Price Index

In related news, the Consumer Price Index grew 0.1 percent in March, which was off from the 0.3 percent the market had expected, the Bureau of Labor Statistics reported last week. Similarly, the index for all items except energy and food — often referred to as core inflation — grew 0.1 percent, as well.

Some key indexes that saw pronounced change were the energy index, which was up 0.9 percent, and the gasoline index, which was up 2.2 percent. Meanwhile, the food index was down 0.2 percent. Also, apparel prices were down 1.1 percent, while shelter and transportation services were both up 0.2 percent.

Initial Jobless Claims

Layoffs fell to their lowest level since 1973 as initial jobless claims dropped well past market expectations. First-time claims for unemployment benefits filed by the newly unemployed tumbled to 253,000, a plummet of 13,000 claims from the prior week’s total of 266,000, the Employment and Training Administration reported last week. This was well below market expectations of 268,000 claims.

“Not every element of the economy is performing as well as the labor market, but that piece of the puzzle remains rock solid,” Amherst Pierpont Securities Chief Economist Stephen Stanley told the Wall Street Journal.

The four-week moving average — considered a more stable gauge of how lay-offs are performing — ticked down to 265,000 claims, a drop of 1,500 claims from the preceding week’s average of 266,500 claims.

This week, we can expect:

  • Tuesday — Building permits and housing starts for March from the Census Bureau.
  • Wednesday — Existing home sales for March from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Leading economic indicators for March from The Conference Board.

Posted in Economic Advisor



Economic Advisor: March 18, 2015
March 18, 2015


 

Last week’s economic headlines showed that retail sales were up while first-time jobless claims had dropped as the winter’s frigid grasp on the economy seemed to be loosening.

Retails Sales

Retail sales for February increased 0.3 percent to $427.2 billion, and were 1.5 percent higher than last year’s sales from February 2013, the Census Bureau reported last week. February’s performance outpaced analysts’ expectations of 0.2 percent growth for the month.

“The economy seems to be rebounding from a winter-related slump,” Bank of Tokyo-Mitsubishi UFJ chief financial economist Chris Rupkey told the Reuters news service. “We expect the Fed will stay the course with its exit strategy.”

“We see this as further confirmation that the underlying momentum in the economy remains quite favorable,” added Millan Mulraine, deputy chief economist at TD Securities in New York.

Key categories that showed solid growth over January were health and personal care stores, which were up 1.2 percent; sport goods, hobbies, book and music stories, which were up 2.5 percent; and non-store retailers, which were up 1.2 percent.

Employment

First-time claims for unemployment insurance filed by the newly unemployed during the week ending March 8 hit dropped to 315,000, a decline of 9,000 from the previous week’s revised figure of 324,000, the Employment and Training Administration reported last week. This was the lowest level since November, which saw a six-month low. The four-week moving average — considered a more stable gauge of near-term employment activity — dropped to 330,500, a dip of 6,250 claims from the previous week’s revised average of 336,750.

Initial jobless claims have been volatile during the extreme winter conditions felt by most of the country, as well as due to other factors, according to Barclay’s Cooper Howes in an interview with Business Insider.

“Claims data have been volatile dating back to last fall, as factors such as computer system upgrades, seasonal adjustments related to moving holidays, and severe weather all potentially complicated the interpretation of the previously steady downward trend,” Howes explained. “That being said, the four week moving average has settled in around where it was last summer before these factors came into play, suggesting that it may be stabilizing.”

Wholesale

Meanwhile, sales for wholesalers dipped in January while inventories increased. Sales for merchant wholesalers dropped 1.9 percent from December to $432.6 billion, but were up 3.9 percent from January 2013, the Census Bureau reported last week.

Total inventories for merchant wholesalers grew by 0.6 percent in January to hit $521.2 billion. Key categories that saw gains were drugs and druggist sundries (up 2.7 percent), motor vehicles and parts (up 2.2 percent), and paper and paper products (up 2.8 percent).

January’s activity put the inventory-to-sales ratio at 1.20, which was virtually unchanged from January 2013’s ratio of 1.21.

This week, we can expect

  • Monday — Capacity utilization and industrial production for February from the Federal Reserve.
  • Tuesday — Building permits and housing starts for February from the Census Bureau; February consumer price index from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Existing home sales for February from the National Association of Realtors; February leading economic indicators form The Conference Board.

Posted in Economic Advisor



Economic Advisor: March 11, 2015
March 11, 2015


 

The unemployment rate continued to drop, while wage growth slowed, and lay-offs increased. At the same time, personal incomes were under-performing, and consumer credit grew, but not as much as analysts would have liked.

Unemployment

The unemployment rate for February dipped to 5.5 percent as the U.S. economy added 295,000 jobs according to last week’s Bureau of Labor Statistics report. Key sectors that drove job growth were food services and drinking places, professional and business services, construction, healthcare, transportation and warehousing.

While the economy added jobs, wage growth contracted to a 0.1 percent increase, with average hourly earnings for non-farm payrolls growing by 3 cents to $24.78.

“We’re facing a turning point, and we’re going to see more pressure on wages,” Tara Sinclair, chief economist at the job search site Indeed.com, told the New York Times.

The population of long-term unemployed workers — people who have been without work for 27 weeks or longer — hovered at 2.7 million in February, which comprised 31.1 percent of the unemployed. The population of Americas involuntarily employed on a part-time basis for reasons such as their hours had been cut or that was the only work they could fine, also saw little change, hovering at 6.6 million.

Initial Jobless Claims

Turning to more recent employment figures, the number of first-time claims for unemployment benefits continued its growth to a nine-month high. Initial claims filed for jobless benefits filed in the week ending Feb. 28 grew to a considerable 320,000, a gain of 7,000 claims from the preceding week’s level of 313,000, the Employment and Training Administration reported last week. Many analysts chalked the sizable gain up to weather, more than economic activity.

“We suspect the pattern reflects the weather rather than fundamental deterioration,” High Frequency Economics chief U.S. economist Jim O’Sullivan wrote a note to clients. “That said, we will, of course, be on watch for the possibility that the rise in the last two weeks marks a change in the trend.”

The four-week moving average, which is consider a more stable measure of recent jobless activity, also grew, hitting 304,750 claims, which represented an increase of 10,250 claims from the previous week’s average of 294,500.

Personal Incomes and Spending

Personal incomes for January increased $50.8 billion, or 0.3 percent, and disposable personal income (DPI; income after taxes) increased $52.6 billion, or 0.4 percent, according to last week’s report from the Bureau of Economic Analysis. The market had expected a 04 percent increase for incomes.

Meanwhile, personal consumption expenditures (PCE) decreased $18.9 billion, or 0.2 percent. Personal outlays — PCE, personal interest payments, and personal current transfer payments — also decreased, dropping $16.3 billion in January.

So why the drop in spending? Most likely it was because Americans were hanging on to their hard-earned money. Personal savings — which is DPI less personal outlays — hit $728.5 billion in January, compared with $659.6 billion in December. The personal saving rate — which describes personal saving as a percentage of disposable personal income — hit 5.5 percent in January, compared with 5 percent in December.

Consumer Credit

Consumer credit grew at its slowest rate since November 2013, increasing 4.2 percent to $3.32 trillion, according to the Federal Reserve. The market had expected a $14 billion gain. Revolving debt, such as credit cards, actually dipped 1.6 percent, falling to $887.9 billion. Non-revolving debt, such as student or car loans, grew 6.3 percent to $2.44 trillion.

Regardless, any increase is a good increase according to Trey Loughran, president of Equifax’s consumer unit.

“The increase in debt in the country is an indication that consumers are getting healthier,” Loughran told USA Today. “They’re more comfortable using debt.”

This week, we can expect:

  • Tuesday — January wholesale inventories from the Census Bureau.
  • Wednesday — February Treasury department from the Treasury Department.
  • Thursday — February retail sales and import and export prices, as well as January business inventories from the Census Bureau.
  • Friday — February producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: March 04, 2015
March 4, 2015


 

Real estate was the big news maker last week, with existing and new home sales showing middling performance. While real estate was mixed, initial jobless claims took an unexpected bounce upward.

Existing Home Sales

Sales of existing homes for January were a mixed bag. Transactions of existing single-family homes, town homes, condominiums and co-ops, fell 4.9 percent to an annual rate of 4.82 million in January, according to the National Association of Realtors. This was their lowest pace in nine months, but 3.2 percent higher than the same period a year ago.

“January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows,” said Lawrence Yun, NAR chief economist. “Realtors are reporting that low rates are attracting potential buyers, but the lack of new and affordable listings is leading some to delay decisions.”

Existing home inventory did tick up for January, growing 0.5 percent by the end of the month to 1.87 million existing homes available for sale, but was 0.5 percent lower than January 2014’s 1.88 million unit-supply. To Yun’s point, unsold inventory is at a 4.7-month supply at the current sales pace – up from 4.4 months in December.

January’s median price for existing homes of all types grew to $199,600, a 6.2 percent increase over January 2014, marking the 35th consecutive month of year-over-year price gains.

“The labor market and economy are markedly improved compared to a year ago, which supports stronger buyer demand,” Yun noted. “The big test for housing will be the impact on affordability once rates rise.”

New Home Sales

New home sales for January saw similar performance. Transactions of new single-family homes fell 0.2 percent from the previous month to a rate of 481,000, according to estimates released last week by the Census Bureau and the Department of Housing and Urban Development.  While down on a monthly basis, January’s sales were 5.3 percent higher than January 2014’s estimated rate of 457,000.

Looking at price, the median sales price of new houses sold in January came in at $294,300, and the average sales price was $348,300. Looking at supply, the estimate of new homes for sale at the end of January totaled 218,000, representing a supply of 5.4 months at January’s sales pace.

Once again, real estate analysts were saying that a true housing recovery depends on other economic factors.

“We are still taking sort of a meandering, bumpy path toward recovery,” IHS Global Insight U.S. Economist Stephanie Karol told the New York Times. “We expect housing will improve later this year due to the improvement in the labor market and credit conditions.”

Initial Jobless Claims

Looking at one of those other market factors, employment, first-time jobless claims filed by the newly unemployed saw their biggest jump since December 2013 last week; that’s after falling by a similar amount the week before. Initial jobless claims for the week ending Feb. 21 shot up to 313,000, an increase of 31,000 claims from the previous week’s revised level of 282,000, the Employment and Training Administration reported last week.

The four-week moving average, which is considered a more reliable measure of jobless activity also saw a stiff increase, growing to 294,500, a gain of 11,500 from the preceding week’s revised average of 283,000.

This week, we can expect a busy slate of economic headlines:

  • Monday — January personal incomes and spending from the Bureau of Economic Analysis; January construction spending from the Census Bureau.
  • Tuesday — February car and truck sales from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; January factory orders from the Census Bureau.
  • Friday — Consumer credit for January from the Federal Reserve; January trade balance from the Census Bureau; February unemployment, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: February 25, 2015
February 25, 2015


 

Last week’s economic headlines were a mixed bag, with producer prices and new home construction falling, while layoffs declined further than analysts had expected.

Producer Price Index

Producer prices witnessed their biggest decline since 2009, as cheap oil dragged the producer price index for final demand — the prices that businesses get for their goods and services — down by 0.8 percent in January, according to last week’s report from the Bureau of Labor Statistics.

The decline in final demand prices was led by the index for gasoline, which fell a whopping 24 percent, the Bureau reported. Prices for diesel fuel, jet fuel, basic organic chemicals, and home heating oil also fell.

January’s drop marked the third-straight monthly drop in PPI for final demand. Should the drop lend any credibility to jitters over possible deflation? Not according to Ian Shepherdson, chief economist for Pantheon Macroeconomics.

“It’s absolutely not going to happen,” Shepherdson told the Wall Street Journal. “You need to have a broad decline in prices, and at the moment we absolutely do not have that by any stretch of the imagination.”

Housing Starts

New home construction fell in January, with starts on construction of homes of all types dropping 2 percent to an annual rate of 1,065,000, the Census Bureau reported last week. Starts on single-family homes fell a sizable 6.7 percent to an annual rate of 678,000.

Building permits issued for construction of private housing also declined, dipping 0.7 percent to an annual rate of 1,053,000. Permits for single-family homes dropped 3.1 percent to an annual rate of 654,000.

A key contributor to the attenuation in new home construction would be factors preventing first-time buyers from entering the market, such as student debt and rising prices. That said, increased employment — and hopefully future improvement in wages — will improve new home construction.

“We’re getting there, though gradually,” First Trust Portfolios LP deputy chief economist Robert Stein told Bloomberg. “We see the housing recovery continuing this year. It’ll be choppy, but we’ll see consistent improvement over the previous year.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed fell below expectations, after lay-offs saw an equally unexpected rise the week before.

Initial jobless claims filed during the week ending Feb. 14 fell to 283,000 claims, a drop of 21,000 claims from the preceding week’s level of 304,000, the Employment and Training Administration reported last week. Last week’s jobless activity outperformed analysts’ expectations of a smaller drop to 295,000 claims.

The four-week moving average, considering a more stable gauge of lay-off activity, dropped to 283,250 claims, a decline of 6,500 from the preceding week’s average of 289,750.

“It appears that once we come out of the Veterans Day to Presidents Day fog bank, when the individual readings tend to be prone to gyrations, we may settle at a pace of layoffs consistent with where we were before mid-November,” Amherst Pierpont Securities chief economist Stephen Stanley wrote in a public statement.

This week, we can expect:

  • Monday — Existing home sales for January from the National Association of Realtors.
  • Tuesday — Consumer confidence scores for February from The Conference Board.
  • Wednesday — New Home sales for January from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; January consumer price index from the Bureau of Labor Statistics; durable goods orders for January from the Census Bureau.
  • Friday — The Bureau of Economic Analysis’ second GDP estimate for the fourth quarter of 2014; consumer sentiment for January from the University of Michigan and Thomson-Reuters Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: February 18, 2015
February 18, 2015


 

Retail sales took a tumble, while low petroleum prices tempered wholesale inventory growth, and initial jobless claims experienced a significant bump.

Retail Sales

The big news last week was that retail sales fell 0.8 percent in January, the second month in a row in which retail transactions dipped, according to numbers released by the Census Bureau last month. Retail and food services transactions for January totaled $439.8 billion, which while down from December, was still 3.3 percent higher than January 2014.

Looking at notable retail sectors, incredibly low prices at the pump saw gasoline sales fall a whopping 9.3 percent; sporting goods, hobby and book sales dropped 2.6 percent; and motor vehicle dealers took a 1 percent hit. Meanwhile, sales for food and drink services grew 0.8 percent and building material and garden supplies were up 0.6 percent.

Despite cheap gas prices and December’s gains in personal incomes, consumers simply weren’t spending as much, which led many economists to suggest that Americans might be using their cash to pay down debts or save more (personal savings did grow in December). At present, two months’ contraction doesn’t constitute a solid trend.

“Should we be worried about the weakness of underlying sales over the past two months? Possibly,” Capital Economics U.S. economist Paul Ashworth told Reuters. “But all the conditions are in place for a period of very strong consumption growth. We still expect to see that strength come through in the retail sales data soon.”

Wholesale Inventories

Total inventories of merchant wholesalers grew .01 percent to hit $547.6 billion in December, the Census Bureau reported last week. While the data takes longer to produce and might seem a little dusty, wholesale inventories are a key economic data point because they indicate whether or not the supply-side of the economy is anticipating growth. Compared to the previous year, wholesale inventories were up 6.7 percent from December 2013.

While inventories were up, the growth was lower than projections, and the key reason for that came down to one word: oil. Low crude oil prices reduced the value of petroleum stocks, which in turn reduced the inventories. The Bureau reported that January’s inventories of petroleum and petroleum products were down 6.2 percent from previous month.

Meanwhile, sales for merchant wholesalers dropped 0.4 percent in January, falling to $449.8 billion. Once again, oil was a key component with sales of petroleum and petroleum products falling 13.7 percent. This put December’s wholesale inventories-to-sales ratio at 1.22, compared to December 2013’s ratio of 1.16.

Initial Jobless Claims

First-time claims for unemployment benefits filed during the week ending Feb. 7 grew to 304,000, an unexpected and sizable gain of 25,000 claims from the previous week’s revised level of 279,000 claims, the Employment and Training Administration reported last week. Job market watchers had expected claims to grow to only 285,000.

The Administration did not note any special factors related to the increase, but some analysts said cold weather could be a contributor and warned not to regard a single week’s activity as a trend.

“Initial unemployment insurance claims are often volatile in the winter due to bad weather and holidays,” PNC Financial Services Group economist Gus Faucher told the Wall Street Journal. Faucher added that in reviewing past weekly lay-off activity, the claims totals were “consistent with job growth of better than 200,000 per month.”

Bearing that in mind, the four-week moving average — considered a more stable measure of lay-offs — dropped to 289,750 new claims, a decline of 3,250 claims from the previous week’s revised average of 293,000. This kept average claims activity comfortably below the 300,000-claim mark.

This week, we can expect:

  • Wednesday — Housing starts and building permits for January from the Census Bureau; January producer price index from the Bureau of Labor Statistics; industrial production and capacity utilization for January from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for January from The Conference Board.

Posted in Economic Advisor



Economic Advisor: February 11, 2015
February 11, 2015


 

Last week’s voluminous economic headlines featured a mixed bag of gains in personal incomes and consumer credit, while consumer spending dipped, the unemployment rate saw a slight increase, and layoffs increased as well.

Unemployment

Let’s start with the unemployment news: The economy added 257,000 jobs in January, while unemployment rate for January ticked up by a tenth of a percent to 5.7 percent for the month, according to last week’s Bureau of Labor Statistics report. Also, hourly earnings went up 12 cents to an average of $24.75 for the month.

So why did the unemployment rate go up while the economy actually added jobs? The answer is that more employable people were joining the job market. The Bureau’s civilian non-institutional population, which is a fancy way of saying, “all employable Americans”, grew by 696,000 people to hit 249,723,000.

Moreover, the labor force participation rate, which describes the number of employable Americans either with a job or looking for one, increased by 0.2 percent to 62.9 percent, while the number of discouraged workers (out-of-work Americans who have given up on hunting for a job) dropped to 682,000, which was down 155,000 people from the same period a year ago.

The net-net is that employment is on good enough an upswing and more workers want in on an economy that has added 1 million jobs since November.

“These are pretty amazing numbers,” IHS Inc. Chief Economist Nariman Behravesh told Bloomberg. “The January number is strong, but then you’ve got sizzling November and December numbers too. And then you’ve got the wage gains.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed saw a moderate gain after a massive plummet from two weeks ago. Initial jobless claims for week ending Jan. 31 grew to 278,000, a gain of 11,000 claims from the preceding week’s total of 267,000, the Employment and Training Administration reported last week.

The four-week moving average, considered a more reliable measure of lay-off activity, dipped to 292,750, a decline of 6,500 claim from the prior week’s revised average of 299,250.

Incomes and Spending

Personal incomes grew by 0.3 percent to hit $41.3 billion, as did disposable personal income (DPI; income after taxes), which increased 0.3 percent $35.8 billion, according to last week’s report from the Bureau of Economic Analysis. Meanwhile, personal consumption expenditures (PCE; consumer spending) dropped $40.0 billion, or 0.3 percent.

Meanwhile, personal saving — DPI less PCE, personal interest payments, and personal current transfer payments — grew to $643.2 billion in December from $568.2 billion in November. Similarly, the personal saving rate — personal saving as a percentage of DPI — grew 4.9 percent in December, compared with 4.3 percent in November.

“Consumers appear to be saving most of their recent windfall from lower gasoline prices,” PNC Financial Services Group senior economist told Morningstar. “However, consumer spending growth will be solid in 2015 thanks to more jobs, higher wages, and lower energy costs. Households will be able to both spend more and save more this year.”

Consumer Credit

Last but not least, consumer credit grew by 5.4 percent in December to hit a total of $3.3 trillion, a $14.7 billion gain, the Federal Reserve reported last week.

Encouragingly, the big gain was in revolving debt, such as credit cards, which grew 7.9 percent to $887.9 billion. This showed an increased willingness on the part of Americans to use credit cards for their spending. Meanwhile, non-revolving debt, such as student and car loans, showed a healthy 4.5 percent increase to reach $2.4 trillion for the month.

This week, we can expect:

  • Tuesday — Wholesale inventories for December from the Census Bureau.
  • Wednesday — January budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; retail sales for January and business inventories for December from the Census Bureau.
  • Friday — January important and export prices from the Census Bureau and the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: February 04, 2015
February 4, 2015


 

New home sales enjoyed a solid surge in December, lay-offs plummeted to a 15-year low, and consumers are feeling upbeat.

New Home Sales 

New home sales jumped to a six-year high in December with sales of new single-family homes hitting an annual rate of 481,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. This marked an 11.6 percent gain over November’s revised rate of 431,000 and an 8.8 percent increase from December 2013’s estimate of 442,000.

Looking at price, the median sales price of new homes sold in December was $298,100; the average sales price was $377,800. In terms of inventory, the estimated number of new homes for sale at the end of December was 219,000, constituting a 5.5-month supply at the December’s sales rate.

Looking at year-end performance, an estimated 435,000 new homes were sold in 2014, which was 1.2 higher than 2013’s total of 429,000.

“On the whole, the combination of lower mortgage rates and solid labor market activity appear to have ignited a meaningful pick-up in sales activity,” Millan Mulraine, deputy head of U.S. research and strategy at TD Securities, wrote in a public statement. 

Initial Jobless Claims

After a couple weeks of increases, initial jobless claims plummeted to a 15-year low. First-time claims for unemployment benefits filed by the newly unemployed during the week ending Jan. 24, plunged to 265,000, a decline of 43,000 claims from the preceding week’s revised level of 308,000, the Employment and Training Administration reported last week. This is the lowest level for initial jobless claims since April 15, 2000 when it was 259,000.

The four-week moving average, considered a more stable measure of lay-offs, dropped to 298,500, a decline of 8,250 claims from the prior week’s revised average of 306,750.

“The labor market’s in good shape going into 2015 and looks like it will be in good shape for the rest of the year,” RBS Securities Inc. economist Guy Berger told Bloomberg.

Consumer Confidence 

With good news in housing and employment, consumer opinions on the economy were looking more optimistic. The Conference Board’s Consumer Confidence Index shot up to 102.9 January from December’s already encouraging 93.1 (a baseline of 100 was set in1985).

“Consumer confidence rose sharply in January, and is now at its highest level since August 2007 (Index, 105.6),” said Lynn Franco, director of economic indicators for The Conference Board. “A more positive assessment of current business and labor market conditions contributed to the improvement in consumers’ view of the present situation.”

The Present Situation Index, which describes how consumers feel about current economic conditions grew to 112.6 in January from 99.9 December. The Expectations Index, which describes how consumers feel the economy will fare in the near future, increased to 96.4 from 88.5.

This week, we can expect:

  • Monday — Personal incomes and spending for December from the Bureau of Economic Analysis; construction spending for December from the Census Bureau.
  • Tuesday — December factory orders from the census Bureau; car and truck sales for January from the auto manufacturers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; the December balance of trade from the Census Bureau; preliminary fourth quarter labor productivity scores from the Bureau of Labor Statistics.
  • Friday — December consumer credit from the Federal Reserve; January unemployment rate, payrolls, earnings and workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: January 28, 2015
January 28, 2015


 

While 2014’s existing home sales were slightly down, sales in December picked up steam, as did new home construction. Meanwhile, initial jobless claims fell, but not as far as the market had hoped.

Existing Home Sales

The pace of existing home sales rebounded last December, with transactions of single-family homes, townhomes, condominiums and co-ops rising 2.4 percent from November to an annual rate of 5.04 million, the National Association of Realtors reported last week.

Looking at the year in total, 2014 saw 4.93 million home sales, a 3.1 percent decline from 2013’s 5.09 million sales. That dip was chalked up to early lackluster activity that negatively impacted 2014’s overall performance. But while volume was down, prices hit their highest level since 2007. The national median existing-home price for 2014 hit $208,500, which marked a 5.8 percent gain over 2013’s median price of $197,100.

“Home sales improved over the summer once inventory increased, prices moderated and economic growth accelerated,” said NAR Chief Economist Lawrence Yun, summarizing the year. “Sales were measurably better in the second half — up 8 percent compared to the first six months of the year.”

Shifting back to December performance, total housing inventory for the month dropped 11.1 percent to 1.85 million existing homes for sale, which represented a 4.4-month supply at December’s sales rate. This was down from November’s 5.1 months and just 0.5 percent lower than December 2013’s 1.86 million.

Not surprisingly, that inventory drop had an effect on prices. December’s median existing-home price hit $209,500, which was 6 percent higher than December 2013’s median price, and marked the 34th straight month of year-over-year price increases. That’s a concern given that wages are not keeping pace with the real estate market, according to Yun.

“A drop in housing supply in December raises some affordability concerns in the months ahead as minimal selection and the potential for faster price appreciation could offset the demand from buyers encouraged by a stronger economy and sub-4 percent interest rates,” he explained.

New Home Construction

While existing home inventory might have dipped, new home construction, especially for single-family homes, saw healthy gains in December. Building permits issued in December for the construction of private housing hit an annual rate 1,032,000, which marked a 1.9 percent gain over November, and a 1 percent increase of December 2013, according to last week’s report from the Census Bureau. Permits for single-family homes issued in December hit a 667,000, which was 4.5 percent higher than November and the highest point since mid 2008.

“The strength is where you’d like to see it, in single-family housing,” Societe Generale senior U.S. economist Brian Jones told Bloomberg. “It bodes well for residential real estate. It’s another thing going in the right direction for the economy.”

Starts on construction of private housing in December rose to an annual rate of 1,089,000, which was 4.4 percent over November’s revised pace of 1,043,000 and 5.3 percent higher than the December 2013 rate of 1,034,000. Starts on single-family homes in December shot up to a rate of 728,000, which was 7.2 percent higher than November’s revised rate of 679,000.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed dropped, but not as far as expected, according to last week’s numbers from the Employment and Training Administration. Initial jobless claims filed during the week ending Jan. 17 dropped to 307,000, a decline of 10,000 from the prior week’s revised level of 317,000.

Employment watchers had expected 302,000 claims. The question on many analysts’ minds was whether the third week in a row of jobless claims over the 300,000 mark was indicative of any trend, or merely the lingering impact of holiday hire layoffs

“It has to do with noise surrounding the end of the holiday season,” RBS Securities Inc. economist Guy Berger explained in a Bloomberg interview. “There isn’t any real sign that layoffs are picking up in any real sense. It seems like the labor market is entering 2015 in pretty good shape.”

The four-week moving average, which is considered a more reliable measure of jobless activity, hit 306,500, an increase of 6,500 claims from the preceding week’s revised average of 300,000.

This week, we can expect:

  • Tuesday — Durable goods orders and new home sales for December from the Census Bureau; January consumer confidence from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Fourth quarter gross domestic product from the Bureau of Economic Analysis; January consumer sentiment from the University of Michigan and Thomson-Reuters Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: January 21, 2015
January 21, 2015


 

The sharp drop in gas prices hurt December retail sales and sent consumer prices to a six-year low, while layoffs of holiday hires pushed initial jobless claims hit a four-month high.

Retail Sales

December’s retail performance was an example of how one variable can throw off a monthly total. Sales of retail goods and food services sales for December dropped 0.9 percent to 442.9 billion, according to advanced figures released last week by the Census Bureau. While sales were down for the month, they were still up 3.2 percent from December 2013.

The big factor was energy costs, and specifically gasoline sales, which fell a considerable 6.5 percent during December. This, of course, has to do with the substantial drop in gasoline prices, which economists are still trying to definitively explain; gas prices in December were 58 percent lower than the $107-a-barrel high set in July. Given that variable, December’s drop is likely not indicative of a trend.

“There is [no] basis for believing the weakness in December alone represents a change in the trend,” High Frequency Economics’ Jim O’Sullivan told Fortune.

Other notable retail sectors were electronics stores, which dropped 1.6 percent; building materials stores, which dipped 1.9 percent; general merchandise stores, which fell 0.9 percent; clothing stores, which were up 0.8 percent; furniture stores, which gained 0.8 percent; and health stores which grew 0.5 percent.

Consumer Price Index

In related news, the consumer price index for December dropped 0.4, the Bureau of Labor Statistics reported last week. On a year basis, the index was up 0.8 percent from December 2013. This was the biggest cost of living drop in six years.

Like retail sales, the big influence on December’s prices was gasoline, index for which dropped by a considerable 9.4 percent. The fuel oil index also saw a steep drop, falling 7.8 percent for the month. As a whole, the energy index was down 4.7 percent.

“The gasoline plunge was massive in the CPI for the past two months, and is about to upgrade to gargantuan in early 2015,” IHS Global Insight U.S. economist Michael Montgomery told the Los Angeles Times.

Initial Jobless Claims

Initial jobless claims hit their highest point since September, according to data released last week by the Employment and Training Administration. First-time claims for unemployment benefits filed by the newly unemployed during the week ending Jan. 10 shot up to 316,000 claims, a substantial increase of 19,000 from the preceding week’s revised level of 297,000.

Most economists chalked up the large gain to holiday workers finally being laid off, and initial lay-off figures should return to a figure near 300,000 in coming weeks.

“It happens at the beginning of every calendar quarter and the beginning of every year, so it’s difficult to seasonally adjust at this time,” Societe Generale senior U.S. economist Brian Jones told the Bloomberg news service. “People are finding work. The labor market is fine.”

The four-week moving average, considered a much more stable gauge of jobless activity, grew to 298,000, a 6,750-claim gain from the prior week’s revised average of 291,250.

This week, we can expect:

  • Wednesday — Housing starts and building permits for December from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Existing home sale for December from the National Association of Realtors; leading economic indicators for December from the Conference Board

Posted in Economic Advisor



Economic Advisor: January 14, 2015
January 14, 2015


 

Last week saw encouraging employment news, with the unemployment rate falling and near-term layoffs dropping as well. Additionally, wholesale inventories outpaced market expectations to a solid degree.

Unemployment

The unemployment rate for December beat expectations by dropping to 5.6 percent, with the population of unemployed Americans falling by 383,000 to 8.7 million people, the Bureau of Labor Statistics reported last week. December’s performance marked the lowest unemployment rate in six and a half years.

The economy added 252,000 jobs in December, with key job sectors helping drive the growth including professional and business services, industry, administrative and waste services. All told, the U.S. economy added 2.95 jobs during 2014, marking the best year for job creation since 1999.

While December’s unemployment rate was encouraging, a key element many analysts say must improve is wages. In that regard, hourly earnings actually declined by 5 cents in December to $24.57. This was a 180-degree turn from November’s gain of 6 cents, but was likely a temporary setback, according to PNC Chief Economist Stuart Hoffman.

“Faster wage growth remains the missing piece of the puzzle, but with the unemployment rate declining further and 21 states raising their minimum wage starting this month, wages should accelerate as 2015 progresses,” Hoffman wrote in a public statement.

Initial Jobless Claims

The good news could be felt on the near-term employment front, as well. Judging by figures released last week by the Employment and Training Administration, it appears that employers decided to hang on to more of their holiday hires than usual.

First-time claims for unemployment benefits filed by the newly unemployed during the week ending Jan. 3 dropped to 294,000, a decline of 4,000 claims from the preceding week’s unrevised level of 298,000, the Administration reported.

That level of claims was “low enough to be consistent with very big payroll gains,” Pantheon Macroeconomics Inc. chief economist Ian Shepherdson noted in a public statement. “If the economy strengthens again in the first half, it could easily dip to new lows.”

The Administration’s four-week moving average — which is considered a more accurate measure of layoffs — notched down to 290,500, a dip of 250 from the prior week’s unrevised average of 290,750.

Wholesale Inventories

Wholesale inventories — a key indicator because it predicts the wholesale market’s expectations of economic growth or contraction — grew 0.8 percent in November to hit  $547.2 billion, solidly outpacing market expectations of 0.3 percent growth, according to figures released last week by the Census Bureau.

Key sectors driving inventory gains were computer, peripheral equipment and software, which grew 2.6 percent; hardware, plumbing and heating equipment, which gained 1.7 percent; farm product raw materials, which shot up 5.7 percent; and drugs and pharmacist sundries, which moved up 2.6 percent.

Merchant wholesaler sales dipped 0.3 percent to $452.2 billion in November, but were up 2.4 percent compared to November 2013. This put November’s inventories-to-sales ratio for wholesalers at 1.21. The November 2013 ratio was 1.16.

This week we can expect:

  • Tuesday — December budget from the Treasury Department.
  • Wednesday — December retail sales and November Business Inventories from the Census Bureau; December import and export prices from the Census Bureau and Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week; December producer price index from the Bureau of Labor Statistics.
  • Friday — December consumer price index from the Bureau of Labor Statistics; December industrial production and capacity utilization form the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: January 07, 2015
January 7, 2015


 

Last week’s slate of economic news was very light due to holiday bureau closures, but there were a couple key announcements that surfaced in the headlines: U.S. manufacturing was still growing, but hit a six-month low, and the pace of construction activity unexpectedly fell.

Construction Spending

The pace of U.S. construction fell further than the market expected, but private construction, and especially residential construction showed improved performance. Construction spending during November dropping to an annual rate of $975 billion, which was 0.3 percent off from October’s revised estimate of $977.7 billion, the Census Bureau reported last week. The market had expected a 0.1 percent gain. That said, compared annually, November’s construction performance was 2.4 percent over November 2013’s estimate of $952.5 billion.

While construction on the whole was down, private construction spending fared positively. Private construction for November hit an annual rate of $697.7 billion, which was 0.3 percent over October’s revised estimate of $695.7 billion. Better yet, residential construction hit an annual rate of $352.7 billion in November, which was 0.9 percent better than October’s revised estimate of $349.6 billion.

The big drop was clearly in non-residential construction, and more specifically in public construction spending, which dropped to $277.3 billion, a whopping 1.7 percent below October’s revised estimate of $282.0 billion.

“November’s drop in nonresidential construction spending ends four consecutive months of spending growth, but represents only a minor dip in the industry’s momentum,” Associated Builders and Contractors Chief Economist Anirban Basu told Contractor Magazine. “… Conditions remain conducive to continued construction spending growth. Both the quantity and quality of job growth continues to improve, which will fuel the ongoing recovery in office-related spending.”

Manufacturing

Manufacturing for December lagged behind expectations, with the Institute for Supply Management reporting last week that its index for factory production fell to 55.5 percent, a decrease of 3.2 percentage points from November’s reading of 58.7 percent. This marked a six-month low for the index, but it is important to note that while the index was down, any reading over 50 percent demonstrates growth in manufacturing.

Some other key manufacturing figures for December released by the ISM included the New Orders Index, which dropped 8.7 percentage points to 57.3 percent; the Production Index, which dipped 5.6 points to 58.8 percent; the Employment Index, which grew 1.9 points to 56.8 percent; and raw materials inventories, which dropped 6 points to 45.5 percent. What some analysts said these figures indicated was that manufacturing was waiting on prices to fall, so the drop could be momentary, and could point to pent up growth in the near future.

“Prices aren’t going to be falling forever, so at some point it’s going to make sense for these people to start buying again,” RBS Securities Inc. economist Guy Berger told Bloomberg. “If anything, it suggests we may be back-loading activity into 2015 that would have taken place in December, and that is actually good news.”

This week returns to a normal calendar of economic releases. We can expect:

  • Monday — Car and truck sales for December from the auto manufacturers.
  • Tuesday — November factory orders from the Census Bureau.
  • Wednesday — The November balance of trade from the Census Bureau of the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; December consumer credit totals from the Federal Reserve.
  • Friday — November wholesale inventories from the Census Bureau; December unemployment rate, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: December 31, 2014
December 31, 2014


 

Existing home sales dropped in November, as did new home sales, while initial jobless claims fell and personal incomes and spending grew. 

Existing Home Sales

After reaching their peak for 2014, sales of existing homes dropped in November. Transactions of single-family homes, townhomes, condos and co-ops dipped 6.1 percent to an annual rate of 4.93 million from October’s 5.25 million pace, according to last week’s figures from the National Association of Realtors.

While November saw a monthly decline, on an annual basis, November’s pace was still 2.1 percent higher than November 2013. Part of November’s decline could easily be tied to winnowing supply of homes for sale, which is pushing prices upward, according to NAR chief economist Lawrence Yun.

“Lagging homebuilding activity continues to hamstring overall housing supply and is still too low in relation to this year’s promising job growth,” Yun said. “Much faster price and rent appreciation – easily exceeding wage growth – will occur next year unless new construction picks up measurably.”

