by Calculated Risk on 6/09/2024 06:18:00 PM

Weekend:
• Schedule for Week of June 9, 2024

Monday:
• No major economic releases scheduled.

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

Oil prices were down over the last week with WTI futures at $75.37 per barrel and Brent at $79.53 per barrel. A year ago, WTI was at $70, and Brent was at $75 - so WTI oil prices are up about 7% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.40 per gallon. A year ago, prices were at $3.57 per gallon, so gasoline prices are down $0.17 year-over-year.

by Calculated Risk on 6/09/2024 09:40:00 AM

Most analysts expect there will be no change to the federal funds rate at the meeting this week keeping the target range at 5‑1/4 to 5-1/2 percent.   Currently market participants expect the next Fed move to be a 25 bp cut announced at the November FOMC meeting.  The market is almost pricing in a 2nd cut in December. 

 
From BofA:

The bottom line is that the stronger-than-expected May employment report remains consistent with our monetary policy outlook for staying on hold. This report showed solid payroll gains with positive implications for consumer spending. We expect the Fed to stay on hold for now and start a gradual cutting cycle in December which will depend on a moderation in the inflation data. The economy may be cooling, but it is not cool.

Projections will be released at this meeting. For review, here are the March projections. 

The BEA's second estimate for Q1 GDP showed real growth at 1.3% annualized.  Early estimates for Q2 GDP are around 2% to 3% annualized, and the FOMC projections for year-over-year growth in Q4 2024 are close.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2024	2025	2026
Mar 2024	2.0 to 2.4	1.9 to 2.3	1.8 to 2.1
Dec 2023	1.2 to 1.7	1.5 to 2.0	1.8 to 2.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 4.0% in April, at the FOMC projections for Q4.  This might be revised up slightly.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2024	2025	2026
Mar 2024	3.9 to 4.1	3.9 to 4.2	3.9 to 4.3
Dec 2023	4.0 to 4.2	4.0 to 4.2	3.9 to 4.3

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of April 2024, PCE inflation increased 2.7 percent year-over-year (YoY).  This is at the high end of the FOMC projections for Q4, and inflation will likely be revised down slightly.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2024	2025	2026
Mar 2024	2.3 to 2.7	2.1 to 2.2	2.0 to 2.1
Dec 2023	2.2 to 2.5	2.0 to 2.2	2.0

PCE core inflation increased 2.8 percent YoY in April.  This is also at the high end of the FOMC projections for Q4 2024.  However, housing is still distorting the measures of inflation, and the shelter index will continue to decline (monetary policy can't impact what happened in the past), and it is likely projections for core PCE will be revised down slightly.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2024	2025	2026
Mar 2024	2.5 to 2.8	2.1 to 2.3	2.0 to 2.1
Dec 2023	2.4 to 2.7	2.0 to 2.2	2.0 to 2.1

by Calculated Risk on 6/08/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• The "Home ATM" Mostly Closed in Q1

• 1st Look at Local Housing Markets in May

• Asking Rents Mostly Unchanged Year-over-year

• Freddie Mac House Price Index Increased in April; Up 6.5% Year-over-year

• ICE Mortgage Monitor: "Home Prices Cool for Second Straight Month in April"

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

by Calculated Risk on 6/08/2024 08:11:00 AM

The key report this week is May CPI.

The FOMC meets on Tuesday and Wednesday, and rates are expected to be unchanged.

----- Monday, June 10th -----
No major economic releases scheduled.

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

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

8:30 AM: The Consumer Price Index for May from the BLS. The consensus is for 0.2% increase in CPI (up 3.4% YoY), and a 0.3% increase in core CPI (up 3.5% YoY).

2:00 PM: FOMC Statement. The FOMC is expected to leave the Fed Funds rate unchanged at this meeting.

2:00 PM: FOMC Projections This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, June 13th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 226 thousand initial claims, down from 229 thousand last week.

8:30 AM: The Producer Price Index for May from the BLS. The consensus is for a 0.2% increase in PPI, and a 0.3% increase in core PPI.

----- Friday, June 14th -----
10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for June).

by Calculated Risk on 6/07/2024 07:53:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

For deaths, I'm currently using 4 weeks ago for "now", since the most recent three weeks will be revised significantly.

