by Calculated Risk on 8/05/2019 08:30:00 AM

Black Knight released their Mortgage Monitor report for June today. According to Black Knight, 3.73% of mortgages were delinquent in June, down slightly from 3.74% in June 2018. Black Knight also reported that 0.50% of mortgages were in the foreclosure process, down from 0.56% a year ago.

This gives a total of 4.23% delinquent or in foreclosure.

Press Release: Black Knight Mortgage Monitor: Affordability Improves on Rate Drops, Reaches an 18-Month High in July; Home Price Growth Deceleration Begins to Level Off

Today, the Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage performance, housing and public records datasets. After 15 months of declining year-over-year home price growth, the company revisited the home affordability landscape. As Black Knight Data & Analytics President Ben Graboske explained, as a result of falling interest rates and slowing home price appreciation, affordability is the best it’s been in 18 months.

“For much of the past year and a half, affordability pressures have put a damper on home price appreciation,” said Graboske. “Indeed, the rate of annual home price growth has declined for 15 consecutive months. More recently, declining 30-year fixed interest rates have helped to ease some of those pressures, improving the affordability outlook considerably. In November 2018 – when rising interest rates hit a seven-year high and home price growth fell by half a percent in a single month – it took 23.3% of the median household income to make the principal and interest payments when purchasing the average-priced home. As 30-year rates fell to 3.75%, that share fell to 21.3%, the lowest it’s been in 18 months.

“This has changed the affordability landscape significantly. Whereas nine states were less affordable than their long-term norms back in November – a key driver behind the subsequent deceleration in home prices – only California and Hawaii remained so as of July. And despite the average home price rising by more than $12K since November, today’s lower fixed interest rates have worked out to a $108 lower monthly payment when purchasing the average-priced home with 20% down. Lower rates have also increased the buying power for prospective homebuyers looking to purchase the average-priced home by the equivalent of 15%, meaning that they could effectively buy $45,000 ‘more house’ while still keeping their payments the same as they would have been last fall. As affordability pressures have eased, it also appears to be putting the brakes on the home price deceleration we’ve been tracking since February 2018. After 15 consecutive monthly declines, the national home price growth rate for June stayed level from May at 3.78%.”
emphasis added

Click on graph for larger image.

Here is a graph from the Mortgage Monitor that shows the National delinquency rate over time.

From Black Knight:

• June's nearly 11% jump in delinquencies was one of the top five such single-month increases in the past decade and one of the top 15 on record back to 2000

• However, while significant, it wasn’t unexpected given the seasonal and calendar-related pressures weighing on the market

• On average, over the past 20 years, the national delinquency rate has increased by 2.5% in June

• More impactful is that the month ended on a Sunday, which means servicing operations are closed on the last two calendar days of the month and cannot process last-minute payments

• June has ended on a Sunday three times in the past 20 years; the last two (2002 and 2013) saw an average monthly delinquency rate increase of 11.1%, nearly identical to this year

• Delinquencies tend to improve in the month following a Sunday month-end, which may help to counter the seasonal rise typically seen in July

The second graph shows foreclosure starts:

• First-time foreclosure starts accounted for just 37% of all activity, marking the lowest such volume and share of foreclosure activity of any quarter on record

• A total of 120K foreclosure starts were initiated in Q2 2019, down 7% from Q1 and down 12% year-over-year, marking the lowest quarterly total since the turn of the century

• First-time foreclosure starts were down 20% year-over-year, while repeat foreclosures saw only a 7% decline

There is much more in the mortgage monitor.

by Calculated Risk on 8/04/2019 06:55:00 PM

Weekend:
• Schedule for Week of Aug 4, 2019

Monday:
• At 10:00 AM ET, the ISM non-Manufacturing Index for July.   The consensus is for a reading of 55.5, up from 55.1.

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

Oil prices were down over the last week with WTI futures at $55.53 per barrel and Brent at $61.33 barrel.  A year ago, WTI was at $69, and Brent was at $73 - so oil prices are down about 15%to 20% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.70 per gallon. A year ago prices were at $2.86 per gallon, so gasoline prices are down about 6% year-over-year.

by Calculated Risk on 8/04/2019 01:31:00 PM

I've written about gun violence several times. For example, back in 2015, I wrote:

And we also hear "nothing can be done" about the ongoing mass shooting in the U.S., even though most Americans support stricter background checks, longer waiting periods, and restricting certain types of weapons.

And that was written before the Las Vegas massacre, Parkland Florida attack, and the very recent mass shooting in Dayton, El Paso, and at the Garlic Festival in Gilroy (that was just a week ago) and many many more.

We can debate policy forever, but we need politicians in the White House, Senate and House who will support gun control.    This is something almost all Americans support, so make it a voting litmus test - only vote for candidates that support gun control legislation.  Something can be done, and it starts with the voters.

by Calculated Risk on 8/03/2019 08:11:00 AM

This will be a light week for economic data.

----- Monday, Aug 5th -----
10:00 AM: the ISM non-Manufacturing Index for July.   The consensus is for a reading of 55.5, up from 55.1.

----- Tuesday, Aug 6th -----
10:00 AM ET: Job Openings and Labor Turnover Survey for June from the BLS.

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

Jobs openings decreased in May to 7.323 million from 7.372 million in April.

The number of job openings (yellow) were up 3% year-over-year, and Quits were up 2% year-over-year.

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

3:00 PM: Consumer Credit from the Federal Reserve.