In terms of inventory, the supply of homes for sale at the close of November dropped 6.7 percent to 2.09 million units for sale, which represented a 5.1-month supply at November’s sales rate. That said, it’s worth mentioning that inventory was 2 percent higher than a year ago. Still, looking at prices, November’s median existing-home price for all homes of all types notched up to $205,300, which was 5 percent over November 2013’s median price, and marked the 33rd straight year-over-year price gain.

New Home Sales

Sales of new homes hit a four-month low in November, with transactions of new single-family units dropping 1.6 percent to an annual rate of 438,000, the Census Bureau and the Department of Housing and Urban Development reported last week. Compared to last year, November’s rate was 1.6 percent below November 2013’s estimate of 445,000.

November’s new home dip was due largely to similar factors as existing home sales: the impact of inadequate supply pushing up prices and quashing volume.

“[New home sales] will get back in tune in 2015 with these continued low mortgage rates and more job growth,” PNC Financial Services Group Inc. Chief Economist Stuart Hoffman told Bloomberg. “I don’t see any fundamental weakening going on here, it’s just more of the very slow back-and-forth in housing improvement.”

Looking at price and supply, November’s median new home price was $280,900, and the average price was $321,800. November’s estimated inventory of new houses for sale was 213,000, which represented a 5.8-month supply at November’s sales pace.

Initial Jobless Claims

New claims for unemployment benefits filed by the recently unemployed during the week ending Dec. 20 dropped to 280,000, a decline of 9,000 claims from the preceding week’s level of 289,000, the Employment and Training Administration reported last week. This marked the lowest point for layoffs since Nov. 1.

“The labor market is tightening up,” MUFG Union Bank chief financial economist Chris Rupkey told Reuters. “Any job losses are just normal frictional unemployment in a healthy growing economy.”

The four-week moving average, considered a more stable read of jobless activity, fell to 290,250, a drop of 8,500 claims from the prior week’s average of 298,750.

Personal Incomes and Spending

Two key segments of the economy various analysts are watching, incomes and spending, both saw improvement in November. Personal incomes for the month increased $54.4 billion, or 0.4 percent, and disposable personal income (DPI; incomes after taxes) increased $42.4 billion, or 0.3 percent, the Bureau of Economic Analysis reported last week.

Personal consumption expenditures increased $67.9 billion, or 0.6 percent. Personal outlays, which comprise PC with personal interest payments and personal current transfer payments, grew $67.7 billion in November.

Personal saving, which is DPI minus personal outlays, totaled $576.5 billion in November, compared with $601.7 billion in October. The personal saving rate, which express personal saving as a percentage of disposable personal income, came to 4.4 percent in November, compared with 4.6 percent in October.

This week, the holiday season finally catches up with the Economic Advisor, and we will see an extremely light slate of economic releases:

  • Friday — December manufacturing index from the Institute of Supply Management; November construction spending from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: December 24, 2014
December 24, 2014


 

New home construction saw a dip, but layoffs enjoyed an encouraging drop, as did consumer prices, leading some analysts to say they were on the watch for continued good news in the New Year.

New Home Construction

Construction of new homes lost some momentum in November, according to last week’s numbers from the Census Bureau. Building permits issued for private housing dropping to an annual rate of 1,035,000, which was 5.2 percent below October’s revised rate of 1,092,000. Permits issued in November for single-family homes dipped to a rate of 639,000, which was down 1.2 percent from October.

Starts on construction for private homes initiated in November dropped 1.6 percent from October to an annual rate of 1,028,000. Starts on single-family homes in November fell 5.4 percent to an annual rate of 677,000. Completions of private housing in November dipped 6.4 percent from October to an annual rate of 863,000, with completions of single-family homes dropping 2.9 percent to hit an annual rate of 596,000 for the month.

Despite November’s lull, some analysts were forecasting growth in the home market, which will come down to jobs and incomes, according to Moody’s Analytics Inc. senior economist Ryan Sweet.

“All the conditions for stronger residential investment are in place for 2015,” Sweet told Bloomberg. “An improving job market is going to do wonders for the housing market.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly jobless enjoyed a drop, and appeared to be settling at encouraging levels. Initial jobless claims for the week ending Dec. 13 fell to 289,000, a decline of 6,000 from the prior week’s revised level of 295,000, the Employment and Training Administration reported last week.

The four-week moving average, considered a more stable measure of near-term employment activity, ticked down to 298,750, a dip of 750 claims from the preceding week’s revised average of 299,500.

This positive trend in lay-offs will likely continue, according to Pantheon Macroeconomics chief economist Ian Shepherdson.

“The underlying trend in claims, we believe, is still 285,000 to 290,000; low enough to signal very strong payroll growth, assuming indicators of the hiring side of the payroll equation remain strong,” Shepherdson told Business Insider.

Consumer Prices

The consumer price index saw its biggest monthly drop in six years, decreasing 0.3 percent in November, the Bureau of Labor Statistics reported last week. The market had expected only a 0.1 percent decline. Over the last 12 months ending November, the bureau’s price index increased 1.3 percent, compared to 1.7 percent for the 12-month period ending in October.

Energy prices were a big driver for November’s overall price drop, with the gasoline index notching its sharpest decline since December 2008, falling 6.6 percent. The fuel oil and natural gas indexes     also declined, falling 3.5 percent and 1.7 percent, respectively. Overall, the energy index dropped 3.8 percent. Meanwhile, food prices ticked up 0.2 percent.

Stripping out volatile food and energy prices, consumer prices were up 0.1 percent for November. The bureau’s shelter index grew by 0.3 percent in November,  with rent prices increasing 0.3 percent. The medical care index rose 0.4 percent for the month, its largest monthly gain since August 2013.

“The consumer is getting a well-deserved break,” PNC Financial Services Group Inc. chief economist Stuart Hoffman told Bloomberg. “We’re seeing a little more wage growth, more jobs, better confidence and finally a price break at the pump. It adds up to a very strong holiday season.”

This week, we will see a packed slate of economic headlines despite the holiday season:

  • Monday — Existing home sales for November from the National Association of Realtors.
  • Tuesday — Durable goods orders for November from the Census Bureau; third quarter gross domestic product (third estimate) and November personal incomes and spending from the Bureau of Economic Analysis; December consumer sentiment from the University of Michigan and Thomson-Reuters survey of consumers; November new home sales from the Census Bureau.
  • Wednesday — Initial jobless claims for last week from the Employment and Training Administration.

Posted in Economic Advisor



Economic Advisor: December 17, 2014
December 17, 2014


 

Reassuring retail sales beat market expectations, as did wholesale inventories (an important economic indicator), and lay-offs continued to drop.

Retail Sales

Retail sales nearly doubled market expectations last week, with retail and food sales for November growing 0.7 percent to $449.3 billion, the Census Bureau reported last week. This was 5.1 percent higher than November 2013, and was the largest increase in eight months.

Key growth sectors were motor vehicle and parts sales, which grew 1.7 percent; building and materials and garden supplies, which increased 1.4 percent; department stores, which were up 1 percent; and electronics and appliances, which gained 0.9 percent. The two segments that were down were gasoline, which dropped 0.8 percent, and the bureau’s miscellaneous retailer category, which was down 1.7 percent.

November’s performance also undercut some retailers’ bleak Black Thursday reports, which had fostered some fretting among pundits at the time. The upshot was that, thanks to a record 50 straight months of job creation, consumers seemed to be feeling upbeat about spending money.

“Most measures of confidence seem to be trending higher,” Moody’s Analytics’ senior director of consumer economics Scott Hoyt told the Los Angeles Times. “It appears that consumers are getting the message and going out and spending.”

Wholesale Inventories

Another economic indicator that outpaced predictions was wholesale inventories, which hit $542 billion in October, according to last week’s numbers from the Census Bureau. This represented a 0.4 percent gain over the previous month, which was double the 0.2 percent the market had expected.

Gains in wholesale inventories typically indicate anticipated sales on the part of wholesalers, and the October’s increase could help boost the nation’s third quarter gross domestic product.

And where sales were concerned, transactions for wholesalers grew 0.2 percent to hit $454.6 billion in October. This was 4.3 percent higher than October 2013’s wholesale sales. Comparing October’s sales to stockpiles put the October inventories-to-sales ratio at 1.19, which was slightly up from October 2013’s ratio of 1.16. 

Initial Jobless Claims

First-time claims for jobless benefits filed by the newly unemployed during the week ending Dec. 6, dropped to 294,000, a decline of 3,000 from the previous week’s unrevised level of 297,000, the Employment and Training Administration reported last week. The moderate decline put new claims at their lowest level in three weeks.

“The change is still fairly modest given normal volatility, especially at this time of year,” High Frequency Economics’ chief U.S. economist Jim O’Sullivan told MarketWatch. “Nor is there any sign of a sustained uptrend in new claims.”

Last week’s four-week moving average, considered a more steady measure of new jobless claims, notched up to 299,250, an increase of 250 claims from the previous week’s unrevised average of 299,000.

This week, we can expect:

  • Tuesday — November industrial production and capacity utilization from the Federal Reserve.
  • Wednesday — November housing starts and construction permits from the Census Bureau.
  • Thursday — November consumer price index from the Bureau of Labor Statistics.
  • Friday — Initial jobless claims for last week from the Employment and Training Administration; November leading economic indicators from The Conference Board.

Posted in Economic Advisor



Economic Advisor: December 10, 2014
December 10, 2014


 

Job growth and declining layoffs highlighted last week’s employment headlines, while home construction spending posted a healthy gain, and consumer borrowing grew, but not to expectations.

Unemployment

New hires greatly outperformed analysts’ expectations for the month of November, with the economy adding 321,000 jobs, according to last week’s figures released by the Bureau of Labor Statistics. The gain was well above the market expectation of 230,000 jobs, and was driven by strong performance in professional and business services, retail trade, healthcare, and manufacturing, the bureau reported.

“We are kind of hitting that point where the tide is turning, and the labor market is more in favor of the worker than it has been in many years,” Tara Sinclair, chief economist at job search site Indeed.com, told the Washington Post.

The unemployment rate remained at 5.8 percent with 9.1 million Americans out of work. The number of people unemployed 27 weeks or longer (categorized as “long-term unemployed”) continued to hover at 2.8 million in November, and comprised 30.7 percent of total unemployment.

The number of Americans involuntarily employed on a part-time because of reasons such as that was the only work they could find or because their hours were cut totaled 6.9 million in November, little changed from October.

Initial Jobless Claims

After seeing a noticeable increase three weeks ago, first-time claims for unemployment benefits experienced a sizable drop the week before last, putting claims at continued low levels. Initial jobless claims filed by the newly unemployed in the week ending Nov. 29 fell to 297,000, a decline of 17,000 claims from the prior week’s revised level of 314,000, the Employment and Training Administration reported.

The four-week moving average, considered a more stable measure of jobless claims, notched up to 299,000, an increase of 4,750 claims from the preceding week’s revised average of 294,250. All told, these are still exceptionally low figures for layoffs.

“We have no reason to think the trend in claims is turning higher, so we expected a further decline next week,” Pantheon Macro’s Ian Shepherdson told Business Insider. “That said, the trend probably has now flattened off, but at an extraordinarily low level, consistent with very strong payroll numbers.”

Construction Spending

Construction spending regained in October, its momentum increasing by 1.1 percent to an annual rate of $971.0 billion, which represented the biggest monthly gain since May, according to figures released last week by the Census Bureau.

Driving the growth was spending on private construction, and particularly homes. Spending on private construction grew by 0.6 percent to an annual rate of $692.4 billion, and residential construction grew 1.3 percent to an annual rate of $353.8 billion, with spending on single-family home construction jumping a solid 1.8 percent. Compared to last year, single-family home construction spending was up 13.2 percent from October 2013.

The gains were encouraging, because real estate watchers have wanted increased inventory to keep prices under control, which will increase sales volume of new homes. That said, the pace would be higher if wages were to increase.

“This is showing up in less construction employment and a smaller acceleration in wages than we would like given the age of this recovery, which in dog years is well into middle age,” Mesirow Financial chief economist Diane Swonk told the Associated Press.

Consumer Credit

Consumer borrowing continued to increase in October, albeit at a slower rate than before, with overall consumer credit growing by 4.9 percent to $3.27 trillion, according to last week’s report from the Federal Reserve. Consumer credit growth for the month was less than market expectations by $3.3 billion.

Non-revolving debt, such as student and car loans, continued to drive most of consumer credit’s growth, increasing 6.2 percent to $2.39 trillion. Revolving debt, such as credit cards, grew by 1.3 percent to 882.6 billion.

This week, we can expect:

  • Tuesday — October wholesale inventories from the Census Bureau.
  • Wednesday — November budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; November retail sales and October business inventories from the Census Bureau; and November import and export prices from the Census Bureau and Bureau of Economic Analysis.
  • Friday — November producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: December 3, 2014
December 3, 2014


 

Sales of new homes increased, but not as much as real estate watchers had hoped. Personal incomes and spending both posted gains. Layoffs, while up, remained at low levels.

New Home Sales

Sales of new single-family homes in October posted gains for the third-straight month, but the performance was tepid. Transactions of new homes grew 0.7 percent to an annual rate of 458,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development.

October’s new home transactions were short of the 470,000-unit pace that the market had expected and likely pointed to mediocre gains in momentum for the new home market for the remainder of the year. Still, compared to last year, the month was up 1.8 percent from the October 2013 rate of 450,000.

Looking at home values, the median sales price of new homes sold in October was $305,000 and the average price was $401,100. In terms of inventory, the estimated number of new homes for sale at the end of October was 212,000, which represented a 5.6-month supply at October’s sales rate.

Personal Incomes and Spending

Consumer spending bounced back a bit and beat expectations in October, while incomes also posted gains. Incomes grew in October by $32.9 billion, or 0.2 percent, and disposable personal income (DPI; income after taxes) gained $23.4 billion, or 0.2 percent, the Bureau of Economic Analysis reported last week.

Personal consumption expenditures (PCE) grew by $27.3 billion, or 0.2 percent, which outpaced market expectations of 0.1 percent growth. Personal outlays, which combine PCE, interest payments, and transfer payments, swelled by $26.3 billion during October, which was significantly larger than September’s $8.7 billion in outlays.

October’s personal savings, which are DPI less personal outlays, notched down to $651.2 billion in October, compared with $654.0 billion in September. The personal saving rate, which is personal saving expressed as a percentage of DPI, stayed unchanged from September’s at 5 percent.

“The storyline is basically that U.S. household spending appears to have regained its footing this quarter after slipping badly at the end of Q3,” TD Securities’ deputy head of U.S. research and strategy Millan Mulraine told the Wall Street Journal. “However, given the relatively subdued pace of gains, we continue to expect economic momentum to slip in Q4, with the pace of GDP growth slowing to between 2.5 percent and 3 percent.”

Initial Jobless Claims

First-time claims for unemployment benefits took an unexpected jump, but remained at low levels. Claims for unemployment insurance filed by the newly unemployed during the week ending Nov. 22 surged to 313,000, a sizable gain of 21,000 claims over the previous week’s revised level of 292,000, the Employment and Training Administration reported last week.

The four-week moving average, considered a more stable measure of near-term jobless activity, grew to 294,000, an increase of 6,250 over the prior week’s revised average of 287,750.

Looking at the total number of insured unemployed, the number of workers covered by benefits dropped to 2,316,000 during the week ending Nov. 15, a decline of 17,000 from the previous week’s revised level of to 2,333,000. This marked the lowest level for insured unemployment since Dec. 9, 2000’s level of 2,263,000.

“Though we have seen increases over the past three weeks in the four-week average, the trend in claims remains relatively low,” BNP Paribas’ Derek Lindsey told Business Insider.

This week, we can expect:

  • Tuesday — October construction spending from the Census Bureau; November car and truck sales from the auto manufacturers.
  • Wednesday — Third quarter productivity scores from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — November unemployment rate, payroll, earnings and average workweek from the Bureau of Labor Statistics; October trade balance and factor orders from the Census Bureau; October consumer credit from the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: November 26, 2014
November 26, 2014


 

Existing home sales picked up the pace, while growth in construction permits stoked optimism for increased home inventory, and lay-offs continued to remain at very low levels.

Existing Home Sales

Sales of existing homes regained some momentum as transactions of single-family homes, townhomes, condominiums and co-ops, grew 1.5 percent in October to hit an annual rate of 5.26 million, the National Association of Realtors reported last week. October’s performance marked the second consecutive monthly sales gain, and with sales for the month being 2.5 percent higher than October 2013, it was the first time this year where sales were up from a year ago.

“Sales activity in October reached its highest annual pace of the year as buyers continue to be encouraged by interest rates at lows not seen since last summer, improving levels of inventory and stabilizing price growth,” explained NAR chief economist Lawrence Yun. “Furthermore, the job market has shown continued strength in the past six months. This bodes well for solid demand to close out the year and the likelihood of additional months of year-over-year sales increases.”

Looking at price, the median price in October for existing homes of all types grew to $208,300, which was 5.5 percent over October 2013’s median price, and marked the 32nd straight month of annual price increases. Where inventory was concerned, supplies of existing homes fell 2.6 percent in October to 2.22 million units for sale, representing a 5.1-month supply at October’s sales rate. Inventory has been a key concern among real estate watchers, because an adequate supply keeps prices down, which helps ensure decent sales volume.

“The growth in housing supply this year will likely prevent the drastic sales slowdown and coinciding spike in home prices we saw last winter due to low inventory,” Yun noted. “However, more housing starts are needed to increase supply, meet current demand and keep price growth in check.”

Housing Starts and Permits

In other real estate news, permits issued for construction of new homes hit a six-and-a-half-year high, but starts on construction of new homes saw a drop, according to data released by the Census Bureau last week.

Permits issued for private housing hit an annual rate of 1,080,000 in October, which was 4.8 percent higher than September’s rate and 1.2 percent higher than October 2013’s rate. Permits for single-family homes hit a rate of 640,000, which was 1.4 percent higher than September’s rate.

Construction starts on private housing in October dipped to an annual rate of 1,009,000, which was 2.8 percent under September’s rate, but was 7.8 percent higher than October 2013’s rate. Starts on single-family homes hit an annual rate of 696,000, which was 4.2 percent higher than September’s rate.

While October figures might come across like a mixed bag, the report generally pointed to continued improvement, according to HSBC Securities USA economist Ryan Wang.

“Conditions in the housing market are at least stable, and on the margin they appear to be improving a bit,” Wang told Bloomberg. “We should expect continued gradual growth heading into next year.”

Initial Jobless Claims

Looking at near-term employment activity, first-time claims for unemployment benefits filed by the newly unemployed continued to fall, and overall insured unemployment was at a 14-year low. Initial unemployment claims filed during the week ending Nov. 15 dropped to 291,000, a fall-off of 2,000 claims from the prior week’s revised level of 293,000, the Employment and Training Administration reported last week.

The four-week moving average for initial jobless claims — considered a more stable measure of near-term layoffs — notched up to 287,500, a gain of 1,750 from the preceding week’s revised average of 285,750, but still at the lowest levels in years.

Notably, the total population of unemployed workers covered by benefits for the week ending Nov 8 fell to 2,330,000, a drop of 73,000 from the previous week. This was the lowest level since Dec. 16, 2000, when the population was 2,322,000.

This week, we can expect a busy, but condensed slate of economic releases due to the Thanksgiving holiday:

  • Tuesday — The second estimate of third quarter GDP from the Bureau of Economic Analysis.
  • Wednesday — Initial jobless claims for last week from the Employment and Training Administration; November consumer confidence from The Conference Board; October Durable goods orders from the Census Bureau; October personal incomes and spending from the Bureau of Economic Analysis; November consumer sentiment from the University of Michigan and Thomson-Reuters Survey of Consumers; and October new home sales from the Census Bureau and the Department of Housing and Urban Development.

Posted in Economic Advisor



Economic Advisor: November 19, 2014
November 19, 2014


 

Retail sales performed better than expected, layoffs increased, but remained at low levels, and wholesalers posted decent sales and inventory gains.

Retail Sales

Retail sales bounced back in October, with retail and food services transactions growing 0.3 percent to $445.5 billion, according to last week’s report from the Census Bureau. Compared to a year ago, October’s receipts came in 4.1 percent higher than October 2013’s retail totals.

Nearly every segment of the retail market showed improvement for October. Key performers included non-store retailers, which grew by 1.9 percent; sporting goods, hobby, books and music stores, which increased by 1.2 percent; food service and drinking establishments, which enjoyed a 0.9 percent gain; and health and personal care stores, which notched up 0.7 percent. The two sectors that faired poorly were electronics and appliance stores, which were down 1.6 percent, and gas stations, which dropped 1.5 percent.

October’s retail performance outpaced analyst expectations of a 0.2 percent gain. Some retail sales watchers said they had expected good news after other data points released in October indicated they might have some cause for optimism.

“When October came in we know from the employment reports that incomes went up and confidence was doing relatively well,” IHS Global Insight Chris Christopher told the Los Angeles Times. “So wham-o, you get a pretty strong October.”

Initial Jobless Claims

Initial jobless claims jumped up last week from the 14-year low posted two weeks ago. First time claims for unemployment benefits filed by the newly unemployed during the week ending Nov. 8, shot up to 290,000, a sizable gain of 12,000 claims from the prior week’s very low total of 278,000, the Employment and Training Administration reported last week.

To put things in context, this is the longest stretch where initial jobless claims totaled less than 300,000 since 2000.

“Despite the week’s increase, the trend in claims remains consistent with labor-market improvements,” BNP Paribas economist Derek Lindsey told the Wall Street Journal.

The four-week moving average, which is considered a more reliable measure of lay-offs grew to 285,000, a gain of 6,000 over the preceding week’s average of 279,000.

Wholesale Inventories

Inventories for merchant wholesalers hit $538.8 billion in September, marking a 0.3 percent gain over August and a 7.4 percent increase from September 2013, the Census Bureau reported last week. The gain was somewhat in line with market expectations of 0.2 percent growth.

Wholesalers add to their inventories when they anticipate sales increases, and total receipts for wholesalers in September would seem to indicate that. Sales for wholesalers for the month hit $454.3 billion, up 0.2 percent from August, and were 5.2 percent higher than September 2013’s level.

This put September’s wholesale inventory-to-sales ratio at 1.19, which, when compared on an annual basis, was slightly ahead of September 2013’s ratio of 1.16.

This week, we can expect:

  • Monday — Industry production and capacity utilization for October from the Federal Reserve.
  • Tuesday — October producer price index from the Bureau of Labor Statistics.
  • Wednesday — Housing starts for October from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; October consumer price index from the Bureau of Labor Statistics; November existing home sales from the National Association of Realtors; leading economic indicators for October from The Conference Board.

Posted in Economic Advisor



Economic Advisor: November 12, 2014
November 12, 2014


 

Unemployment continued to drop, while initial jobless claims plummeted to a 14-year low, consumer credit grew, and residential construction ticked up by slight amount.

Unemployment

The economy added 214,000 jobs in October, with food and drink establishments, retail trade, and healthcare businesses helping drive job growth, according to last week’s report from the Bureau of Labor Statistics. This pushed the unemployment rate down to 5.8 percent with 9 million Americans out of work according to the Bureau’s report.

“We’re seeing solid job growth, and broad-based job growth,” Department of Labor Secretary Thomas Perez told Time. “If you’d taken a group of pundits one years ago when the unemployment rate was 7.2, very few would have said it would go to 5.8 percent.”

October’s population of long-term unemployed — those out of work for 27 weeks or longer — saw little change, hovering at 2.9 million people. The long-term unemployed comprised 32 percent of total unemployment. The labor force participation rate — the number of employed people as a percentage of the total number of employable Americans — remained flat at 62.8 percent.

The population of people employed on part-time basis for economic reasons, such as only being able to find part-time work or their hours getting cut, was unchanged in October at 7 million.

“That number is still very elevated, which suggests that even though the employment numbers look pretty good, if people aren’t getting the type of job that they want there’s still room for improvement,” economist Tara Sinclair said in an NPR interview.

Initial Jobless Claims

Turning to current employment statistics, first-time claims for unemployment benefits filed by the newly unemployed fell to their lowest point since April 2000. Initial jobless claims filed in the week ending Nov. 1 dropped to 278,000, a significant drop of 10,000 claims from the preceding week’s revised level of 288,000, the Employment and Training Administration reported last week.

The four-week moving average, considered a more accurate gauge of near-term layoffs fell to 279,000, a decline of 2,250 from the previous week’s revised average of 281,250. The report wrapped up a month of solid job creation and low layoffs.

“The level of claims is now extremely low,” Pantheon Macroeconomics chief economist Ian Shepherdson told the Wall Street Journal. “It signals very rapid payroll growth.”

Consumer Credit

Consumer credit for September increased by $15.9 billion to $3.26 trillion, marking a 5.9 percent gain over August, the Federal Reserve reported last week. This met market expectations for growth of $16 billion.

Non-revolving debt, such as student and car loans, was the big driver for September’s growth, increasing 7.3 percent to $2.38 trillion. Revolving debt, such as credit cards grew 2 percent to $881.8 billion.

Construction

Overall construction for September fell slightly by 0.4 percent to an annual rate of $950.9 billion, but spending on residential construction grew 0.4 percent to an annual rate of $349.1 billion, according to last week’s figures from Census Bureau. Overall, construction was still up on an annual basis, remaining 2.9 percent over August 2013’s rate.

This week, we can expect:

  • Wednesday — September wholesale inventories from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; October budget from the Treasury Department.
  • Friday — October retail sales totals and September business inventories from the Census Bureau; October export and import prices from the Census Bureau and Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: November 5, 2014
November 5, 2014


 

Third quarter GDP grew beyond expectations; personal incomes grew, but not as well as expected, while spending was down; and initial jobless claims continued to perform well.

GDP

Gross domestic product, which represents the value of U.S. goods and services, grew at an annual rate of 3.5 percent during the third quarter, outpacing expectations of 3 percent growth, according to last week’s report from the Bureau of Economic Analysis.

The big drivers for the GDP gain were government spending and particularly defense spending, which were up 10 percent and 16 percent respectively. Also, a 7.8 percent gain in export, and a 1.7 percent decrease in imports helped. Meanwhile, personal consumer expenditures grew 1.8 percent; durable goods increased 7.2 percent; and investments gained 5.5 percent. This was almost directly opposite from the second quarter, in which government spending was down, defense spending made a tiny gain, and the other, more consumer- and production-driven segments posted significantly higher gains.

That contrast, along with the fact that the increases in government and defense spending would be temporary, left some analysts wondering how GDP would fare in the fourth quarter.

“The report affirmed what was broadly believed to be the case: the economy grew at an above trend rate in recent months, extending its strong advance since early spring,” Plante Moran Financial Advisors chief investment officer Jim Baird wrote in a public statement. “While top-line growth exceeded expectations, the degree to which it was driven by likely unsustainable gains in government spending and the balance of trade takes a bit of the bloom off the rose. Stronger results in personal consumption and private investment would have been preferred.”

Personal Incomes and Spending

Personal income grew $22.7 billion, or 0.2 percent, in September and disposable personal income (DPI; income after taxes) improved by $15.7 billion, or 0.1 percent, the Bureau of Economic Analysis reported last week. The personal income gain was just short of the 0.3 percent growth the market had expected.

Meanwhile, personal consumption expenditures (PCE) dropped $19.0 billion, or 0.2 percent, in contrast to an increase of $58.7 billion. Personal outlays — which combine PCE, personal interest payments, and personal current transfer payments — dropped $14.5 billion in September, compared to an increase of $63.4 billion in August.

“The decline was on the heels of a pretty outsized gain in August so some payback should have been expected,” RBC Capital Markets LLC chief U.S. economist Tom Porcelli told Bloomberg. “The quarter ended on relatively soft footing from a spending perspective, however consumer fundamentals remain fairly sound.”

Meanwhile, savings were up for the month. Personal saving — DPI minus personal outlays — grew to $732.2 billion in September over August’s $702.0 billion. The personal saving rate — described as personal saving as a percentage of DPI — notched up to 5.6 percent in September from August’s 5.4 percent.

Initial Jobless Claims

First-time claims for unemployment benefits grew, but remained at very low levels. Initial jobless claims filed during the week ending Oct. 25 hit 287,000, an increase of 3,000 claims from the preceding week’s revised level of 284,000, the Employment and Training Administration reported last week.

While claims were up, they were up from a very low point. To put things in perspective, the total of 266,000 claims from two weeks ago was the lowest total for new claims since April 2000.

The four-week moving average, considered a more stable measure of jobless claims, dipped to 281,000, a drop of 250 from the prior weeks revised average.

“Claims are already low enough, when coupled with mostly robust indicators of the pace of hiring, to signal payroll gains of 250K-plus over the next few months,” Pantheon Macroeconomics chief economist Ian Shepherdson wrote in a public statement. “If that happens, the unemployment rate will continue to fall rapidly … .”

This week, we can expect:

  • Monday — Car and truck sales for October from the auto manufacturers.
  • Tuesday — September factor orders from the Census Bureau; September trade balance from the Census Bureau and Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Third quarter productivity scores from the Bureau of Labor Statistics.
  • Friday — September consumer credit scores from the Federal Reserve; October unemployment rate, payrolls, earnings and workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: October 29, 2014
October 29, 2014


 

Sales of existing home sales bounced back with vigor, while new home sales contracted slightly, and initial jobless claims hit a 14-year low.

Existing Home Sales

After a decline in August, existing home sales rebounded in September to their highest pace so far this year, the National Association of Realtors reported last week. Total sales of existing single-family homes, townhomes, condominiums and co-ops grew 2.4 percent to an annual rate of 5.17 million in September. While sales are at their highest rate for the year 2014, but they lag 1.7 percent behind September 2013’s 5.26 million-unit pace.

Low interest rates and price gains holding steady led to September’s healthy increase, even with investor activity remaining on par with last month’s marked decline,” said NAR chief economist Lawrence Yun. “Traditional buyers are entering a less competitive market with fewer investors searching for available homes, but may also face a slight decline in choices due to the fact that inventory generally falls heading into the winter.”

Looking at price, the median price for existing homes of all types in September was $209,700, which was 5.6 percent higher than September 2013. This marked the 31st consecutive month of year-over-year price growth.

Those price increases could be due to limited inventory, which was down again. Inventory for all housing types in September notched down 1.3 percent to 2.3 million homes for sale, representing a 5.3-month supply at September’s sales pace. That said, unsold inventory was 6 percent greater than a year ago.

New Home Sales

In related news, sales of new single-family homes grew 0.2 percent in September to an annual rate of 467,000, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development. Compared annually, this was 17 percent over September 2013’s estimated pace of 399,000.

While low rates on mortgages have helped foster slight growth in new home sales, some real estate experts expect that wages and price will mean that growth will be gradual at best.

“This was going to be a very lengthy recovery for the housing sector, and we still have a long way to go,” Raymond James & Associates Inc. chief economist Scott Brown told Bloomberg. “The low mortgage rates are very helpful. The job growth is very, very helpful. But we’re still seeing relatively tight mortgage credit and relatively weak growth in average wages.”

Looking at price, the median sales price for new home sold in September was $259,000 and the average sales price was $313,200. The estimated inventory of new homes for sale at the end of September hit 207,000, representing a 5.3-month supply at September’s sales rate.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly jobless remained at low levels, despite some growth. Initial jobless claims filed during the week ending Oct. 18 grew to 283,000, a gain of 17,000 claims over the prior week’s revised level of 264,000.

While the weekly score was up, the four-week moving average, considered a more stable measure of near-tern employment activity, actually dropped to 281,000, which was 3,000 claims under the preceding week’s average of 284,000. This marked the lowest level since May 6, 2000 when the average was at 279,250.

“There’s no let-up in the labor-market improvement,” High Frequency Economics’ chief U.S. economist Jim O’Sullivan told Bloomberg. “There’s no sign of any spillover from the turmoil in the markets and the global slowdown. The U.S. economy is chugging along despite the global turmoil.”

This week, we can expect:

  • Tuesday — Durable goods orders for September from the Census Bureau; October consumer confidence scores from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; advance Third Quarter GDP from the Bureau of Economic Analysis.
  • Friday — Personal incomes and spending from the Bureau of Economic Analysis; consumer sentiment for October from the University of Michigan and Thomson-Reuters Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: October 22, 2014
October 22, 2014


 

New home construction showed indications that housing inventory is coming out of its late-summer doldrums, and initial jobless claims plummeted to a 14-year low, while retail sales shrank slightly.

Home Construction

Construction of new homes returned a solid performance in September and in many aspects outpaced the same period a year ago. Permits for the construction of private homes issued in September grew 1.5 percent over August to hit an annual rate of 1,018,000, the Census Bureau reported last week. Meanwhile, permits issued for construction of single-family homes ticked down 0.5 percent to hit an annual rate of 624,000.

Starts on construction of private housing enjoyed a 6.3 percent jump to an annual rate of 1,017,000, which was a solid 17.8 percent higher than September 2013’s rate of 863,000. Starts on single-family homes grew 1.1 percent to a rate of 646,000.

Completions of housing constructions popped up 8.6 percent to an annual rate of 999,000, which was a whopping 31.3 percent over September 2013’s rate. Completions on single-family homes notched up 1 percent to a rate of 624,000. This difference between overall housing construction performance and single-family homes in specific gave some real estate watchers reason to be guarded in their assessment of the Bureau’s report.

“In the wake of the considerable volatility seen in the financial markets this week, the immediate reaction to the September construction data was a large sigh of relief,” wrote Richard Moody, chief economist of Regions Financial. “The details of the construction data, however, don’t make us feel any more positive about the single-family segment of the housing market, which continues to plod along at a frustratingly slow pace.”

Initial Jobless Claims

Initial jobless claims cascaded to their lowest point in 14 years, with first-time claims for jobless benefits filed by the newly unemployed during the week ending Oct. 11, nose-diving to 264,000, a drop of 23,000 claims from the previous week’s total of 287,000, the Employment and Training Administration reported last week.

This marked the lowest point for initial jobless claims since April 15, 2000’s total of 259,000 claims. Even with a healthy dose of skepticism, the numbers were still solid, according to Pantheon Macroeconomics’ chief economist Ian Shepherdson.

“In one word: Spectacular,” Shepherdson wrote. “Whether claims can be sustained at such a low level — an all-time low, as a share of payroll employment — is debatable, given that the prior trend was about 295,000, but this is a clear signal of real strength in the labor market.”

The four-week moving average, considered a more dependable measure of new jobless claims, dropped to 283,500, a decrease of 4,250 claims from the previous week’s average of 287,750. This marked the lowest level for this average since June 10, 2000 when it was 283,500.

Retail Sales

Retail sales for September were off, with retail and food services transactions ticking down 0.3 percent to $442.7 billion, according to last week’s report from the Census Bureau. That said, September’s performance was still 4.5 percent higher than September 2013’s showing,

Looking at retail categories, the one strong performer was electronics and appliances stores, which posted a 3.4 percent gain for September. Health and personal care stores also showed a slight gain of 0.3 percent; food services and drinking establishments notched up 0.6 percent; and general merchandise stores grew 0.2 percent.

Meanwhile, all other categories were down. Some of the largest drops were clothing and accessory store sales, which fell 1.2 percent; building material and garden stores, which dropped 1.1. percent; gas stations, which shrank 0.8 percent; and motor vehicle and parts dealers, which also fell 0.8 percent.

For anyone watching consumer spending, September’s numbers gave reason for guarded concern, but one month does not make a trend. The key for better cash register receipts in the future will be better paychecks, according to RBS Securities Inc. U.S. economist Omair Sharif.

“The fact that real wages and salaries haven’t picked up that dramatically, it puts a ceiling on how much spending can accelerate,” Sharif told Bloomberg. “It seems like relatively widespread softness in spending. The pickup in consumption that we’re all waiting for hasn’t quite taken off yet.”

This week, we can expect:

  • Tuesday — Existing home sales for September from the National Association of Realtors.
  • Wednesday — The consumer price index for September from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for September from The Conference Board.
  • Friday — New home sales for September from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: October 15, 2014
October 15, 2014


 

The pace of consumer credit growth slowed, while initial jobless claims hit an eight-year low, and wholesale sales saw an unexpected drop.

Consumer Credit

Consumer borrowing for August grew 5 percent to $3.24 trillion, according to last week’s report from the Federal Reserve. While consumer credit was still growing, the pace had slowed to its lowest level since November 2013, and the month’s total growth of $13.5 billion was well below market expectations of $20 billion.

The big driver for August’s lackluster scores was poorly performing credit cards. Revolving debt, such as credit cards, decreased by 0.3 percent to $880.3 billion, while non-revolving debt, such as student or car loans, grew 7 percent to $2.36 trillion.

