by Calculated Risk on 2/07/2020 12:29:00 PM

From Merrill Lynch:

We are forecasting 1.0% for 1Q. [Feb 7 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 1.7% for 2020:Q1. [Feb 7 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2020 is 2.7 percent on February 7, down from 2.9 percent on February 5. [Feb 7 estimate]

CR Note: These very early estimates suggest real GDP growth will be between 1.0% and 2.7% annualized in Q1.

by Calculated Risk on 2/07/2020 09:44:00 AM

The headline jobs number at 225 thousand for January was above consensus expectations of 162 thousand, and the previous two months were revised up 7 thousand, combined. The unemployment rate increase to 3.6%. Note: It appears weather boosted employment in January - I'll have more on this later.

Earlier: January Employment Report: 225,000 Jobs Added, 3.6% Unemployment Rate

In January, the year-over-year employment change was 2.052 million jobs including Census hires.

The annual benchmark revision showed a reduction in jobs in March 2019 of 505 thousand (close to the preliminary estimate of the downward revision).

With these revisions, the record job streak remained alive - although February 2019 was revised down to just +1 thousand jobs added.  (Note: Excluding temporary Census hiring, the job streak ended in February 2019 - since the Census hired +1 thousand workers in Feb 2019).

Average Hourly Earnings

Wage growth was below expectations. From the BLS:

"In January, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $28.44. Over the past 12 months, average hourly earnings have increased by 3.1 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 3.1% YoY in January.

Wage growth had been generally trending up, but weakened in 2019.

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 was increased in January to 83.1%, and the 25 to 54 employment population ratio increased to 80.6%.

Part Time for Economic Reasons

From the BLS report:

"The number of persons employed part time for economic reasons, at 4.2 million, was essentially unchanged in January. 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 increased in January to 4.182 million from 4.148 million in December.   The number of persons working part time for economic reason has been generally trending down.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 6.9% in January.

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 1.186 million in December.

This was the lowest level for long term unemployed since June 2007.

Summary:

The headline jobs number was above expectations, and the previous two months were revised up slightly.  The headline unemployment rate increase to 3.6%; wage growth picked up to 3.1% year-over-year.  Overall this was a solid report, although there was probably some boost from the weather.

by Calculated Risk on 2/07/2020 08:53:00 AM

From the BLS:

Total nonfarm payroll employment rose by 225,000 in January, and the unemployment rate was little changed at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in construction, in health care, and in transportation and warehousing.
...
The change in total nonfarm payroll employment for November was revised up by 5,000 from +256,000 to +261,000, and the change for December was revised up by 2,000 from +145,000 to +147,000. With these revisions, employment gains in November and December combined were 7,000 higher than previously reported.
...
In January, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $28.44. Over the past 12 months, average hourly earnings have increased by 3.1 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 225 thousand in December (private payrolls increased 206 thousand).

Payrolls for November and December were revised up 7 thousand combined.

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

In January, the year-over-year change was 2.052 million jobs.

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

The Labor Force Participation Rate was increased in January at 63.4%. 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 increased to 61.2% (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 increased in January to 3.6%.

This was above consensus expectations of 161,000 jobs added, and November and December were revised up by 7,000 combined.

On the annual benchmark revision:

The total nonfarm employment level for March 2019 was revised downward by 514,000 (-505,000 on a not seasonally adjusted basis), or -0.3 percent. The absolute average benchmark revision over the past 10 years is 0.2 percent.

The over-the-year change in total nonfarm employment for 2019 was revised from +2,108,000 to +2,096,000 (seasonally adjusted).

I'll have much more later ...

by Calculated Risk on 2/06/2020 07:55:00 PM

My January Employment Preview.

Goldman's January Payrolls preview.

Friday:
• At 8:30 AM ET, Employment Report for January.   The consensus is for 161,000 jobs added, and for the unemployment rate to be unchanged at 3.5%.

Note: The annual benchmark revision will be released with the January report. The preliminary estimate of the Benchmark revision "indicates a downward adjustment to March 2019 total nonfarm employment of -501,000".

• At 3:00 PM, Consumer Credit from the Federal Reserve.

by Calculated Risk on 2/06/2020 03:27:00 PM

A few brief excerpts from a note by Goldman Sachs economist Spencer Hill:

We estimate nonfarm payrolls increased 190k in January ... initial jobless claims declined further, ADP job gains were significantly larger than expected, and an unseasonably dry survey week in the Northeast and Ohio Valley is set to boost weather-sensitive categories. We also note that January job growth tends to accelerate in tight labor markets, as labor supply constraints may lead firms to implement fewer end-of-year layoffs. … We estimate an unchanged unemployment rate at 3.5%
emphasis added

by Calculated Risk on 2/06/2020 11:28:00 AM

Special Notes: The 2020 Decennial Census will start increasing hiring in early 2020. In reporting the employment report, the headline number should be reduced (or increased) by the change in Census temporary employment to show the underlying trend.  Based on previous Census hiring, I expect the Census hired 5 to 15 thousand temporary workers in January.

Also, the annual benchmark revision will be released with the January report. The preliminary estimate of the Benchmark revision "indicates a downward adjustment to March 2019 total nonfarm employment of -501,000". Usually the preliminary estimate is pretty close to the final estimate. These jobs are subtracted from the March 2019 total, and then wedged-back to March 2018.