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

----- Friday, Aug 9th -----
8:30 AM: The Producer Price Index for July from the BLS. The consensus is for a 0.2% increase in PPI, and a 0.2% increase in core PPI.

by Calculated Risk on 8/02/2019 02:00:00 PM

From Merrill Lynch:

The collapse in construction spending and soft inventories cut 0.3pp from 2Q GDP tracking, bringing our estimate down to 1.8% qoq saar from the advance 2.1% print. … we revise up our 3Q GDP forecast to a trend-like 1.7% qoq saar from 1.2%. [Aug 2 estimate]
emphasis added

From Goldman Sachs:

We lowered our Q3 GDP tracking estimate by one tenth to +1.8% (qoq ar). [Aug 2 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 1.6% for 2019:Q3. [Aug 2 estimate].

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2019 is 1.9 percent August 2, down from 2.2 percent on August 1. [Aug 2 estimate]

CR Note: These very early estimates suggest real GDP growth will be in the high 1% range annualized in Q3.

by Calculated Risk on 8/02/2019 12:26:00 PM

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

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

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

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

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

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

Click on graph for larger image.

The first graph is for private employment only.

Mr. Trump is in Orange (30 months).

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

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

During the first 30 months of Mr. Trump's term, the economy has added 5,504,000 private sector jobs.

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

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

During the first 30 months of Mr. Trump's term, the economy has added 232,000 public sector jobs.

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

After 30 months of Mr. Trump's presidency, the economy has added 5,736,000 jobs, about 514,000 behind the projection.

by Calculated Risk on 8/02/2019 10:04:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $55.2 billion in June, down $0.2 billion from $55.3 billion in May, revised.

June exports were $206.3 billion, $4.4 billion less than May exports. June imports were $261.5 billion, $4.6 billion less than May imports.

Click on graph for larger image.

Exports and imports decreased in June.

Exports are 25% above the pre-recession peak and down 2% compared to June 2018; imports are 13% above the pre-recession peak, and up 1% compared to June 2018.

In general, trade had been picking up, but both imports and exports have moved more sideways recently.

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $59.18 per barrel in June, down from $60.56 in May, and down from $62.46 in June 2018.

The trade deficit with China decreased to $30.0 billion in June, from $33.8 billion in June 2018.

by Calculated Risk on 8/02/2019 09:08:00 AM

The headline jobs number at 164 thousand for July was close to consensus expectations of 156 thousand, however the previous two months were revised down 41 thousand, combined. The unemployment rate increased to 3.7%. Overall this was a decent report. Note: Temporary Decennial Census hiring for July is not available yet (something to watch).

Earlier: July Employment Report: 164,000 Jobs Added, 3.7% Unemployment Rate

In July, the year-over-year employment change was 2.246 million jobs. That is decent year-over-year growth.

Average Hourly Earnings

Wage growth was at expectations. From the BLS:

"In July, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $27.98, following an 8-cent gain in June. Over the past 12 months, average hourly earnings have increased by 3.2 percent."

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 3.2% YoY in July.

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

Prime (25 to 54 Years Old) Participation

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

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

The 25 to 54 participation rate decreased in July to 82.0% from 82.2% in June, and the 25 to 54 employment population ratio was decreased to 79.5% from 79.7%.

Part Time for Economic Reasons

From the BLS report:

"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 363,000 in July to 4.0 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full- time jobs. Over the past 12 months, the number of involuntary part-time workers has declined by 604,000."

The number of persons working part time for economic reasons decreased in July to 3.984 million from 4.347 million in June.   The number of persons working part time for economic reason has been generally trending down, and this is the lowest level since 2006.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 7.0% in July. This is the lowest level for U-6 since 2000.

Unemployed over 26 Weeks

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

According to the BLS, there are 1.166 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.414 million in June.

This is the lowest level since 2007.

Summary:

The headline jobs number was at expectations, however the previous two months were revised down.  The headline unemployment rate was unchanged at 3.7%. Wage growth was at expectations.

Some good news is the number of people working part time for economic reasons is at the lowest level since 2006, and the number of unemployed over 26 weeks is at the lowest level since 2007.

Overall this was a somewhat disappointing jobs report.   The economy added 1.156 million jobs through July 2019, down from 1.589 million jobs during the same period of 2018.   So job growth has slowed.

by Calculated Risk on 8/02/2019 08:40:00 AM

From the BLS:

Total nonfarm payroll employment rose by 164,000 in July, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in professional and technical services, health care, social assistance, and financial activities.
...
The change in total nonfarm payroll employment for May was revised down by 10,000 from +72,000 to +62,000, and the change for June was revised down by 31,000 from +224,000 to +193,000. With these revisions, employment gains in May and June combined were 41,000 less than previously reported.
...
In July, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $27.98, following an 8-cent gain in June. Over the past 12 months, average hourly earnings have increased by 3.2 percent.
emphasis added

Click on graph for larger image.

The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes).

Total payrolls increased by 164 thousand in July (private payrolls increased 148 thousand).

Payrolls for May and June were revised down 41 thousand combined.

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

In July, the year-over-year change was 2.246 million jobs.

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

The Labor Force Participation Rate was increased in July to 62.9%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics and long term trends.

The Employment-Population ratio was unchanged at 60.6% (black line).

I'll post the 25 to 54 age group employment-population ratio graph later.

The fourth graph shows the unemployment rate.

The unemployment rate was unchanged in July at 3.7%.

This was close to consensus expectations of 156,000 jobs added, however April and May were revised down by 41,000 combined.

I'll have much more later ...

by Calculated Risk on 8/01/2019 07:59:00 PM

My July employment preview.

Goldman's July payroll preview.

Friday:
• At 8:30 AM ET, Employment Report for July.   The consensus is for 156,000 jobs added, and for the unemployment rate to decline to 3.6%.

• Also at 8:30 AM, Trade Balance report for June from the Census Bureau. The consensus is the trade deficit to be $54.7 billion.  The U.S. trade deficit was at $55.5 Billion the previous month.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for July). The consensus is for a reading of 98.4.