While the slowdown was disappointing, it’s no reason to go running to the hills. A single monthly report doesn’t represent a trend, reminded Matt Schulz, senior industry analyst for CreditCards.com.

“Maybe what we’re seeing is consumers taking a little bit of a break after going on a nice little shopping spree over the last five months,” Schulz told the Los Angeles Times. “You want a certain amount of growth to indicate they’re confident and to keep the economy humming, but there’s that delicate balance of “Do people have too much debt?”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending Oct. 4, dropped to 287,000, a decrease of 1,000 claims, from the prior week’s revised level of 288,000, the Employment and Training Administration reported last week. This pushed initial jobless claims to their lowest level since February 2006.

“With the pace of firings exceptionally low, and surveys signaling robust hiring, we have to expect very strong payroll growth,” Pantheon Macroeconomics chief economist Ian Shepherdson told the Wall Street Journal.

The four-week moving average, which is considered to be a more reliable measure of recent unemployment activity, fell to 287,750, a decline of 7,250 from the preceding week’s revised average of 295,000. This too was the lowest level for the average since February 2006.

Wholesale Inventories

Sales for merchant wholesalers, except manufacturers’ sales branches and offices, dropped 0.7 percent in August to reach $453.9 billion, the Census Bureau reported last week. While the drop was unexpected, wholesale sales were 5.8 percent higher than August 2013.

Some notable wholesale segments were durable goods, which ticked up 0.1 percent; nondurable goods, which dropped 1.3 percent; metals and minerals, which grew 1.6 percent; petroleum and petroleum products, which dropped a considerable 4.2 percent; and sales of farm product raw materials, which fell 3.8 percent.

That sales slowdown helped push total inventories for merchant wholesalers to $538 billion in August, marking a 0.7 percent drop from July. This put the August inventories-to-sales ratio for wholesalers at 1.19, which was not significantly different than the August 2013 ratio of 1.16.

This week, we can expect:

  • Wednesday — Retail sales for September and August business inventories from the Census Bureau; the September Producer Price Index from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; industrial production and capacity utilization for September from the Federal Reserve.
  • Friday — September housing starts and building permits from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: October 8, 2014
October 8, 2014


 

Unemployment fell to its lowest point since 2008, new jobless claims dropped and personal spending and incomes were up, but construction spending dipped.

Unemployment

Unemployment fell below 6 percent for the first time since 2008, with the economy adding 248,000 jobs in September, which pushed the unemployment rate down to 5.9 percent, the Bureau of Labor Statistics reported last week. Overall, the number of unemployed Americans dropped by 329,000 to 9.3 million.

The big drivers for September’s job gains were in professional and business services, retail trade, and healthcare.

“This is a very muscular report,” RBC Global Asset Management chief economist Eric Lascelles told the Washington Post. “It’s showing powerful job creation, no matter how one cares to slice it.”

That said, there were still Americans trying to get into the workforce. The population of long-term unemployed people — those without jobs for 27 weeks or longer — continued to hover at 3 million, comprising 31.9 percent of total unemployment. The labor force participation rate — those employed or looking for work compared to the total population of employable individuals — also was essentially unchanged at 62.7 percent. Also, the number of people involuntarily employed part-time because either their hours had been cut or that was the only work they could find was holding at 7.1 million in September.

“The remaining challenge now is to ensure that the rising tide that we clearly see lifts all boats,” Labor Secretary Thomas Perez told the Post.

Initial Jobless Claims

In related news, initial jobless claims saw positive performance, as first-time claims for unemployment benefits filed by the newly unemployed during the week ending Sept. took an unexpected tumble to 287,000, a drop of 8,000 claims from the prior week’s revised level of 295,000, the Employment and Training Administration reported last week.

The four-week moving average, which is a more stable gauge of near-term unemployment, dipped to 294,750, a decline of 4,250 from the preceding week’s revised average of 299,000.

Personal Incomes

Personal incomes and spending both saw increases in August, according to data released last week by the Bureau of Economic Analysis. Specifically, incomes grew by $47.3 billion, or 0.3 percent, and disposable personal income (DPI; income after taxes) increased $35.2 billion, or 0.3 percent, in August, meeting market expectations of 0.3 percent growth.

Similarly, personal consumption expenditures (PCE) increased $57.5 billion, or 0.5 percent, slightly outpacing market expectations of 0.4 percent. Personal outlays — which combine PCE, interest payments, and transfer payments — saw a strong increase of $60.4 billion in August, compared with July’s increase of $3.5 billion.

Personal savings, which is DPI minus personal outlays, dipped to $705.3 billion in August from July’s $730.5 billion. Likewise, the personal saving rate, which describes the personal saving as a percentage of DPI, dipped to 5.4 percent in August from 5.6 percent in July.

Overall, the incomes and spending gains pointed to sustained economic improvement, according to TD Securities economist Millan Mulraine.

“(The data) is a further signal that the positive momentum in domestic activity is being sustained,” Mulraine told the Christian Science Monitor.

Construction Spending

One down note was that construction spending saw its second decline in the past three months, with spending in August dropping 0.8 percent from July to an annual rate of $961 billion, the Census Bureau reported last week. That said, August’s spending was still 5 percent higher than August 2013’s rate of $915.3 billion.

Residential construction fared better, falling only 0.1 percent in August to an annual rate of $351.7 billion.

The drop was largely unexpected by economists, and the sudden volatility followed six months of gains, which makes August’s drop tough to pin down.

“This is a volatile series, but the 12-month trend is still headed in the right direction … higher,” BMO Capital Markets economist Jennifer Lee told Business Insider.

This week, we can expect:

  • Tuesday — Consumer credit scores for August from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; August wholesale inventories from the Census Bureau.
  • Friday — September export and import prices from the Census Bureau and Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: October 1, 2014
October 1, 2014


 

There was give and take in real estate with new home sales posting solid gains while existing home sales dropped. Meanwhile, initial jobless claims grew slightly but remained at low levels.

New Home Sales

New home sales skyrocketed to a six-year high in August with transactions of new single-family homes hitting an annual average of 504,000 for the month, the Census Bureau and the Department of Housing and Urban Development reported last week. August’s sales represented an 18 percent gain over July’s revised average of 427,000, and were 33 percent higher than August 2013’s average of 379,000.

August’s gain was welcome news after July’s sudden drop, and helped calm any jitters real estate market watchers might have had over the housing market’s recovery.

“We expect some of this buoyancy to be reversed in the coming month, but continue to believe that the underlying fundamentals of the housing sector remain favorable,” TD Securities’ deputy chief economist Millan Mulraine told the Reuters news service.

Looking at price and inventory, August’s median sales price for new homes was $275,600, and the average sales price was $347,900. There were an estimated 203,000 new homes for sale at the end of August, representing a 4.8-month supply at the month’s sales pace.

Existing Home Sales

Meanwhile, existing home sales fell in August after four consecutive months of gains, but the cause most likely had more to do with investors than the economy, according to data released last week from the National Association of Realtors.

Sales of existing single-family homes, townhomes, condominiums and co-ops, declined 1.8 percent to an annual rate of 5.05 million in August. That performance marked the second-highest sales pace of 2014, but August’s rate still came in 5.3 percent below the August 2013’s 5.33 million-unit level.

NAR chief economist Lawrence Yun chalked up August’s drop to some investors begging off from the market. All-cash transactions — typical of investors — comprised 23 percent of August’s sales, compared to 29 percent in July, marking the second consecutive monthly drop in cash transactions the lowest share since December 2009.

“There was a marked decline in all-cash sales from investors,” he explained. “On the positive side, first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country. … As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying.”

While volume was down, prices were still up. August’s median price for existing-homes of all types $219,800, which was 4.8 percent higher than August 2013, and marked the 30th consecutive month of year-over-year price gains. August’s housing inventory dropped 1.7 percent to 2.31 million existing homes for sale, representing a 5.5-month supply at August’s rate.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly jobless increased, but remained at pre-recession levels. Initial jobless claims filed during the week ending Sept. 20, notched up to 293,000, a gain of 12,000 claims from the prior week’s revised total of 281,000, according to the Employment and Training Administration.

The four-week moving average, considered a more accurate measure of near-term employment activity, dipped to 298,500, a decline of 1,250 from the preceding week’s revised average of 299,750.

This week, we can expect:

  • Monday — Personal incomes and spending for August from the Bureau of Economic Analysis.
  • Tuesday — Consumer confidence for August from The Conference Board.
  • Wednesday — August construction spending from the Census Bureau; September car and truck sales from the auto manufacturers.
  • Thursday — August factory orders from the Census Bureau.
  • Friday — September unemployment rate, payrolls, hourly earnings, workweek from the Bureau of Labor Statistics; and August trade balance from the Census Bureau and the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: September 24, 2014
September 24, 2014


 

Housing starts saw a significant drop, while first-time unemployment claims plummeted to a 14-year low, and consumer prices dropped to their lowest point in more than a year.

Housing Starts

After seeing a solid performance in July, new home construction news for August was not exactly stellar, with permits and housing starts both seeing drops, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development.

Building permits issue in August for construction of residences of all types, fell to an annual rate of 998,000, marking a 5.6 percent drop from July’s revised rate of 1,057,000. Permits for single-family homes took a smaller hit, dropping only 0.8 percent to 626,000 in August from July’s 631,000. Overall, permits are still 5.3 percent higher than August 2013.

Starts on construction of private housing took a steep fall in August to an annual average of 956,000, marking a sizable 14.4 percent drop from July’s revised estimate of 1,117,000. Starts on single-family homes saw a much smaller drop, falling 2.4 percent to 643,000. Overall, constructions starts were still 8 percent higher than August 2013.

Meanwhile, completions of private housing in August hit an annual average of 892,000, which was 3.2 percent over July’s revised estimate of 864,000 and was 16.9 percent higher than August 2013’s average of 763,000.

But permits and starts are the key figures to watch as they indicate future real estate activity. Bearing that in mind, the wild swings between July’s gains and August’s losses should be taken with a grain of salt given that much of the fluctuation has been occurring in construction of multi-family dwellings, such as apartments, and because single-month performances aren’t indicative of trends.

“Overall, the weakness in this report reflects the expected giveback from the unexpected surge in activity the month before, and is not an indication of weakening underlying momentum in the sector,” Millan Mulraine, deputy head of U.S. research and strategy at TD Securities, noted in a public statement.

Initial Jobless Claims

New jobless claims saw another big swing. After initial jobless claims saw an increase of 11,000 claims in the week ending Sept. 6, first-time claims for unemployment benefits filed by the newly unemployed nose dived to 280,000 claims during the week ending Sept. 13, marking a massive 36,000-claim fall from the previous week’s revised level of 316,000, the Administration reported last week.

This brought initial jobless claims to their second-lowest level in 14 years.

“With the exception of the week of July 19, when claims were distorted by the automakers’ shutdowns, this is the lowest reading since May 2000,” Pantheon Macro’s Ian Shepherdson told Business Insider.

The four-week moving average, which is considered a more stable measure of near-term jobs activity, also saw a downward trend, dropping to 299,500 claims, a decline of 4,750 from the preceding week’s 304,250 claims.

Consumer Prices

Consumer prices dropped to their lowest point in a year and a half, with the Consumer Price Index for All Urban Consumers (CPI-U) declining 0.2 percent in August, the Bureau of Labor Statistics reported last week.

August’s big price mover was energy. While the food and shelter indexes both rose 0.2 percent in August, those gains were offset to a considerable degree by a 2.6 percent drop in energy prices, which was especially fueled by a 4.1 decline in gasoline prices.

For those watching inflation as an indicator as to whether or not the Fed will move interest rates, it appears that unless consumer prices see a major shift there will likely not be much interest rate movement in the near future.

“With inflation below target and no indication of an acceleration, the first increase in the fed funds rate, the central bank’s key short-term rate, will not come until July 2015,” PNC Financial Services Group chief economist Stuart Hoffman told the Wall Street Journal.

This week, we can expect:

  • Monday — Existing home sales for August from the National Association of Realtors.
  • Wednesday — New home sales for August from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Second quarter GDP from the Bureau of Economic Analysis; and consumer sentiment for September fro the University of Michigan and Thompson-Reuters survey of consumers.

Posted in Economic Advisor



Economic Advisor: September 17, 2014
September 17, 2014


 

Consumer credit posted its biggest monthly gain since 2001; retail sales bucked predictions of a lull and posted a gain, instead; and initial jobless claims grew, but remained at healthy levels.

Consumer Credit

Consumer credit scored its biggest gain in nearly 13 years in July, with borrowing for the month growing by 9.7 percent to reach a total of $3.23 trillion, the Federal Reserve reported last week. This marked a $26 billion gain, which was well over the $17 billion the market had expected. Consumer credit hasn’t seen that big a monthly gain since a $28 billion spike in November 2001.

Non-revolving credit, such as car and student loans, posted the biggest increase, enjoying a 10.6 percent gain in July to hit $2.35 trillion. That said, revolving debt, such as credit cards, also posted a sizable 7.4 percent increase to hit $880.5 billion. The spike in non-revolving debt was driven by car loans, according to FTN Financial Chief Economist Chris Low.

“The only thing we have to worry about is there is excessive risk-taking in the auto sector,” Low told the Reuters news service. “But it’s still a good thing for the economy at least in the short term. Car sales are back to where they were before the financial crisis, which is remarkable.”

Retail Sale

If consumer spending was supposed to see a summer lull, someone forgot to tell the consumers. Retail and food service sales totaled $444.4 billion in August, an increase of 0.6 percent over July and a 5 percent increase from August 2013, according to data released by the Census Bureau last week.

In line with August’s consumer credit numbers, spending gained across a number of categories, including motor vehicles and parts, which grew by 1.5 percent; building materials, which were up 1.4 percent; sport goods, hobby, book and music stories, which grew 0.9 percent; and health and personal care retailers, which posed a 0.6 percent gain.

“Consumers are not going hog wild, but they are responding to the better labor market by gradually increasing their spending,” PNC Financial Services Group chief economist Stuart Hoffman told the Wall Street Journal.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending Sept. 6 hit 315,000, a gain of 11,000 claims from the prior week’s revised level of 304,000, according to last week’s report from the Employment and Training Administration.

While the total was over the market expectation of a dip to 300,000 claims, initial jobless claims were still hovering around pre-recession levels. Moreover, because the totals fell over the Labor Day holiday, that could have influenced the results.

“Claims have been running around 300,000 for a couple of months now, so I would not regard this as a deterioration in labor demand,” RBS Securities Inc. U.S. economist Omair Sharif told Bloomberg. “It was during Labor Day holiday, so odds are that there are some seasonal adjustment problems. Underlying labor demand remains very firm, and certainly that is going to help consumer spending going forward.”

Bearing that in mind, the four-week moving average, which is considered a more stable measure of near-term employment activity, ticked up to 304,000, which was a slight, 750-claim increase over the preceding week’s revised average of 303,250.

This week, we can expect:

  • Monday — August industrial production and capacity utilization from the Federal Reserve.
  • Tuesday — August producer price index from the Bureau of Labor Statistics.
  • Wednesday — August consumer price index from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; August housing starts and construction permits from the Census Bureau.
  • Friday — Leading economic indicators for August from The Conference Board.

Posted in Economic Advisor



Economic Advisor: September 10, 2014
September 10, 2014


 

Hiring suffered an unexpected slow-down; new claims for unemployment benefits saw a slight increase, but remained on solid footing; and construction spending enjoyed a rebound.

Employment

The latest jobs figures showed the unemployment rate down, but weak job growth. While the unemployment rate ticked down to 6.1 percent in August, the economy added only 142,000 non-farm jobs, the Bureau of Labor Statistics reported last week.

August’s new jobs total ranked well under the more-than-200,000 jobs that has been the norm over several months. That said, economists warned not to panic at August’s weak job growth as statistically it did represent a trend, and because other aspects of the economy performed well during the month.

“I don’t believe the numbers,” TIAA-CREF chief economist Tim Hopper told the Washington Post. “Not only are they very weak, they just don’t match anything else that’s in the market right now.”

Looking at some deeper statistics, the number of long-term unemployed workers (those without jobs for 27 weeks or longer) dropped by 192,000 to 3 million in August. The long-term unemployed comprised 31.2 percent of all out-of-work Americans for the month, and compared to a year ago, the number of long-term unemployed has fallen by 1.3 million people.

August’s civilian labor force participation rate (the ratio between the number of people available for work and the population of employable individuals) hovered at 62.8 percent, essentially unchanged since April.

The number of Americans involuntarily employed part time for economic reasons, because either their hours had been cut or that was the only work they could find, totaled 7.3 million in August, seeing little change from July.

Initial Jobless Claims

In more recent employment activity, first-time claims for unemployment benefits filed by the newly unemployed during the week ending Aug. 30 notched up to 302,000, a gain of 4,000 claims from the prior week’s total of 298,000, according to last week’s numbers from the Employment and Training Administration.

To put things in perspective, initial jobless claims fell to 279,000, their lowest point of the year so far, in July, and have basically hovered around that point since. First-time unemployment claims haven’t been that low since 2006.

“This is an extraordinarily low pace of layoffs,” said Pierpont Securities economist Stephen Stanley told the Wall Street Journal.

The Administration’s four-week moving average, a more stable measure of near-term job activity, saw a similar bump up to 302,750 claims, a gain of 3,000 from the preceding week’s average of 299,750.

Construction Spending

Construction spending during July enjoyed a 1.8 percent boost to an annual rate of $981.3 billion, the Census Bureau reported last week. Compared to last year, July’s total as 8.2 percent higher than the July 2013 estimate of $906.6 billion.

July’s total spending marked its best performance in five-and-a-half years, and its percentile growth well outpaced the 1 percent economists had projected.

Spending on private construction grew 1.4 percent to an annual rate of $701.7 billion, and spending on residential construction grew by 0.7 percent to an annual rate of $358.1 billion.

This week, we can expect:

  • Monday — Consumer credit totals for July from the Federal Reserve.
  • Wednesday — July wholesale inventories from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; August budget from the Treasury Department.
  • Friday — August retail sales and July business inventories from the Census Bureau; August import and export prices from the Census Bureau and the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: September 3, 2014
September 3, 2014


 

New home sales continued to perform below expectations, and incomes and spending ticked up and down, respectively. Meanwhile, initial jobless claims saw a slight decline.

New Home Sales

While, as Economic Advisor reported last week, existing home sales enjoyed solid gains in July, sales of new homes in July were down for the third straight month, hitting their weakest pace since March.

Sales of new single-family homes during July 2014 dropped 2.4 percent to an annual rate of 412,000, marking, the Census Bureau and the Department of Housing and Urban Development reported last week. That said, on an annual basis, July’s new home sales came in 12.3 percent higher than July 2013’s estimated rate of 367,000.

Looking at price, the median sales price for new homes sold in July was $269,800, and the average price was $339,100. In terms of inventory, there were an estimated 205,000 new homes for sale at the end of July, representing a six-month supply at July’s sales rate.

“The new-home sales figures by now have that lived-in feeling, with few signs of a significant change, in either direction, over the near term,” Regions Financial Chief Economist Richard Moody wrote in a public statement. Moody went on to characterize the new-home market as “basically running in place.”

Incomes and Spending

Personal incomes grew $28.6 billion, or 0.2 percent, continuing an upward trend, but not as large as June’s gain of $67.1 billion (0.5 percent), according to last week’s report from the Bureau of Economic Analysis. Disposable income, which is income after taxes, saw similar performance in July, growing by $17.7 billion, or 0.1 percent.

Meanwhile, personal consumption expenditures (PCE) declined $13.6 billion, or 0.1 percent, a disappointing reversal of June’s PCE gain of $50.5 billion, or 0.4 percent. Both incomes and spending are key to economic performance, as consumer spending represents roughly 70 percent of the U.S. economy.

“Higher wages have been slow to appear and gains in the stock market are not enjoyed by all,” Global Insight economist Chris Christopher told the Wall Street Journal. “More widespread income gains are needed to get all consumers back on solid footing.”

July’s personal savings, which is DPI minus personal outlays, grew to $739.1 billion, compared with June’s $709.4 billion.  July’s personal savings rate, which is personal saving as a percentage of DPI, notched up to 5.7 percent, compared with June’s 5.4 percent.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed dropped for the second week in a row. Initial jobless claims filed during the week ending Aug. 23 notched down to 298,000, a decline of 1,000 claims from the prior week’s revised level of 299,000, the Employment and Training Administration reported.

The four-week moving average, considered a more stable gauge of near-term employment, saw similar activity, coming in at 299,750 claims, a drop of 1,250 from the preceding week’s revised average of 301,000.

This week, we can expect:

  • Tuesday — Construction spending for July from the Census Bureau.
  • Wednesday — July factory orders from the Census Bureau; and August car and truck sales from the auto manufacturers.
  • Thursday — July trade balance from the Census Bureau; second quarter productivity from the Bureau of Labor Statistics; and initial jobless claims for last week from the Employment and Training Administration.
  • Friday — August unemployment, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: September 3, 2014
September 3, 2014


 

New home sales continued to perform below expectations, and incomes and spending ticked up and down, respectively. Meanwhile, initial jobless claims saw a slight decline.

New Home Sales

While, as Economic Advisor reported last week, existing home sales enjoyed solid gains in July, sales of new homes in July were down for the third straight month, hitting their weakest pace since March.

Sales of new single-family homes during July 2014 dropped 2.4 percent to an annual rate of 412,000, marking, the Census Bureau and the Department of Housing and Urban Development reported last week. That said, on an annual basis, July’s new home sales came in 12.3 percent higher than July 2013’s estimated rate of 367,000.

Looking at price, the median sales price for new homes sold in July was $269,800, and the average price was $339,100. In terms of inventory, there were an estimated 205,000 new homes for sale at the end of July, representing a six-month supply at July’s sales rate.

“The new-home sales figures by now have that lived-in feeling, with few signs of a significant change, in either direction, over the near term,” Regions Financial Chief Economist Richard Moody wrote in a public statement. Moody went on to characterize the new-home market as “basically running in place.”

Incomes and Spending

Personal incomes grew $28.6 billion, or 0.2 percent, continuing an upward trend, but not as large as June’s gain of $67.1 billion (0.5 percent), according to last week’s report from the Bureau of Economic Analysis. Disposable income, which is income after taxes, saw similar performance in July, growing by $17.7 billion, or 0.1 percent.

Meanwhile, personal consumption expenditures (PCE) declined $13.6 billion, or 0.1 percent, a disappointing reversal of June’s PCE gain of $50.5 billion, or 0.4 percent. Both incomes and spending are key to economic performance, as consumer spending represents roughly 70 percent of the U.S. economy.

“Higher wages have been slow to appear and gains in the stock market are not enjoyed by all,” Global Insight economist Chris Christopher told the Wall Street Journal. “More widespread income gains are needed to get all consumers back on solid footing.”

July’s personal savings, which is DPI minus personal outlays, grew to $739.1 billion, compared with June’s $709.4 billion.  July’s personal savings rate, which is personal saving as a percentage of DPI, notched up to 5.7 percent, compared with June’s 5.4 percent.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed dropped for the second week in a row. Initial jobless claims filed during the week ending Aug. 23 notched down to 298,000, a decline of 1,000 claims from the prior week’s revised level of 299,000, the Employment and Training Administration reported.

The four-week moving average, considered a more stable gauge of near-term employment, saw similar activity, coming in at 299,750 claims, a drop of 1,250 from the preceding week’s revised average of 301,000.

This week, we can expect:

  • Tuesday — Construction spending for July from the Census Bureau.
  • Wednesday — July factory orders from the Census Bureau; and August car and truck sales from the auto manufacturers.
  • Thursday — July trade balance from the Census Bureau; second quarter productivity from the Bureau of Labor Statistics; and initial jobless claims for last week from the Employment and Training Administration.
  • Friday — August unemployment, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: August 27, 2014
August 27, 2014


 

Last week enjoyed a hat trick of good news, with existing home sales enjoying particularly good performance, new home construction following with solid gains, and initial jobless claims falling more than expected.

Existing Homes

Sales of existing single-family homes, townhomes, condominiums and co-ops during July hit their highest point in the year, and distressed property sales dropped to an important low. July’s existing home sales grew 2.4 percent to hit an annual rate of 5.15 million, marking the fourth consecutive month of growth and the highest pace of 2014, the National Association of Realtors reported last week. That said, July’s sales were still 4.3 percent down from July 2013’s 5.38 million-home rate.

NAR’s chief economist Lawrence Yun chalked up July’s gains to increasing inventory holding down prices: “The number of houses for sale is higher than a year ago and tamer price increases are giving prospective buyers less hesitation about entering the market,” he explained. “More people are buying homes compared to earlier in the year and this trend should continue with interest rates remaining low and apartment rents on the rise.”

Also notable was the fact that sales of distressed homes, such as foreclosures and short sales, comprised 9 percent of July’s transactions, which was down from 15 percent a year ago, and marked the first time distressed home sales were in the single digits since October 2008.

July’s median price for existing home sales rang in at $222,900, marking a 4.9 percent gain over July 2013, and marked the 29th consecutive month of year-over-year price increases. Helping keep prices somewhat in check was a 3.5 percent increase in inventory to 2.37 homes for sale, representing a 5.5-month supply at July’s sales pace.

Housing Starts

New home construction also saw good news. Starts on construction of new homes in July jumped a whopping 15.7 percent to hit an annual rate of 1,093,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. July’s housing starts were also 7.7 percent over July 2013’s estimate of 977,000. Starts on single-family homes grew by 8.3 percent to a rate of 656,000.

Construction permits for new homes issued in July were also up, growing 8.1 percent to an annual rate of 1,052,000. Permits issued for single-family homes grew 0.9 percent to an annual rate of 640,000.

Last, but not least, completed constructions of homes in July grew by 3.7 percent to an annual rate of 841,000, with completions of single-family homes growing by 6.2 percent to a rate of 811,000.

What these numbers point to is an increase in the inventory that economists have been calling for in order to ensure home sales volume moves up while prices stay in check.

Initial Jobless Claims

First-time claims for unemployment insurance filed by the newly unemployed during the week Aug. 16 dove to 298,000, a drop of 14,000 claims from the prior week’s revised level of 312,000, the Employment and Training Administration reported last week. This soundly beat market expectations of 308,000 claims.

That said, the four-week moving average, which is considered a more reliable measure of near-term employment activity notched up to 300,750 claims, a gain of 4,750 from the preceding week’s revised average of 296,000 claims.

Still, initial claims are looking positive according to Pantheon Macro’s Ian Shepherdson: “The downward trend continues, and is consistent with strong payroll numbers,” Shepherdson told Business Insider. “… This time last year, claims were trending at about 335,000, so the improvement has been substantial, and enough on its own to suggest that payroll growth should be able to sustain a pace close to 250,000 per month.”

This week, we can expect:

  • Monday — New home sales totals for July from the Census Bureau.
  • Tuesday — Durable goods for July from The Census Bureau; and consumer confidence scores for August from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; and the second estimate of Q2’s GDP from the Bureau of Economic Analysis.
  • Friday — July personal incomes and spending from the Bureau of Economic Analysis; and August consumer sentiment from the University of Michigan and Thomson-Reuters.

Posted in Economic Advisor



Economic Advisor: August 20, 2014
August 20, 2014


 

Retail sales were in a holding pattern, while producer prices saw small, measured gains, and near-term employment saw an unexpected increase, but remained on a generally positive trend.

Retail Sales

Retail sales for July were essentially flat, ringing in at $439.8 billion, which was nearly unchanged from June, according to last week’s report from the Census Bureau. This was the weakest monthly reading since January but was 3.7 percent higher than July 2013’s total.

July’s receipts were well down from the 0.3 percent growth economists had expected, and most experts chalked up July’s middling performance to a 0.2 percent drop in auto sales. Without car sales, July’s retail sales would have shown a 0.1 percent gain over June.

Retail sectors that did see solid growth in July included food and beverage stores, which enjoyed 0.3 percent growth over June; health and personal care stores, which were up 0.4 percent; clothing stores, which saw a 0.4 percent gain; and miscellaneous retailers, which grew by a healthy 0.9 percent.

While July’s retail performance wasn’t strong, many economists do not see a negative trend, and are expecting gains in month to come.

“Given the strong gains in labor market activity, along with other indications of strengthening domestic growth momentum, we expect this slowdown to be short-lived and we look for consumer spending to rebound strongly in the coming months,” TD Securities deputy chief economist Millan Mulraine told the Reuters news service.

Producer Price Index

The Producer Price Index rose 0.1 percent in July, which was a tapering off from a 0.4 percent advance in June the Bureau of Labor Statistics reported last week. Compared to last year, the PPI was up 1.7 percent from July 2013, which should ease some concerns about possible escalating inflation that arose after a 2.1 percent annual increase in April, a 2 percent increase in May and a 1.9 percent increase in May.

Looking at some specific categories, producer prices for foods were up 4 percent; energy was down 0.6 percent; processed goods were up 0.1 percent; unprocessed goods were down in 2.7 percent; and services were up 0.3 percent.

“Aside from recent energy weakness, the PPI results continued to point to a steady firming in underlying inflation trends that we expect to continue,” Morgan Stanley economist Ted Wieseman wrote in a public statement.

Initial Jobless Claims

First-time claims for unemployment insurance filed by the newly unemployed during the week ending Aug. 9 hit an unexpected 311,000, a gain of 21,000 from the prior week’s revised level of 290,000, the Employment and Training Administration reported. This marked a six-week high, but claims were still below pre-recession levels.

“Despite the rise in claims, the underlying downward trend remains firmly in place,” Sterne Agee chief economist Lindsey Piegza told the Wall Street Journal. “Businesses continue to reduce the number of layoffs.”

Last week’s four-week moving average, which is considered a more dependable measure of recent employment activity, ticked up slightly to 295,750 claims, a rise of 2,000 from the previous week’s revised average of 293,750.

This week, we can expect:

  • Tuesday — Consumer price index for July from the Bureau of Labor Statistics; housing starts and construction permits for July from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; existing home sales for July from the National Association of Realtors; and leading economic indicators for July from The Conference Board.

Posted in Economic Advisor



Economic Advisor: August 13, 2014
August 13, 2014


 

The most recently released reports indicate that consumer credit showed improvement in June, but the pace of its gains clearly slowed. Meanwhile factory orders enjoyed an unexpected bump, and new jobless claims fell below 300,000 again.

Consumer Credit

Consumer borrowing was still on the rise in June, but the pace of growth has slowed to its lowest level in four months. Overall, consumer credit rose 6.5 percent in June to hit $3.21 trillion dollars, according to figures released last week by the Federal Reserve.

The majority of June’s consumer borrowing growth was fueled by non-revolving debt, such as car loans and student loans. Non-revolving debt increased 8.4 percent for the month to reach $2.33 trillion. Meanwhile, revolving debt, such as credit cards, grew by 1.3 percent to $873 billion.

June’s performance showed that many consumers were eschewing whipping out the plastic, and instead focused their borrowing on larger items. While some might initially worry this could impact consumer spending, given positive retail sales in the recent past, what this could indicate is a great willingness on the part of Americans to pursue big-ticket purchases.

“Consumers are gradually feeling more comfortable borrowing and lenders are a little more comfortable lending,” Gus Faucher, senior economist at PNC Financial Services Group Inc., told Bloomberg last week. “That’s going to be good for growth.”

Factory Orders

Factory orders, considered a sneak-peak of wholesale inventory levels, resumed their positive growth in June after a surprise 0.6 percent drop in May, and actually beat market expectations.

New orders for manufactured goods placed in June, grew by 1.1 percent to $503.2 billion, outpacing the 0.5 percent growth that was expected, according to last week’s release from the Census Bureau. This marked the highest level of factory growth since the series was published in 1992.

Manufacturers’ shipments, which, like orders, were up four of the last five months, grew 0.5 percent in June to $499.8 billion. Inventories, up 19 of the last 20 months, notched up 0.3 percent in June to $653.8 billion. The inventories-to-shipments ratio was the same as May at 1.31, This also marked the highest shipments and inventories since the series was published in 1992.

Initial Jobless Claims

First-time claims for jobless benefits filed by the newly unemployed continued to fall, dropping to an eight-year low. Initial unemployment insurance claims filed in the week ending Aug. 2, dropped by 14,000 claims to 289,000, The Employment and Training Administration reported last week. This also marked the second lowest initial jobless claims figure in the year.

The four-week moving average, considered a more stable figure for looking at recent employment activity, dropped to 293,500 claims, a decline of 4,000 from the prior week’s revised average of 297,500. This was the lowest four-week moving average since February 2006.

This week, we can expect:

  • Tuesday — The July budget from the Treasury Department.
  • Wednesday — July retail sales and June business inventories from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; July export and import prices from the Census Bureau and the Bureau of Economic Analysis.
  • Friday — July producer price index from the Bureau of Labor Statistics; July industrial production and capacity utilization from the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: August 6, 2014
August 6, 2014


 

The unemployment rate for July edged up, while initial jobless claims grew and construction spending shrank.

Unemployment

The unemployment rate for July grew by a tenth of a percent to 6.2 percent, but the economy also added 209,000 jobs for the month, according to last week’s report from the Bureau of Labor Statistics. While the rate gain might raise eyebrows, the month marked the sixth consecutive month that the economy added more than 200,000 jobs — a positive trend that hasn’t happened since the 1990s.

All told, July recorded 9.7 million Americans out of work, which was not far off from June. On a yearly basis, the number of out-of-work people has dropped by 1.1 percent, or 1.7 million people.

July’s labor force participation rate, which describes the percentage of employable people either with jobs or looking for one, stood at 62.9 percent, which wasn’t much different from June. The number of people who have been unemployed for 27 weeks or longer (the long-term unemployed) hovered at 3.2 million in July, which accounted for 32.9 percent of total unemployment.

The number of Americans involuntarily employed part time in July either because their hours had been cut or because that’s the only work they could find stood at 7.5 million, little changed from June.

“This report is consistent with a moderation in economic growth in the second half of the year,” Dean Maki, chief U.S economist for Barclays, told the New York Times. “This is a labor market that is growing solidly, just not quite as fast as in prior month.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the recently unemployed during the week ending July 26 jumped to 302,000, a 23,000-claim increase from the previous week’s revised level of 279,000, the Employment and Training Administration Reported last week.

While the drop was sizable, it’s important to note that during last month initial jobless claims were at their lowest average level in eight years. Moreover, it’s worth remembering that the week before last initial jobless claims hit a 14-year low.

Turning to the Administration’s four-week moving average, which is considered a more stable measure of new jobless claims, dropped to 297,250, a decline of 3,500 claims from the previous week’s level of 300,750. This was the lowest level for this average since April 15, 2006, when it was 296,000.

Construction Spending

Turning to real estate, construction spending during June dropped by 1.8 percent to an annual rate of $950,200 billion, but was 5.5 percent over June 2013’s estimate of $900,300 billion, the Census Bureau reported last week.

July represented the largest monthly drop in more than three years. For a housing market that is looking for inventory to help keep prices in check, the slowdown in construction spending was not welcome news.

Spending on private construction dipped 1 percent in June to an annual rate of $685,500 billion, with residential construction ticked down 0.3 percent to an annual rate of $355,900. Single-family home construction dropped by 1.4 percent to an annual rate of $184,200.

This week, we can expect:

  • Tuesday — June factory orders from the Census Bureau.
  • Wednesday — June balance of trade from the Census Bureau and the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; consumer credit totals for June from the Federal Reserve.
  • Friday — Second quarter productivity from the Bureau of Labor Statistics; June wholesale inventories from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: July 30, 2014
July 30, 2014


 

Real estate suffered from a split personality last week, with existing home sales posting regained momentum while new home sales experienced setbacks. Meanwhile, near-term employment scores gave cause for cheer.

Existing Home Sales

Existing home sales hit their fastest pace since October 2013, with transactions of existing single-family homes, townhomes, condominiums and co-ops climbing 2.6 percent to an annual rate of 5.04 million in June, according to last week’s report from the National Association of Realtors. The news of progress was encouraging, but sales are still 2.3 down from their 5.16 million-unit page from a year ago.

The reason for the turnaround was, as expected, inventory. Experts have been calling for a larger supply of homes for sale to help push volume while tempering prices, and now the market is seeing that happen, according to NAR chief economist Lawrence Yun.

“Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country,” he explained. “This bodes well for rising home sales in the upcoming months as consumers are provided with more choices. On the contrary, new home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages – particularly in the West – are still putting upward pressure on prices.”

Yun cautioned that while U.S. employment has seen solid improvement, wages are still down, and that decreased buying power is keeping the housing market from bouncing back as big as it could.