Note: "Effective May 1, 2024, hospitals are no longer required to report COVID-19 hospital admissions, hospital capacity, or hospital occupancy data."  So I'm no longer tracking hospitalizations, however hospitalizations were at a pandemic low three weeks ago.

COVID Metrics
	Now	Week Ago	Goal
Deaths per Week✅	303	398	≤3501
1my goals to stop weekly posts, 🚩 Increasing number weekly for Deaths ✅ Goal met.

Click on graph for larger image.

This graph shows the weekly (columns) number of deaths reported.

Weekly deaths have declined from the recent peak of 2,561 and are now below the previous pandemic low of 491 last July.  

And here is a graph I'm following concerning COVID in wastewater as of June 6th:

This appears to be a leading indicator for COVID hospitalizations and deaths.

Nationally, COVID in wastewater is now off about 90% from the holiday peak at the end of December - and also near the lows of last year - and that suggests weekly deaths will continue to decline.   However, there was a pickup recently, especially in the West.

by Calculated Risk on 6/07/2024 04:45:00 PM

From Manheim Consulting today: Wholesale Used-Vehicle Prices Declined in May

Wholesale used-vehicle prices (on a mix, mileage, and seasonally adjusted basis) were down in May compared to April. The Manheim Used Vehicle Value Index (MUVVI) fell to 197.3, a decline of 12.1% from a year ago. The seasonal adjustment to the index reduced the impact on the month, resulting in values that declined 0.6% month over month. The non-adjusted price in May decreased by 1.2% compared to April, moving the unadjusted average price down 11.4% year over year.
emphasis added

Click on graph for larger image.

This index from Manheim Consulting is based on all completed sales transactions at Manheim’s U.S. auctions.

The Manheim index suggests used car prices declined in May (seasonally adjusted) and were down 12.1% year-over-year (YoY).

by Calculated Risk on 6/07/2024 01:15:00 PM

Today, in the Real Estate Newsletter: The "Home ATM" Mostly Closed in Q1

Excerpt:

During the housing bubble, many homeowners borrowed heavily against their perceived home equity - jokingly calling it the “Home ATM” - and this contributed to the subsequent housing bust, since so many homeowners had negative equity in their homes when house prices declined.

Unlike during the housing bubble, very few homeowners have negative equity now. From CoreLogic this morning: Homeowner Equity Insights – Q1 2024

CoreLogic analysis shows U.S. homeowners with mortgages (roughly 62% of all properties*) have seen their equity increase by a total of $1.5 trillion since the first quarter of 2023, a gain of 9.6% year over year.

In the first quarter of 2024, the total number of mortgaged residential properties with negative equity decreased by 2.1%  from the fourth quarter of 2023, representing 1 million homes, or 1.8% of all mortgaged properties. On a year-over-year basis, negative equity declined by 16.1% from 1.2 million homes, or 2.1% of all mortgaged properties, from the first quarter of 2023.

Here is the quarterly increase in mortgage debt from the Federal Reserve’s Financial Accounts of the United States - Z.1 (sometimes called the Flow of Funds report) released today. In the mid ‘00s, there was a large increase in mortgage debt associated with the housing bubble.

In Q1 2024, mortgage debt increased $38 billion, down from $91 billion in Q4, and down from the cycle peak of $467 billion in Q2 2021. Note the almost 7 years of declining mortgage debt as distressed sales (foreclosures and short sales) wiped out a significant amount of debt.

However, some of this debt is being used to increase the housing stock (purchase new homes), so this isn’t all Mortgage Equity Withdrawal (MEW).

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/.

by Calculated Risk on 6/07/2024 12:36:00 PM

The Federal Reserve released the Q1 2024 Flow of Funds report today: Financial Accounts of the United States.

The net worth of households and nonprofits rose to $160.8 trillion during the first quarter of 2024. The value of directly and indirectly held corporate equities increased $3.8 trillion and the value of real estate increased $0.9 trillion.
...
Household debt increased 2.9 percent at an annual rate in the first quarter of 2024. Consumer credit grew at an annual rate of 1.8 percent, while mortgage debt (excluding charge-offs) grew at an annual rate of 2.1 percent.

