by Calculated Risk on 4/19/2014 08:31:00 AM

The key reports this week are March Existing Home Sales on Tuesday and March New Home sales on Wednesday.

For manufacturing, the April Richmond and Kansas City Fed surveys will be released.

----- Monday, April 21st -----
8:30 AM ET: Chicago Fed National Activity Index for March. This is a composite index of other data.

----- Tuesday, April 22nd -----
9:00 AM: FHFA House Price Index for February 2013. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.3% increase.

10:00 AM: Existing Home Sales for March from the National Association of Realtors (NAR).

The consensus is for sales of 4.56 million on seasonally adjusted annual rate (SAAR) basis. Sales in February were at a 4.60 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 4.64 million SAAR.

As always, a key will be inventory of homes for sale.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for April.  The consensus is for a reading of 0, up from -7 in March.

----- Wednesday, April 23rd -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: New Home Sales for March from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the February sales rate.

The consensus is for an in increase in sales to 455 thousand Seasonally Adjusted Annual Rate (SAAR) in March from 440 thousand in February. 

During the day: The AIA's Architecture Billings Index for March (a leading indicator for commercial real estate).

----- Thursday, April 24th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 313 thousand from 304 thousand.

8:30 AM: Durable Goods Orders for March from the Census Bureau. The consensus is for a 2.0% increase in durable goods orders.

11:00 AM: the Kansas City Fed manufacturing survey for April. 

----- Friday, April 25th -----
9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for April). The consensus is for a reading of 82.5, down from the preliminary reading of 82.6, but up from the March reading of 80.0.

by Calculated Risk on 4/18/2014 08:21:00 PM

Following some comments from Senator Rand Paul, I've been requested to post this again with a couple of tables added.

Senator Paul said last week: "When is the last time in our country we created millions of jobs? It was under Ronald Reagan ..."

That is completely wrong. (I've corrected both Republicans and Democrats, but recently it is mostly prominent Republicans that make stuff up!).

Here is a table for private sector jobs. Reagan's 2nd term saw about the same job growth as during Carter's term. Note: There was a severe recession at the beginning of Reagan's first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter's term (gas prices increased sharply and there was an oil embargo).

Term	Private Sector Jobs Added (000s)
Carter	9,041
Reagan 1	5,360
Reagan 2	9,357
GHW Bush	1,510
Clinton 1	10,885
Clinton 2	10,070
GW Bush 1	-841
GW Bush 2	379
Obama 1	1,998
Obama 21	2,692
1Just over one year into 2nd term

The first graph below shows the change in private sector payroll jobs from when each president took office until the end of their term(s).  President George H.W. Bush only served one term, and President Obama is just starting the second year of his second term. 

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

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

Click on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush's (red) first term was very sluggish, and private employment was down 841,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 462,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,955,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 1,998,000 more private sector jobs at the end of Mr. Obama's first term.  Just over one year into Mr. Obama's second term, there are now 4,690,000 more private sector jobs than when he initially took office.

And a table for public sector jobs. Public sector jobs declined the most during Obama's first term, and increased the most during Reagan's 2nd term.

Term	Public Sector Jobs Added (000s)
Carter	1,304
Reagan 1	-24
Reagan 2	1,438
GHW Bush	1,127
Clinton 1	692
Clinton 2	1,242
GW Bush 1	900
GW Bush 2	844
Obama 1	-713
Obama 21	-25
1Just over one year into 2nd term

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

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 738,000 jobs). These job losses have mostly been at the state and local level, but more recently at the Federal level.  This has been a significant drag on overall employment.

Looking forward, I expect the economy to continue to expand for the next few years, so I don't expect a sharp decline in private employment as happened at the end of Mr. Bush's 2nd term (In 2005 and 2006 I was warning of a coming recession due to the bursting of the housing bubble).

The bottom line is Mr. Paul was completely wrong. 

The best private sector job growth was under Clinton (both terms) followed by Reagan's 2nd term and Carter (Obama's 2nd term will probably be close - even with a declining participation rate).