In terms of inventory, June rose 2.2 percent to 2.30 million existing homes for sale at the end of the month, which constituted a 5.5-month supply at June’s sales pace. Looking at price, the median price for existing homes of all types in June was $223,300, which was 4.3 percent over June 2013 and marked the 28th month in a row of year-over-year price increases.

New Home Sales

While existing home sales were up in June, sales of new single-family homes dropped to an annual rate of 406,000 for the month, the Census Bureau and the Department of Housing and Urban Development reported last week. This was 8.1 percent under May’s May rate of 442,000 and was11.5 percent off from June 2013’s estimated pace of 459,000.

Why the drop? IHS Global Insight economist Stephanie Karol, who described the report as “dismal”, attributed part of June’s poor performance to the overarching concern of the real estate market: location.

“When choosing between a new house in the middle of nowhere and an existing home in a better location, buyers are likely to choose the latter,” she wrote in an analysis. “Since lending standards are easing for construction and land development credit, the scarcity of well-located, shovel-ready lots should resolve itself, but it will take some time.”

Looking at price, the median sales price for new homes in June 2014 was $273,500, and the average price was $331,400. Where inventory is concerned, the estimated pool of new homes for sale at the end of June was 197,000, which represented a 5.8-month supply at June’s sales rate.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed plummeted to an eight-year low, according to last week’s report by the Employment and Training Administration. Initial claims filed during the week ending July 19 fell to 284,000, a drop of 19,000 claims from the prior week’s revised level of 303,000. This is the lowest level for initial claims since February 18, 2006, which were 283,000.

The Administration’s four-week moving average, which is considered a more stable measure of near-term job activity fell to 302,000 claims, a decline of 7,250 claims from the preceding week’s revised average of 309,250. This was the lowest level for this average since May 19, 2007 when it was 302,000.

This week, we can expect:

  • Tuesday — Consumer confidence for July from The Conference Board.
  • Wednesday — Advance second quarter GDP scores from the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Unemployment rate, payrolls, earnings and average workweek for July from the Bureau Labor Statistics; personal incomes and spending for June from the Bureau of Economic Analysis; June construction spending from the Census Bureau; and July car and truck sales from the auto manufacturers.

Posted in Economic Advisor



Economic Advisor: July 23, 2014
July 23, 2014


 

Retail sales for June and near-term employment activity offered encouraging news last week, but new homes construction disappointed real estate market watchers.

Retail Sales

Retail and food services sales for June grew by 0.2 percent to reach $439.9 billion, the Census Bureau reported last week. To give an annual comparison, this was 4.3 percent higher than June 2013.

Some key growth categories include general merchandise stores, which grew by 1.1 percent; health and personal care stores, which posed a 0.9 percent gain; clothing and accessory stores, which gained 0.8 percent; and sporting goods, hobby, book and music stores, which were up 0.6 percent.

June’s core retail sales figure, which strips out cars, gasoline, building materials and food services, grew by 0.6 percent last month. June’s core retail growth was noteworthy, because spending in the remaining retail categories is what helps fuel growth in the consumer sector.

“This is not a fragile economy,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ, told the Reuters news service. “The consumer continues to play their part in moving the economy forward.”

Housing Starts

Housing starts dropped to their lowest level in nine months. Construction permits issued for private housing in June dropped 4.2 percent to an annual rate of 963,000, according to last week’s report from the Census Bureau. Meanwhile, permits issue for single-family home constructions grew by 2.6 percent to reach a rate of 631,000.

Starts on construction of private homes for the month took a heavy drop of 9.3 percent to a rate of 893,000, and starts on single-family homes correspondingly dropped 9 percent to hit an annual rate of 575,000.

Completed constructions of private housing in June dropped a sizable 12 percent to an annual rate of 789,000. Completions of single-family homes fell 6.5 percent to an annual rate of 586,000.

Needless to say, for a real estate market that experts have been saying is in need of inventory in order to see volume growth, June’s weak housing starts are not an encouraging sign.

“This was a hugely disappointing report, especially in light of the substantial increase in new home sales during May, a pick-up in homebuilder confidence to a six-month high, and mortgage rates that have recently tracked lower,” TD Economics senior economist Michael Dolega told USA Today. Dolega added he expects a turnaround in coming months as the jobs front continues to improve.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the recently unemployed continued to drop, keeping new claims at their lowest level since 2007. Initial jobless claims filed during the week ending July 12 dropped to 302,000, a 3,000-claim drop from the previous week’s revised level of 305,000, the Employment and Training Administration Reported.

Similarly, the four-week moving average, which is considered a more stable measure of recent jobless scores, dipped to 309,000, a decline of 3,000 claims from the previous week’s revised average of 312,000. This is the lowest level for the four-week moving average since June 2, 2007, when it dropped to 307,500.

“The declining trend in claims is very encouraging, and is further evidence that the strong payrolls number we saw for June is not a fluke,” Moody’s Analytics Inc. senior economist Ryan Sweet told the Bloomberg news service. “The labor market is gaining momentum. This is consistent with strong gains in consumer spending.”

This week, we can expect:

  • Tuesday — Consumer price index for June from the Bureau of Labor Statistics; existing home sales for June from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; June new home sales from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: July 16, 2014
July 16, 2014


 

While last week saw a light calendar of economic headlines, it still witnessed some significant news, with better-than-expected consumer credit and initial jobless claims. Also, wholesale sales and inventories saw gains, which was cause for optimism.

Consumer Credit

Consumer credit saw an encouraging gain in May, according to last week’s report from the Federal Reserve. Total consumer borrowing for the month hit $3.19 trillion, a 7.4 percent, or $19.6 billion, gain over the previous month when the market was expecting only a $15 billion increase.

Non-revolving debt, such as car or student loans, continued to be a key driver for consumer borrowing, growing 9.3 percent in May to $2.32 trillion. Revolving debt, such as credit card transactions, grew by 2.5 percent during the month to $872.2 billion.

May’s credit gains coincided with solid gains in several retail sales categories (reported by the Census Bureau in June). The willingness of consumers to assume more debt pointed to increased belief in the economy, according to Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd.

“This says a lot about the confidence of consumers and bodes well in terms of future spending,” Rupkey told the Bloomberg news services. “Their ability to take on more debt, because of the firmer job market means this economy has some staying power.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed fell further than anticipated, according to last week’s numbers from the Employment and Training Administration. The market had expected last week’s numbers to match the previous week’s total of 315,000 claims, but that wasn’t the case.

Instead, claims filed in week ending July 5 dropped to 304,000, a solid decline of 11,000 from the previous week’s 315,000-claim mark. The numbers seemed to be confirmed by the four-week moving average, which dropped to 311,500, marking a 3,500-claim reduction from the previous week’s average of 315,000. (The four-week moving average is considered a more reliable figure to measure near-term employment activity.)

“Overall, unemployment claims have been exceptionally stable at low levels as of late and suggests that labor market conditions continue to improve,” BNP Paribas economist Yelena Shulyatyeva told MarketWatch.

Wholesale Sales and Inventories

Turning to the merchant side of the economy, sales for merchant wholesalers, except manufacturers’ sales branches and offices, grew 0.7 percent in May to hit $453.2 billion, the Census Bureau reported last week.

Looking at supply, total inventories for merchant wholesalers saw a similar gain of 0.5 percent to hit $532.7 billion in May. This put the inventory-to-sales ratio for merchant wholesalers in May at 1.18. The May 2013 ratio was 1.16.

That increase in inventories came as encouraging news, as it points to expectations of increased sales activity for wholesalers in coming months.

This week we can expect:

  • Tuesday — Retail sales totals for June, export and import prices for June, and May business inventories from the Census Bureau.
  • Wednesday — June producer price index from the Bureau of Labor Statistics; Industrial production and capacity utilization for June from the Federal Reserve.
  • Thursday — Initial jobless claims from the Employment and Training Administration; housing starts and building permits for June from the Census Bureau.
  • Friday — June leading economic indicators from The Conference Board.

Posted in Economic Advisor



Economic Advisor: July 9, 2014
July 9, 2014


 

Employment continued to improve in June, but is not out of the woods, while last week’s initial jobless claims continue to ride a positive trend. Meanwhile construction spending was up for May, but housing wasn’t a part of that increase.

Unemployment

June showed good news on the unemployment front, but the job market still has much recovering to do. The economy added 288,000 non-farm jobs in June, unemployment rate to 6.1 percent from 6.3 percent in May, the Bureau of Labor Statistics reported last week. Overall, the number of unemployed Americans dropped by 325,000 to 9.5 million.

The problem is that the recovery in employment has been particularly slow for the long-term unemployed. The number of workers unemployed for 27 weeks or longer dropped by 293,000 in June to 3.1 million, which was positive. However, the long-term jobless comprised 32.8 percent of June’s population of unemployed workers.

Given June’s labor force participation rate — which is the ratio of the current workforce compared to the total number of employable individuals, continued to hover at 62.8 percent for the third consecutive month — it’s clear that the plight of the long-term unemployed is not over by a long shot, but the situation is slowly improving.

Meanwhile, the number of workers employed part-time for economic reasons such as their hours being cut or because they couldn’t find full-time work, grew by 275,000 in June to 7.5 million. That said, the population of “involuntary” part-time workers remained down for the year so far, and the Bureau said June’s up-tick did not indicate a clear trend.

Initial Jobless Claims

Fast-forward to more recent employment activity, and first-time claims for jobless benefits slightly increased last week, but remained at a low level not seen since 2007.

Initial claims for unemployment benefits filed by the newly unemployed during the week ending June 28 notched up to 315,000, a gain of 2,000 claims over the previous week’s revised level of 313,000, the Employment and Training Administration reported last week.

The four-week moving average, which is considered a more stable number of near-term employment activity, seemed to confirm the slight increase. Last weeks four-week moving average edged upward to 315,000 claims, an increase of 500 claims from the prior week’s revised average of 314,500.

Construction Spending

In real estate, construction spending during May skirted up to an annual rate of $956.1 billion, marking a 0.1 percent gain over April’s revised estimate of $955.1 billion, according to last week’s report from the Census Bureau. Compared to last year, May’s rate was 6.6 percent over May 2013’s estimated rate of $896.6 billion.

While construction as a whole was up in May, housing that was not residential construction dipped to an annual rate of $354.8 billion for the month, marking a 1.5 percent drop from April’s revised estimate of $360.1 billion. While that drop might create concerns about housing inventory (a key factor in housing prices), it’s important to remember that the June 23 Economic Advisor reported that housing completions in May actually posted a 6.8 percent increase.

This week we can expect a light slate of economic headlines:

  • Tuesday — Consumer credit scores for May from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; May wholesale inventories from the Census Bureau.
  • Friday — June Treasury budget from the Treasury Department.

Posted in Economic Advisor



Economic Advisor: July 2, 2014
July 2, 2014


 

Real estate sales heated up with noteworthy increases in both existing and new home sales, initial jobless claims dropped slightly, and both incomes and spending saw gains in last week’s economic headlines.

New Home Sales

Sales of new single-family homes in May hit a six-year high, coming in at an annual rate of 504,000, the Census Bureau and the Department of Housing and Urban Development reported last week. This marked an 18.6 percent gain over April’s revised rate of 425,000 and a 16.9 percent increase from May 2013’s estimate of 431,000, and was the biggest one-month increase in 22 years.

With May’s gains as towering as they were, many economists warned that the monthly new homes data can be volatile and could be revised downward. But even with a revision, May’s soaring upswing could not be ignored.

“Housing is beginning to revive,” IHS Global Insight economist Stephanie Karol told Bloomberg. “It’s a step in the right direction. The job market is helping, and there was an expansion of supply the past couple of months.

In terms of price, the median sales price for new homes sold in May was $282,000 and the average sales price was $319,200. Looking at inventory, the estimated number of new homes for sale in May was 189,000, constituting a 4.5-month supply at May’s sales pace.

Existing Home Sales

Existing home sales saw their best increase since 2011, with transactions single-family homes, townhomes, condominiums and co-ops growing 4.9 percent to an annual rate of 4.89 million in May, according to last weeks report from the National Association of Realtors. That said, existing homes sales have a way to go, as May’s rate was still 5 percent below May 2013’s 5.15 million-unit pace.

In addition to an improving job market, a growing supply of homes helped keep prices in check, which in turn helped push sales volume, according to NAR’s chief economist Lawrence Yun. May’s inventory of existing homes grew 2.2 percent to 2.28 million homes available for sale, representing a 5.6-month supply at May’s sales pace.

“Rising inventory bodes well for slower price growth and greater affordability, but the amount of homes for sale is still modestly below a balanced market,” Yun said. Therefore, new home construction is still needed to keep prices and housing supply healthy in the long run.”

Looking at price, the median existing-home price in May was $213,400, which was 5.1 percent over May 2013.

Initial Jobless Claims

Turning to recent employment scores, first-time claims for unemployment benefits by the newly unemployed during the week ending June 21 ticked down to 312,000, a decline of 2,000 from the prior week’s revised level of 314,000, the Employment and Training Administration reported last week.

That said, the four-week moving average, which is a more steady measure of near-term unemployment, hit 314,250, an slight gain of 2,000 from the preceding week’s revised average of 312,250.

Incomes and Spending

Both incomes and spending were up for May. Personal income increased $58.8 billion, or 0.4 percent, and disposable personal income (DPI) increased $55.6 billion, or 0.4 percent, in May, according to last week’s report from the Bureau of Economic Analysis. The key driver for income was private wages and salaries, which increased $27.8 billion in May, which was noticeably higher than April’s increase of $17.9 billion.

Personal consumption expenditures (PCE) increased $18.3 billion, or 0.2 percent. Similarly, personal outlays, which combine PCE, personal interest payments and personal current transfer payments, grew by $18 billion in May.

Personal savings, which is DPI less personal outlays, grew to $620.3 billion in May, in comparison with $582.7 billion in April. The personal savings rate, which describes personal saving as a percentage of disposable personal income, grew to 4.8 percent in May from 4.5 percent in April.

This week we can expect all the economic releases to come in before Friday in honor of Independence Day (enjoy the holiday!):

  • Tuesday — May construction spending from he Census Bureau; June car and truck sales from the auto manufacturers.
  • Wednesday — May factory orders from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; May balance of trade from the Census Bureau and Bureau of Economic Analysis; June unemployment, payrolls, hourly earning and average workweek from the Bureau of Labor Statistics.

 

Posted in Economic Advisor



Economic Advisor: June 23, 2014
June 25, 2014


 

First-time unemployment claims continued to decline, while consumer prices notched up. New home construction offered mixed news as permits dipped while completions posted solid gains.

Initial Jobless Claims

First-time claims for unemployment insurance filed by the newly unemployed hit a new seven-year low, according to last week’s report from the Employment and Training Administration. Initial jobless claims filed during the week ending June 14 declined to 312,000, a drop of 6,000 claims from the previous week’s revised level of 318,000 The four-week moving average, which is considered a more accurate measure of recent employment news, dipped to 311,750 claims, a decline of 3,750 claims from the prior week’s revised average of 315,500.

The news could indicate that the Bureau of Labor Statistics might report progress in its June employment report, which is due in the beginning of July.

“Through the normal ups and downs in the weekly figures, the trend in initial claims — as well as other details of the claims report — are indicative of improvement in the labor market over the past few months,” J.P. Morgan economist Daniel Silver told the Wall Street Journal last week.

Consumer Prices

Inflation in May saw its biggest gain since early 2013, with the Consumer Price Index for all Urban Consumers (CPI-U) growing by 0.4 percent for the month, the Bureau of Labor Statistics reported last week.

May’s inflation was seen largely in food and energy prices. Prices for food at home (groceries) grew 0.7 percent, which was its biggest monthly gain since 2011. Gasoline also grew, gaining 0.7 percent for the month, but it was not as high as April’s 2.3 percent gain in gas prices. In a related index, transportation services were up 1 percent, but the big energy gainer apart from gasoline prices was electricity was 2.3 percent.

Needless to say, gains in food and fuel don’t sit well with consumers and could impact spending, but the big question being discussed by analysts last week was whether or not gains in consumer prices would influence the Fed to adjust interest rates.

“We have an unemployment rate that’s been falling faster than the Fed expected, and now we’ve got an inflation rate that’s been rising more than the Fed expected,” RDQ Economics LLC chief economist John Ryding explained to the Wall Street Journal. “It raises some interesting questions for those at the Fed who’ve argued that there’s so much slack in the labor market. It really brings into question how much slack there is…”

New Real Estate

Turning to new home construction, building permits issued for private housing dipped to an annual rate of 991,000 in May, which was 6.4 percent below April and was 1.9 percent below May 2013, the Census Bureau and the Department of Housing and Urban Development reported last week. That said, permits issued for single-family homes in May notched up to a rate of 619,000, which was 3.7 percent over April.

Similar to permits, construction starts on private housing in May were at an annual rate of 1,001,000, which was 6.5 percent below April. That said, construction starts for May were 9.4 percent over May 2013. Starts on single-family homes dipped 5.9 percent from April to a rate of 625,000.

But, permits and starts are only part of the story. Completions on private housing hit an annual rate of 897,000 in May, which was a solid 6.8 percent higher than April and a whopping 24.8 percent over May 2013. Completions on single-family homes grew to a rate of 618,000, which 2.1 percent over April. Whether this will expand inventories and temper prices remains to be seen.

This week we can expect:

  • Monday — Existing home sales for May from the National Association for Realtors.
  • Tuesday — New home sales for May from the Census Bureau; and June consumer confidence The Conference Board.
  • Wednesday — May durable goods orders from the Census Bureau; third estimate for First Quarter GDP from the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; personal incomes and spending for May from the Bureau of Economic Analysis.
  • Friday — June consumer sentiment from the University of Michigan-Thompson Reuters Survey of Consumers

Posted in Economic Advisor



Economic Advisor: June 18, 2014
June 18, 2014


 

While retail sales for May were good, they were not as high as expected, however, wholesale inventories for April could point to future gains. Meanwhile, near-term employment activity continues to indicate employers are hanging on to their workers.

Retail Sales

Retail sales for May were still up, but under-performed against market expectations. Retail and food services for the month saw a 3 percent gain, instead of the anticipated 7 percent, which put them at a total of $437.6 billion, according to last weeks report from the Census Bureau. On an annual basis, this marked a 4.3 percent increase from May 2013’s sales.

Key drivers for May’s receipts included sales for motor vehicle and parts dealers, which were up 1.4 percent; building materials and garden supplies dealers, which were up 1.1 percent; and miscellaneous retailers, which were up 1.8 percent.

Growth in retail sales is important given that it drives nearly 70 percent of the U.S. economy. Bearing that in mind, while May was not a barnstormer, it was encouraging nonetheless.

“The continued gains during the first two months of the second quarter suggests that consumers are continuing to hold their side of the bargain, building on the strong momentum at the end of the last quarter,” TD Securities deputy chief economist Millan Mulraine told the Reuters news service.

Wholesale Inventories and Sales

Wholesaler activity could point to increased retail activity in the near future. Last week the Total inventories of merchant wholesalers grew 1.1 percent to $530.6 billion in April, and were 6.7 percent higher than April 2013’s level, the Census Bureau reported last week.

Key wholesale inventory segments were inventories of durable goods, which grew by 0.9 percent in April; electrical and electronic goods, which were up 2.8; metals and minerals, except petroleum, which gained 2.5 percent; and inventories of nondurable goods, which were up 1.4 percent.

Growth in wholesaler inventories usually points to anticipation on the part of wholesalers that they will see sales growth in months to come.

Sales of merchant wholesalers saw similar growth, growing 1.3 percent in April to reach $450.2 billion. April’s activity was 7.8 percent higher than April 2013’s sales level, and put the inventory-to-sales ration at 1.18, close to April 2013’s ratio of 1.19.

Initial Jobless Claims

While the retail sales gains were less than expected, near-term employment maintained a positive trend. First-time claims for unemployment insurance filed by the newly unemployed ticked up slightly, but maintained an encouragingly low level, according to figures released last week by the Employment and Training Administration.

Initial claims for jobless benefits grew to 317,000 during the week ending June 7, a 4,000-claim increase over the previous week’s revised level of 313,000, the Administration reported. This kept first-time unemployment claims at their lowest point since the first half of 2007, before the recession. This points to increasing stability in the job market.

“The underlying trend in claims is still falling, albeit quite slowly, but the decline already recorded this year is more than enough to suggest that payroll gains of 225,000-plus ought to be sustainable,” Pantheon Macroeconomics chief economist Ian Shepherdson told the Wall Street Journal.

The four-week moving average, considered a more reliable measure of near-term employment trends, reflected a similar reality. The four-week average notched up to 315,250, a gain of 4,750 claims from the prior week’s revised average of 310,500.

This week we can expect:

  • Monday — May industrial production and capacity utilization from the Federal Reserve.
  • Tuesday — Housing starts and building permits for May from the Census Bureau; consumer price index for May from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for May from The Conference Board.

Posted in Economic Advisor



Economic Advisor: June 11, 2014
June 11, 2014


 

Last week enjoyed a slate of optimistic economic headlines with unemployment, initial jobless claims and consumer credit all performing better than expected.

Unemployment

Last week saw encouraging news on the employment front, with the U.S. economy adding 217,000 jobs in May, slightly higher than the 215,000 additional jobs economists had expected. This kept the unemployment rate steady at a nearly six-year low of 6.3 percent, with 9.8 million Americans unemployed.

May marked the fourth consecutive monthly gain of 200,000 or more jobs. That steady improvement enjoyed by the U.S. job market was notable, according to Ron Sanchez, executive vice president and chief investment officer at Fiduciary Trust.

“That is the first time that we have seen four consecutive months of 200,000 or more since October of 1999,” Sanchez told Forbes. “For a number that has a high degree of variability, this is notable for its stability. And markets always like to see a true trend, and this would appear to be a well-entrenched trend.”

Still, the job market is not out of the woods. The number of people unemployed for 27 weeks or longer in May was unchanged at 3.4 million, and comprised 34.6 percent of unemployed workers in May. The number of Americans involuntarily employed part-time because their hours had been cut or because that was the only work they could find was also unchanged at 7.3 million people.

The labor force participation rate, which measures the number of working age Americans who are either employed or looking for work, was unchanged in May, at 62.8 percent, well below the pre-recession high of 66 percent.

Initial Jobless Claims

Turning to more recent employment figures, first-time claims filed for unemployment insurance by the newly unemployed were up, but were still hovering around a seven-year low, according to last week’s report from the Employment and Training Administration.

Initial jobless claims filed during May grew 312,000, an 8,000-claim gain over the previous week’s revised total of increase 304,000, the Administration reported. This was the lowest total of new jobless claims since June 2, 2007’s total of 307,500. The four-week moving average, which is considered a more stable measure of new jobless claims, notched down by 2,250 claims to 310,250.

The news was welcome, and pointed to continued economic growth, according to many experts, but many cautioned that while a drop in new jobless claims is good, they are one piece of a larger employment puzzle.

“We need to see continued job growth,” Kathleen Bostjancic, Oxford Economics USA Inc.’s director of U.S. macro investor services, told the Bloomberg news service. “Rising wage growth is one of the missing keys here for the U.S. economy.”

Consumer Credit

Consumer borrowing benefited from bigger-than-unexpected gains in April with an equally unexpected increase credit card spending. Overall, consumer credit grew by a whopping 10.2 percent, reaching $3.17 trillion, according to last week’s release from the Federal Reserve. April’s $26.85-billion gain over March was considerably larger than the $15 billion analysts had predicted.

Adding to the encouragement was the fact that credit card spending fueled April’s growth. Revolving debt, such as credit card spending, grew by a massive 12.3 percent, to reach $870.4 billion. Revolving debt, such as student and car loans, also enjoyed considerable growth, expanding 9.2 percent to reach $2.3 trillion.

However, April’s credit card spending is critical as it indicates an increased willingness on the part of consumers to buy. Besides hinting at increased consumer confidence in at least near-term economic prospects, that consumer spending drives roughly two-thirds of the U.S. economy.

This week we can expect:

  • Tuesday — April wholesale inventories from the Census Bureau.
  • Wednesday — May Treasury budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; April business inventories and May retail sales totals from the Census Bureau; May import and export prices from the Census Bureau and Bureau of Economic Analysis.
  • Friday — May producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: June 4, 2014
June 4, 2014


 

Last week saw incomes increase, while spending posted an unexpected drop, and jobless claims enjoyed a better-than-expected drop, but a drop in the first quarter’s GDP kept optimism in check.

Incomes and Spending

Consumer spending for April threw the experts for a loop when it posted the first monthly loss in a year. Personal income increased $43.7 billion, or 0.3 percent in April, and disposable personal income (DPI; income after taxes) increased $44.6 billion, or 0.3 percent, the Bureau of Economic Analysis reported last week.

Economists had expected personal consumption expenditures (PCE) growth to slow from 1 percent growth in March to 0.2 percent, but April PCE actually decreased $8.1 billion, or 0.1 percent.

Ultimately, April’s performance boils down to consumers needing more income growth, according to Stephen Stanley, chief economist at Pierpont Securities LLC, who predicted the decline according to Bloomberg.

“The risk at this point is that the consumer is falling back into a pattern of mediocre spending growth,” Stanley told Bloomberg last week. “You need to see more wage growth.”

While Americans spent less in April, they’ve saved more. Personal saving, which is DPI less personal outlays (which includes PCE as well as interest and transfer payments) hit $518.1 billion in April, compared to $464.4 billion in March. The personal saving rate — personal saving as a percentage of DPI — grew to 4 percent in April over 3.6 percent in March.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed enjoyed a bigger drop than employment watchers had expected, according to last week’s news from the Employment and Training Administration. While the market had expected initial jobless claims to drop to 318,000 claims, they actually fell to 300,000, a decline of 27,000 claims from the previous week’s revised level of 327,000.

Turning to the four-week moving average, which is considered a more reliable near-term employment statistic because it is less volatile, last week posted a solid 11,250-claim drop to 311,500, a decrease of 11,250 from the previous week’s revised average. This was the lowest level for this average since 311,250 claims in Aug. 11, 2007.

GDP

While incomes were up and near-term employment offered encouraging news, the economy shrank for the first time in three years during the first quarter, according to last week’s report from the Bureau of Economic Analysis. The Bureau reported that real gross domestic product, which is the output of goods and services produced by U.S. labor and property, decreased at an annual rate of 1 percent in the first quarter. Comparatively, the fourth quarter’s real GDP grew by 2.6 percent.

Many experts had expected the bad news based on the first quarter’s dominant trend: terrible weather, which negatively impacted various elements of the economy at that time.

The first quarter’s negative performance casts a shadow on projections that economists made at the outset of 2014 that the year would see 3 percent GDP growth overall. However, lest anyone succumb to too much gloom, various economists noted that current data such as last week’s reports on better-than-expected employment performance and income growth indicate the quarter’s poor performance is already in the process of being reversed.

“The U.S. recovery took a backward step in the first quarter, most likely the result of many parts of the country having been battered by extreme weather at the start of the year,” Chris Williamson, chief economist for Markit, told the Los Angeles Times. “However, current indicators suggest this was merely a temporary setback in an otherwise ongoing robust recovery, pointing to a strong rebound in the second quarter.”

This week we can expect:

  • Monday — Construction spending for April from the Census Bureau.
  • Tuesday — Car and truck sales for May from the auto makers; factory orders for April from the Census Bureau.
  • Wednesday — April trade balance data from the Census Bureau and Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Payrolls, unemployment rate, earnings and workweek for May from the Bureau of Labor Statistics; April consumer credit scores from the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: May 28, 2014
May 28, 2014


 

While last week’s calendar of economic releases was light, real estate enjoyed some good news both in terms of existing and new home sales.

Existing Home Sales

Real estate watchers breathed a sigh of relief as sales of existing single-family homes, townhomes, condominiums and co-ops saw their first gain this year, as well as meaningful increases in inventory, according to last week’s report from the National Association of Realtors.

Total sales of existing homes rose 1.3 percent in April to an annual rate of 4.65 million from 4.59 million in March. That said, they were still 6.8 percent below the 4.99 million-unit pace in April 2013. Ultimately, the growth had to do with pent up demand finally giving away as inventory increased, said Lawrence Yun, NAR’s chief economist.

“Some growth was inevitable after sub-par housing activity in the first quarter, but improved inventory is expanding choices and sales should generally trend upward from this point,” Yun Explained. “Annual home sales, however, due to a sluggish first quarter, will likely be lower than last year.”

Housing inventory at the end of April saw a considerable 16.8 percent gain to 2.29 million existing homes available for sale, constituting a 5.9-month supply at April’s sales pace. Unsold inventory is 6.5 percent higher than a year ago, when there was a 5.2-month supply.

That said, prices were still up, but not as much with April’s median price for existing homes of all types ringing in at $201,700, which was 5.2 percent above April 2013. By comparison, the first quarter’s median price was 8.6 percent higher than the same period last year.

“Current price data suggests a trend of slower growth, which bodes well for preserving favorable affordability conditions in much of the country,” Yun said.

New Home Sales

Transactions of new real estate enjoyed similar gains with, sales of new single-family home hitting annual rate of 433,000, which marked a 6.4 percent gain over the March rate of 407,000, according to last week’s report from Census Bureau and the Department of Housing and Urban Development.

Looking at price the median sales value of new homes sold in April was $275,800; the average sales price was $320,100. Where volume was concerned, the estimated number of new homes for sale at the end of April was 192,000, which represented a 5.3-month supply of homes at April’s sales rate.

Still, home sales have a way to go. On an annual basis, April’s sales were still 4.2 percent lower than April 2013’s estimated rate of 452,000. This is because Americans are facing financial challenges, which means housing will recover as they do, and so far that is happening somewhat slowly.

“I am cautiously optimistic,” IHS Global Insight economist Stephanie Karol told the Los Angeles Times. “I do expect things to get better.

“The driver here on out is going to be job growth and income growth,” she added.

Employment

In other news, initial jobless claims saw a slight increase, but the overall number of unemployed Americans using unemployment insurance was down. The number of newly unemployed people filing first-time claims for unemployment benefits during the week ending May 17 hit 326,000, the Employment and Training Administration reported last week. This was an increase of 28,000 claims from the previous week’s revised level of 298,000 claims.

That said, the four-week moving average — usually considered a more accurate gauge of near-term employment activity — notched down to 322,500, a decline of 1,000 from the prior week’s revised average of 323,500.

Looking at the population of insured unemployed workers, the number of unemployed Americans covered by unemployment benefits during the week ending May 10 declined to 2,653,000, a drop of 13,000 people from the previous week’s revised level. This marked the lowest count of insured unemployed workers since Dec. 1, 2007 when it was 2,639,000 people.

This week, we can expect:

  • Tuesday — Durable goods orders for April from the Census Bureau; Consumer confidence for May from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; second estimate GDP for the first quarter form the Bureau of Economic Analysis.
  • Friday — Personal incomes and spending for May from the Bureau of Economic Analysis; Consumer sentiment for May from the University of Michigan and Thomson-Reuters Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: May 21, 2014
May 21, 2014


 

Last week saw mediocre retail performance, with gains in consumer prices and unexpectedly good, near-term employment figures.

Retail Sales

Retail sales for April were essentially flat seeing just a slight gain, but far below market expectations. U.S. retail and food services sales for April skirted up slightly to $434.6 billion, a gain of 0.1 percent from March, according to the Census Bureau. While April’s retail sale were 4 percent higher than April 2013’s level, the market was hoping for a 0.3 percent gain at the least.

Nearly all categories suffered middling performance, but there were some notables: clothing stores saw a 1.2 percent gain; department store sales grew by 1.8 percent; gas station sales increased 0.8 percent and car and other vehicle dealer sales gained 0.7 percent. On the downward side, some categories that took notable hits were electronics and appliance store sales, which dropped 2.3 percent; food service and drinking establishments, which declined 0.9 percent; and furniture store sales, which shrank by 0.6 percent.

Part of April’s lackluster retail performance could be attributed to the late Easter, which could have pushed some sales into March, which would mean that consumer demand is stronger than the Bureau’s figures might actually indicate.

“The shift in Easter to April did not provide enough bounce to retailers as retail sales struggled to keep their strong spring pace,” National Retail Federation chief executive Matthew Shay told the Los Angeles Times.

Consumer Prices

In related news, consumer prices saw some gains for April, marking the sixth straight monthly gain and biggest gain in 10 months. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent for the month, according to last week’s report form the Bureau of Labor Statistics.

Key categories were the indices for gasoline, shelter and food, which all contributed to a 2 percent increase in the All Items index. The gasoline index rose 2.3 percent, which helped generate the first gain in the energy index since January, even though fuel oil and electricity were both down. The food index rose 0.4 percent for the third consecutive month.

“As consumer demand starts to pick up and consumers are more confident and less sensitive to price changes, you’ll see some pick-up in inflation,” Credit Agricole CIB economist Robert Rosener told the Los Angeles Times. “Overall, prices should be normalizing by the middle of 2015.”

Employment

Meanwhile, there was good news in employment with initial jobless claims hitting a seven-year low. First time claims for unemployment insurance filed by the newly jobless during the week ending May 10 plummeted to 297,000, a decrease of a whopping 24,000 claims from the previous week’s level of 321,000.

Contrary to economists’ predictions that claims would hit 320,000, last week’s total turned out to be the lowest level for initial claims since May 12, 2007.

“It conveys the message of solid economic activity,” chief economic strategist at Miller Tabak Anthony Karydakis told the Reuters news service. “Labor conditions continue to improve and I expect this will be validated by payroll reports over the next few months.”

Looking at the four-week moving average, which is considered a more reliable measure of near-term employment activity, the average fell to 323,250, a decline of 2,000 from the previous week’s revised average of 325,250.

This week will have a light economic news calendar; we can expect:

  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; exiting home sales for April from the National Association of Realtors; April leading economic indicators from The Conference Board; and new home sales for April from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: May 14, 2014
May 14, 2014


 

While last week saw a thin slate of economic headlines, consumer credit saw significant gains, the trade deficit narrowed, and jobless claims saw an encouraging drop.

Consumer Credit

Consumer borrowing saw its biggest gain in a year, with March’s consumer credit total growing by 6.7 percent to a total of $3.14 trillion, according to last week’s report from the Federal Reserve. All told, March saw a $17.5 billion gain in consumer credit activity.

The push was led by non-revolving debt, such as student or car loans, which experienced a substantial 8.7 percent gain, growing from $2.26 trillion in February to $2.28 trillion in March. Meanwhile, revolving debt, such s credit cards grew by 1.6 percent to $856.7 billion in March, from February’s poor showing of $855.6 billion.

“The worst of the de-leveraging is behind us, but the future is less certain,” said, IHS Global Insight Inc.’s financial economics director Paul Edelstein told Bloomberg. “All the debt is really for student lending and autos, but not for credit cards.”

While Edelstein might be overly dismissive of March’s mild revolving debt increase, it is certain that going forward, the key will be to watch for improved revolving debt, as credit card spending is indicative of increased consumer confidence and buying activity (consumer spending fuels roughly 70 percent of U.S. economic activity).

Initial Jobless Claims

After the previous week’s surprise jump, initial jobless claims enjoyed some good news last news. First-time claims for unemployment insurance filed by the newly unemployed during the week ending May 3 dropped to 319,000, a decline of 26,000 claims from the previous week’s revised level of 345,000, according to last week’s report from the Employment and Training Administration.

The four-week moving average — considered a more reliable measure of near-term employment activity — saw a slight gain to 324,750 claims. This marked an increase of 4,500 claims from the prior week’s four-week average of 320,250.

Economists were forecasting that initial jobless claims would fall to 325,000 the week before last, according to Reuters.

“Claims, in conjunction with (last) Friday’s employment number, show that we continue to see an incremental improvement in the labor market,” Fiduciary Trust Company International’s director of fixed income strategies Ron Sanchez told the news service.

Bearing that in mind, many employment watchers expect to see continued progress as the weather warms and the economy picks up.

Trade Balance

Lastly, the international trade gap declined, the Census Bureau and Bureau of Economic Analysis reported last week. March’s total exports of goods and services were valued at $193.9 billion and its imports totaled $234.3 billion, which put the trade deficit at $40.4 billion. This marked a 2.5 percent drop from February’s revised deficit figure of $41.9 billion.

Looking in more detail, March exports grew by $3.9 billion to $193.9 billion, and March imports increased by $2.5 billion to $234.3 billion. That 2.1 percent gain was the highest level since November.

Goods were an important element for March, which saw exports of goods post a $3.7 billion gain to $135.1 billion, and imports of goods increased by $3.1 billion to $195.8 billion. Overall, the goods deficit fell by $0.6 billion to drop to $60.7 billion in March.

“The strong finish to the last quarter points to further improvement in the trade balance in the coming months if this positive momentum is sustained,” TD Securities deputy chief economist Millan Mulraine said in a Reuters interview.

