by Calculated Risk on 6/01/2023 10:03:00 AM

(Posted with permission). The ISM manufacturing index indicated contraction. The PMI® was at 46.9% in May, down from 47.1% in April. The employment index was at 51.4%, up from 50.2% last month, and the new orders index was at 42.6%, down from 45.7%.

From ISM: Manufacturing PMI® at 47.1% May 2023 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector contracted in May for the seventh consecutive month following a 28-month period of growth, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The May Manufacturing PMI® registered 46.9 percent, 0.2 percentage point lower than the 47.1 percent recorded in April. Regarding the overall economy, this figure indicates a sixth month of contraction after a 30-month period of expansion. The New Orders Index remained in contraction territory at 42.6 percent, 3.1 percentage points lower than the figure of 45.7 percent recorded in April. The Production Index reading of 51.1 percent is a 2.2-percentage point increase compared to April’s figure of 48.9 percent. The Prices Index registered 44.2 percent, down 9 percentage points compared to the April figure of 53.2 percent. The Backlog of Orders Index registered 37.5 percent, 5.6 percentage points lower than the April reading of 43.1 percent. The Employment Index indicated another month of expansion, registering 51.4 percent, up 1.2 percentage points from April’s reading of 50.2 percent. The Supplier Deliveries Index figure of 43.5 percent is 1.1 percentage points lower than the 44.6 percent recorded in April; this is the index’s lowest reading since March 2009 (43.2 percent). The Inventories Index dropped 0.5 percentage point to 45.8 percent; the April reading was 46.3 percent. The New Export Orders Index reading of 50 percent is 0.2 percentage point higher than April’s figure of 49.8 percent. The Imports Index remained in contraction territory, registering 47.3 percent, 2.6 percentage points lower the 49.9 percent reported in April.”
emphasis added

This suggests manufacturing contracted in May.  This was slightly above the consensus forecast. 

by Calculated Risk on 6/01/2023 09:00:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 4.2% Below Peak; Price-to-rent index is 8.3% below recent peak

Excerpt:

It has been 17 years since the bubble peak. In the February Case-Shiller house price index released Tuesday, the seasonally adjusted National Index (SA), was reported as being 62% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 11% above the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is at the bubble peak.

The inflation adjusted indexes increased in real terms in March using CPI ex-shelter. CPI less shelter has only increased at a 1.1% annual rate over the last six months, and that has kept real prices from falling even faster.

People usually graph nominal house prices, but it is also important to look at prices in real terms.  As an example, if a house price was $200,000 in January 2000, the price would be $340,000 today adjusted for inflation (70% increase).  That is why the second graph below is important - this shows "real" prices.

The third graph shows the price-to-rent ratio, and the fourth graph is the affordability index.

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

by Calculated Risk on 6/01/2023 08:33:00 AM

The DOL reported:

In the week ending May 27, the advance figure for seasonally adjusted initial claims was 232,000, an increase of 2,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 229,000 to 230,000. The 4-week moving average was 229,500, a decrease of 2,500 from the previous week's revised average. The previous week's average was revised up by 250 from 231,750 to 232,000.
emphasis added

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 was decreased to 229,500.

The previous week was revised up.

Weekly claims were below the consensus forecast.

by Calculated Risk on 6/01/2023 08:20:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 278,000 Jobs in May; Annual Pay was Up 6.5%

Private sector employment increased by 278,000 jobs in May and annual pay was up 6.5 percent year-over-year, according to the May ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”).
...
“This is the second month we've seen a full percentage point decline in pay growth for job changers,” said Nela Richardson, chief economist, ADP. “Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.”
emphasis added

This was way above the consensus forecast of 160,000. The BLS report will be released Friday, and the consensus is for 180 thousand non-farm payroll jobs added in May.

by Calculated Risk on 5/31/2023 09:00:00 PM

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

Thursday:
• At 8:15 AM ET, The ADP Employment Report for May. This report is for private payrolls only (no government). The consensus is for 160,000 payroll jobs added in May, down from 296,000 in April.

• At 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 234 thousand initial claims, up from 229 thousand last week.

• At 10:00 AM, ISM Manufacturing Index for May. The consensus is for the ISM to be at 47.0, down from 47.1 in April.

• Also, at 10:00 AM, Construction Spending for April. The consensus is for a 0.2% increase in construction spending.

• All day, Light vehicle sales for May. The consensus is for light vehicle sales to be 14.5 million SAAR in May, up from 14.3 million in April (Seasonally Adjusted Annual Rate).

by Calculated Risk on 5/31/2023 07:43:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Freddie Mac House Price Index Increased Slightly in April; Up 0.3% Year-over-year

A brief excerpt:

Freddie Mac reported that its “National” Home Price Index (FMHPI) increased 0.3% month-over-month on a seasonally adjusted (SA) basis in April, putting the National FMHPI down 0.9% SA from its June 2022 peak, and down 1.2% Not Seasonally Adjusted (NSA) from the peak.