On Friday at 8:30 AM ET, the BLS will release the employment report for January. The consensus is for an increase of 161,000 non-farm payroll jobs, and for the unemployment rate to be unchanged at 3.5%.

Last month, the BLS reported 145,000 jobs added in December (142,000 ex-Census).

Here is a summary of recent data:

• The ADP employment report showed an increase of 291,000 private sector payroll jobs in January. This was well above consensus expectations of 159,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth above expectations.

• The ISM manufacturing employment index increased in January to 46.4%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll decreased around 40,000 in January. The ADP report indicated manufacturing jobs increased 10,000 in January.

The ISM non-manufacturing employment index decreased in January to 53.1%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll increased 155,000 in January.

Combined, the ISM surveys suggest employment gains at 115,000, suggesting gains below consensus expectations.

• Initial weekly unemployment claims averaged 212,000 in January, down from 224,000 in December. For the BLS reference week (includes the 12th of the month), initial claims were at 223,000, down from 235,000 during the reference week the previous month.

This suggest fewer layoffs (during the reference week) in January than in December.

• The final January University of Michigan consumer sentiment index increased to 99.8 from the December reading of 99.3. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• The BofA job tracker increased in January to 161,000, up from 54,000 in December, suggesting more jobs added in January.  This suggests job growth close to consensus.

• Weather: The weather was mostly warm and dry during the reference period, and this suggests a boost to employment in January.  The ADP report quoted 'Mark Zandi, chief economist of Moody’s Analytics, said, “Mild winter weather provided a significant boost to the January employment gain.'

• Conclusion: The data is mixed.  For example the ADP report suggests a strong employment report, and the ISM surveys suggest employment growth below expectations.   With some boost from the weather, I expect employment gains above expectations.

by Calculated Risk on 2/06/2020 09:52:00 AM

This is a key former distressed market to follow since Las Vegas saw the largest price decline, following the housing bubble, of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported Local housing market starts 2020 with home prices, sales up from one year ago GLVAR housing statistics for January 2020

The total number of existing local homes, condos and townhomes sold during January was 2,875. Sales were down from December. But compared to the same time last year, January sales were up 25.2% for homes and up 22.8% for condos and townhomes.
...
By the end of January, GLVAR reported 4,906 single-family homes listed for sale without any sort of offer. That’s down 32.4% from one year ago. For condos and townhomes, the 1,418 properties listed without offers in January represented a 16.7% drop from one year ago.
…
Meanwhile, the number of so-called distressed sales remains near historically low levels. GLVAR reported that short sales and foreclosures combined accounted for 2.7% of all existing local property sales in January. That compares to 2.8% of all sales one year ago, 4.3% two years ago and 11% three years ago.
emphasis added

1) Overall sales were up 24.7% year-over-year to 2,875 in January 2020 from 2,305 in January 2019.

2) Active inventory (single-family and condos) is down from a year ago, from a total of 8,957 in January 2019 to 7,093 in January 2020. Note: Total inventory was down 29.4% year-over-year.   This is the third consecutive month with a year-over-year decrease in inventory, and that follows 16 consecutive months with a YoY increase in inventory.  And months of inventory is still low.

3) Low level of distressed sales.

by Calculated Risk on 2/06/2020 08:36:00 AM

The DOL reported:

In the week ending February 1, the advance figure for seasonally adjusted initial claims was 202,000, a decrease of 15,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 216,000 to 217,000. The 4-week moving average was 211,750, a decrease of 3,000 from the previous week's revised average. The previous week's average was revised up by 250 from 214,500 to 214,750.
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 211,750.

This was lower than the consensus forecast.

by Calculated Risk on 2/05/2020 05:04:00 PM

Five years ago I wrote Demographics and GDP: 2% is the new 4%.

I started that post with an excerpt from a WSJ opinion piece:

"The fourth quarter report means that growth for all of 2014 clocked in at 2.4%, which is the best since 2.5% in 2010. It also means another year, an astonishing ninth in a row, in which the economy did not grow by 3%."

I noted that it wasn't "astonishing" if you paid attention to demographics!

The WSJ could update that piece today and note that growth for all of 2019 clocked in at 2.3%. And finish with "It also means another year, an astonishing fourteenth in a row, in which the economy did not grow by 3%."

Although it is still not "astonishing".

by Calculated Risk on 2/05/2020 03:41:00 PM

Several times on this blog I've written about my experiences in the run-up to the Iraq war. I wrote earlier: "I opposed the Iraq war, and was shouted down and called names like "Saddam lover" for questioning the veracity of the information." It wasn't in my interest to speak out in early 2003, but it was the right thing to do.  I never regret doing what I believe is right.

Over time, opposing the Iraq war has become a positive for politicians like Barrack Obama and Bernie Sanders. Even Donald Trump has claimed (falsely) that he opposed the Iraq war.

And now, on impeachment: There is no question Mr. Trump abused the power of his office for personal gain, and I support removing him from office.

Since the Senate will not remove him, I will work tirelessly to remove him in the November election. It is the right thing to do.