This week, we can expect:

  • Monday — April Treasury budget from the Treasury Department.
  • Tuesday — April retail sales and import and export prices, as well as March business inventories from the Census Bureau.
  • Wednesday — April producer price index from the Bureau of Labor Statistics.
  • Thursday — April consumer price index from the Bureau of Labor Statistics; initial jobless claims for last week from the Employment and Training Administration; and industrial production and capacity utilization for April from the Federal Reserve.
  • Friday — April building permits and housing starts from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: May 7, 2014
May 7, 2014


 

Last week was filled with unexpected employment news shockers, including April seeing the lowest rate of unemployment since 2008 and a surprise increase in initial jobless claims. Meanwhile, personal incomes and spending gained momentum.

Unemployment

The U.S. economy added a whopping 288,000 jobs in April, bringing the unemployment rate down to 6.3 percent from 6.7 in March, the Bureau of Labor Statistics reported last week. This was the lowest unemployment rate since its lowest level since September 2008, and beat analyst’s expectations of a 6.6 percent rate with 215,000 new jobs.

All in all, there were 9.8 million Americans out of work in April, the Bureau stated, which was down by 733,000. The number of long-term unemployed people (those out of work for 27 weeks or longer) dropped by 287,000 in April to 3.5 million. The number of Americans involuntarily employed on a part-time for economic reasons — such as their hours had been cut, or they could not find full-time work — saw little change and hovered at 7.5 million for the month.

Less clear was how the figures jibed with the labor participation rate (the rate of employable Americans actively involved in looking for work). The labor force participation rate notched down by 0.4 percent in April to 62.8 percent. However, the civilian labor force dropped by 806,000 (this followed an increase of 503,000 in March). The Bureau noted that the participation rate has exhibited no clear trend over recent months and currently is the same as it was this past October.

Regardless, many analysts pointed to the report as evidence of a positive overall trend.

“Gains in the jobs market have been good for some time, but recent results continue to point to a gathering strength in recent months, despite the poor economic growth of the first quarter,” said Jim Baird, CIO of Plante Moran Financial Advisors in a public statement.

Initial Jobless Claims

While April showed surprise good news, more recent employment scores brought a disappointing shock: initial jobless claims hit a nine-week high, according to last week’s report from the Employment and Training Administration.

First-time claims filed by the newly unemployed during the week ending April 26, 344,000, an increase of 14,000 from the previous week’s revised level, the Administration reported. Forecasts for the week were at 325,000.

That said, the four-week moving average, which is considered a more reliable measure of near-term unemployment scores, bumped up just 3,000 claims to hit 320,000.

So why were analysts off in their forecasts? Seasonal volatility. Spring break, plus religious holiday such as Passover and Easter make it difficult for job market watchers to predict accurately (yet another reason to always check the four-week moving average).

Incomes and Spending

Turning from employment news, incomes and spending were up for March, according to last week’s report from the Bureau of Economic Analysis. Personal income grew by $78.4 billion, or 0.5 percent, and disposable personal income (DPI; income after taxes) increased $68.0 billion, or 0.5 percent, the Bureau reported.

Likewise, personal consumption expenditures (PCE) were up, growing by $107.2 billion, or 0.9 percent, for the month. Personal outlays, which comprise PCE, interest payments and transfers, increased $109.7 billion in March.

Looking at savings, personal saving, which is DPI minus personal outlays, dropped to $487.7 billion in March, compared with $529.4 billion in February. The personal saving rate, which is personal saving as a percentage of DPI, dipped to 3.8 percent in March, compared with 4.2 percent in February.

Improving weather accounted for a good deal of income improvement and increases in spending, according to Paul Dales of Capital Economics, as did the Affordable Care Act sign-ups.

“The weather-related rebound may now have run its course,” Dales told Business Insider. “The rush to take out a healthcare policy before the end of March, however, means that healthcare spending could rise rapidly in April too.”

This week, we can expect:

  • Tuesday — March balance of trade from the Census Bureau and the Bureau of Economic Analysis.
  • Wednesday — Preliminary First Quarter productivity scores from the Bureau of Labor Statistics; March consumer credit totals from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — March wholesale inventories from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: April 30, 2014
April 30, 2014


 

Real estate dominated last week’s economic headlines, with sales of both existing and news homes dropped, as inventory remained scant and prices grew. Meanwhile, initial jobless claims experienced an unexpected spike.

Existing Home Sales

March saw basically flat sales of existing homes, but inventory continued to push prices upward. Sales of existing single-family homes, townhomes, condominiums and co-ops, slipped 0.2 percent to an annual rate of 4.59 million in March from 4.6 million in February, and are 7.5 percent below the 4.96 million-unit pace in March 2013, the National Association of Realtors reported.

This marked the slowest since July 2012’s 4.59 million-pace, and the month was clearly underperforming by historical standards, according to NAR chief economist Lawrence Yun. That said, Yun said he expects improvement.

“There really should be stronger levels of home sales given our population growth,” he noted. “In contrast, price growth is rising faster than historical norms because of inventory shortages.”

“With ongoing job creation and some weather delayed shopping activity, home sales should pick up, especially if inventory continues to improve and mortgage interest rates rise only modestly,” he added.

Looking at price, March median existing-home price for all housing types grew 7.9 percent from March 2013 to hit $198,500. Total housing inventory rose 4.7 percent in March to 1.99 million existing homes available for sale, representing a 5.2-month supply at the current sales pace. The median time on market for all housing types was 55 days in March, which was down from 62 days in February, as well as 62 days in March 2013.

New Home Sales

Turning to new real estate, sales of new single-family homes dropped to an annual rate of 384,000 units in March, according to data released last week by the Census Bureau and the Department of Housing and Urban Development. This marked a hefty 14.5 percent decline from February’s revised rate of 449,000 and was 13.3 percent under March 2013’s rate of 443,000.

March’s drop marked an eight-month low for new home sales, various analysts sought an explanation for the drop. Given that the rough winter weather was wearing off by March, many expects felt snow couldn’t be the sole cause of the drop.

“The housing recovery is on pause,” RBS Securities Inc. economist Guy Berger told Bloomberg. “There may be some weather impact, but it doesn’t seem like that’s what’s really holding things back. What does seem to be holding things back is this shortage of inventory.”

Where inventory was concerned, the estimate of new homes for sale at the end of March was 193,000, which represented a six-month supply at March’s sales rate. Looking at price, the median price tag for new homes sold in March 2014 was $290,000, and the average sales price was $334,200.

Employment

After some relative calm, initial jobless claims saw a spike, according to last weeks report from the Employment and Training Administration.

First-time claims for unemployment benefits by the newly unemployed during the week ending April 19 saw a 7.9 percent jump to 329,000, a gain of 24,000 over the previous week’s revised level of 305,000. This outpaced analysts’ expectations of roughly 315,000 claims.

Before getting too worried, the four-week moving average — considered a more reliable gauge of near-term employment activity — only grew by 1.5 percent to 316,750 claims, an increase of 4,750 from the previous week’s unrevised average of 312,000 claims, the Administration reported.

Moreover, regardless of a single swing, initial jobless claims are still at their lowest level since 2007, indicating that firings have slowed considerably.

“You’re hard-pressed to make much of weekly wiggles; we still expect that the broader trend in claims will continue to hover around 300,000,” Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC, told USA Today. “At the end of the day, it’s encouraging that the firing side of the equation continues to show improvement, and that’s what’s been happening, even with today’s number.”

This week, we can expect:

  • Tuesday — April consumer confidence from The Conference Board.
  • Wednesday — Advance GDP for the first quarter from the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; personal incomes and spending for March from the Bureau of Economic Analysis; March construction spending from the Census Bureau; and April car and truck sales from the auto manufacturers.
  • Friday — April unemployment, payrolls, earnings and workweek from the Bureau of Labor Statistics; March factory orders from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: April 23, 2014
April 23, 2014


 

Retail sales showed solid performance in March, while consumer prices trended up for the month. Real estate continued to suffer inventory snags, while near-term employment continued to hold its own.

Retail Sales

March’s retail sales saw a solid surge, growing 1.1 percent over February to hit $433.9 billion for the month, the Census Bureau reported last week. This marked the biggest growth in a year and a half for retail and food service sales. On an annual basis they were 3.8 percent higher than March 2013.

Many experts took note of the fact that March’s improved retail performance occurred when the weather was still cold for much of the country, which buoyed some analysts’ outlook about the overall strength of the economy.

“It shows there is an underlying current of strength in the economy despite the drag from the severe winter weather,” Comerica Bank chief economist Robert Dye told the New York Times.

“This is not a fragile economy,” said Bank of Tokyo-Mitsubishi UFJ chief financial economist Chris Rupkey added. “The linchpin of economic growth — the consumer — is back, and with the consumer’s help, growth will be even faster in 2014.”

Key retail segments that enjoyed gains in March included motor vehicle and parts sales, which saw 3.1 percent growth; building material, garden and home stores, which increased 1.8 percent; and general merchandise stores, which increased 1.9 percent.

Consumer Prices

In related news, not only were retail sales up, but prices were, as well. The Consumer Price Index for All Urban Consumers (CPI-U) grew by 0.2 percent in March, according to last week’s report from the Bureau of Labor Statistics. Moreover, compared to March 2013, the all items index grew by 1.5 percent.

The bureau chalked up the gains in the all-items index to increased in the shelter and food indexes. The food index grew by 0.4 percent in March, with several major grocery store food groups increasing and many experts pointing to beef prices as a key element in that increase. The shelter index saw a 0.3 percent increase.

Real Estate

Meanwhile, in real estate, building permits issued in March for the construction of private housing shrank by 2.4 percent to an annual rate of 990,000, but were still 11.2 percent higher than March 2013, the Census Bureau reported. Permits issued for construction of single family homes notched up by 0.5 percent to a rate of 592,000.

The volume of permits has been on a slight decline for the past three months, which has led some real estate watchers to be concerned about a decrease in inventory. The question up for debate in the media was, did that downturn have to do with the housing market or the bad weather? Opinions varied.

Meanwhile, actual starts on construction of private housing in March hit an annual rate of 946,000, which was 2.8 percent over February’s rate, but 5.9 below March 2013’s rate. Starts on single family homes were up a solid 6 percent to a rate of 635,000 units.

Finally, completed constructions of private housing in March dipped 0.2 percent to an annual rate of 872,000, which was actually 7.7 percent higher than March 2013’s rate. That said, completions on single-family dropped 3.8 percent to a rate of 602,000 units.

Initial Jobless Claims

In employment, first-time claims for unemployment insurance filed by the newly unemployed during he week ending April 12 grew by just 2,000 claims to 304,000 claims, the Employment and Training Administration Reported.

Looking at the four-week moving average — considered a more reliable gauge of near-term employment performance — claims dropped to 312,000, a decrease of 4,750 from the previous week’s revised average. This is the lowest  level for this average since Oct. 6, 2007 when it was 302,000.

This week, we can expect:

  • Monday — Leading economic indicators for March from The Conference Board.
  • Tuesday — March existing home sales from the National Association of Realtors.
  • Wednesday — March new home sales from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; March durable goods orders from the Census Bureau.
  • Friday — Consumer sentiment for April from the University of Michigan and Thompson-Reuters.

Posted in Economic Advisor



Economic Advisor: April 18, 2014
April 18, 2014


 

Consumer credit beat analysts’ forecasts, while initial jobless claims dropped to a seven-year low, according to last week’s economic highlights.

Consumer Credit

Consumer credit grew by 6.4 percent in February to hit $3.12 trillion, a gain of $16.5 billion over the previous month, the Federal Reserve reported last week. This outpaced analysts’ expectations of a gain of $14 billion for the month.

“Consumer credit is keeping track with the slow but positive growth we’ve seen in consumer spending throughout the cycle and in household spending in the first quarter,” Action Economics LLC chief economist Mike Englund told the Bloomberg news services.

Non-revolving debt, such as student loans and car loans, was the key driver for February’s gains, growing 10.1 percent over January to hit $2.27 trillion, the Federal Reserve reported. Meanwhile, revolving debt, such as credit card spending, actually shrank by 3.4 percent, dropping to $854.2 billion.

Initial Jobless Claims

There was good news in recent employment activity, with first-time claims for jobless benefits hitting a seven-year loan, according to figures released by the Employment and Training Administration reported last week. Claims filed by the newly unemployed for unemployment insurance dropped by 32,000 claims during the week ending April 5 to 300,000. The last time initial claims were that low was May 12, 2007 when they dropped to 297,000.

The four-week moving average, considered a more reliable gauge of near-term employment activity, backed up last week’s score, falling 4,750 claims to 316,250. A key driver for the improvement was the warmer weather, which was helping to heat up economic activity as well, according to various employment watchers, such as said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

“The return of warmer temperatures has brought with it better data,” Baird told the Reuters news services. “There are a number of signs that progress in the jobs market could be accelerating, a positive sign for the broad economy, as well.”

Producer Price Index

The Producer Price Index for final demand notched up 0.5 percent in March, the Bureau of Labor Statistics reported last week. March’s gain followed a drop of 0.1 percent in February and a rise of 0.2 percent in January. The Bureau attributed March’s 0.5-percent increase to its index for final demand services, which rose 0.7 percent. Prices for final demand goods in March were unchanged.

The PPI for final demand is a recently implemented index that the Bureau uses to measure price change for goods, services, and construction products sold for personal consumption, for capital investment, for export, and to government.

This week, we can expect:

  • Monday — March retails sales and February business inventories from the Census Bureau.
  • Tuesday — March consumer price index from the Bureau of Labor Statistics.
  • Wednesday — March building permits and housing starts from the Census Bureau; March industrial production and capacity utilization from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.

Posted in Economic Advisor



Economic Advisor: April 9, 2014
April 9, 2014


 

The job market made headlines after adding back the 8.8 million jobs it lost during the recession, but still had a ways to go, while construction spending was flat, according to last week’s economic releases.

March Unemployment

The economy added 192,000 jobs in March, keeping the unemployment rate at 6.7 percent, with 10.5 million people out of work, the Bureau of Labor Statistics reported last week. Overall, there were 116.1 million private sector jobs, which is significant, because that is higher than the previous peak of 116 million jobs recorded in January 2008. This means that the country has gained back the jobs it lost during the recession of the past five years.

However, the job market still has much further to go given that a considerably larger number of younger people have entered the workforce over that time. The labor force participation rate, the number of employment age Americans either employed or actively looking for work, still hovered at 63.2 percent in March, a continued low of more than 30 years.

The number of Americans involuntarily employed on part-time basis for economic reasons, such as because their hours had been cut or they were unable to find full-time work, hovered at 7.4 million in March.

The number of long-term people unemployed for 27 weeks or longer totaled 3.7 million in March, comprising 35.8 percent of the unemployed. This was little changed from February, but the number of long-term unemployed was down by 837,000 over the year. “While down, this population represents some of the most vulnerable of the unemployed,” Federal Reserve chair Janet Yellen said in a speech last week.

“In some ways, the job market is tougher now than in any recession,” she said in regard o the long-term unemployed. “These workers find it exceptionally hard to find steady, regular work, and they appear to be at a severe competitive disadvantage when trying to find a job. The concern is that the long-term unemployed may remain on the sidelines, ultimately dropping out of the workforce.”

Initial Jobless Claims

Turning to more recent employment activity, first-time claims for unemployment benefits filed by the newly unemployed during the week ending March 29 grew to 326,000, a gain of 16,000 from the prior week’s revised figure of 310,000, the Employment and Training Administration reported last week. The gain was much higher than the 9,000-claim jump that analysts had expected.

However, while the recent week’s claims saw a spike, the four-week moving average — considered a more reliable gauge of near-term employment activity — was much more stable. The four-week total ticked up to 319, 500 claims, a slight gain of only 250 claims from the preceding week’s revised average of 319,250.

“Layoffs are still very, very low,” Moody’s Analytics Inc. senior economist Ryan Sweet told Bloomberg. “Claims are pointing toward an improvement in the job market. It’s evidence that the economy’s struggles this year were temporary.”

Construction Spending

Turning to real estate, construction spending during February hit an annual rate of $945.7 billion, 0.1 percent over January’s revised rate $944.6 billion, the Census Bureau reported last week. Compared to a year ago, February’s spending was 8.7 higher than the February 2013 estimate of $869.9 billion.

Once again, bad weather was to blame, with harsh winter snows and cold temperatures keeping construction activity low during the opening months of the year.

Private construction spending ticked up to an annual rate of $680 billion, which was just 0.1 percent over January’s revised estimate of $679.1 billion. The big loss was in residential construction, which dropped to an annual rate of $360.4 billion in February, marking a 0.8 percent drop from January’s revised rate of $363.2 billion.

This week, we can expect:

  • Monday — Consumer credit for February from the Federal Reserve.
  • Wednesday — February wholesale inventories from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; March import and export prices from the Census Bureau; March Treasury budget from the Treasury Department.
  • Friday — March producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: April 2, 2014
April 2, 2014


 

Last week saw a busy slate of economic news, including a drop in new home sales, gains in consumer incomes and spending, encouraging near-term employment, and better-than-expected performance for fourth quarter GDP.

Real Estate

Sales of new single-family homes in February dipped to an annual rate of 440,000, marking a 3.3 drop from January’s revised rate of 455,000, and 1.1 percent dip from February 2013’s estimate of 445,000, the Census Bureau and the Department of Housing and Urban Development reported last week.

In terms of price, February’s median sales price of new homes sold in 2014 was $261,800, and the average sales price was $317,500. In terms of inventory, the estimated number of new homes for sale at the end of February was 189,000, representing a 5.2-month supply.

Overall, March’s performance represented a five-month low that many experts chalked up to bad weather, too-high prices and tight inventory.

“The trend in sales is flat,” Pantheon Macroeconomics chief economist Ian Shepherdson told the Wall Street Journal. “The upward trend of 2012 and early 2013 is gone.”

Personal Incomes and Spending

Personal incomes and spending for February both increased, according to last week’s report from the Bureau of Economic Analysis. Personal incomes grew $47.7 billion, or 0.3 percent, and disposable personal income (DPI; income after taxes) increased $42.3 billion, or 0.3 percent, while personal consumption expenditures (PCE) increased $30.8 billion, or 0.3 percent.

Personal outlays, which combine PCE, personal interest payments and personal current transfer payments, notched up $33.8 billion in February. Personal savings — DPI less personal outlays — grew to $544.5 billion in February, compared with $535.9 billion in January. The personal savings rate, which is personal saving as a percentage of DPI, hit 4.3 percent in February, which was slightly up from 4.2 percent in January.

Employment

Looking at near-term employment, first-time claims for unemployment insurance filed by the newly unemployed during the week ending March 22 dropped to 311,000, a decline of 10,000 claims from the prior week’s revised figure of 321,000, according to last week’s figures from the Employment and Training Administration.

The four-week moving average, which is considered a more reliable gauge of recent employment activity, fell to 317,750, a similar drop of 9,500 claims from the preceding week’s revised average of 327,250, claims. Overall, the week’s performance marked a four-month low for initial jobless claims, and led some economists to speak in more encouraging terms about the job market.

“The rate of firing in the economy remains low, a positive for employment growth looking ahead to the second quarter,” said Neil Dutta, head of economics at Renaissance Macro Research, in an interview with MarketWatch.

Gross Domestic Product

The Bureau of Economic Analysis released its third estimate for fourth quarter 2013’s real gross domestic product, and the scores were slightly higher than expected. Real GDP (the output of goods and services produced by U.S. labor and property) grew at an annual rate of 2.6 percent, which was slightly higher than the previous 2.4 percent estimate.

The increase in Q4’s real GDP was attributed to gains in PCE, exports, and nonresidential fixed investments that were partly offset by negative contributions from federal government spending and residential fixed investment, the Bureau reported.

“The data suggests that the economy had slightly more momentum than previously thought before it was hit by extreme weather at the start of 2014,” Market chief economist Chris Williamson told USA Today.

Market watchers said key drivers for continued GDP growth in 2014 will be consumer spending, declining consumer debt and an improved housing market.

This week, we can expect:

  • Tuesday — February construction spending from the Census Bureau; March car and truck sales from the auto manufacturers.
  • Wednesday — February factory orders from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; February trade balance from the Census Bureau and Bureau of Economic Analysis.
  • Friday — March Unemployment rate, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistic.

Posted in Economic Advisor



Economic Advisor: March 26, 2014
March 26, 2014


 

New and existing real estate seems to be trying to catch up to housing demand, which has been stymied by rising home prices and narrowing inventories, while claims for jobless benefits by the newly unemployed remained low.

Existing Home Sales

Bad weather pushed the volume of existing home sales down in February, while narrowing inventories pushed prices up, the National Association Realtors reported last week. Total transactions of existing single-family homes, townhomes, condominiums and co-ops, dropped 0.4 percent from January to an annual rate of 4.6 million units in February. This was 7.1 percent below the 4.95 million-unit level in February 2013, marking the lowest pace since July 2012, when it stood at 4.59 million.

“We had ongoing unusual weather disruptions across much of the country last month, with the continuing frictions of constrained inventory, restrictive mortgage lending standards and housing affordability less favorable than a year ago,” said NAR chief economist Lawrence Yun. “Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”

The median price for existing home prices of all types was $189,000 in February, which was 9.1 percent over February 2013. Yun noted that, “Price gains have translated into an additional $4 trillion of housing wealth recovery over the past three years.” The median time on the market in February for all homes types was 62 days, which was slightly down from 67 days in January and considerably down from 74 days on market in February 2013.

Housing inventory of existing homes at the end of February gained 6.4 percent to 2 million units, which represents a 5.2-month supply at February’s sales pace, which was up from 4.9 months in January.

Housing Starts

In new real estate, permits issued for construction of new homes of all types issued in February hit an annual rate of 1.01 million, which was 7.7 percent over January’s revised rate of 945,000, and was 6.9 percent over February 2013’s estimate of 952,000, the Census Bureau reported. Permits issued for construction of single-family homes in February ticked down to a rate of 588,000, which was 1.8 percent below January’s revised rate of 599,000.

Starts on construction of private housing in February notched down to an annual rate of 907,000, which was 0.2 percent below January’s revised estimate of 909,000, and 6.4 percent below February 2013’s rate of 969,000. Starts on single-family homes had a slight gain to a rate of 583,000, which was 0.3 percent over January’s revised pace of 581,000.

Looking at completed constructions, finished housing constructions in February grew to annual rate of 886,000, which was 4.4 percent higher than January’s revised estimate of 849,000, and was 21.9 percent higher than February 2013’s rate of 727,000. Completions of single-family homes in February hit a rate of 631,000, which was 4 percent higher than the January’s revised rate of 607,000.

It appears that despite the bad weather, homebuilders are hustling to tap into the pent up demand that is butting up against increasing home prices.

Initial Jobless Claims

Meanwhile, first-time claims for unemployment benefits filed by newly unemployed workers during the week ending March 15 notched slightly up to 320,000, an increase of 5,000 claims from the previous week’s unrevised figure of 315,000, the Employment and Training Administration reported last week.

The four-week moving average — considered a better gauge of near-term employment activity — was 327,000, a decline of 3,500 from the prior week’s unrevised average of 330,500.

This week, we can expect:

  • Tuesday — March consumer confidence scores from The Conference Board; February New Home sales from the Census Bureau.
  • Wednesday — February durable goods orders from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Third estimate of Fourth Quarter GDP from the Bureau of Economic Analysis.
  • Friday — February personal incomes and spending form the Bureau of Economic Analysis; March consumer sentiment from the University of Michigan and Thomson Reuters.

Posted in Economic Advisor



Economic Advisor: March 19, 2014
March 19, 2014


 

Last week’s economic headlines showed that retail sales were up while first-time jobless claims had dropped as the winter’s frigid grasp on the economy seemed to be loosening.

Retails Sales

Retail sales for February increased 0.3 percent to $427.2 billion, and were 1.5 percent higher than last year’s sales from February 2013, the Census Bureau reported last week. February’s performance outpaced analysts’ expectations of 0.2 percent growth for the month.

“The economy seems to be rebounding from a winter-related slump,” Bank of Tokyo-Mitsubishi UFJ chief financial economist Chris Rupkey told the Reuters news service. “We expect the Fed will stay the course with its exit strategy.”

“We see this as further confirmation that the underlying momentum in the economy remains quite favorable,” added Millan Mulraine, deputy chief economist at TD Securities in New York.

Key categories that showed solid growth over January were health and personal care stores, which were up 1.2 percent; sport goods, hobbies, book and music stories, which were up 2.5 percent; and non-store retailers, which were up 1.2 percent.

Employment

First-time claims for unemployment insurance filed by the newly unemployed during the week ending March 8 hit dropped to 315,000, a decline of 9,000 from the previous week’s revised figure of 324,000, the Employment and Training Administration reported last week. This was the lowest level since November, which saw a six-month low. The four-week moving average — considered a more stable gauge of near-term employment activity — dropped to 330,500, a dip of 6,250 claims from the previous week’s revised average of 336,750.

Initial jobless claims have been volatile during the extreme winter conditions felt by most of the country, as well as due to other factors, according to Barclay’s Cooper Howes in an interview with Business Insider.

“Claims data have been volatile dating back to last fall, as factors such as computer system upgrades, seasonal adjustments related to moving holidays, and severe weather all potentially complicated the interpretation of the previously steady downward trend,” Howes explained. “That being said, the four week moving average has settled in around where it was last summer before these factors came into play, suggesting that it may be stabilizing.”

Wholesale

Meanwhile, sales for wholesalers dipped in January while inventories increased. Sales for merchant wholesalers dropped 1.9 percent from December to $432.6 billion, but were up 3.9 percent from January 2013, the Census Bureau reported last week.

Total inventories for merchant wholesalers grew by 0.6 percent in January to hit $521.2 billion. Key categories that saw gains were drugs and druggist sundries (up 2.7 percent), motor vehicles and parts (up 2.2 percent), and paper and paper products (up 2.8 percent).

January’s activity put the inventory-to-sales ratio at 1.20, which was virtually unchanged from January 2013’s ratio of 1.21.

This week, we can expect:

  • Monday — Capacity utilization and industrial production for February from the Federal Reserve.
  • Tuesday — Building permits and housing starts for February from the Census Bureau; February consumer price index from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Existing home sales for February from the National Association of Realtors; February leading economic indicators form The Conference Board.

Posted in Economic Advisor



Economic Advisor: March 12, 2014
March 12, 2014


 

Last week offered some optimistic economic headlines. February’s jobs report showed job growth, as did last week’s jobless claim report. Incomes and spending credit, however, all ticked up to varying degrees.

Employment

Shrugging off the cold weather, employers added 175,000 jobs in February, putting the nation’s unemployment rate at 6.7 percent, which was relatively unchanged from January’s rate of 6.6 percent, the Bureau of Labor Statistics reported last week. Many of the new jobs were in professional and business services as well as wholesale trade.

“The report showed solid job growth in February despite clearly negative effects from the weather,” Dean Maki, chief United States economist at Barclays, told the New York Times. “It suggests the jobs numbers should improve as the weather gets better.”

The total number of unemployed workers was at 10.5 million people. Over the year, the number of unemployed Americans has dropped by 1.6 million people. This is partly due to the lowest trend in labor market participation since 1978. The labor force participation rate — which shows how many employable workers are actively involve in the job force — hovered at 63 percent.

February’s population of long-term unemployed (those jobless for 27 weeks or longer) grew by 203,000 to 3.8 million. The number of persons involuntarily employed part-time for economic reasons, such as because their hours had been cut or they couldn’t find full-time work, stayed at 7.2 million in February.

Initial Jobless Claims

In more recent employment news, first-time claims for unemployment benefits filed by the newly unemployed during the week ending March 1, dipped to 323,000, a decline of 26,000 claims from the previous week’s revised figure of 349,000, the Employment and Training Administration reported.

The drop was larger than expected by analysts, and marked a three-month low, pointing to easing layoffs. Looking at the four-week moving average, considered a more stable figure, claims fell to 336,500, a drop of 2,000 from the previous week’s revised average of 338,500.

Incomes and Spending

U.S. consumer spending for January passed up analysts’ growth expectations, as personal consumption expenditures increased $48.1 billion, or 0.4 percent, according to last week’s report from the Bureau of Economic Analysis. Similarly, personal income increased $43.9 billion, or 0.3 percent, in January, and disposable personal income (DPI; income after taxes) increased $45.2 billion, or 0.4 percent.

“Consumer spending had “okay” momentum,” Brian Jones, senior U.S. economist for Societe Generale, told Bloomberg. “We expect to see better job growth in the spring. More people with jobs means more money to spend.”

Personal saving (DPI less personal outlays) dipped a bit in January to $540.1 billion from December’s $544.5 billion in December. That said, January’s personal saving rate (personal saving as a percentage of disposable personal income) hovered at 4.3 percent, unchanged from December.

Consumer Credit

Consumer credit grew by 5.3 percent in January, with total outstanding debt at $3.11 trillion, according to last week’s report from the Federal Reserve. The key driver was non-revolving debt, such as student loans and car loans, which grew by 7.5 percent to $2,25 trillion. Revolving debt, such as credit cards, which had shown healthy growth in recent months, actually contracted by 0.3 percent for the month, declining to $856.2 billion.

A key driver for the gains in non-revolving debt was student loans, according to Barclays economist Cooper Howes, who remarked to the Wall Street Journal, “We expect student loans to continue to push non-revolving credit higher while revolving credit growth remains tepid.”

This week, we can expect:

  • Tuesday — January wholesale inventories from the Census Bureau.
  • Wednesday — February budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; February retail sales totals, business inventories, and import and export prices from the Census Bureau.
  • Friday — February producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: March 5, 2014
March 5, 2014


 

While developments in the Ukraine and Venezuela dominated last week’s news, some noteworthy economic developments were announced, including a surprise spike in new home sales, an unexpected climb in new jobless claims, and a confusion among the two leading consumer outlook indices.

New Real Estate

Sales of newly built homes hit a five-and-a-half-year high in January, with completed transactions of new single-family homes hitting an annual rate of 468,000, the Census Bureau and the Department of Housing and Urban Development reported last week. January’s sales marked a healthy 9.6 percent climb from December’s revised rate of 427,000, and were 2.2 percent higher than January 2013’s pace of 458,000.

Looking at price and inventory, the median price of new homes sold in January rang in at $260,100, and the average sales price was $322,800. The estimated number of new homes for sale at the end of January was 184,000, which represented a supply of 4.7 months at January’s sales rate.

It’s important to note that new home sales can become volatile, and comprise a smaller portion of the real estate market than existing home sales. That said, housing market watchers are expecting overall growth for the real estate market through 2014.

“Despite higher mortgage rates, the fundamentals for new-home sales and residential construction are solid,” PNC Financial Services Group chief economist Stuart Hoffman told the Washington Post last week. “The economy is adding jobs and incomes are growing, making households more confident.”

Initial Jobless Claims

First time claims for unemployment insurance filed by the newly unemployed during the week ending Feb. 22 experienced an unexpected increase, according to figures released by the Employment and Training Administration last week. Initial jobless claims, grew by 14,000 claims to 348,000, outpacing the market expectation of 335,000 claims.

That said, the four-week moving average, considered a more reliable gauge of current employment activity, came in at 338,250, which was unchanged from the previous week’s revised average.

Most analysts chalked up the jobless claim spike to February’s continued poor weather and its impact on business overall. Moreover, some, such as Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC, said they expect a better labor market once the sun comes out.

“We still have a fairly constructive view on the labor market,” Mulraine said in an interview with the Bloomberg news service. “There have been some weather-related setbacks in hiring, but as it warms up, you’re going to see much better performance in labor market activity.”

Consumer Outlook

The glum weather and its economic impact, resulted in a mixed bag of consumer opinions, according to last week’s news. On the one hand, The Conference Board’s Consumer Confidence Index, fell to 78.1 in February from 79.4 in January (a baseline of 100 was set in 1985). On the other hand, The University of Michigan-Thomson Reuters Consumer Sentiment Index hovered at 81.2 in February, unchanged from January. And it should be noted that analysts polled by Reuters had actually expected a dip in February to 80.6.

To add to the discontinuity between the two indices, the drop in Consumer Confidence was driven by the Expectations Index (how consumers feel their economic prospects will fare), which dropped to 75.7 in February from 80.8; and the drop in the Consumer Sentiment was driven by consumer’s take on current economic conditions, which slipped to 94 in February from 96.8 in January.

If anything, this confusion over how to read the economy, whether on the part of the experts or the part of the consumers, is probably proof that this winter’s combination of frigid temperatures in the East and Midwest, along with drought conditions on the west coast has obscured everyone’s crystal ball. Hopefully when the weather clears, so to will everyone’s perspective on the economy.

This week, we can expect:

  • Monday — Personal incomes and spending for January from the Bureau of Economic Analysis; January construction spending from the Census Bureau; car and truck sales for February from the auto makers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Fourth Quarter productivity scores from the Bureau of Labor Statistics; January factory orders from the Census Bureau.
  • Friday — February unemployment rate, payrolls, workweek and earnings from the Bureau of Labor Statistics; January consumer credit totals form the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: February 26, 2014
February 26, 2014


 

While cold winter weather continues to assail much of the country, last week saw some sunnier economic headlines as real estate and jobs performed better, and new data pointed to growing economic strength.

Existing Home Sales

One look at last week’s real estate market shows the cold weather is continuing to have its impact on housing, but is the weather the whole story? Sales of existing single-family homes, townhomes, condominiums and co-ops, dropped 5.1 percent to a seasonally adjusted annual rate of 4.62 million in January from 4.87 million in December, the National Association of Realtors reported last week.

This was the lowest level in a year and a half – 5.1 percent below January 2013’s 4.87 million-unit pace. While it would be easy to chalk up the drop entirely to the difficult weather, NAR chief economist Lawrence Yun described the various factors at play.

“Disruptive and prolonged winter weather patterns across the country are impacting a wide range of economic activity, and housing is no exception,” he explained. “Some housing activity will be delayed until spring. At the same time, we can’t ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates. These issues will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact.”

Looking at prices, January’s median existing-home price for existing homes of all types grew to $188,900, up 10.7 percent from January 2013. Total housing inventory for January rose 2.2 percent to 1.9 million existing homes for sale, which represented a 4.9-month supply at January’s sales pace. Unsold inventory was 7.3 percent higher than a year ago.

Housing Starts

And while new real estate construction sought to fill in the necessary inventory (which would help keep prices down), the cold weather had an impact as well. Building permits issued for construction of private housing dropped 5.4 percent in January to an annual total of 937,000, according to last week’s report from the Census Bureau. Permits for single-family home construction in January dropped 1.3 percent to a rate of 602,000.

Starts on construction of private housing were significantly down, dropping 16 percent in January to an annual total of 880,000. Starts on single-family homes fell a nearly identical 15.9 percent to a total of 573,000.

All that said, completed construction on private homes actually grew 4.6 percent in January to an annual rate of 814,000. Completions on single-family housing increased 3 percent in January to reach a total of 580,000.

Initial Jobless Claims

A bright spot in last week’s economic news was a reduction in new jobless claims. First-time claims for unemployment insurance filed during the week ending Feb. 15 by the newly unemployed, dropped by 3,000 claims to 336,000, the Employment and Training Administration reported last week. That said, the four-week moving average, which is considered a more stable measure of short-term unemployment activity, grew by 1,750 claims to 338,500.

If the economy is indeed experiencing a drop in job losses, that could spell an improving job market. When employers hold off on lay-offs, that could point to actual growth in jobs.

“I think the fundamentals for stronger job growth are in place,” Moody’s Analytics Inc. senior economist Ryan Sweet told Bloomberg. “We’re going to get some of the jobs that weren’t added in December and January because of weather.”

Sweet added that growth might not come until March.

Leading Economic Indicators

If the real estate and jobs reports are pointing to increasing strength, that would jibe with The Conference Board’s latest Leading Economic Index, which compiles various key pieces of economic data in manufacturing, jobs, real estate, the stock market and credit. The LEI for the United States grew by 0.3 percent in January to 99.5 (based on a baseline of 100 set in 2004), the Board reported last week.

“The U.S. Leading Economic Index continues to fluctuate on a monthly basis, but the six-month average growth rate has been relatively stable in recent months, which suggests that the economy will remain resilient in the first half of 2014 and underlying economic conditions should continue to improve,” said Ataman Ozyildirim, economist at The Conference Board.

“The increase in the Leading Economic Index reflects an economy that is expanding moderately, although the pace is somewhat held back by persistent and severe inclement weather in most parts of the country,” added Conference Board Economist Ken Goldstein. “If the economy is going to move on to a faster track in 2014 compared to last year, consumer demand and especially investment, will need to pick up significantly from their current trends.”