Click on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  

Net worth increased $5.1 trillion in Q1 to an all-time high.  As a percent of GDP, net worth increased in Q1, but is below the peak in 2021.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc.) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

The second graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q1 2024, household percent equity (of household real estate) was at 73.8% - up from 73.4% in Q4, 2023. This is close to the highest percent equity since the 1960s.

Note: This includes households with no mortgage debt.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.  

Mortgage debt increased by $38 billion in Q1.

Mortgage debt is up $2.38 trillion from the peak during the housing bubble, but, as a percent of GDP is at 46.3% - down from Q4 - and down from a peak of 73.3% of GDP during the housing bust.

The value of real estate, as a percent of GDP, increased in Q1 - but is below the peak in Q2 2022, and is well above the average of the last 30 years.

by Calculated Risk on 6/07/2024 12:15:00 PM

From BofA:

Since last week,1Q GDP tracking is up from 1.3% q/q saar to 1.6% q/q saar and 2Q GDP tracking is down two-tenths to 1.6%. [June 7th estimate]
emphasis added

From Goldman:

Wholesale inventories increased somewhat below consensus expectations and the preliminary report. We lowered our Q2 GDP tracking estimate to +2.1% (qoq ar), reflecting weaker details in yesterday’s trade report. Our domestic final sales estimate remains at +2.0% (qoq ar). [June 7th estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 3.1 percent on June 7, up from 2.6 percent on June 6. After this morning’s employment situation release from the US Bureau of Labor Statistics and this morning's wholesale trade report from the US Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and second-quarter real gross private domestic investment growth increased from 2.4 percent and 5.8 percent, respectively, to 2.8 percent and 7.7 percent. [June 7th estimate]

by Calculated Risk on 6/07/2024 09:08:00 AM

The headline jobs number in the May employment report was well above expectations, however March and April payrolls were revised down by 15,000 combined.   The participation rate and employment population ratio decreased, and the unemployment rate increased to 4.0%.

Construction employment increased 21 thousand and is now 613 thousand above the pre-pandemic level. 

Manufacturing employment increased 8 thousand and is now 185 thousand above the pre-pandemic level.

Earlier: May Employment Report: 272 thousand Jobs, 4.0% Unemployment Rate

Prime (25 to 54 Years Old) Participation

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

The 25 to 54 years old participation rate increased in May to 83.6% from 83.5% in April, and the 25 to 54 employment population ratio was unchanged at 80.8% from 80.8% the previous month.

Both are above pre-pandemic levels and near the highest level this millennium.

Average Hourly Wages

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees from the Current Employment Statistics (CES).  

There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.

Wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 4.1% YoY in May.   

Part Time for Economic Reasons

From the BLS report:

"The number of people employed part time for economic reasons, at 4.4 million, changed little in May. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."

The number of persons working part time for economic reasons decreased in May to 4.42 million from 4.47 million in April. This is slightly above pre-pandemic levels.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 7.4% from 7.4% in the previous month. This is down from the record high in April 2020 of 23.0% and up from the lowest level on record (seasonally adjusted) in December 2022 (6.5%). (This series started in 1994). This measure is above the 7.0% level in February 2020 (pre-pandemic).

Unemployed over 26 Weeks

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

According to the BLS, there are 1.350 million workers who have been unemployed for more than 26 weeks and still want a job, up from 1.250 million the previous month.

This is down from post-pandemic high of 4.174 million, and up from the recent low of 1.050 million.

This is slightly above pre-pandemic levels.

Job Streak

Through May 2024, the employment report indicated positive job growth for 41 consecutive months, putting the current streak in 5th place of the longest job streaks in US history (since 1939).

Headline Jobs, Top 10 Streaks
	Year Ended	Streak, Months
1	2019	100
2	1990	48
3	2007	46
4	1979	45
5	20241	41
6 tie	1943	33
6 tie	1986	33
6 tie	2000	33
9	1967	29
10	1995	25
1Currrent Streak

Summary:

The headline jobs number in the April employment report was well above expectations, however, March and April payrolls were revised down by 15,000 combined. The participation rate and the employment population ratio decreased, and the unemployment rate increased to 4.0%.  Another strong report.