The largest increase in public sector jobs was during Reagan's 2nd term.  The largest decrease was under Obama.  It is important to get the facts correct.

by Calculated Risk on 4/18/2014 03:24:00 PM

The NAR will report March Existing Home Sales on Tuesday, April 22nd. The consensus is for sales of 4.56 million on seasonally adjusted annual rate (SAAR) basis. Sales in February were at a 4.60 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 4.64 million SAAR.

Housing economist Tom Lawler has been sending me his predictions of what the NAR will report for 4 years.  The table below shows the consensus for each month, Lawler's predictions, and the NAR's initial reported level of sales. 

Lawler hasn't always been closer than the consensus, but usually when there has been a fairly large spread between Lawler's estimate and the "consensus", Lawler has been closer.

Over the last four years, the consensus average miss was 160 thousand with a standard deviation of 170 thousand.  Lawler's average miss was 70 thousand with a standard deviation of 50 thousand.

Note: Many analysts now change their "forecast" after Lawler's estimate is posted, so the consensus is doing a little better recently!

Existing Home Sales, Forecasts and NAR Report millions, seasonally adjusted annual rate basis (SAAR)
Month	Consensus	Lawler	NAR reported1
May-10	6.20	5.83	5.66
Jun-10	5.30	5.30	5.37
Jul-10	4.66	3.95	3.83
Aug-10	4.10	4.10	4.13
Sep-10	4.30	4.50	4.53
Oct-10	4.50	4.46	4.43
Nov-10	4.85	4.61	4.68
Dec-10	4.90	5.13	5.28
Jan-11	5.20	5.17	5.36
Feb-11	5.15	5.00	4.88
Mar-11	5.00	5.08	5.10
Apr-11	5.20	NA	5.05
May-11	4.75	4.80	4.81
Jun-11	4.90	4.71	4.77
Jul-11	4.92	4.69	4.67
Aug-11	4.75	4.92	5.03
Sep-11	4.93	4.83	4.91
Oct-11	4.80	4.86	4.97
Nov-11	5.08	4.40	4.42
Dec-11	4.60	4.64	4.61
Jan-12	4.69	4.66	4.57
Feb-12	4.61	4.63	4.59
Mar-12	4.62	4.59	4.48
Apr-12	4.66	4.53	4.62
May-12	4.57	4.66	4.55
Jun-12	4.65	4.56	4.37
Jul-12	4.50	4.47	4.47
Aug-12	4.55	4.87	4.82
Sep-12	4.75	4.70	4.75
Oct-12	4.74	4.84	4.79
Nov-12	4.90	5.10	5.04
Dec-12	5.10	4.97	4.94
Jan-13	4.90	4.94	4.92
Feb-13	5.01	4.87	4.98
Mar-13	5.03	4.89	4.92
Apr-13	4.92	5.03	4.97
May-13	5.00	5.20	5.18
Jun-13	5.27	4.99	5.08
Jul-13	5.13	5.33	5.39
Aug-13	5.25	5.35	5.48
Sep-13	5.30	5.26	5.29
Oct-13	5.13	5.08	5.12
Nov-13	5.02	4.98	4.90
Dec-13	4.90	4.96	4.87
Jan-14	4.70	4.67	4.62
Feb-14	4.64	4.60	4.60
Mar-14	4.56	4.64	---
1NAR initially reported before revisions.

by Calculated Risk on 4/18/2014 12:25:00 PM

Just a quick graph ... heavy truck sales really collapsed during the recession, falling to a low of 181 thousand in April 2009 on a seasonally adjusted annual rate (SAAR) from a peak of 555 thousand in February 2006.  

Sales doubled from the recession low by April 2012 - and have mostly moved sideways since then.


Click on graph for larger image.

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is current estimated sales rate.

As construction - both residential and commercial - picks up, heavy truck sales will probably increase further.

by Calculated Risk on 4/18/2014 10:33:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were generally little changed in March. Twenty-one states had unemployment rate decreases, 17 states and the District of Columbia had increases, and 12 states had no change, the U.S. Bureau of Labor Statistics reported today.
...
Rhode Island had the highest unemployment rate among the states in March, 8.7 percent. The next highest rates were in Nevada and Illinois, 8.5 percent and 8.4 percent, respectively. North Dakota again had the lowest jobless rate, 2.6 percent.

Click on graph for larger image.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement. 