This week, we can expect:

  • Tuesday —February consumer confidence from The Conference Board.
  • Wednesday — January new home sales from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; January durable goods orders from the Census Bureau.
  • Friday — Fourth quarter GDP, second estimate from the Bureau of Economic Analysis; February consumer sentiment from the University of Michigan.

Posted in Economic Advisor



Economic Advisor: February 19, 2014
February 19, 2014


 

Sales of existing homes saw considerably healthy activity in December, and near-term employment saw some stability, while leading economic indicators gained slightly.

Real Estate

The big economic news last week was in real estate, with sales of existing-homes for all of 2013 hitting their highest point since 2006. Sales of existing single-family homes, townhomes, condominiums and co-ops grew by 1 percent in December to an annual rate of 4.87 million, the National Association for Realtors reported.

Compared to a year ago, last month was down 0.6 percent from a 4.90 million-unit pace from December 2012, the association reported, but when 2013 was taken as a whole, its 5.09 million sales were 9.1 percent higher than 2012. Annual performance hasn’t been that good since 2006 when sales hit a high of 6.48 million during the housing bubble.

“Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates and a large pent-up demand driving the market,” said NAR chief economist Lawrence Yun. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”

In terms of price, the median price for all existing homes of all types hit $198,000 in December, marking a 9.9 percent increase from December 2012. Looking at the full year, the national median existing-home price for the entirety of 2013 was $197,100, marking an 11.5 percent gain over 2012’s median of $176,800. This was the biggest yearly gain since 2005’s 12.4 percent increase.

Helping drive that price growth was a shrinking number of transactions of distressed homes, such as foreclosures and short sales, which comprised 14 percent of December’s sales. While this was unchanged from November it was down considerably from December 2012’s 24 percent.

And prices might continue to grow given the supply of homes for sale. Housing inventory for December fell 9.3 percent to 1.86 million existing homes available for sale, representing a 4.6 month supply at the December’s sales pace, which was down from 5.1 months in November.

Employment

Turn to employment, short-term employment scores appear to have left the tumult of the holiday season behind and are starting to smooth out. First-time claims filed by the newly unemployed for unemployment benefits hovered around a six-week low, only ticking up by 1,000 claims to 326,000 in the week ending Jan. 18, the Employment and Training Administration reported last week.

The four-week moving average, often considered a more reliable figure, dropped to 331,500 claims, a decline of 3,750 from the preceding week’s revised average of 335,250. The total number of unemployed Americans during the week ending Jan. 11 grew to 3,056,000, a gain of 34,000 from the previous week’s revised level of 3,022,000, the Administration also reported.

Economic Indicators

Meanwhile, The Conference Board reported last week that its Leading Economic Indicators (LEI) index, a compendium of various key economic metrics, such as employment, real estate, stock prices and manufacturing, grew 0.1 percent in December to hit 99.4 (a baseline of 100 was set in 2004).

“Despite month-to-month volatility in the final quarter of 2013, the U.S. LEI continues to point to gradually strengthening economic conditions through early 2014,” said Ataman Ozyildirim, economist for The Conference Board. “The LEI was lifted by its financial components in December, but consumer expectations for business conditions and residential construction continue to pose risks.”

This week we can expect:

  • Monday — December new home sales from the Census Bureau.
  • Tuesday — Durable goods orders for December from the Census Bureau; consumer confidence for January from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; advance fourth quarter GDP from the Bureau of Economic Analysis.
  • Friday — December personal income and spending from the Bureau of Economic Analysis; January consumer sentiment from the University of Michigan and Thomson-Reuters news services.

Posted in Economic Advisor



Economic Advisor: February 12, 2014
February 12, 2014


 

The January jobs report offered a mixed bag of employment news, while consumer credit for December posted its biggest gain in 10 months, according to last week’s economic headlines.

January Employment

The most positive way to spin January’s job performance was that it was a “glass half-full, or glass half-empty” scenario. While the month’s employment rate marked a five-year low, the number of new jobs was lackluster.

The economy added just 113,000 non-farm jobs in January, putting the unemployment rate at 6.6 percent, which was slightly down from December’s 6.7 percent rate, the Bureau of Labor Statistics reported last week. All in all, 10.2 million Americans were unemployed, according to the report.

Key sectors that added jobs were construction (up 48,000 jobs), manufacturing (up 21,000 jobs), wholesale trade (up 14,000 jobs), and mining (up 7,000 jobs). These labor-oriented job sectors buoyed employment for men, which is notable given that some analysts had referred to the recession as the “man-cession,” because male employment has been so hard-hit. Besides being good news for men, it could also be indicative of continued economic strengthening, according to Gary Burtless, an economist at the Brookings Institution.

“You rarely see expansions in these industries without the economy being in fairly healthy shape,” Burtless told Businessweek.

The number of Americans involuntarily employed part-time for economic reasons, such as their hours being cut or not being able to full-time work fell by 514,000 to 7.3 million. The number of workers unemployed for 27 weeks or longer dropped by 232,000 to 3.6 million. Overall, the population of those long-term unemployed workers has fallen by 1.1 million over the past year. Meanwhile, the labor force participation rate, which tracks how many people of working age either have jobs or are trying to get one, ticked up to 63 percent.

Perhaps Chief U.S. Economist for IHS Global Insight Doug Handler summarized the report best by noting that job gains had “clearly downshifted over the past two months. But we still believe the economic fundamentals remain strong and … forecast an acceleration of growth later in the year.”

Initial Jobless Claims

Turning to more recent employment figures, first-time claims for unemployment benefits filed by the newly unemployed during the week ending Feb. 1 dropped by 20,000 claims to 331,000 from the previous week’s total of 351,000, according to last week’s report from the Employment and Training Administration.

Turning to a less volatile figure, the four-week moving average slightly edged up to 334,000 claims, an up-tick of 250 from the prior week’s revised average of 333,750.

The total number of out-of-work Americans covered by unemployment insurance during the week ending Jan. 25 hit 2,964,000, an increase of 15,000 from the previous week’s revised level of 2,949,000.

Consumer Credit

In other news, consumer credit for December not only outpaced analyst expectations, but hit a 10-month high. The Federal Reserve reported last week that overall consumer credit grew by 7.3 percent in December to hit $3.1 trillion dollars. December’s borrowing marked an $18.8 billion gain over November, and was well above the $12 billion increase that analysts were expecting for the month.

Looking at the types of borrowing, revolving debt, such as credit cards, grew by 7 percent to hit $861.9 billion, and non-revolving debt, such as car and student loans, grew by 7.4 percent to reach $2.24 trillion.

While non-revolving debt has been the core driver in consumer borrowing, the increased revolving debt could be indicative of increased consumer spending, which would be encouraging, given that consumer spending comprises 70 percent of U.S. economic activity. Ultimately, jobs, credit and spending are all connected, according to Jim O’Sullivan, chief U.S. economist at High Frequency Economics.

“To the extent that the labor market holds up and wealth holds up, then I think you’d expect to see credit continue to rise along with consumer spending,” O’Sullivan told the Bloomberg news service. “Consumer credit tends to be positively correlated with growth. It’s generally a good sign when credit is rising.”

This week, we can expect:

  • Tuesday — December wholesale inventories from the Census Bureau.
  • Wednesday — January Treasury Department budget.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; January retail sales data and December business inventories from the Census Bureau
  • Friday — January import and export prices from the Census Bureau and Bureau of Economic Analysis; January industrial production and capacity utilization from the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: February 5, 2014
February 5, 2014


 

Spending was up while incomes saw only very slight gains, which resulted in increased consumer caution, according to last week’s financial headlines. Meanwhile, current employment performance was on par with previous weeks, and new home sales took a dip in December, thanks to winter cold.

Consumer Spending and Incomes

Consumer spending grew in December, despite middling income performance, the Bureau of Economic Analysis reported last week. Personal incomes only increased $2.3 billion, or less than 0.1 percent, for the month, while personal consumption expenditures (PCE) increased $44.1 billion, or 0.4 percent, the Bureau reported.

Factoring in personal taxes, which increased $6 billion in December, disposable personal income (DPI; income after taxes) actually decreased $3.8 billion, or less than 0.1 percent, in December. Personal outlays — PCE, personal interest payments, and personal current transfer payments — grew by $42 billion in December, which was down from November’s $72.7 billion increase.

This put personal savings — DPI less personal outlays — at $495.2 billion in December, down from November’s $541 billion in November. The personal saving rate — personal saving as a percentage of disposable personal income — for December, dipped to 3.9 percent from November’s 4.3 percent.

Could December’s income performance hint at a possible slowdown in consumer spending? Raymond James & Associates chief economist Inc. Scott Brown told the Wall Street Journal that December’s income scores “raise a degree of caution for the near-term outlook because some pullback in spending growth seems likely.”

“We came into the year priced for a strong recovery, and now it looks like it might stumble a bit,” he added.

Consumer Confidence

Keeping Brown’s sentiments in mind, consumer confidence scores dipped a bit in January, the University of Michigan and Thomson Reuters news service reported in their joint Surveys of Consumers last week. The Consumer Sentiment Index dipped to 81.2 in January survey, dropping slightly below December’s 82.5. That said, January’s score was considerably improved from January’s 73.8.

The Survey chalked up the dip to a few things, such as larger home heating bills, and a general response form more than half the respondents that their household incomes would likely not see a gain in the coming year. The Current Conditions index, which tracks consumers’ opinion of their current economic status, dipped to 96.8 in January from December’s 96.8. The Expectations Index, which tracks how consumers expect their economic situation to fare in the near future, skirted down to 71.2 in January from 72.1 in December.

“Despite the recent economic gains, consumers’ outlook for their finances as well as the national economy over the longer term have remained more resistant to improvement than in past recoveries,” Surveys of Consumers chief economist Richard Curtin wrote in his report, “This deeply rooted uncertainty about future economic conditions was first sparked by the Great Recession.”

“… Optimism about long term job and income prospects are essential for maintaining high levels of economic motivation,” he added. “Too few consumers have regained that optimism.”

Employment

In recent employment scores, first-time claims for unemployment benefits filed by the newly unemployed during the week ending Jan. 25, hit 348,000, the Employment and Training Administration reported. This represented an increase of 19,000 claims from the preceding week’s revised figure of 329,000.

Looking at the four-week moving average, a steadier gauge of current unemployment, claims barely rose to 333,000, a gain of 750 claims from the prior week’s revised average of 332,250 claims.

New Home Sales

Lastly, sales of new, single-family homes took a 7 percent dip in December, dropping to an annual rate of 414,000 from  the revised November rate of 445,000, the Census Bureau reported last week. Most experts chalked up the drop to winter weather and said they expected a rebound given low housing inventories.

“I’m not very worried,” said IHS Global Insight director of long-term forecasting, Patrick Newport, told USA Today. “There’s a high probability housing will be a major contributor to economic growth this year. We’ve been under-building for too long.”

The median price of new homes in December in was $270,200 and the average sales price was $311,400. The inventory of new homes for sale at the end of the month was 171,000, representing a 5-month supply at December’s sales rate.

This week, we can expect:

  • Monday — December construction spending from the Census Bureau; January car and truck sales from the auto manufacturers.
  • Tuesday — December factory orders from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; the December balance of trade from the Census Bureau; preliminary productivity scores for the Fourth Quarter from the Bureau of Labor Statistics.
  • Friday — December consumer credit totals from the Federal Reserve; January unemployment, payrolls, earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: January 29, 2014
January 29, 2014


 

Sales of existing homes saw considerably healthy activity in December, and near-term employment saw some stability, while leading economic indicators gained slightly.

Real Estate

The big economic news last week was in real estate, with sales of existing-homes for all of 2013 hitting their highest point since 2006. Sales of existing single-family homes, townhomes, condominiums and co-ops grew by 1 percent in December to an annual rate of 4.87 million, the National Association for Realtors reported.

Compared to a year ago, last month was down 0.6 percent from a 4.90 million-unit pace from December 2012, the association reported, but when 2013 was taken as a whole, its 5.09 million sales were 9.1 percent higher than 2012. Annual performance hasn’t been that good since 2006 when sales hit a high of 6.48 million during the housing bubble.

“Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates and a large pent-up demand driving the market,” said NAR chief economist Lawrence Yun. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”

In terms of price, the median price for all existing homes of all types hit $198,000 in December, marking a 9.9 percent increase from December 2012. Looking at the full year, the national median existing-home price for the entirety of 2013 was $197,100, marking an 11.5 percent gain over 2012’s median of $176,800. This was the biggest yearly gain since 2005’s 12.4 percent increase.

Helping drive that price growth was a shrinking number of transactions of distressed homes, such as foreclosures and short sales, which comprised 14 percent of December’s sales. While this was unchanged from November it was down considerably from December 2012’s 24 percent.

And prices might continue to grow given the supply of homes for sale. Housing inventory for December fell 9.3 percent to 1.86 million existing homes available for sale, representing a 4.6 month supply at the December’s sales pace, which was down from 5.1 months in November.

Employment

Turn to employment, short-term employment scores appear to have left the tumult of the holiday season behind and are starting to smooth out. First-time claims filed by the newly unemployed for unemployment benefits hovered around a six-week low, only ticking up by 1,000 claims to 326,000 in the week ending Jan. 18, the Employment and Training Administration reported last week.

The four-week moving average, often considered a more reliable figure, dropped to 331,500 claims, a decline of 3,750 from the preceding week’s revised average of 335,250. The total number of unemployed Americans during the week ending Jan. 11 grew to 3,056,000, a gain of 34,000 from the previous week’s revised level of 3,022,000, the Administration also reported.

Economic Indicators

Meanwhile, The Conference Board reported last week that its Leading Economic Indicators (LEI) index, a compendium of various key economic metrics, such as employment, real estate, stock prices and manufacturing, grew 0.1 percent in December to hit 99.4 (a baseline of 100 was set in 2004).

“Despite month-to-month volatility in the final quarter of 2013, the U.S. LEI continues to point to gradually strengthening economic conditions through early 2014,” said Ataman Ozyildirim, economist for The Conference Board. “The LEI was lifted by its financial components in December, but consumer expectations for business conditions and residential construction continue to pose risks.”

This week we can expect:

  • Monday — December new home sales from the Census Bureau.
  • Tuesday — Durable goods orders for December from the Census Bureau; consumer confidence for January from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; advance fourth quarter GDP from the Bureau of Economic Analysis.
  • Friday — December personal income and spending from the Bureau of Economic Analysis; January consumer sentiment from the University of Michigan and Thomson-Reuters news services.

Posted in Economic Advisor



Economic Advisor: January 22, 2014
January 22, 2014


 

Last week’s economic headlines saw gains in retail sales, along with consumer and producer price increases, a return to more measured performance in short-term employment activity, and new home construction ended the year on a positive note.

Retail Sales

Retail sales enjoyed a bump in December thanks to holiday shopping and sales of winter clothing and related goods, according to sales numbers released last week by the Census Bureau.

Looking at December’s performance, retail and food services sales grew by 0.2 percent over November to hit $431.9 billion, the Bureau reported. This marked a 4.1 percent gain over December 2012, and total sales for the 12 months of 2013 were up 4.2 percent from 2012. These performance gains are important, because consumer spending powers 70 percent of the U.S. economy.

“It’s encouraging as we exit the year, particularly with some of the headwinds that we had with a little bit more challenging weather and the shorter holiday-spending period,” Ameriprise Financial Inc. senior economist Russell Price told the Bloomberg new services, adding that “the consumer is still a driver [of the economy].”

Key performers were clothing stores, which increased their sales by 1.8 percent; food and beverage stores, which were up 2 percent; gas stations, which grew by 1.6 percent; and non-store retailers, which experienced a 1.4 percent gain. That last item is important to note, because non-store retailers include online retailers, which analysts say are gaining more of the holiday shopping market.

Bearing that in mind, brick-and-mortar retailers saw a dint in their December sales. Sporting goods, hobby, music and bookstore sales were down 0.6 percent; and electronics and appliance sales dropped by 2.5 percent.

Pricing

In related news, consumer prices also saw gains in December. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent for the month, the Bureau of Labor Statistics reported last week. Looking at the year, the all items index increased 1.5 percent over the last 12 months.

Energy and shelter costs were the primary influences and December’s price gains, with a gasoline index increase of 3.1 percent, along with heating fuel and electricity price gains pushing the overall energy index up 2.1 percent.

Meanwhile, the Bureau’s Producer Price Index for finished goods grew by 0.4 percent in December. Looking at the year, prices for finished goods increased 1.2 percent in 2013 compared with 2012’s 1.4 percent gain. This marked the smallest annual PPI increase in five years, and could mark the moment the Federal Reserve begins to change the course of their inflation policies.

The lack of inflation pressures will give the Fed more room to maneuver,” said Gennadiy Goldberg, a U.S. strategist for TD Securities USA.

Employment

It appears that short-term employment figures could be shaking off some of the holiday season volatility, according to last week’s data from the Employment and Training Administration.

The number of first-time claims filed for unemployment benefits by the newly unemployed during the week ending Jan. 11 dropped to 326,000, a decline of 2,000 claims from the preceding week’s downwardly revised figure of 328,000, the Administration reported. This was in line with analyst expectations.

The four-week moving average, a more stable figure, was 335,000, a drop of 13,500 from the prior week’s revised average of 348,500; further evidence the mid-November-through-December roller coaster might be smoothing out.

Real Estate

Lastly, looking at new real estate, December construction performance was rocky, but ended the year on an undeniably positive swing.

Construction permits issued in December for private housing were at an annual rate of 986,000, which was 3 percent down from November, but 4.6 percent higher than the December 2012 estimate of 943,000, the Census Bureau reported. Looking at standalone housing, Permits issued for building single-family homes issued in December were at a rate of 610,000, which was 4.8 percent below November.

Starts on construction of private housing in December dropped to an annual rate of 999,000, which was 9.8 percent below November, but was 1.6 percent over the December 2012 rate of 983,000. Starts on single-family homes in December hit a rate of 667,000, which was 7 percent below November.

Completions of housing construction in December dropped to an annual rate of 744,000, which was 10.8 percent below November, but is 10.7 percent higher than the December 2012 rate of 672,000. Completed constructions of single-family homes in December declined to a rate of 550,000, which was 8.2 percent below November.

Comparing yearly totals, the Bureau estimates construction on 974,700 housing units was authorized by building permits in 2013, which was 17.5 percent over the 2012 figure of 829,700. Similarly, construction was completed on an estimated 762,200 housing units in 2013, which was 17.4 percent over the 2012 figure of 649,200.

This week we can expect a light slate of economic news:

  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; December existing home sales from the National Association of Realtors; and leading economic indicators for December from The Conference Board.

Posted in Economic Advisor



Economic Advisor: January 15, 2014
January 15, 2014


 

Last week’s news cycle had its ups and downs. While consumer borrowing, a key segment of the U.S. economy, was up, there was bitter news on the employment front.

Employment

December’s employment scores came in last and while the unemployment rate went down to 6.7 percent, according to the figures released by the Bureau of Labor Statistics, the news was not as bright as was hoped.  The economy added only 74,000 jobs in December with the number of unemployed Americans dropping by 490,000 people, to 10.4 million workers.

So how did the number of unemployed people drop so greatly when the economy saw its lowest level of new jobs added in three years? Because 347,000 people left the labor force, pushing the labor force participation down by 0.2 percent to 62.8 percent. This was the lowest rate since 1978.

Moreover, employees that do have jobs didn’t see much crow about in December. The average workweek notched down by 0.1 hour to 34.4 hours for the month, and average hourly earnings only increased 2 cents to $24.17. For the year, average hourly earnings grew by a total of 42 cents, or 1.8 percent overall, and average hourly earnings of private-sector production and non-supervisor workers increased by 3 cents to $20.35.

Initial Jobless Claims

December’s rough job report was tempered by the most recent initial jobless claims report from the Employment and Training Administration, which reported last week that first-time claims for unemployment filed by the newly unemployed during the week ending Jan. 4 dropped to 330,000. This marked a decrease of 15,000 claims from the previous week’s revised figure of 345,000.

The four-week moving average, which is a more reliable figure as it is not as subject to variations as the weekly figure, totaled 349,000 claims, a decline of 9,750 from the prior week’s revised average of 358,750.

Consumer Credit

While employment watchers probably exhaled in dejection, followers of consumer credit likely breathed a sigh of relief last night when the Federal Reserve reported that U.S. consumer borrowing grew by 4.8 percent in November to $3.08 trillion.

Non-revolving debt, such as student loans and car loans, comprised the lion’s share of the growth, increasing by 6.4 percent to $2.23 trillion. What was encouraging to many was that revolving debt, such as credit card spending notched up 0.6 percent to $856.9 billion.

While not as big as October’s 5.6 percent increase in revolving debt, a sustained willingness on the part of consumers to whip out the plastic for retail and online transactions speaks to increased consumer activity. Consumer spending is important because it drives roughly 70 percent of the economy and is key to any meaningful recovery.

“Credit conditions are improving,” IHS Inc. chief economist Nariman Behravesh told the Bloomberg news service. “We are seeing consumers beginning to take on more debt, and that’s part of the recovery.”

This week, we can expect:

  • Monday — December budget from the Treasury Department.
  • Tuesday — Retail sales totals for December and November business inventories from the Census Bureau; December import and export prices from the Bureau of Economic Analysis and the Census Bureau.
  • Wednesday — December producer price index from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; Consumer price index for December from the Bureau of Labor Statistics.
  • Friday — Housing starts and building permits for December from the Census Bureau; December industrial production and capacity utilization from the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: January 8, 2014
January 8, 2014


 

Despite a light slate of financial headlines due to the New Year’s holiday, the real estate market enjoyed some welcome news where housing supply was concerned; short term employment might soon see some stability; and car sales scored a six-year high.

Real Estate

After two months of real estate experts calling for more inventory to counteract increasing prices and declining sales volume, construction spending hit its highest point in longer than four years.

Construction spending during November hit estimated annual rate of $934.4 billion, marking a 1 percent gain over October’s revised estimate of $925.1 billion, the Census Bureau reported. This was 5.9 percent over the November 2012 estimated rate of $882.7 billion the highest rate since May 2009.

November’s numbers pending on private construction (as opposed to public sector buildings) ticked up to an annual rate of $659.4 billion, which was 2.2 percent higher than October’s revised estimate of $644.9 billion. Similarly, residential construction grew to an annual rate of $345.5 billion, representing a 1.9 percent gain over October’s revised estimate of $339.2 billion.

Besides increasing the supply of homes, which should hopefully stabilize prices and improve sales volume, construction brings additional benefit: each new home generates roughly $90,000 in tax revenue and creates three new jobs for the year, according to the National Association of Home Builders.

Employment

And where jobs are concerned, first-time claims for unemployment insurance saw a slight dip, according to last week’s report from the Employment and Training Administration. Initial jobless claims filed during the week ending Dec. 28, inched down to 339,000, a decline of 2,000 claims from the previous week’s revised figure of 341,000, the Administration reported. This was the lowest level in a month.

That week’s claims were in line with economists’ expectations, but the Thanksgiving-through-New Year’s time period is considered highly volatile for first-time jobless claims. The four-week moving average, which is considered a more reliable gauge of recent employment activity notched up to 357,250, an 8,500-claim increase from the preceding week’s revised average of 348,750.

The Administration also reported that the total number of unemployed Americans on jobless benefits during the week ending Dec. 21 dropped to 2,833,000, a decline of 98,000 people from the previous week’s revised level of 2,931,000.

Auto Sales

U.S. sales of cars and trucks hit a six-year high in December, but the month’s receipts weren’t as high as the auto manufacturers had hoped for, given that sales activity during the late Thanksgiving holiday grabbed some of December’s sales volume. All told, car makers sold roughly 1.4 million cars and trucks in December, which was still the fourth-best sale month of 2013.

With the close of the year, U.S. auto sales grew 8 percent to hit 15.6 units for 2013, which would be the highest since 2007’s 16.1 million. An average 4 percent increase in rebates and incentives helped push December’s performance, with Ford notably increasing rebates 22 percent. Those efforts to nab buyers are indicative of car makers’ desires to woo buyers.

“We think there’s going to definitely be more competition,” said Larry Dominique, president of Automotive Lease Guide, which reports on car sales and lease prices. “We’re seeing the OEMs fighting each other a little bit more now.”

Some key performances for the year were Ford, which enjoyed an 11 percent U.S. sales increase; Chrysler and Nissan, which both saw 9 percent sales growth; and General Motors, Toyota and Honda, which notched a 7 percent sales increase. Also notable was the fact that Detroit’s Big Three, General Motors, Ford Motor and Chrysler, comprised 45.2 percent of all new U.S. vehicle sales in 2013, which was up from 44.5 percent in 2012.

This week, we can expect:

  • Monday — Factory orders for November from the Census Bureau.
  • Tuesday — The international trade balance for November from the Census Bureau.
  • Wednesday — Consumer credit scores for November from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from Employment and Training Administration.
  • Friday — The unemployment rate, payrolls, hourly earnings and average workweek for December from Bureau of Labor Statistics; wholesale inventories for November from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: January 1, 2014
January 1, 2014


 

Measured improvement and managing expectations: Those could be the watchwords of the economy for 2014. Last week’s economic headlines showed moderate income gains, growth in spending, measured improvement in the job market, and a slowing in real estate growth.

Incomes and Spending

Incomes and spending were up in November, but the overriding question was had they seen a big enough boost? Person incomes grew 0.2 percent, or $30.1 billion in the month, which was short of the 0.5 percent gain analysts had expected, and disposable income — the income after taxes and mandatory expenses — grew 0.1 percent, or $16.2 billion, according to last week’s report from the Bureau of Economic Analysis.

Personal consumption expenditures (PCE; a.k.a. consumer spending) grew by 0.5 percent, or $63 billion. Meanwhile, personal saving — DPI minus PCE and other outlays, such as interest — was $525.4 billion in November, compared to October’s  $571.8 billion. November’s personal saving rate — personal saving as a percentage of disposable personal income — was 4.2 percent, compared to October’s 4.5 percent.

Casual observation shows that incomes, while rising, aren’t keeping pace with spending, and consumers are dipping into savings as a result. This is causing some economists to worry that consumer spending, which drives 70 percent of the economy, might slow and hurt any recovery.

Consumer Sentiment

But while some economists are concerned, consumers’ outlook is improving.  Last week’s consumer sentiment report from the University of Michigan and Reuters news services posted its best results in five months, coming in at a score of 82.5 for December, compared to November’s 75.1 and December 2012’s 72.9.

The end to the government shut down had improved consumers’ outlook in November, but two things were driving consumer’s improved outlook for December, according to the report: jobs and incomes. Consumers believe there are more jobs to be had, and their pay is improving, but they are guarded.

“Simply ending the shutdown or passing a new budget to keep the government open, however welcome, is not seen by consumers as a proactive step toward better economic policy,” said the University of Michigan Surveys of Consumers chief economist, Richard Curtin. “While they anticipate the economy to improve and retailers to offer larger discounts, most consumers still anticipate tiny wage gains — gains that are even smaller than the currently low inflation rate. Consumers are not ready to celebrate, aside from those who have benefited from rising stock market wealth.”

Employment

And where jobs were concerned, we once again witnessed the Thanksgiving-through-New Year volatility in the short-term employment numbers that Economic Advisor mentioned last week.

First-time claims for unemployment benefits filed during the week ending Dec. 21 dropped to 338,000, The Employment and Training Administration reported last week. This was a decrease of 42,000 claims from the previous week’s revised figure of 380,000, and the largest weekly drop in longer than a year.

The four-week moving average, which is a more stable number, ticked up to 348,000 claims, an increase of 4,250 from the previous week’s revised average of 343,750.The total number of unemployed Americans covered by jobless benefits during the week ending Dec. 14 hit 2,923,000, an gain of 46,000 people from the previous week.

Real Estate

Another case in point of tempered growth was last week’s report on new home sales. Transactions of new, single-family homes in November ticked down to an annual rate of 464,000, which was 2.1 percent below October’s revised rate of 474,000, the Census Bureau reported.

November’s was still up on an annual basis, performing 16.6 percent better than November 2012’s estimated rate of 398,000, but the month did represent a drop from a five-year high, and prices and supply were the likely culprits. November’s median sales price for new homes was $270,900 and the average was $340,300. November’s estimated supply of new homes for sale was 167,000, which would constitute a 4.3-month supply at November’s sales rate.

But if incomes and jobs can improve, that could foster increased housing activity despite the prices and inventory constraints, which would be welcome relief for various segments of the economy.

“The market is entering 2014 with momentum in new-home permits, starts and sales,” Jed Kolko, chief economist for real estate watchers Trulia Trends, remarked in a public statement. “That’s good news for the construction industry and other sectors of the economy that depend on home building.”

This week, we can expect to see:

  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; November construction spending from the Census Bureau.
  • Friday — December car and truck sales from the auto manufacturers.

Posted in Economic Advisor



Economic Advisor: December 25, 2013
December 25, 2013


 

Real estate news and employment factors were giving economists reason to temper any discussions of economic recovery with a healthy bit of caution last week — that is until the Bureau of Economic Analysis released a surprisingly good third quarter gross domestic product (GDP) at the end of the week.

GDP

A key measure of economic performance, real GDP describes the output of goods and services produced in the United States. The Bureau of Economic Analysis threw many market watchers for a loop when it announced last week that the third quarter’s GDP had grown by an annual rate of 4.1 percent from the second quarter.

The third quarter’s performance not only beat the second quarter’s 2.5 percent gain, but marked the first time the economy had grown by more than 4 percent since 2011. Among various factors, the Bureau attributed the gain partly to consumer spending, which as Economic Advisor readers will remember had increased by 0.2 percent in October, and comprises more than two-thirds of U.S. economic activity.

“The consumer is back in the game,” noted Chris Rupkey, chief financial economist of Bank of Tokyo-Mitsubishi UFJ, in public statement to clients. “Is this economic growth fast enough to put America back to work? The answer is, yes. The wheels of the economy are turning fast enough to bring down the unemployment rate further.”

The question is whether or not the economy can keep up that pace. Many experts were not so sure, because it is expected business inventories aren’t as plentiful in the fourth quarter as in the third. That said, most agreed the economy is entering 2014 with healthy movement. This is good, given the aforementioned not-so-stellar real estate and employment news from last week.

Real Estate

Sales of existing homes, such as single-family homes, townhomes, condominiums and co-ops, dropped to an annual rate of 4.9 million in November, the National Association of Realtors reported last week.

November’s pace represented a 4.3 percent drop from October’s rate of 5.12 million, and was 1.2 percent below November 2012’s rate of 4.96 million-unit pace. This marked the first time in 29 months that the sales rate was below year-ago levels.

The national median existing-home price for all housing types was $196,300 in November, marking a 9.4 percent gain over November 2012.

Those price gains had an impact. As with October’s existing home sales, climbing prices due to short inventory were creating downward pressure on sales volume, according to Lawrence Yun, NAR’s chief economist.

“Home sales are hurt by higher mortgage interest rates, constrained inventory and continuing tight credit,” Yun said. “There is a pent-up demand for both rental and owner-occupied housing as household formation will inevitably burst out, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction. As such, rents are rising at the fastest pace in five years, while annual home prices are rising at the highest rate in eight years.”

Bearing Yun’s points in mind, total housing inventory for November dropped 0.9 percent to 2.09 million existing homes for sale, representing a 5.1-month supply.

Notably, distressed homes, such as foreclosures and short sales, continued to make up a smaller portion of sales, accounting for 14 percent of November’s sales, as opposed 22 percent in November 2012. This too was a likely contributor to November’s price increases.

Employment

In employment, first- time claims for unemployment insurance filed by the newly employed continued to rise after the previous week’s sizable spike. Initial jobless claims filed during the week ending Dec. 14 hit 379,000, a gain of 10,000 over the previous week’s total of 369,000. This was the highest level since March.

Because the increases in initial jobless claims come so soon after a considerable drop (first-time claims hit a six-year low a few weeks ago), many economists are expecting another drop.

“We continue to take these readings with a grain of salt,” senior BMO Capital Markets economist Jennifer Lee told MarketWatch last week.

The four-week moving average, a more reliable measure of recent unemployment, grew to 343,500, a 13,250-claim increase from the prior week’s revised average of 330,250.

This week, we can expect to see:

  • Monday — November personal incomes and spending from the Bureau of Economic Analysis; consumer sentiment for December from the University of Michigan.
  • Tuesday — November durable goods orders and November new home sales from the Census Bureau.
  • Thursday — Initial jobless claims for last week.

Posted in Economic Advisor



Economic Advisor: December 18, 2013
December 18, 2013


 

Retail sales showed a strong performance last week, with solid receipts rung up during November, but volatility in employment scores tempered the elation some were feeling after the previous week’s string of particularly good news.

Retail Sales

Retail sales for November saw their strongest performance in five months, growing by 0.7 percent, higher than the 0.6 percent increase that was forecasted the Census Bureau reported last week. Retail and food service sales for the month hit an estimated $432.3 billion, which was 4.7 percent higher than the same period last year.

The gain was that much more impressive in that while the figure included the Black Friday shopping surge, it did not include Cyber Monday sales, which occurred on Dec. 2. This points to a likely solid follow up in December.

In any case, those Black Friday receipts help contribute to a number of strong performances for big-ticket retail categories such as car sales, which grew by 1.8 percent; electronics and appliances, which increased by 1.1 percent; and furniture and home furnishings, which gained 1.2 percent.

If anything, this increase demonstrated that even at a time when surveys were reporting consumer jitters over the federal shutdown’s possible impact on the economy, they were ultimately confident enough to get out and spend their money, according to Millan Mulraine, senior economist at TD Securities.

“It should provide more confidence to the Fed that the economic recovery has emerged from the political-induced uncertainties of recent months essentially unscathed and reinforce the expectation for the recent improved performance in the data to be sustained,” Mulraine told the New York Times.

Employment

How can we describe recent short-term employment scores? In a word: volatile, but perhaps that volatility was slightly artificial. After posting a six-year low the week before, last week’s first-time claims for unemployment benefits hit a two-month high.

Claims for unemployment insurance made by the newly unemployed during the week ending Dec. 7 hit 368,000, a gain of 68,000 claims over the prior week’s revised total of 300,000, the Employment and Training Administration reported last week. The Administration also reported that the total number of jobless Americans covered by unemployment benefits for the week ending Nov. 30 was 2,791,000, a gain of 40,000 people over the previous week’s total of 2,751,000.

Most economists were attributing the massive drop that occurred two weeks ago to the Thanksgiving holiday’s influence on jobless reporting. Moreover, first-time claims historically experience a spike the following week, as well, experts added.

More stable reporting should return in the weeks to come, and in the meantime, employment watchers advised to monitor the four-week moving average for initial jobless claims. In last week’s case that was 328,750 claims for jobless benefits, an increase of 6,000 claims from the preceding week’s revised average of 322,750.

Wholesale Sales and Inventories

Meanwhile, sales for wholesalers in October increased 1 percent to $435.3 billion, and were 6.4 percent over the same period in October 2012, the Census Bureau reported last week. Key wholesale performers for October were sales of machinery, equipment and supplies, which were up 3.8 percent from September; non-durable goods, which were up 1.8 percent; and petroleum products, which were up 3.6 percent.

Meanwhile, wholesale inventories for October grew by 1.4 percent over the previous month to hit $514.1 billion. That was almost three times September’s growth in inventories, and marks the largest monthly gain since October 2011. Wholesale inventory gains are typically a positive indicator of economic performance, because it means that businesses expect to sell more to consumers, and certainly the spike in November’s retail sales would confirm that.

This week, we can expect to see:

  • Monday — Third quarter productivity figures from the Bureau of Labor Statistics; November industrial production and capacity utilization from the Federal Reserve.
  • Tuesday — November consumer price index from the Bureau of Labor Statistics.
  • Wednesday — November housing starts and building permits from the Census Bureau.
  • Thursday —  Initial jobless claims for last week from the Employment and Training Administration; November existing home sales from the National Association of Realtors; November leading economic indicators from The Conference Board.
  • Friday — Third quarter gross domestic product from the Bureau of Economics.

Posted in Economic Advisor



Economic Advisor: December 11, 2013
December 11, 2013


 

Could the economy be seeing a solidifying recovery? Last week’s spate of reassuring economic headlines definitely offered some optimism in that regard. Employment, consumer activity, and real estate all showed substantial improvement.

Unemployment

Easily the top story of last week was the news that unemployment for November dropped to 7 percent, down from October’s 7.3 percent, marking the lowest unemployment rate in five years, according to last Friday’s Bureau of Labor Statistics (BLS) report. All in all, the economy added 203,000 jobs, putting the total number of unemployed workers at 10.9 million people.

