by Calculated Risk on 8/31/2019 08:11:00 AM

The key report this week is the August employment report on Friday.

Other key indicators include the August ISM manufacturing and non-manufacturing indexes, August auto sales, and the July trade deficit.

Fed Chair Jerome Powell will participate in a discussion on Friday.

For data nerds, the BLS will release their update Labor Force Projections on Wednesday.

----- Monday, Sept 2nd -----
All US markets will be closed in observance of the Labor Day holiday.

----- Tuesday, Sept 3rd -----
10:00 AM: ISM Manufacturing Index for August. The consensus is for the ISM to be at 51.5, up from 51.2 in July.

Here is a long term graph of the ISM manufacturing index.

The PMI was at 51.2% in July, the employment index was at 51.7%, and the new orders index was at 50.8%.

10:00 AM: Construction Spending for July. The consensus is for a 0.3% increase in construction spending.

----- Wednesday, Sept 4th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Trade Balance report for July from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. 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.

The consensus is for the U.S. trade deficit to be at $55.2 billion in July unchanged from $55.2 billion in June.

During the Day: The BLS is scheduled to release Labor Force projections through 2028.

All day: Light vehicle sales for August. The consensus is for light vehicle sales to be 16.9 million SAAR in August, up from 16.8 million in July (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the current sales rate.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, Sept 5th -----
8:15 AM: The ADP Employment Report for August. This report is for private payrolls only (no government). The consensus is for 150,000 payroll jobs added in August, down from 156,000 added in July.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 215 thousand initial claims, unchanged from 215 thousand the previous week.

10:00 AM: the ISM non-Manufacturing Index for August. The consensus is for index to increase to 54.0 from 53.7 in July.

----- Friday, Sept 6th -----
8:30 AM: Employment Report for August. The consensus is for an increase of 158,000 non-farm payroll jobs in August, down from the 164,000 non-farm payroll jobs added in July.

The consensus is for the unemployment rate to be unchanged at 3.7%.

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.

A key will be the change in wages.

12:30 PM: Discussion with Fed Chair Jerome Powell, Economic Outlook and Monetary Policy, Discussion with Thomas J. Jordan, Chairman of the Swiss National Bank, hosted by the Swiss Institute of International Studies, University of Zurich, Zurich, Switzerland

by Calculated Risk on 8/30/2019 04:18:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency declined to 0.67% in July, from 0.70% in June. The serious delinquency rate is down from 0.88% in July 2018.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

This is the lowest serious delinquency rate for Fannie Mae since June 2007.

Click on graph for larger image

By vintage, for loans made in 2004 or earlier (3% of portfolio), 2.51% are seriously delinquent. For loans made in 2005 through 2008 (4% of portfolio), 4.22% are seriously delinquent, For recent loans, originated in 2009 through 2018 (93% of portfolio), only 0.32% are seriously delinquent. So Fannie is still working through a few poor performing loans from the bubble years.

The increase in the delinquency rate in late 2017 was due to the hurricanes - there were no worries about the overall market.

I expect the serious delinquency rate will probably decline to 0.4 to 0.6 percent or so to a cycle bottom.

Note: Freddie Mac reported earlier.

by Calculated Risk on 8/30/2019 01:33:00 PM

For everyone in Florida - stay safe!

Frequently there is a temporary slowdown in several growth indicators following a large natural disaster.  And usually there is a pretty rapid bounce back following the disaster.

Hurricane Dorian might negatively impact Q3 GDP, and September auto sales and housing.

Since this coming week is not the BLS reference week (includes the 12th of the month), there will probably be limited impact on September employment.

The first economic indicator to be impacted by the hurricane will probably be weekly unemployment claims.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average.   Several events are labeled (9/11, Hurricanes Katrina, Sandy, Harvey and Irma, and the 2013 government shutdown).   The great recession is obvious.

  In 2017, weekly claims jumped from 238,000 to 293,000 following hurricane Harvey.

However, last year, following Hurricane Florence making landfall along the Carolina's coast as a category 1 hurricane, there was little impact on employment claims - despite significant rainfall and loss of life.

If Dorian makes landfall as a major hurricane, I expect some increase in weekly unemployment claims.

We might also see an impact on housing and auto sales in September.   These will not be indicators of a recession, and we should expect any impacted indicator to rebound fairly quickly.

Stay safe.

by Calculated Risk on 8/30/2019 11:17:00 AM

From Merrill Lynch:

3Q GDP tracking rose 0.2pp to 2.1% qoq saar [Aug 29 estimate]
emphasis added

From Goldman Sachs:

We boosted our Q3 GDP tracking estimates by two tenths to +2.2% (qoq ar). [Aug 29 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 1.8% for 2019:Q3. [Aug 30 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 2.0 percent on August 30, down from 2.3 percent on August 26. [Aug 30 estimate]

CR Note: These early estimates suggest real GDP growth will be around 2% annualized in Q3.

by Calculated Risk on 8/30/2019 08:35:00 AM

The BEA released the Personal Income and Outlays report for July:

Personal income increased $23.9 billion (0.1 percent) in July according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $44.4 billion (0.3 percent) and personal consumption expenditures (PCE) increased $93.1 billion (0.6 percent).