The states are ranked by the highest current unemployment rate. No state has double digit or even a 9% unemployment rate.  

The second graph shows the number of states with unemployment rates above certain levels since January 2006. At the worst of the employment recession, there were 10 states with an unemployment rate above 11% (red).

Currently no state has an unemployment rate at or above 9% (purple), four states are at or above 8% (light blue), and 13 states are at or above 7% (blue).

by Calculated Risk on 4/17/2014 09:06:00 PM

From Michelle Meyer at Merrill Lynch: Will April showers bring May flowers?

We have all been waiting for the weather to unleash stronger economic activity, particularly for the housing market. However, the housing data so far have been less than encouraging. We think it will be challenging to realize average housing starts of 1.1 million this year and are therefore trimming our forecast to 1.03 million. Our trajectory through year end is still up, with starts rising 11% from last year, but the rebound is more muted. Slower growth in starts combined with the weaker pace of home sales suggests residential investment will add 0.2pp to GDP growth this year versus our prior forecast of 0.3pp.
...
It is important to put the recovery in housing construction into perspective. The turn started in early 2011 and gained momentum at the end of 2012. However, last year growth was weak until the bounce at the very end of the year. The question is whether that bounce was a start of a stronger rebound which just got delayed due to the weather or simply noise in the data. We think the truth is somewhere in between and are therefore penciling in an acceleration in starts, but not at the pace we experienced in Q4 of last year.

We have to remember that while this is not a V-shaped trajectory, it is still a recovery. Housing construction will head higher as household formation gradually recovers, capacity constraints around available lots and labor are resolved and credit conditions slowly ease for homebuyers. But this all takes time, and we must be patient as the market finds its new equilibrium.

Merrill has reduced their forecast for housing starts from 1.100 million this year to 1.033 million (still an 11% increase from 2013). They have kept their forecast for new home sales at 515 thousand (close to a 20% gain).

by Calculated Risk on 4/17/2014 05:59:00 PM

Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for March since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was up 1.3% compared to the rolling 12 months ending in February.   Outbound traffic was up 0.9% compared to 12 months ending in February.

Inbound traffic has generally been increasing, and outbound traffic has been moving up a little after moving sideways.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year).


This suggests an increase in trade with Asia in March. 

by Calculated Risk on 4/17/2014 01:12:00 PM

From HotelNewsNow.com: US hotels report strong weekly RevPAR

The U.S. hotel industry posted positive results in the three key performance measurements during the week of 6-12 April 2014, according to data from STR.

In year-over-year measurements, the industry’s revenue per available room jumped 12.8% to $80.09. Occupancy for the week increased 7.1% to 68.5%. Average daily rate rose 5.3% to finish the week at $116.85.
emphasis added

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.  These metrics are now at new highs.

The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and is at the highest level since 2000.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2014 and black is for 2009 - the worst year since the Great Depression for hotels.

Through April 12th, the 4-week average of the occupancy rate is tracking higher than pre-recession levels.   

It looks like 2014 should be a good year for hotels.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 4/17/2014 10:29:00 AM

From the Philly Fed: April Manufacturing Survey

Manufacturing activity in the region increased in April, according to firms responding to this month’s Business Outlook Survey. The survey’s broadest indicators for general activity, new orders, shipments, and employment all remained positive and increased from their readings in March. Price pressures remain modest. The surveyʹs indicators of future activity reflected optimism about continued expansion over the next six months, although the indicators have fallen from higher readings in recent months.

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of 9.0 in March to 16.6 this month, its highest reading since last September.

The employment index remained positive for the 10th consecutive month and increased 5 points, suggesting overall improvement.
emphasis added

This was above the consensus forecast of a reading of 9.1 for April.

by Calculated Risk on 4/17/2014 08:37:00 AM

The DOL reports:

In the week ending April 12, the advance figure for seasonally adjusted initial claims was 304,000, an increase of 2,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 300,000 to 302,000. The 4-week moving average was 312,000, a decrease of 4,750 from the previous week's revised average. This is the lowest level for this average since October 6, 2007 when it was 302,000.

The previous week was revised up from 300,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 312,000.

This was lower than the consensus forecast of 320,000.  The 4-week average is at normal levels for an expansion.