Fueling that improvement were gains in robust employment sectors, such as manufacturing, which added 27,000 jobs, and construction, which added 17,000 jobs.  That said, the number of people unemployed for 27 weeks or longer — called long-term unemployed by the BLS — was still hovering at 4.1 million in November, with those job seekers accounting for 37.3 percent of the unemployed.

Meanwhile, November’s labor force participation rate, which describes the amount of Americans of working age engaged in the workforce, was 63 percent, up from 62.8 percent in October. That said, the participation rate is still down from 64 percent a year ago. While the labor force participation rate is impacted by various factors, such as demographics shifts, it has been on a sharp decline since the 2007 recession, so November’s bump upward was welcome.

Initial Jobless Claims

Continuing with the employment news, first-time claims for unemployment insurance benefits took an unexpected and welcome dip to a six-year low, according to last weeks report from the Employment and Training Administration. Claims filed by the newly unemployed during the week ending Nov. 30 dropped to 298,000, a decline of 23,000 claims from the preceding week’s total of 321,000.

The expectation among employment-watchers was for claims to actually ring in at around 320,000. What was the reason for the sudden improvement? It could be due to seasonal volatility in first-time claims, which can skew up or down. In this case, it showed strong improvement, but the actual figures might be closer to economists’ expectations of measured improvement, TD Securities U.S. strategist Gennadiy Goldberg told the press last week.

“While we continue to note that the tone in the initial claims data has been steadily improving over the past few months, we believe that seasonal volatility has recently led the data to overstate the true voracity of labor market improvement,” he said. “We continue to see the ‘true’ trend in claims running at about 320-330K, but we are unlikely to see a fresh confirmation of this trend until strong seasonal volatility begins to unwind in early-February.”

Incomes and Spending

While unemployment news was good all-around, personal incomes and spending were mixed with American incomes decreasing $10.8 billion, or 0.1 percent, in December and disposable personal income (DPI; income after taxes) decreasing $23.6 billion, or 0.2 percent, for the month, the Bureau of Economic Analysis reported last week.

Meanwhile, personal consumption expenditures (PCE) increased $32.7 billion, or 0.3 percent, the Bureau said. While the income news was disappointing, an increase in spending is important given that consumer spending accounts for roughly 70 percent of U.S. economic activity.

Consumer Credit

Bearing the importance of consumer activity in mind, consumer credit was up 7 percent in October, growing to a total of $3.07 trillion, the Federal Reserve reported last week. The big question was, what type of consumer borrowing grew?

Non-revolving debt, such as car and student loans continued its ongoing rise, growing at an annual rate of 7.5 percent to $2.21 trillion. However, revolving debt, such as credit card sales, point to increased consumer activity. Fortunately, revolving credit posted at 6.1 percent, hitting $856.8 billion.

As employment improves and more consumers feel confident about their economic circumstances, that revolving debt, along with spending, could continue to show improvement.

Real Estate

Last, but not least, new homes sales enjoyed a surprise surge in October, with transactions of new single-family homes hitting an annual rate of 444,000, the Census Bureau and the Department of Housing and Urban Development reported last week. This marked a whopping 25.4 percent gain over September’s rate of 354,000 and was 21.6 percent higher than October 2012’s estimated rate of 365,000.

The median sales price for new homes sold in October rang in at $245,800, and the average sales price was $321,700. In terms of inventory, the number of new homes for sale at the end of October totaled 183,000, representing a 4.9-month supply at October’s sales rate.

This week, we can expect to see:

  • Tuesday — Wholesale inventories for October from the Census Bureau.
  • Wednesday — November Treasury budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; November retail sales, November import and export prices, and October business inventories from the Census Bureau.
  • Friday — November producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: December 4, 2013
December 4, 2013


 

Consumers were slow to trade due to lingering worries regarding the economy, while employment showed some improvement in last week’s headlines. Meanwhile, data on new real estate is on-hold as federal reporting agencies suffer from a research backlog caused by the federal shutdown.

Consumer Confidence

After a sharp decline in October, consumer confidence took another hit in November, dropping to 70.4 on the Consumer Confidence Index (a baseline of 100 was set in 1985) from 72.4 in October, The Conference Board reported last week. Simply put, consumers aren’t feeling good about today or tomorrow.

The Present Situation Index, which charts consumers’ feelings about their current economic circumstance dropped to 72 in November from 72.6 in October. The Expectations Index, which describes their outlook on their circumstance in the near future dropped to 69.3 from 72.2.

That said, consumers also appeared to see some improvement in the job market. Consumers saying jobs were “plentiful” notched up to 11.8 percent in November from 11.6 percent in October, and those reporting jobs were “hard to get” skirted down to 34.0 percent from 34.9 percent. But they tempered their optimism with concerns for the future, according to Lynn Franco, The Conference Board’s director of Economic Indicators.

“When looking ahead six months, consumers expressed greater concern about future job and earning prospects, but remain neutral about economic conditions,” she said. “All in all, with such uncertainty prevailing, this could be a challenging holiday season for retailers.”

Leading Economic Indicators

But for any consumer jitters, The Conference Board also reported last week that it’s Leading Economic Indicators, which comprises various key pieces of economic data increased 0.2 percent in October to 97.5 (a baseline of 100 was set in 2004).

This marked the fourth consecutive monthly gain. Key drivers have been improvements in housing, the financial sector, and manufacturing, but the key to truly sustained growth will be in consumer spending. In any case, The Board’s director of Macroeconomic Analysis, Kathy Bostjancic, anticipates better performance in the coming year.

“The recent increase in the index supports our forecast that the U.S. economy is poised to grow somewhat faster at 2.3 in 2014 compared to 1.6 percent in 2013,” she said.

Employment

Employment saw some good news last week, with the number of first-time claims for unemployment insurance filed by the newly unemployed during the week ending Nov. 23 dropping to 316,000. This marked a decline of 10,000 claims from the prior week’s revised figure of 326,000, the Employment and Training Administration reported last week.

To put things in perspective, the Administration reported that the four-week moving average for first-time claims fell by 7,500 claims to 331,750, which was well below the 401,000 four-week average for the same period a year ago. This is a good indication that layoffs have slowed, which is good, but actual job growth won’t be significant until there is a pick-up in consumer spending, which is the key driver to U.S. employment.

Real Estate

As you might recall from last week’s edition, the National Association for Realtors had called for an increase in housing inventory as shrinking supply and rising prices were negatively impacting the pace of home sales. Unfortunately, the Census Bureau, while slated to release October’s construction data, could only release partial data in that regard.

Frustratingly, the federal shutdown is still having some effects on some government agencies’ ability to collect and report accurate data. The Census Bureau is one of them, reporting last week that it would not be able to report accurate data on new home construction for September, October and November until December.

What the Bureau was able to report was that building permits issued for construction of private homes, grew to an annual rate of 1,034,000 units, marking a 6.2 percent gain over September’s rate of 974,000, and a 13.9 percent increase over October 2012’s estimate of 908,000. Construction permits issued for single-family homes in October ticked up to a rate of 620,000, which was 0.8 percent over September’s figure of 615,000.

This week, we can expect to see:

  • Monday — October construction spending from the Census Bureau.
  • Tuesday — November car and truck sales from the auto manufacturers.
  • Wednesday — October new home sales from the Census Bureau; October balance of trade from the Bureau of Economic Analysis.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; October factory orders from the Census Bureau.
  • Friday — Personal incoming and spending from the Bureau of Economic Analysis; October consumer credit from the Federal Reserve; November payrolls, unemployment, hourly earnings and workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: November 27, 2013
November 27, 2013


 

Better-than-expected retail sales performance in October fostered increased confidence in a slowly recovering economy, while declining inventory and increasing prices caused a dip in the volume of home sales, according to last week’s economic news.

Existing Home Sales

Sales of existing homes slipped for the second month in a row in October, with transactions of single-family homes, townhomes, condominiums and co-ops falling 3.2 percent from an annual rate of 5.29 million in September to a rate of 5.12 million in October, the National Association of Realtors reported last week. Moreover, it took longer to sell homes last month; with the median time on market for all homes being 54 days in October, up from 50 days in September.

But to put things in perspective, October’s activity is still a far cry better than last year. October’s sales were 6 percent higher than the 4.83 million-unit level in October 2012, and homes spent a median of 71 days on the market a year ago.

So what caused the dip in sales? Prices might have something to do with it. The median price for existing-homes (of all types) was $199,500 in October, which was 12.8 percent from October 2012, marking the 11th straight month of double-digit, year-over-year price increases. That is cutting away at sales volume, according to NAR experts.

“The erosion in buying power is dampening home sales,” said NAR chief economist Lawrence Yun. “Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.”

And inventory is dipping. Total housing inventory at the end of October notched down 1.8 percent to 2.13 million existing homes available for sale, which represented a five-month supply. It will be interesting to see what the Census Bureau reports for new home construction next week as that should have an influence on the home market.

Retail Sales

Retail food services sales for October hit $428.1 billion, a 0.4 percent gain over September’s, and 3.9 percent higher than October 2012. This was welcome news, as it indicated that the government shutdown only had so much of an impact on consumer activity, and signaled that the slow-and-steady pace of economic recovery was continuing.

“It reinforces the current narrative of sustained growth momentum in the recovery going into the last quarter of the year, even at a time when the economy was contending with the headwinds created by the government shutdown,” TD Securities senior economist Millan Mulraine told the Reuters news service.

Sales were up over a wide variety of retail categories, including auto dealers, which saw a 1.3 percent increase; clothing retailers, who enjoyed a 1.4 percent gain; electronics and appliance sellers, which experienced 1.4 percent growth; and sporting goods shops, which increased their sales by 1.6 percent.

Consumer Prices

While sales were up for October, the consumer’s prices ticked down slightly. The Bureau of Labor Statistics reported last week that its Consumer Price Index for All Urban Consumers (CPI-U) dropped 0.1 percent in October. This was off from expectations that prices would see no change for the month after six months of increases.

A key contributor to the drop was the gasoline price index, which fell a notable 2.9 percent in October. Meanwhile, the food index rose 0.1 percent in October. Taking those two elements out of the equation, the index for all items less food and energy rose 0.1 percent in October.

Consumers only being able to pay so much for certain items will keep inflation, and thusly interest rates in check for the near future.

“Inflation is a distant concern at this time,” Ameriprise Financial senior economist Russell Price told Bloomberg. “It gives the Fed room for its continued quantitative-easing efforts.”

Employment

Lastly, on a quick note, first-time claims for jobless benefits by the newly unemployed fell to a two-month low, with initial claims filed during the week ending Nov. 16, dropping 6.1 percent to 323,000 claims, the Employment and Training Administration reported last week. This was a welcome 21,000 claims lower than previous week’s total of 344,000 claims.

This week, we can expect to see:

  • Tuesday — Building permits and construction starts on new homes for both September and October from the Census Bureau; Consumer confidence for November from The Conference Board.
  • Wednesday — Initial jobless claims for last week from the Employment and Training Administration; October durable goods orders from the Census Bureau; November consumer sentiment from the University of Michigan; October leading economic indicators from The Conference Board.

Posted in Economic Advisor



Economic Advisor: November 20, 2013
November 20, 2013


 

Last week saw mixed economic results, with improving employment, but an unexpectedly widening trade gap with dropping import and export prices, signaling that the economy will continue its recovery in fits and starts.

Employment

First-time claims for unemployment benefits fell for the fifth straight week during the week ending Nov. 9, according to last week’s report from the Employment and Training Administration. That said, the total was slightly higher than projections. Claims filed for the week ticked down to 339,000, a slight decrease of 2,000 claims from the previous week’s revised figure of 341,000.

The total number of unemployed Americans covered by unemployment insurance during the week ending Nov. 2 was 2,874,000, the Administration also reported. This was unchanged from the previous week’s revised level of 2,874,000, and the four-week moving average was 2,866,250, which was down 2,000 from the prior week’s average 2,868,250, a small, but welcome sign.

Many labor market experts had expected this measured employment performance, and cited fears over political and economic uncertainties as its main cause.

Trade Balance

In the meantime, the trade deficit widened unexpectedly to its biggest gap in four months, with September totaling $188.9 billion and imports ringing in at $230.7 billion, according to last week’s report from the Census Bureau and the Bureau of Economic Analysis. This resulted in a goods and services deficit of $41.8 billion, up from $38.7 billion in August.

Expectations were for a gap of roughly $39 billion. Some analysts chalked up the nearly $3 billion difference to underperforming exports in September, which were $0.4 billion less than August exports of $189.3 billion. September imports were $2.7 billion more than August imports of $228.0 billion, marking their highest point since November 2012.

It’s also worth noting that petroleum played a big role in September’s overall trade activity. Petroleum imports pushed the petroleum deficit from $18.6 billion to $19.8 billion in September, which was nearly half of the month’s total deficit.

Import and Export Prices

In related news, lower fuel prices led import prices to notch down 0.7 percent in October, the Bureau of Labor Statistics reported last week. This followed small advances of between 0.1 percent and 0.2 percent over the last three months. It’s worth noting that import prices decreased 2 percent for the year ended in October, which was the largest 12-month decline since a 2.7 percent drop between April 2012 and April 2013.

Export prices fell 0.5 percent in October, after a 0.4 percent increase in September. Prior to September, export prices had been on a downward trend. The last time export prices advanced was in February with a 0.7 percent gain.

In addition to dropping fuel prices impacting both import and export prices, the downward trend in import prices also highlights the fact that consumers abroad, particularly those in Europe, were having enough trouble that U.S. importers couldn’t justify price increases. Altogether, these factors point to continued middling trade performance worldwide.

This week, we can expect to see:

  • Wednesday — October retail sales and September Business Inventories from the Census Bureau; October consumer price index from the Bureau of Labor Statistics; October existing home sales from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; October producer price index from the Bureau of Labor Statistics; October Leading Economic Indications index from The Conference Board.

Posted in Economic Advisor



Economic Advisor: November 13, 2013
November 13, 2013


 

The economic data is once again flowing in earnest from the various federal reporting agencies, but some of the numbers remain slightly off due to skewing caused by the shutdown. The big news last week was employment, which appears to be on track with past trends, and consumer credit, which saw a big bump in non-credit card borrowing.

October Unemployment

October’s unemployment performance beat forecasts despite possible skewing due to the Federal shutdown. The economy added 204,000 non-farm jobs in October, putting the unemployment rate at 7.3 percent for the month, and the total number of jobless Americans at 11.3 percent, according to last week’s report from the Bureau of Labor Statistics. This was slightly up from September’s 7.2 rate, but better than the forecast of 7.4 percent.

That said, the civilian labor force dropped by 720,000 in October, and the labor force participation rate, which describes how many people are actively looking for work, fell by 0.4 percent to 62.8 percent over the month.

The big question is why? For now, experts are chalking up the labor force shrinkage and declining participation to the Federal shutdown, because furloughed employees were counted as jobless, and not a narrowing job market. We’ll know better with the November report whether we’re looking at a trend, or simply more data skewed by the shutdown.

Consumer Credit

Consumer credit grew by 5.4 percent in September to hit a sizable total of $3.05 trillion, according to last week’s report from the Federal Reserve. Once again, the upswing was not felt by credit cards, which actually were down.

Non-revolving debt, such as student loans and car loans, saw a solid surge of 8.7 percent to hit $2.2 trillion, while revolving debt, such as credit cards, dropped by 2.9 percent to $846.9 billion. That’s the fourth-straight month of diminishing credit card spending.

Multiple experts chalked up the gains in non-revolving debt to gains in household wealth resulting in a willingness to buy big-ticket items, while keeping the plastic in their wallets. The question is, does that speak to consumer concerns about the current economy, or about credit card use in general?

“It’s the pattern we’ve seen all year and even most of last year — consumers not really willing to build up credit-card balances,” said Paul Edelstein, director of financial economics at IHS Global Insight. “We can’t preclude the possibility that there’s just been a preference shift in household attitudes toward debt.”

Incomes and Spending

September’s personal income and spending scores from the Bureau of Economic Analysis might speak to Edelstein’s concerns. Incomes grew by a 0.5 percent increase, or $67.4 billion, while personal consumption expenditures grew by 0.2 percent, or $24.7 billion, according to last week’s report.

Growth is a good thing, but while September’s income growth was in line with August’s 0.5 percent gains, the pace of September’s spending was a bit down from August’s 0.3 percent growth. That drop helped keep inflation in check, but September’s personal savings rate rose to 4.9 percent in September from 4.7 percent in August, marking a nine-month high.

That could speak to a reticence on the part of consumers to buy, which hurts growth, given that consumer spending comprises a large portion of the economy. But it could also be attributed to consumer fears exacerbated by the shutdown. The bureau’s release of October scores next month will help shed some light on the situation.

This week, we can expect to see:

  • Wednesday — October import and export prices from the Census Bureau; the October Treasury budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; the September balance of trade from the Census Bureau and Bureau of Economic Analysis; preliminary Third Quarter productivity scores from the Bureau of Labor Statistics.
  • Friday — Industrial production and capacity utilization for October from the Federal Reserve; September wholesale inventories from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: November 4, 2013
November 6, 2013


 

Key economic headlines for last week included a drop in retail sales, as well as the lingering impact of the federal shutdown, which took their toll on consumer confidence.

Where retail sales were concerned, food services sales for September ticked down 0.1 percent from August to $425.9 billion, according to last week’s report from the Census Bureau. While down from the preceding month, September’s performance was still 3.2 percent higher than September 2012’s receipts.

Car and truck sales were the primary influence on September’s retail performance. Auto sales dropped 2.2 percent in September, due to the fact that carmakers agreed to count their Labor Day weekend sales toward August, with car and car parts sales omitted from September’s retail tally, sales actually increased 0.4 percent for the month.

Whiles sales ticked down, prices notched up. The Consumer Price Index for All Urban Consumers (CPI-U) grew by 0.2 percent in September, the Bureau of Labor Statistics reported last week. The energy index was a key mover, posting a 0.8 percent gain in September, while the food index was flat for the month. Just the same, September’s index for all items less food and energy only rose 0.1 percent for the month.

Meanwhile, the Producer Price Index for finished goods skirted won 0.1 percent in September, the Bureau also reported last week. By contrast, the indexes for finished energy goods and for finished goods less foods and energy grew by 0.5 percent and 0.1 percent, respectively.

That poor retail performance helped push down consumer’s assessment of the economy, with The Conference Board’s Consumer Confidence Index posting a sharp drop to 71.2 in September, decreased sharply in October, down from 80.2 in September. (A baseline of 100 was set in 1995.)

The Present Situation Index, which describes how consumers assess the current economic situation, dropped to 70.7 from 73.5. The Expectations Index, which describes how consumers expect the economy to fare in the near feature, plunged to 71.5 from 84.7 last month. Looking at the job market, consumers saying jobs were “plentiful” was virtually unchanged at 11.3 percent in October from 11.4 percent in September, while those saying jobs are “hard to get” grew to 35.8 percent from 33.6 percent.

The Conference Board noted that the government shutdown and debt-ceiling crisis put a large dent in consumers’ expectations. It added that comparable drops in confidence took place during the payroll tax hike earlier this year, the fiscal cliff discussions in late 2012, and the 1995 federal shutdown.

In employment news, first-time claims for unemployment insurance filed during the week ending Oct. 26 dropped to 340,000, a decline of 10,000 claims from the preceding week’s total of 350,000, the Employment and Training Administration reported last week. The four-week moving average was 356,250, a gain of 8,000 people from the prior week’s average of 348,250.

The total number of unemployed Americans covered by insurance during the week ending Oct. 19 grew to 2,881,000, an increase of 31,000 from the previous week’s revised level of 2,850,000, the Administration also reported. The four-week moving average declined to 2,878,750, a drop of 10,000 from the preceding week’s revised average of 2,888,750.

This week, we the federal reporting agencies will continue to play catch-up in their post-shutdown release of economic releases:

  • Monday — August and September factory orders from the Census Bureau.
  • Wednesday — September leading economic indicators from The Conference Board.
  • Thursday — Initial jobless claims for the week ending Nov. 2 from the Employment and Training Administration; Advanced third quarter GDP from the Bureau of Economic Analysis; Sept. consumer credit from the Federal Reserve.
  • Friday — October payrolls, unemployment, hourly earnings and workweek from the Bureau of Labor Statistics; September personal income and spending from the Bureau of Economic Analysis.

Posted in Economic Advisor



Economic Advisor: October 30, 2013
October 30, 2013


 

A flurry of economic releases crowded last week’s financial headlines as government agencies played catch-up to release back reports that were held up by the federal shutdown, and key among them was the Bureau of Labor Statistics’ employment report for September.

The economy added 148,000 non-farm jobs in September, which put the unemployment rate little changed at 7.2 percent for a total of 11.3 million Americans unemployed, the Bureau reported last week.

The population of long-term unemployed people — those jobless for 27 weeks or more — hovered at 4.1 million, and comprised 36.9 percent of unemployed Americans. The total of Americans involuntarily employed on a part-time basis — because their hours were cut or they couldn’t find a full-time job — also was unchanged at 7.9 million in September.

Turning to the current employment situation, the number of first-time claims for unemployment insurance filed in the week of Oct. 19 dropped to 350,000, a decline of 12,000 claims from the previous week’s revised figure of 362,000, the Employment and Training Administration reported last week. The four-week moving average hit 348,250, a gain of 10,750 from the preceding week’s revised average of 337,500.

The total number of insured unemployed Americans during the week ending Oct. 12 dipped to 2,874,000, a decrease of 8,000 from the preceding week’s revised level of 2,882,000, the Administration also reported. The four-week moving average was 2,894,750, a gain of 13,250 from the previous week’s revised average of 2,881,500.

Another key newsmaker was real estate, with a decline in existing home sales leading the week’s home sales news. Sales of single-family homes, townhomes, condominiums and co-ops, declined 1.9 percent in September to an annual rate of 5.29 million from a downwardly revised 5.39 million in August, the National Association of Realtors reported last week. That said, compared to last year, September’s sales were 10.7 percent over the September 2012’s 4.78 million-unit pace. (Sales have continued to outpace year-ago levels for the past 27 months.)

September’s median price existing homes of all housing types was $199,200, marking an 11.7 percent gain over September 2012. Total housing inventory at the end of September hovered at 2.21 million homes for sale, representing a five-month supply at September’s sales pace. This was slightly up from a 4.9-month supply in August.

Distressed homes, such as foreclosures and short sales, comprised 14 percent of September’s sales, which was up from the record low of 12 percent set in August. Nine percent of September sales were foreclosures, and 5 percent were short sales. Foreclosures sold for an average discount of 16 percent below market value in September, while short sales were discounted 12 percent.

Turning to new home sales, the Census Bureau’s long-awaited report on August’s sales showed the month hit an annual rate of 421,000, marking a 7.9 percent gain over July’s revised rate of 390,000, and a 12.6 percent increase over August 2012’s estimate of 374,000.

In terms of price and supply, the median sales price for new houses sold in August ring in at $254,600, and the average sales price was $318,900. The estimated number of new houses for sale at the end of August was 175,000, representing a five-month supply at August’s sales rate.

Construction spending during August notched up to an annual rate of $915.1 billion, a 0.6 percent gain over July’s revised July estimate of $909.4 billion, the Census Bureau also reported. On an annual basis, August’s construction rate marked a 7.1 percent increase over August 2012’s estimate of $854.0 billion.

Spending on private construction hit an annual rate of $640.5 billion in August, which was 0.7 percent over July’s revised estimate of $636.1 billion. Residential construction notched up to an annual rate of $340.2 billion for the month, representing a 1.2 percent increase over July’s revised estimate of $336.2 billion.

This week, we can continue to expect a heavier-than-usual spate of economic releases to make the news:

  • Monday — September industrial production and capacity utilization from the Federal Reserve.
  • Tuesday — September retail sales and August business inventories from the Census Bureau; September producer price index from the Bureau of Labor Statistics; October consumer confidence from The Conference Board.
  • Wednesday — Third quarter gross domestic product from the Bureau of Economic Analysis; September consumer price index from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for the week ending Oct. 26 from the Employment and Training Administration; September personal income and spending from the Bureau of Economic Analysis.
  • Friday — September construction spending from the Census Bureau; October car and truck sales from the automakers.

Posted in Economic Advisor



Economic Advisor: October 23, 2013
October 23, 2013


 

The good news last week was that Congress was able to pass a budget, end the shutdown of the federal government and dodge the debt ceiling bullet at the last moment. The downside was that the shutdown cost the economy approximately $24 billion and created a backlog of economic reports that were delayed from being released last week.

The 16-day shutdown removed $1.5 billion from the economy each day of its duration, according to a report released by the ratings agency Standard & Poor’s. Moody’s Analytics released similar findings, stating that the shutdown cost U.S. production $1.43 billion a day, for a total of $23 billion during the shutdown.

Moreover, it’s expected that the shutdown will reverberate in months to come. The 16-day standoff shook consumer confidence enough that holiday retail sales expectations have been tempered, according to a report released last week by the National Retail Foundation.

While the NRF said it was still forecasting a 3.9 percent increase in holiday sales to $602.1 billion, it also projected that spending by individual consumers would decrease. The group said that the average holiday shopper will spend $737.92 on holiday gifts, décor, greeting cards and other holiday expenses, in comparison with $752.24 last year.

The foundation specifically asked consumers in its survey if the budget impasse would impact their holiday spending, and 29 percent of respondents said the situation would somewhat or very likely affect their spending plans. When asked how they felt about the economy, 51 of the respondents said the economy would impact how they spend this holiday season, and 79.5 percent said they plan to spend less overall.

While concerns about the economy were up, one point of encouragement was that the S&P 500 closed out last week at a record high of 1,744.50 points. Another good bit of news was that first-time claims for unemployment benefits filed during the week ending Oct. 12 dropped to 358,000, a decrease of 15,000 from the previous week’s revised figure of 373,000, the Employment and Training Administration reported last week. The four-week moving average was 336,500, an increase of 11,750 from the prior week’s revised average of 324,750.

The total number of unemployed Americans during the week ending Oct. 5 shrank to 2,859,000, a drop of 43,000 from the previous week’s revised level of 2,902,000, the Administration also reported. The four-week moving average was 2,875,750, an increase of 17,750 from the preceding week’s revised average of 2,858,000.

This week, depending on how quickly government agencies catch up, we can expect:

  • Monday — Existing home sales for September from the National Association of Realtors.
  • Tuesday — Payrolls, unemployment rate, earnings and average workweek for September from the Bureau of Labor Statistics.
  • Wednesday — September import and export prices from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; September new home sales from the Census Bureau.
  • Friday — September durable goods orders from the Census Bureau; October consumer sentiment index from the University of Michigan.

Posted in Economic Advisor



Economic Advisor: October 16, 2013
October 16, 2013


 

While some economic agencies were still too under-funded to report during the federal government shutdown, some key pieces of data still made last week’s headlines. According to last week’s report from the Federal Reserve, the consumer credit posted a 5.4 percent gain in August.

Total credit hit $3.03 trillion thanks to gains auto manufacturers made during the month, according to market experts. Those opinions tracked with August’s total for non-revolving credit, such as student and car loans, which grew by 8 percent to $2.18 trillion. Meanwhile, consumers showed some reticence to whip out the plastic for that month, with revolving credit, such as credit cards, dropping by 1.2 percent down to $848.9 billion.

That said, while August’s revolving debt was down, retail sales for September showed some gains, at least according to one report. While the Census Bureau remained closed due to the shutdown and did not release its regular report on retail sales last week, the market research firm Retail Metrics reported that September’s sales gained 4 percent over September 2012.

Growth during the back-to-school shopping month was carried by drug stores, and would have grown just 2.8 percent without those stores’ sales. Consumers continued to concentrate their spending on larger price-tag items such as cars and appliance and cut back on the smaller transactions, according to the research firm.

In employment, first-time claims for unemployment benefits filed during the week ending Oct. 5 hit 374,000, an increase of 66,000 from the previous week’s unrevised figure of 308,000, the Employment and Training Administration reported. This marked a six-month high for initial jobless benefits that was attributed to federal employees being furloughed and backlogged claims being processed. The four-week moving average hit 325,000, which was 20,000 claims over the preceding week’s unrevised average of 305,000.

The total number of unemployed Americans covered by insurance during the week ending Sept. 28 dropped to 2,905,000, a decline of 16,000 from the previous week’s revised level of 2,921,000, the Administration also reported. The four-week moving average grew to 2,858,750, a gain of 22,500 from the prior week’s revised average of 2,836,250.

This week, provided the various federal agencies are funded and can report, we can expect:

  • Wednesday — The September consumer price index from the Bureau of Labor Statistics.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; September housing starts and building permits from the Census Bureau; and September industrial production and capacity utilization from the Federal Reserve.
  • Friday — September leading economic indicators from The Conference Board.

Posted in Economic Advisor



Economic Advisor: October 9, 2013
October 9, 2013


 

Last week’s economic data was thrown into disarray due to the temporary shutdown of the Federal government. Among the delayed announcements was the Census Bureau’s August construction spending totals and factory orders data. Most importantly, the Bureau of Labor Statistics’ report on September’s unemployment rate and payrolls was delayed.

The unemployment report represents a key measure of economic health. The longer the Bureau of Labor Statistics stays closed (or marginally staffed), the higher the likelihood of additional problems. For instance, if the shutdown lasts long enough to delay the Department of Labor’s household survey, which begins in mid-October, then the release of the Bureau’s October employment report could be delayed as well.

What is known about the unemployment rate for September is that economists were expecting no change from the August rate of 7.3 percent. 11.3 million Americans were listed as unemployed last month. In any case, the Bureau of Labor Statistics and the Department of Labor have given no indication as to when they will resume normal reporting.

While the lack of monthly jobs data frustrated many, there was news in terms of recent employment data. According to last week’s report from the Employment and Training Administration, jobless claims are still hovering at a six-year low.

The number of Americans filing first-time claims for unemployment insurance during the week ending Sept. 28 notched up slightly to 308,000, a gain of 1,000 claims from the previous week’s revised figure of 307,000. The four-week moving average was 305,000, a drop of 3,750 from the prior week’s revised average of 308,750.

The Administration also reported that the total number of unemployed Americans covered by insurance during the week ending Sept. 21 was 2,925,000. This was an increase of 104,000 from the previous week’s revised level of 2,821,000. The four-week moving average was 2,837,250, a drop of 4,750 from the previous week’s revised average of 2,842,000.

It is likely that the weekly first-time jobless data will be some of the only government-generated economic data to be released during the shutdown. Likely, we can also expect this week’s initial claims for jobless benefits to experience a spike due to furloughed federal employees filing claims.

Another piece of data that wasn’t hampered by the shutdown was September’s new car and truck sales totals for the auto manufacturers. That being said, September’s numbers were subject to slight skewing as the auto industry counts the Labor Day weekend (Sept. 1-3) sales as part of August’s totals.

Bearing that in mind, September’s sales fell 24.2 percent from August, and 4.2 percent from a year earlier, with the auto manufacturers selling 1.1 million new cars and trucks. This was roughly 50,000 vehicles off from September 2012.

Looking at individual manufactures: Ford and Chrysler saw gains with their sales rising 5.7 percent and 0.7 percent, respectively. General Motors’ sales dropped 11 percent. The major Asian car makers also posted a decline in sales with Kia seeing a 21 percent decline; Honda, 9.9 percent; Hyundai, 8.2 percent; Nissan, 5.5 percent; and finally, Toyota, who suffered a 4.3 percent loss.

This week, provided the various federal agencies are funded and can report, we can expect:

  • Monday — August consumer credit totals from the Federal Reserve.
  • Tuesday — August balance of trade from the Census Bureau.
  • Wednesday — August wholesale inventories from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; September import and export prices from the Census Bureau and Bureau of Economic Analysis.
  • Friday — September retail sales and August Business Inventories from the Census Bureau; and September producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: October 2, 2013
October 2, 2013


 

Americans earning more with personal incomes are seeing their biggest gain since February, according to data released last week by the Bureau of Economic Analysis. Personal income grew by $57.2 billion, or 0.4 percent, over July and disposable personal income (DPI) increased $56.2 billion, or 0.5 percent, in August, the bureau reported.

Americans were also spending more, with personal consumption expenditures (PCE) in August gaining $34.5 billion, or 0.3 percent over July. Personal outlays — which combine PCE, personal interest payments and personal current transfer payments — grew by $38.4 billion in August.

Looking at incomes in detail, private wages and salaries grew by $28.5 billion during August and supplements to wages and salaries improved by $3.8 billion during the month.

Meanwhile, personal saving — DPI less personal outlays — hit $580.7 billion in August, and the personal saving rate — personal saving as a percentage of disposable personal income — grew slightly to 4.6 percent in August, up from July’s 4.5 percent.

New real estate sales grew in August after a drop in July, with sales of new single-family homes hitting an annual rate of 421,000 for the month, the Census Bureau reported last week. August’s sales marked a 7.9 percent gain over July’s revised rate of 390,000 and a 12.6 percent increase from August 2012’s estimated rate of 374,000.

In terms of price, August’s median sales price for new homes rang in at $254,600 and the average sales price was $318,900. In terms of inventory, the estimation of new homes for sale at the end of the month was 175,000, representing a five-month supply at August’s sales rate.

Turning to employment news, first-time claims for unemployment insurance filed during the week ending Sept. 21 notched down to 305,000, a decline of 5,000 from the prior week’s revised figure of 310,000, the Employment and Training Administration reported last week. The four-week moving average dropped to 308,000, a decrease of 7,000 from the preceding week’s revised average of 315,000.

The total number of unemployed Americans covered by insurance for the week ending Sept. 14 grew to 2,823,000, an increase of 35,000 from the previous week’s revised level of 2,788,000, the Administration also reported. That said, the four-week moving average was 2,842,500, a decline of 42,750 from the prior week’s revised average of 2,885,250.

But despite the relative good news, Americans were feeling some trepidation about the economy, which many experts chalked up to fears over last week’s Congressional debates about the budget. The University of Michigan/Thomson-Reuters Survey of Consumers reported that of consumer sentiment for September dropped to 77.5 from August’s 82.1. It was the second straight decline after confidence reached a six-year high of 85.1 in July. Similarly, The Conference Board’s Consumer Confidence Index dipped to 79.7 in September from 81.8 in August (a baseline of 100 was set in 1985).

In terms of how consumers felt about their current economic circumstances, reports were mixed with the Conference Board’s Present Situation Index grew to 73.2 in September from 70.9, but the Survey of Consumers’ Current Conditions Index dipped to 92.6 in September from 95.2 in August. Both reports agreed about how consumers felt in regards to the economy’s prospects in the near future: The Conference Board’s Expectations Index fell to 84.1 in September from 89 in August. The Survey of Consumers Expectations Index fell to 67.8 in September, down from 73.7 in August.

This week we can expect:

  • Tuesday — August construction spending from the Census Bureau; September car and truck sales from the auto makers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; August factory orders from the Census Bureau.
  • Friday — September unemployment, payrolls, earnings and workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: September 25, 2013
September 25, 2013


 

Real estate watchers breathed a collective sigh of relief last week as existing home sales enjoyed a significant spike. Transactions of existing single-family homes, townhomes, condominiums and co-ops, increased 6.5 percent to an annual rate of 5.39 million in July, according to last week’s report from the National Association of Realtors. July’s sales were 17.2 percent above the 4.60 million-unit pace in July 2012.

Prices also saw solid gains with the national median price for existing homes of types growing 13.7 percent over July 2012 to hit $213,500 in July. The median price has risen at double-digit rates for the past eight months, and is now 7.3 percent below the all-time record of $230,400 set in July 2006. To get a picture of how far the market has come, two years ago, the median price was 25.7 percent below the peak.

Looking at supply, the total inventory of existing homes at the end of July notched up 5.6 percent to hit 2.28 million existing homes available for sale, which represented a 5.1-month supply at July’s sales pace. This was unchanged from June, but was 5 percent below a year ago.

Distressed home sales due to foreclosures and short sales continued to drop, comprising 15 percent of July’s sales. Comparatively, they were 24 percent in July 2012. This trend, paired with the tight supply of homes will most likely push prices upward.

Turning to new home activity, building permits issued for construction of private housing in August dipped to an annual rate of 918,000, which was 3.8 percent under July’s revised July rate of 954,000, but a solid 11 percent over August 2012’s estimated rate of 827,000, the Census Bureau reported last week. Permits issued for single-family homes in August ticked up to a rate of 627,000, which was 3 percent above July’s revised rate of 609,000.