Real DPI increased 0.1 percent in July and Real PCE increased 0.4 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

The July PCE price index increased 1.4 percent year-over-year and the July PCE price index, excluding food and energy, increased 1.6 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through July 2019 (2012 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was below expectations,  and the increase in PCE was slightly above expectations.

Note that core PCE inflation was at expectations.

by Calculated Risk on 8/29/2019 07:32:00 PM

Friday:
• At 8:30 AM ET, Personal Income and Outlays, July 2019. The consensus is for a 0.3% increase in personal income, and for a 0.5% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 9:45 AM, Chicago Purchasing Managers Index for August.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for August). The consensus is for a reading of 92.3.

by Calculated Risk on 8/29/2019 04:21:00 PM

By request, here is an update to the chart showing market performance under Presidents Trump and Obama.

CR Note: I don't think the stock market is a great measure of policy performance, but some people do - and I'm having a little fun with them.

There are some observers who think the stock market is the key barometer of policy success.  My view is there are many measures of success - and that the economy needs to work well for a majority of the people - not just stock investors.

However, for example, Treasury Secretary Steven Mnuchin was on CNBC on Feb 22, 2017, and was asked if the stock market rally was a vote of confidence in the new administration, he replied: "Absolutely, this is a mark-to-market business, and you see what the market thinks."

And Larry Kudlow wrote in 2007: A Stock Market Vote of Confidence for Bush: "I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today's stock market message is an unmistakable vote of confidence for the president."

Note: Kudlow's comments were made a few months before the market started selling off in the Great Recession. For more on Kudlow, see: Larry Kudlow is usually wrong

And from White House chief economic advisor Gary Cohn on December 20, 2017:

"I think there is a lot more momentum in the stock market. ... "The stock market is reflecting the reality of what's going in the business environment today," said Cohn, director of the National Economic Council. "There is going to be a continuation [of the] rally in the equity markets based on real underlying fundamentals of the U.S. economy ... as well as companies having more earnings power because of lower tax rates."

For fun, here is a graph comparing S&P500 returns (ex-dividends) under Presidents Trump and Obama:

Click on graph for larger image.

Blue is for Mr. Obama, Orange is for Mr. Trump.

At this point, the S&P500 is up 29% under Mr. Trump - compared to up 44% under Mr. Obama for the same number of market days.

by Calculated Risk on 8/29/2019 01:15:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 24 August

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 18-24 August 2019, according to data from STR.

In comparison with the week of 19-25 August 2018, the industry recorded the following:

• Occupancy: +0.8% to 70.1%
• Average daily rate (ADR): +0.5% to US$128.57
• Revenue per available room (RevPAR): +1.2% at US$90.08
emphasis added

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 2019, dash light blue is 2018 (record year), blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

Occupancy has been solid in 2019, and close to-date compared to the previous 4 years.

However occupancy will be lower this year than in 2018 (the record year), unless there is a strong boost due to hurricane impacted areas.

Seasonally, the occupancy rate will now start to decline as the peak summer travel season ends.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 8/29/2019 10:03:00 AM

From the NAR: Pending Home Sales Decline 2.5% in July

ending home sales fell in July, reversing course on two consecutive months of gains, according to the National Association of Realtors®. Of the four major regions, each reported a drop in contract activity, although the greatest decline came in the West.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 2.5% to 105.6 in July, down from 108.3 in June. Year-over-year contract signings fell 0.3%, doing an about-face of the prior month’s increase.
...
All regional indices are down from June. The PHSI in the Northeast fell 1.6% to 93.0 in July and is now 0.9% lower than a year ago. In the Midwest, the index dropped 2.5% to 101.0 in July, 1.2% less than July 2018.

Pending home sales in the South decreased 2.4% to an index of 122.7 in July, but that number is 0.1% higher than last July. The index in the West declined 3.4% in July to 93.5 but still increased 0.3% above a year ago.
emphasis added

This was well below expectations of a 0.3% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in August and September.

by Calculated Risk on 8/29/2019 08:58:00 AM

The DOL reported:

In the week ending August 24, the advance figure for seasonally adjusted initial claims was 215,000, an increase of 4,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 209,000 to 211,000. The 4-week moving average was 214,500, a decrease of 500 from the previous week's revised average. The previous week's average was revised up by 500 from 214,500 to 215,000.
emphasis added

The previous week was revised up.

The following graph shows the 4-week moving average of weekly claims since 1971.

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 214,500.

This was close to the consensus forecast.