On a year-over-year basis, the National FMHPI was up 0.3% in April, from up 1.2% YoY in March.  The YoY increase peaked at 19.2% in July 2021. ...

In April, 22 states and D.C. were below their 2022 peaks, Seasonally Adjusted. The largest seasonally adjusted declines from the recent peak were in Nevada (-7.6%), Idaho (-7.2%), Utah (-6.2%), Arizona (-6.0%), Washington (-5.9%), D.C. (-5.5%), California (-5.3%), and Wyoming (-5.0%).

For cities (Core-based Statistical Areas, CBSA), here are the 30 cities with the largest declines from the peak, seasonally adjusted.

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

by Calculated Risk on 5/31/2023 04:54:00 PM

Note: I like using Las Vegas as a measure of recovery for both leisure (visitors) and business (conventions).

From the Las Vegas Visitor Authority: April 2023 Las Vegas Visitor Statistics

Las Vegas hosted approximately 3,385,500 visitors in Apr 2023, on par with the robust volumes achieved last Apr when pent‐up demand overtook receding pandemic impacts.

Overall hotel occupancy reached 84.3% for the month, similar to last Apr (+0.3 pts YoY). As Weekend occupancy (92.4%) saw a ‐0.8 pts YoY decline, Midweek occupancy approached 81%, surpassing last Apr by 1.5 pts.

Overall ADR reached $171, down 3.3% from Apr 2022 while RevPAR exceeded $144, ‐3.0% YoY.

Click on graph for larger image.

The first graph shows visitor traffic for 2019 (Black), 2020 (light blue), 2021 (purple), 2022 (orange), and 2023 (red).

Visitor traffic was down 4.4% compared to the same month in 2019.

Visitor traffic was up 0.1% compared to last April.

The second graph shows convention traffic.

Convention traffic was down 30.2% compared to April 2019, and down 2.1% compared to April 2022.

Note: There was almost no convention traffic from April 2020 through May 2021.

by Calculated Risk on 5/31/2023 02:06:00 PM

Fed's Beige Book "This report was prepared at the Federal Reserve Bank of Chicago based on information collected on or before May 22, 2023."

Economic activity was little changed overall in April and early May. Four Districts reported small increases in activity, six no change, and two slight to moderate declines. Expectations for future growth deteriorated a little, though contacts still largely expected a further expansion in activity. Consumer expenditures were steady or higher in most Districts, with many noting growth in spending on leisure and hospitality. Education and healthcare organizations saw steady activity on balance. Manufacturing activity was flat to up in most Districts, and supply chain issues continued to improve. Demand for transportation services was down, especially in trucking, where contacts reported there was a "freight recession." Residential real estate activity picked up in most Districts despite continued low inventories of homes for sale. Commercial construction and real estate activity decreased overall, with the office segment continuing to be a weak spot. Outlooks for farm income fell in most districts, and energy activity was flat to down amidst lower natural gas prices. Financial conditions were stable or somewhat tighter in most Districts. Contacts in several Districts noted a rise in consumer loan delinquencies, which were returning closer to pre-pandemic levels. High inflation and the end of Covid-19 benefits continued to stress the budgets of low- and moderate-income households, driving increased demand for social services, including food and housing.

Employment increased in most Districts, though at a slower pace than in previous reports. Overall, the labor market continued to be strong, with contacts reporting difficulty finding workers across a wide range of skill levels and industries. That said, contacts across Districts also noted that the labor market had cooled some, highlighting easier hiring in construction, transportation, and finance. Many contacts said they were fully staffed, and some reported they were pausing hiring or reducing headcounts due to weaker actual or prospective demand or to greater uncertainty about the economic outlook. Staffing firms reported slower growth in demand. As in the last report, wages grew modestly.
emphasis added

by Calculated Risk on 5/31/2023 10:05:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings edged up to 10.1 million on the last business day of April, the U.S. Bureau of Labor Statistics reported today. Over the month, the number of hires changed little at 6.1 million. Total separations decreased to 5.7 million. Within separations, quits (3.8 million) changed little, while layoffs and discharges (1.6 million) decreased.
emphasis added

The following graph shows job openings (black line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for April the employment report this Friday will be for May.

Click on graph for larger image.

Note that hires (dark blue) and total separations (red and light blue columns stacked) are usually pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

The spike in layoffs and discharges in March 2020 is labeled, but off the chart to better show the usual data.

Jobs openings increased in April to 10.1 million from 9.7 million in March.

The number of job openings (black) were down 14% year-over-year. 

Quits were down 16% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

by Calculated Risk on 5/31/2023 08:32:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: Census Finally Releases 2020 Census Demographic Profile and Demographic and Housing Characteristics File

Excerpt:

From housing economist Tom Lawler:

After an unusually long delay related to the challenges associated with conducting a Census during a nationwide pandemic, last week Census finally released the 2020 Census Demographic Profile and Demographic and Housing Characteristics File.  ... The table below focuses on housing/household related data.

In a report later this week I will discuss some of the issues associated with the Census population numbers with respect to age distribution and discuss how that impacts folks trying to project the population by age.

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