Starts on construction of private housing hit an annual rate of 891,000 in August, marking a 0.9 percent gain over July’s revised estimate of 883,000 and a 19 percent increase over August 2012’s rate of 749,000. Starts on single-family homes in August hit a rate of 628,000, which was 7 percent over July’s revised figure of 587,000.

Completed constructions of private homes for August skirted up to an annual rate of 769,000, which was a 0.3 percent increase over July’s revised estimate of 767,000 and a 12.1 percent gain from August 2012’s rate of 686,000. Completions of single-family homes hit a rate of 573,000 in August, which was 0.5 percent over July’s revised rate of 570,000.

Turning to the retail sector, retail prices stayed relatively steady in August with just small gains in some segments, according to last week’s report from the Bureau of Labor Statistics. The Consumer Price Index for All Urban Consumers (CPI-U) increased just 0.1 percent in August, and over the last 12 months, the all items index increased 1.5 percent.

Gains in the indexes for shelter and medical care contributed to the increase in the all items index; they also accounted for most of the 0.1 percent increase in the index for all items less food and energy. The food index rose slightly for the month, with the fruits and vegetable index rising 1.2 percent. The energy index declined 0.3 percent, due mostly to a sharp decline in the index for natural gas.

Lastly, in employment news, first time claims for unemployment insurance filed in the week ending Sept. 14 hit 309,000, a gain of 15,000 claims from the previous week’s revised figure of 294,000, the Employment and Training Administration reported last week. The four-week moving average was 314,750, a drop of 7,000 claims from the prior week’s revised average of 321,750.

While the weekly figure was up, the total number of Americans covered by unemployment insurance for the week ending Sept. 7 dropped to 2,787,000, a decrease of 28,000 from the previous week’s revised level of 2,815,000, the Administration also reported. The four-week moving average was 2,885,000, a decline of 54,000 from the previous week’s revised average of 2,939,000.

This week we can expect:

  • Tuesday — September consumer confidence scores from The Conference Board.
  • Wednesday — August durable goods orders and August new home sales from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — August personal income and spending from the Bureau of Economic Analysis; August consumer sentiment figure from the University of Michigan.

Posted in Economic Advisor



Economic Advisor: September 18, 2013
September 18, 2013


 

Borrowing by Americans continued to expand in July, but not at the rate for which experts had hoped. The Federal Reserve reported last week that consumer credit grew by an annual rate of 4.25 percent in July to hit $2.85 trillion, a $10.4 billion gain that fell short of the anticipated $13 billion growth.

Once again, non-revolving debt, such as car and school loans, comprised the lion’s share of July’s gain, growing at an annual rate of 7.5 percent from $1.99 trillion to $2 trillion. Meanwhile, revolving debt, such as credit cards decreased at an annual rate of 2.5 percent to $849.8 billion from June’s $851.6 billion.

Almost going hand-in-hand with July’s so-so gains in consumer credit, the Census Bureau reported last week that retail and food services sales for August, only grew by 0.2 percent to $426.6 billion, and were only 4.7 percent over August 2012’s sales. Economists had expected at least a 0.4 percent gain over July.

The key mover in August’s retail sales were motor vehicle dealers and parts sales, which grew by 0.9 percent, and auto dealer sales in specific, which grew by 1 percent. (Car sales would follow logically from July’s gains in non-revolving debt, which includes car loans.) Conversely, sales of more “consumable,” smaller-ticket items flagged. For example, building and garden supply sales were down 0.9 percent; clothing sales contracted by 0.8 percent; sporting goods were down 0.5 percent; and general merchandise sales saw a 0.2 percent dip.

Shifting to the opposite side of the economy, the Producer Price Index for finished goods rose 0.3 percent in August, with food and gas being the key drivers, the Bureau of Labor Statistics reported last week. The index for finished energy goods grew by 0.8 percent in August, with most of the advance can be traced to gasoline prices, which climbed 2.6 percent. Prices for finished consumer foods notched up 0.6 percent in August with prices for fresh and dry vegetables shooting up a whopping 26.9 percent.

While consumer credit, retail sales and producer prices showed mediocre performance, there was some optimistic news in employment: First-time claims for unemployment insurance filed in the week ending Sept. 7, dropping to 292,000, a decrease of 31,000 claims from the previous week’s unrevised figure of 323,000, the Employment and Training Administration reported last week.

This was the lowest level of initial jobless benefits since April 2006, but it should be noted that the contraction was at least partially artificial given that the period included Labor Day, and work on computers systems in two states (unidentified by the Labor Department) threw off totals for the period. Looking at a longer period, the four-week moving average for first-time claims dipped to 321,250, a decline of 7,500 from the previous week’s revised average of 328,750.

The total number of unemployed Americans covered by unemployment insurance for the week ending Aug. 31 fell to 2,871,000, a drop of 73,000 from the preceding week’s revised level of 2,944,000, the Administration also reported. The four-week moving average for the total population dropped to 2,953,000, a decrease of 24,750 from the previous week’s revised average of 2,977,750.

This week we can expect:

  • Monday — Industrial production and capacity utilization for August from the Federal Reserve.
  • Tuesday — The Consumer Price Index for August from the Bureau of Labor Statistics.
  • Wednesday — Housing starts and building permits for August from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; existing home sales for August from the National Association of Realtors; leading economic indicators for August from The Conference Board.

Posted in Economic Advisor



Economic Advisor: September 12, 2013
September 12, 2013


 

Employment figures were a key newsmaker last week, and whether or not the news was favorable depended on the eye of the beholder. Specifically, the economy added 169,000 in August, which put the unemployment rate at 7.3 percent, the Bureau of Labor Statistics reported last week. This was little changed form July, but the lowest since December 2008.

On the face of things, that’s good news, but it skirts the issue of people who have given up looking for work, which is described by the labor-force participation rate. For August, the percentage of working-age people either working or looking for work, dropped to 63.2 percent from 63.4 percent in July. This was its lowest rate since 1978.

Ignoring the participation rate and going by the 7.3 percent rate, the number of unemployed Americans totaled 11.3 in August, the number of long-term unemployed (those jobless for 27 weeks or longer) hovered at 4.3 million. The long-term unemployed accounted for 37.9 percent of the total unemployed population.

The number of Americans involuntarily employed part time for economic reasons, such as their hours were cut or they were unable to find full-time work dropped by 334,000 to 7.9 million in August.

While the monthly unemployment scenario’s progress was unclear at best, more recent employment scores were more upbeat, with first-time claims for jobless benefits remaining at a five-year low.

First-time claims for unemployment insurance filed during the week ending Aug. 31 dipped to 323,000, a decline of 9,000 from the previous week’s revised figure of 332,000, according to last week’s report from the Employment and Training Administration. The four-week moving average was 328,500, a drop of 3,000 from the prior week’s revised average of 331,500.

The total number of unemployed Americans covered by jobless benefits during the week ending Aug. 24 dropped to 2,951,000, a loss of 43,000 from the previous week’s revised level of 2,994,000, the Administration also reported. The four-week moving average was 2,979,500, a decrease of 18,000 from the previous week’s revised average of 2,997,500.

Switching gears to real estate news, construction spending during July notched up 0.6 percent over June’s revised rate of $895.7 billion to hit an annual rate of $900.8 billion, the Census Bureau reported last week. Compared to last year, July’s rate was 5.2 percent over July 2012’s rate of $856.3 billion.

Spending on private construction hit an annual rate of $631.4 billion in July, which was 0.9 percent higher than June’s revised June estimate of $625.6 billion. Residential construction hit an annual rate of $334.6 billion in July, which was 0.6 percent over June’s revised estimate of $332.7 billion.

Finally, in international trade, the trade gap widened in July with exports of $189.4 billion and imports of $228.6 billion creating a trade deficit of $39.1 billion, which was up from $34.5 billion in June, the Census Bureau and the Bureau of Economic Analysis jointly reported last week.

July exports were down $1.1 billion from June’s exports of $190.5 billion, while July’s imports were $3.5 billion higher than June’s imports of $225.1 billion. This increase in imports was due to a combination of increased crude oil prices as well as consumer spending on goods from overseas, which could point to an improving economy, according to some analysts.

This week we can expect:

  • Monday — Consumer credit for July from the Federal Reserve.
  • Wednesday — July wholesale inventories from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; August import and export prices from the Census Bureau; and August budget from the Treasury Department.
  • Friday — August retail sales totals and July business inventories from the Census Bureau; and August producer price index from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: September 4, 2013
September 4, 2013


 

Consumers are still feeling strong about the economy, but perhaps while buoyed by improving employment conditions, they are still keeping their purse strings taut, according to last week headlines.

Where employment was concerned, first time claims for unemployment insurance nearly hit a five-year low, with claims filed in the week ending Aug. 24 dropping to 331,000, a decline of 6,000 from the previous week’s revised figure of 337,000, the Employment and Training Administration reported last week. The four-week moving average ticked up slightly to 331,250, a gain of 750 from the prior week’s unrevised average of 330,500, which was the lowest since November 2007. The lowest initial claims been since they’ve been since the Great Recession began was on Aug. 10, which dropped to 322,000 claims.

The total number of Americans covered by unemployment insurance during the week ending Aug. 17 dropped to 2,989,000, a decrease of 14,000 from the preceding week’s revised level of 3,003,000, the Administration also reported. The four-week moving average was 2,996,250, an increase of 9,500 people from the previous week’s average of 2,986,750.

Looking at incomes and spending, personal income increased $14.1 billion in July (0.1 percent), and disposable personal income (DPI) increased $21.7 billion (0.2 percent), in July, the Bureau of Economic Analysis reported last week. Personal consumption expenditures (PCE; in other words, spending) notched up to $16.3 billion (0.1 percent).  This was a considerable shift from the $64 billion gain (0.6 percent) in consumer spending for June.

Real disposable income (in other words, income after taxes) grew only 0.1 percent in July, in contrast to a decrease of 0.2 percent in June.  Real PCE ticked up less than 0.1 percent, compared with an increase of 0.2 percent.

It could be that some of July’s spending money, went into the bank, instead. Personal saving — DPI less personal outlays — grew to $544.5 billion in July, compared with $541.2 billion in June.  July’s personal saving rate — personal saving as a percentage of disposable personal income — hovered at 4.4 percent, the same as June’s.

This mixed bag of job news and spending news falls in line with last week’s consumer reports, which were also varied. The Conference Board reported that its Consumer Confidence Index, which had notched won in July, ticked back up in August. The Index for August hit 81.5 (a baseline of 100 was set in 1985), a slight gain over July’s 81.0.

The Board’s Present Situation Index, which describes how consumers feel about current economic conditions, dropped to 70.7 from 73.6. The Expectations Index, how they feel the economy will fare in the near future, grew to 88.7 from 86.0 last month.

While The Conference Board’s survey was up, the Thomson-Reuters and University of Michigan Survey of Consumers dropped from July’s 85.1, its highest level in six years, to 82.1 in August, a 3.3 percent decline. Compared to August 2012’s 74.3, August’s score was still 10.5 percent better than last year.

The Expectations Index — how consumers feel their economic circumstance will fare in coming months — declined to 73.7 in August from 76.5 in July. Compared to last year, it still outpaced August 2012’s 65.1. The Current Conditions Index — how they judge their current circumstances — dropped to 95.2 in August from 98.6 in July. Compared annually, this, too, was much better than August 2012’s 88.7.

This week, we can expect:

  • Tuesday — July construction spending totals from the Census Bureau.
  • Wednesday — July balance of trade from the Census Bureau; and August car and truck sales from the auto makers.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; and July factory orders from the Census Bureau.
  • Friday — August unemployment rate, payrolls, earnings and workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



Economic Advisor: August 28, 2013
August 28, 2013


 

Real estate sales for July were a mixed bag and then some, with sales of existing homes seeing a massive jump, while sales of new homes took a massive dive, according to last week’s news.

Sales of existing homes skyrocketed to their highest spot in three years thanks to a substantial spike in July, according to last week’s report from the National Association of Realtors. Transactions of existing single-family homes, townhomes, condominiums and co-ops, grew 6.5 percent to an annual rate of 5.39 million for the month from June’s 5.06 million-unit pace, and were 17.2 percent over June 2012’s 4.60 million-unit rate.

Tighter inventories helped push prices up. Total housing inventory rose 5.6 percent in July to 2.28 million existing homes for sale, which represents a 5.1-month supply. The median price for existing homes of all types hit $213,500 in July, which was 13.7 percent over July 2012. This marked 17 consecutive months of year-over-year price gains, which hasn’t occurred since the January 2005-to-May 2006 period.

Also helping push prices up was the fact that distressed homes, which include heavily discounted foreclosures and short sales, comprised only 15 percent of July’s sales, marking the lowest amount since monthly tracking began in October 2008. By comparison, distressed homes made up 24 percent of July 2012’s sales.

Meanwhile, sales of new single-family homes in July plummeted to an annual rate of 394,000, which was a dramatic 13.4 percent below June’s revised rate of 455,000, the Census Bureau and the Department of Housing and Urban Development reported last week. Still, this was 6.8 percent higher than July 2012’s estimate of 369,000.

The median sales price for new homes sold in July was $257,200 and the average sales price was $322,700. Last week’s reports put July’s estimated inventory of new homes for sale at 171,000, which represented a 5.2-month supply at July’s sales rate.

Turning to employment, first-time claims for unemployment insurance benefits filed the week ending Aug. 17, hit 336,000, an increase of 13,000 claims from the previous week’s revised figure of 323,000, the Employment and Training Administration reported last week. However, the four-week moving average dipped to 330,500, a decline of of 2,250 from the prior week’s average of 332,750.

The total number of unemployed Americans covered by unemployment insurance during the week ending Aug. 10 hits 2,999,000, a 29,000-person gain from the previous week’s revised level of 2,970,000, the Administration also reported. The four-week moving average ticked down to 2,985,750, a dip of 1,000 people from the previous week’s revised average of 2,986,750.

Despite these mixed economic reports, The Conference Board reported last week that its leading economic indicator index for July saw a 0.6 percent gain in July to hit 96 (a baseline of 100 was set in 2004). The LEI combines various pieces of data such as stock market performance, monthly unemployment scores, new home construction and manufacturer’s orders, for example, to summarize key trends and signal economic turning points.

This week, we can expect:

  • Monday — July durable goods orders from the Census Bureau.
  • Tuesday — August consumer confidence scores from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; second quarter gross domestic product, second estimate, from the Bureau of Economic Analysis.
  • Friday — Personal income and spending for July from the Bureau of Economic Analysis; August consumer sentiment from the University of Michigan.

Posted in Economic Advisor



Setting the Stage for a Successful Home Sale
June 13, 2013


 

Styling your home to make it look its best when it’s on the market, also known as staging, can be more complicated than you would think. But you don’t have to rush out and empty the local Williams-Sonoma [and your wallet] to show the potential of your property. Here are some tips for showcasing your home.
 
The walk-through. Have a critical eye as you move from the curb to the front door. Look for areas that need cleaning and clearing out. Imagine what buyers will be looking for rather than imposing your sense of style on the house. Focus on the highlights of each room and note ways to play those features up.
 
Clean, clean, clean. If buyers aren’t fond of clutter, they’ll be even less fond of dust bunnies in corners, dirty footprints across the linoleum, and fingerprints on the stainless steel.
 
Clear the way. Getting things off the closet floors is the ideal when showing your home, but if you can’t manage to put everything away, at least invest in some inexpensive storage bins or baskets to keep the home looking tidy. This goes for garden tools in the shed, toys, and items in the kitchen and bathrooms as well.
 
Add a pop of color. In a sparse room, buyers can picture their own belongings much better, but you still want the home to have warmth. A couple of bright throw pillows on a bed or couch will foster a cozy feeling.
 
Be gender neutral. In the master bedroom and bath, strip out any indications of gender. Crisp white linens, a clear dresser top, and a neutral quilt will appeal to everyone. Aim for a bedroom that is serene, calming, and peaceful.
 
Do up the dining room. A formal dining room can look cold and overly… formal. Set the table with the dishes you’d use for favorite, frequent guests rather than a formal dinner party.
 
Rearrange the furniture. It might not be how you chose to set up your rooms, but pulling furniture into conversation areas is appealing to most people.
 
Make every space count. The guest room should be obviously a guest room; the same goes for the office. Ambiguity in a room’s purpose can be confusing to homeshoppers. Make it clear what each room is for. If you have an oddly shaped landing, or a little nook in the living room, don’t ignore it: show its potential.
 
It’s important that you’re thinking about what buyers may want in your home, rather than what you wanted and how you used your space. These easy staging tips, coupled with the advice of your real estate agent, should have your home under contract in no time!
 

Posted in Home Front Finance



Economic Advisor: June 12, 2013
June 12, 2013


 

A key newsmaker last week was employment news for May. Last week’s report from the Bureau of Labor Statistics shows that while the economy added 175,000 jobs, the unemployment rate actually ticked up to 7.6 percent, from 7.5 percent in April. Key job growth sectors were professional and business services, food services and drinking places, and retail trade.
 
The total number of unemployed Americans hit 11.8 million in May. The population of people unemployed long-term (those without a job for 27 weeks or more) was unchanged at 4.4 million for the month. The number of people involuntarily employed on a part-time basis due to economic reasons, such as because their hours had been cut back or because they could not find a full-time job, was also unchanged at 7.9 million.
 
May’s average workweek for all employees on private non-farm payrolls was unchanged at 34.5 hours. The average hourly earnings for all employees on private non-farm payrolls in May gained just 1 cent to skirt up to $23.89.
 
Looking at more recent employment figures, first-time claims for unemployment benefits filed in the week ending June 1 dipped to 346,000, a drop of 11,000 from the previous week’s revised figure of 357,000, the Employment and Training Administration reported. The four-week moving average was 352,500, a gain of 4,500 from the prior week’s revised average of 348,000.
 
The total number of insured unemployed Americans during the week ending May 25 dropped to 2,952,000, a decline of 52,000 from the previous week’s revised level of 3,004,000, the Administration also reported. The four-week moving average was 2,975,750, a decrease of 15,250 from the preceding week’s revised average of 2,991,000.
 
Another key economic release last week was consumer credit for April, which hit $2.82 trillion according to last week’s report from the Federal Reserve. This marked a 4.75 percent increase.
 
Revolving debt for May, such as credit cards, grew by 1 percent to hit $849.8 billion, while non-revolving debt, such as student and car loans, grew by 6.4 percent to hit $1.97 trillion.
 
In real estate news, construction spending for April hit an annual rate of $860.8 billion, a 0.4 percent increase over March’s revised estimate of $857.7 billion, the Census Bureau reported last week.
 
Spending on private construction for April ticked up to an annual rate of $602 billion, a 1 percent gain over March’s revised estimate of $595.9 billion. That said, residential construction ticked down to an annual rate of $301.9 billion in April, which was 0.1 percent below March’s revised estimate of $302.2 billion.
 
This week, we can expect:

  • Tuesday — April wholesale inventories from the Census Bureau.
  • Wednesday — May Treasury budget from the Treasury Department.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; May retail sales from the Census Bureau; May import and export prices from the Census Bureau; and April business inventories from the Census Bureau.
  • Friday — May producer price index from the Bureau of Labor Statistics; May industrial production and capacity utilization from the Federal Reserve.

Posted in Economic Advisor



Economic Advisor: June 05, 2013
June 5, 2013


 

Retail sales were a key economic newsmaker last week, with retail and food services sales for May growing by 0.6 percent to hit $421.1 billion, the Census Bureau reported last week.
 
On an annual basis, May’s sales were 4.3 percent higher than May 2012, and total sales for the March-through-May period gained 3.7 percent from the same period a year ago. Retail trade sales were up 4.3 percent May 2012, and non-store retailers’ sales grew 11.3 percent from May 2012. Also notable, building material and garden equipment dealers’ sales in May grew by 10.1 percent from last year.
 
In terms of specific retail segments, some key performers in May were motor vehicle and parts dealers, who saw a 1.8 percent gain; food and beverage stores, which saw a 0.7 percent sales increase; sporting goods stores, which saw a 0.6 percent gain; and miscellaneous retailers, which saw 1.2 percent sales growth.
 
Switching to the producer side of the economy, the Producer Price Index for finished goods rose 0.5 percent in May, according to last week’s release from the Bureau of Labor Statistics.
 
More than 60 percent of May’s price gain for finished goods could be chalked up to the index for finished energy goods, which grew by 1.3 percent. Also contributing to May’s price gains was the index for finished consumer foods, which grew by 0.6 percent, as well as prices for finished goods less foods and energy, which ticked up 0.1 percent.
 
While retail sales saw growth, trade sales saw a drop. The Census Bureau also reported that manufacturers’ sales and shipments for April ticked down to $1,267.9 billion, a decline of 0.1 percent from March 2013. That said, they were still up 1.5 percent from April 2012.
 
Manufacturers’ inventories saw a gain in April, ringing in at $1,657.2 billion, representing a 0.3 percent gain over March 2013, and a 4.2 percent increase over April 2012. This put April’s inventories-to-sales ratio at 1.31, which was up from April 2012′s ratio of 1.27.
 
Meanwhile, April sales for merchant wholesalers, except manufacturers’ sales branches and offices, ticked up to $416.6 billion, a 0.5 percent increase from March and a 0.7 percent increase over April 2012, the Census Bureau also reported. Total inventories of merchant wholesalers for April grew 0.2 percent to hit $504.8 billion. This put the April inventories-to-sales ratio for merchants at 1.21, which was up from April 2012′s ratio of 1.17.
 
Turning to employment, first-time claims for unemployment benefits filed during the week ending June 8 dropped to 334,000, a decline of 12,000 from the prior week’s unrevised figure of 346,000, the Employment and Training Administration reported last week. The four-week moving average was 345,250, a decline of 7,250 from the preceding week’s unrevised average of 352,500.
 
The total population of insured unemployed Americans for the week ending June 1 notched up to 2,973,000, a gain of 2,000 from the previous week’s revised level of 2,971,000, the administration also reported. The four-week moving average was 2,967,250, a drop of 12,750 from the preceding week’s revised average of 2,980,000.
 
This week, we can expect:

  • Tuesday — May consumer price index from the Bureau of Labor Statistics; May housing starts and building permits from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; May existing home sales from the Census Bureau; May leading economic indicators from The Conference Board.

Posted in Economic Advisor



Economic Advisor: May 29, 2013
May 29, 2013


 

Real estate was a key newsmaker last week, with April’s sales of existing single-family homes, townhomes, condominiums and co-ops skirting up by 0.6 percent to an annual rate of 4.97 million over March’s pace of 4.94 million, the National Association of Realtors reported last week. This marked the highest level of sales since November 2009 when the homebuyer tax credit caused sales to surge to 5.44 million.
 
Distressed homes, such as foreclosures and short sales, comprised 18 percent of April’s sales, which was down from 21 percent in March and 28 percent in April 2012. Foreclosures accounted for 11 percent of April’s sales and short sales amounted to 7 percent of transactions for the month.
 
Looking at price, April’s median price for existing all types of homes was $192,800, marking an 11 percent gain over April 2012. This marked the 14th consecutive monthly gain in existing home prices.
 
In terms of inventory, the total amount of housing for sale at the end of April gained 11.9 percent, increasing to 2.16 million existing homes available for purchase, which represents a 5.2-month supply at April’s sales pace.
 
Switching gears to new real estate, sales of new single-family homes in April 2013 hit an annual rate of 454,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. April’s sales were 2.3 percent over March’s revised rate of 444,000 and a whopping 29 percent over April 2012′s estimate of 352,000.
 
In terms of price, April’s median sales price for new houses was $271,600 and the average sales price was $330,800. In terms of inventory, the estimated number of new homes for sale at the end of April was 156,000, representing a supply of 4.1 months at April’s sales rate.
 
Turning to employment, the number of first-time claims for unemployment benefits filed in the week ending May 18 dropped to 340,000, a decline of 23,000 from the prior week’s revised figure of 363,000, the Employment and Training Administration reported last week. The four-week moving average was 339,500, a dip of 500 from the previous week’s revised average of 340,000.
 
The total number of insured unemployed Americans during the week ending May 11 dropped to 2,912,000, a decrease of 112,000 from the preceding week’s revised level of 3,024,000, the Administration also reported. The four-week moving average was 2,995,250, a decrease of 23,750 from the previous week’s revised average of 3,019,000.
 
In manufacturing, new orders placed for manufactured durable goods in April grew by 3.3 percent ($7.2 billion) over March to $222.6 billion, the Census Bureau reported last week. Transportation was a key mover for April, growing 8.1 percent ($5.1 billion) to $67.6 billion.
 
Shipments of durable goods dropped 0.6 percent in April ($1.3 billion) to $227.1 billion. Unfilled orders for durable goods increased 0.3 percent ($2.7 billion) in April to $996.2 billion. Inventories of durable goods continued to stack up, growing 0.4 percent ($1.3 billion) in April to $377.9 billion. This continued an upward inventory trend, and marked the highest level since the Bureau published the series in 1992.
 
This week, we can expect:

  • Tuesday — Consumer confidence scores for May from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; first quarter gross domestic product, second estimate, from the Bureau of Economic Analysis.
  • Friday — April personal income and spending from the Bureau of Economic Analysis; May consumer sentiment index from the University of Michigan.

Posted in Economic Advisor



Economic Advisor: May 22, 2013
May 22, 2013


 

U.S. retail and food services sales for April notched up to $419.0 billion, a gain of 0.1 percent over the previous month, the Census Bureau reported last week. On an annual basis, last month’s performance was 3.7 percent above April 2012′s sales, and total sales for the February-through-April period gained 3.7 percent over the same period a year ago.
 
Notable monthly changes included building materials and garden supplies, which were up 1.5 percent over February; gasoline stations, which were down a whopping 4.7 percent; non-store retailers, which were up 1.4 percent; and clothing sales, which were up 1.2 percent. Compared to last year, retail trade sales were 3.6 percent over April 2012; non-store retailers were up 15.4 percent from April 2012; and auto and other motor vehicle dealers were up 8.8 percent over last year.
 
Looking at prices consumers were paying, the Consumer Price Index for All Urban Consumers (CPI-U) dipped 0.4 percent in April, according to last week’s report from the Bureau of Labor Statistics. While down for the month, the all items index grew by 1.1 percent over the last 12 months.
 
A strong decrease in the gasoline index was the primary cause of the decline in all items index, a trend reflected by the fuel oil index, which also declined. That said the electricity and natural gas indexes increased. Overall, the energy index saw a net 4.3 percent decrease in prices.
 
Meanwhile, producer prices saw similar performance, with the Producer Price Index for finished goods decreasing 0.7 percent in April, the Bureau reported. Prices for finished goods dropped 0.6 percent in March and increased 0.7 percent in February.
 
U.S. employment saw some bad news last week, with first-time claims for unemployment benefits filed in the week ending May 11 hitting 360,000, a gain of 32,000 from the previous week’s revised figure of 328,000, the Employment and Training Administration reported. The four-week moving average hit 339,250, an increase of 1,250 from the previous week’s revised average of 338,000.
 
The total number of unemployed Americans covered by benefits during the week ending May 4 dropped to 3,009,000, a decline of 4,000 from the preceding week’s revised level of 3,013,000, the Administration also reported. The four-week moving average was 3,015,250, a drop of 21,000 from the previous week’s revised average of 3,036,250.
 
Turning to real estate, building permits issued for construction of private housing in April took a significant jump up to an annual rate of 1,017,000, marking a 14.3 percent gain over March’s revised rate of 890,000, and a 35.8 percent increase over the April 2012 estimate of 749,000, the Census Bureau reported last week. Permits issued for single-family homes in April hit a rate of 617,000, which was 3 percent over March’s revised figure of 599,000.
 
That said, starts of construction on private housing in April were at a seasonally adjusted annual rate of 853,000, which was 16.5 percent down from March’s revised estimate of 1,021,000, but was 13.1 percent over the April 2012 rate of 754,000. Construction starts on single-family homes notched down to a rate of 610,000 in April, which was 2.1 percent below the revised March figure of 623,000.
 
Completions of private homes in April dropped to an annual rate of 689,000, which was 14.3 percent below March’s revised estimate of 804,000, but 3.3 percent over April 2012′s rate of 667,000. Completions of single-family homes in April dropped to a rate of 536,000, which was 9.8 percent down from March’s revised rate of 594,000.
 
This week, we can expect:

  • Tuesday — April existing home sales from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; April new home sales from the Census Bureau.
  • Friday — April durable goods orders from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: May 15, 2013
May 15, 2013


 

Last week was a light calendar for regular economic reports, however the week was not without significant news. Specifically, the Dow Jones Industrial Average reached its highest point in history last Thursday, hitting a high of 15,144.83. It then followed on Friday, by hitting a record high close of 15,118.49.
 
For the week, the Dow was up 144.53, or 1 percent. For the year so far, the Dow was up 15 percent, with a year-to-date gain of 2,014.35 points. Friday closed with all eyes pointed on this week, wondering if the Dow Jones could continues its historic run.
 
The Dow wasn’t the only newsmaker. Another key announcement from last week was March consumer credit, which grew at an annual rate of 3.4 percent to hit $2.8 trillion, according to last week’s report from the Federal Reserve.
 
Revolving debt, such as credit cards, dropped 2.4 percent from February’s $847.9 billion to dip to $846.2 billion in March. Non-revolving debt, such as student loans, grew by 5.9 percent from February’s $1.95 trillion to $1.96 trillion in March.
 
In employment news, first-time claims filed during the week ending May 4 ticked down to 323,000, a decrease of 4,000 from the previous week’s revised figure of 327,000, the Employment and Training Administration reported last week. The four-week moving average was 336,750, a drop of 6,250 from the preceding week’s revised average of 343,000.
 
The total number of unemployed covered by insurance during the week ending April 27 was 3,005,000, a decrease of 27,000 from the preceding week’s revised level of 3,032,000, the Administration also reported. The four-week moving average was 3,034,250, a drop of 24,500 from the previous weeks revised average of 3,058,750.
 
In wholesale trade, sales of merchant wholesalers, except manufacturers’ sales branches and offices in March dropped to $414.7 billion, down 1.6 percent from February’s revised level, the Census Bureau reported last week. That said March’s sales were up 1.3 percent from the March 2012 level.
 
Meanwhile inventories of merchant wholesalers, except manufacturers’ sales branches and offices, notched up to $503.1 billion at the end of March, a 0.4 percent gain from February’s revised level, and 4.7 percent up from March 2012′s supply. This put the March inventories-to-sales ratio for merchant wholesalers at 1.21. The March 2012 ratio was 1.17.
 
This week, we can expect:

  • Monday — April retail sales from the Census Bureau; March business inventories from the Census Bureau.
  • Tuesday — April import and export prices from the Census Bureau.
  • Wednesday — April producer price index from the Bureau of Labor Statistics; April industrial production and capacity utilization from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; April consumer price index from the Bureau of Labor Statistics; April housing starts and building permits from the Census Bureau.
  • Friday — April leading economic indicators from the Conference Board.

Posted in Economic Advisor



Creative Ways to Use Your Tax Return
May 15, 2013


 


By now many people have received or are looking forward to a chunk of cash in the form of a tax return. If you’re one of those people, let this be the year you make your tax return work for you, rather than just parking the money in your savings. Here are some creative ideas for using your tax refund:
 
Down payment on a house. This might seem obvious; or it might seem like it doesn’t apply to you. But with historically low interest rates, it’s a great time to buy, and as home prices are slowly inching up and availability is slowly scaling down, making a move now is a smart decision. And remember, we’re not only talking about a primary home; a rental or second home can be a great investment.
 
Make an extra mortgage payment. We’ve mentioned this before, and it’s not right for everyone, but an extra payment can actually end up saving you hundreds of dollars in the long run, especially if your mortgage is only a few years old.
 
Make money-saving improvements. If you’ve been in your home for a while, you may be considering giving it a facelift with your tax return, such as a new coat of paint or refinishing the hardwood floors. Why not invest in your home and make some improvements that will save you money in the long run? Low flow toilets, faucets, shower heads, and even sprinkler systems can make a dent in your bills. Energy Star appliances can earn you tax credits while they improve your home’s efficiency and help you keep costs down. And when it’s time to sell your home, you will have increased its value to boot.
 
Pay down debt. Credit cards have extremely high interest rates. When you don’t pay off your bill each month, you’re incurring more debt, often at a 15 or 18 percent interest rate — for some folks, even higher. Pay off your credit card bills and keep more of your money for yourself!
 
Go solar. The cost of solar energy has fallen in recent years and the efficiency and available financing have improved, while utility bills keep rising. You can get a full system installed with no money down and effectively freeze your electricity bill for the next 10 or 20 years. You can even lease a system, which lets you off the hook for repairs and upkeep while still allowing you to reduce your utility costs.
 
Of course, you always have the option to make a “stress-relieving investment” and splurge on yourself: take a class, learn a skill, hire a personal trainer, take a dream vacation. With so many options to truly get your tax refund working for you, it’s a great time to really maximize your money and make the most of this year’s return. Enjoy!
 
*We are not a tax advisory firm. The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. Consult your tax advisor or the IRS for current tax year rules, restrictions and regulations.
 

Posted in Home Front Finance



Economic Advisor: May 08, 2013
May 8, 2013


 

The U.S. unemployment rate hit a four-year low in April, after employers added 165,000 non-farm jobs during the month, which put the unemployment rate at 7.5 percent, the Bureau of Labor Statistics reported last week. This put the total number of unemployed Americans at 11.7 million people. Key sectors for job growth included professional and business services; food services and drinking places; retail trade; and healthcare.
 
The number of long-term unemployed — those jobless for 27 weeks or more — declined by 258,000 in April to 4.4 million, and their share of the unemployed dropped by 2.2 percentage points to 37.4 percent. The number of Americans involuntarily employed on a part-time basis for economic reasons, such as their hours had been cut or because they couldn’t find full time work, grew by 278,000 to 7.9 million.
 
Looking at more recent data, first-time claims for unemployment benefits filed in the week ending April 27 dropped to 324,000, a decline of 18,000 from the previous week’s revised figure of 342,000, the Employment and Training Administration reported last week. The four-week moving average was 342,250, a decrease of 16,000 from the preceding week’s revised average of 358,250.
 
The total number of unemployed workers covered by unemployment insurance for the week ending April 20 grew to 3,019,000, a gain of 12,000 from the preceding week’s revised level of 3,007,000, the Administration also reported. The four-week moving average was 3,055,500, a decrease of 18,000 from the previous week’s revised average of 3,073,500.
 
Meanwhile, the Bureau of Economic Analysis Personal reported last week that personal income had grown in March by $30.9 billion (0.2 percent) and disposable personal income (DPI) increased by $20.7 billion (0.2 percent). Similarly, personal consumption expenditures (PCE) gained $21.0 billion (0.2 percent). Real disposable income (after taxes are factored in) ticked up 0.3 percent in March, and real PCE grew by 0.3 percent in March.
 
Personal saving — DPI less personal outlays — was down in March, with Americans saving $329.1 billion, compared with $330.9 billion in February. March’s personal saving rate, which is personal saving as a percentage of disposable personal income, hovered at 2.7 percent in March, the same rates as in February.
 
In real estate news, construction spending in March skirted down to an annual rate of $856.7 billion, which was 1.7 percent under February’s revised estimate of $871.2 billion, according to last week’s report from the Census Bureau. That said, March’s rate was 4.8 percent over March 2012′s estimated rate of $817.8 billion.
 
Spending on private construction dipped to an annual rate of $598.4 billion in March, which was 0.6 percent under February’s revised estimate of $602.0 billion. However, residential home construction inched up to an annual rate of $294.9 billion in March, marking a 0.4 percent increase over February’s revised estimate of $293.8 billion.
 
Not surprisingly, consumers are feeling better about the economy. In line with some of the more positive headlines from last week, The Conference Board reported that its Consumer Sentiment Index climbed to an unexpectedly high 68.1 in April (a baseline of 100 was set in 1985), up from 61.9 in March. The Present Situation Index, which gauges how consumers feel about the current economic environment, grew to 60.4 from 59.2. The Expectations Index, how they expect economic circumstances to fare in the near term, shot up to 73.3 from 63.7 last month.
 
Looking at opinions on employment, consumers who said they expect job growth over the coming months grew to 14.2 percent from 13 percent, while those expecting fewer jobs dipped to 22.4 percent from 26 percent. Consumers who said they expect their incomes to grow increased to 16.8 percent from 14.6 percent, while those anticipating a pay cut skirted down to 16 percent from 17.7 percent.
 
This week, we can expect:

  • Tuesday — March consumer credit totals from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; March wholesale inventories from the Census Bureau.
  • Friday — The April Treasury budget from the Treasury Department.

Posted in Economic Advisor




July 22, 2017
Posted in Economic Advisor



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