by Calculated Risk on 12/08/2023 04:30:00 PM

From the Association of American Railroads (AAR) Rail Time Indicators. Graphs and excerpts reprinted with permission.

In the first 11 months of 2023, total carloads were 10.82 million, up 0.2% (21,700 carloads) over last year and up 0.5% (53,682 carloads) over 2021. ... In 2023 through November, intermodal originations totaled 11.68 million, down 6.0% (748,046 units) from 2022 and down 10.6% (1.39 million units) from 2021.
emphasis added

Click on graph for larger image.

This graph from the Rail Time Indicators report shows the six-week average of U.S. Carloads in 2021, 2022 and 2023:

Total originated carloads on U.S. railroads fell 0.01%, or 102 carloads, in November 2023 from the equivalent period in 2022. It was the fifth year-over-year decline for total carloads in the past six months, but most of those declines have been very small in percentage terms. Total carloads averaged 225,715 per week in November 2023, the fourth lowest of the 11 months so far this year. The Thanksgiving holiday typically holds down rail volumes in November.

The second graph shows the six-week average (not monthly) of U.S. intermodal in 2021, 2022 and 2023: (using intermodal or shipping containers):

U.S. intermodal volume was up 5.0% in November 2023, its third straight year-over-year gain after 18 straight declines and the biggest year-over-year percentage gain for intermodal in 29 months. U.S. railroads averaged 255,981 originated containers and trailers per week in November 2023. That’s the fourth highest average intermodal volume for November on record (2017, 2018, and 2020 were higher).

by Calculated Risk on 12/08/2023 02:00:00 PM

From BofA:

Our 4Q GDP tracking estimate remains at 1.0% q/q saar as higher than expected October construction spending was offset by lower than expected vehicle sales in November and a small downward revision in core capital goods orders in the final October print. [Dec 6th estimate]
emphasis added

From Goldman:

We lowered our Q4 GDP tracking estimate by 0.1pp to +1.4% (qoq ar). Our Q4 domestic final sales estimate remains at +2.1% (qoq ar). [Dec 7th estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2023 is 1.2 percent on December 7, down from 1.3 percent on December 6 after rounding. [Dec th estimate]

by Calculated Risk on 12/08/2023 12:17:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Q3 Update: Delinquencies, Foreclosures and REO

A brief excerpt:

In 2021, I pointed out that with the end of the foreclosure moratoriums, combined with the expiration of a large number of forbearance plans, we would see an increase in REOs in late 2022 and into 2023. And there was a slight increase.

However, I argued this would NOT lead to a surge in foreclosures and significantly impact house prices (as happened following the housing bubble) since lending has been solid and most homeowners have substantial equity in their homes.
...
Here is some data from the FHFA’s National Mortgage Database showing the distribution of interest rates on closed-end, fixed-rate 1-4 family mortgages outstanding at the end of each quarter since Q1 2013 through Q2 2023 (Q3 2023 data will be released in a few weeks).

This shows the surge in the percent of loans under 3%, and also under 4%, starting in early 2020 as mortgage rates declined sharply during the pandemic. Currently 22.9% of loans are under 3%, 60.3% are under 4%, and 79.9% are under 5%.

With substantial equity, and low mortgage rates (mostly at a fixed rates), few homeowners will have financial difficulties.

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

by Calculated Risk on 12/08/2023 09:27:00 AM

The headline jobs number in the November employment report was at expectations, however employment for the previous two months was revised down by 35,000, combined.  The participation rate and the employment population ratio both increased, and the unemployment rate decreased to 3.7%.

Leisure and hospitality gained 40 thousand jobs in November.  At the beginning of the pandemic, in March and April of 2020, leisure and hospitality lost 8.2 million jobs, and are now down 158 thousand jobs since February 2020.  So, leisure and hospitality has now added back about 98% all of the jobs lost in March and April 2020. 

Construction employment increased 2 thousand and is now 425 thousand above the pre-pandemic level. 

Manufacturing employment increased 28 thousand jobs and is now 200 thousand above the pre-pandemic level.

Earlier: November Employment Report: 199 thousand Jobs, 3.7% Unemployment Rate

In October, the year-over-year employment change was 2.79 million jobs.

Seasonal Retail Hiring

Typically, retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year.

This graph really shows the collapse in retail hiring in 2008. Since then, seasonal hiring had increased back close to more normal levels. Note: I expect the long-term trend will be down with more and more internet holiday shopping.

Retailers hired 264 thousand workers Not Seasonally Adjusted (NSA) net in November.  This was about the same as last year and suggests similar real retail sales this holiday season as last year.

This was seasonally adjusted (SA) to a loss of 38 thousand jobs in November.

Prime (25 to 54 Years Old) Participation

Since the overall participation rate is impacted by both 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.

The 25 to 54 participation rate was unchanged in November at 83.3% from 83.3% in October, and the 25 to 54 employment population ratio declined to 80.7% from 80.6% the previous month.

Both are close to the pre-pandemic levels.

Average Hourly Wages

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees from the Current Employment Statistics (CES).  

There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.

Wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 4.0% YoY in November.   

Since wages increased sharply last December, it is likely YoY wage growth will slow further next month.

Part Time for Economic Reasons

From the BLS report:

"The number of persons employed part time for economic reasons decreased by 295,000 to 4.0 million in November. 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 decreased in November to 3.99 million from 4.28 million in October. This is below pre-recession levels.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 7.0% from 7.2% in the previous month. This is down from the record high in April 2020 of 22.9% and up from the lowest level on record (seasonally adjusted) in December 2022 (6.5%). (This series started in 1994). This measure is at the 7.0% level in February 2020 (pre-pandemic).

Unemployed over 26 Weeks

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

According to the BLS, there are 1.150 million workers who have been unemployed for more than 26 weeks and still want a job, down from 1.282 million the previous month.

This is at pre-pandemic levels.

Job Streak

Through November 2023, the employment report indicated positive job growth for 35 consecutive months, putting the current streak in 5th place of the longest job streaks in US history (since 1939).

Headline Jobs, Top 10 Streaks
	Year Ended	Streak, Months
1	2019	100
2	1990	48
3	2007	46
4	1979	45
5	20231	35
6 tie	1943	33
6 tie	1986	33
6 tie	2000	33
9	1967	29
10	1995	25
1Currrent Streak

Summary:

The headline monthly jobs number was at consensus expectations; however, employment for the previous two months was revised down by 35,000, combined.  The participation rate and the employment population ratio both increased, and the unemployment rate decreased to 3.7%.

Another solid employment report.

by Calculated Risk on 12/08/2023 08:30:00 AM

From the BLS:

Total nonfarm payroll employment increased by 199,000 in November, and the unemployment rate edged down to 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care and government. Employment also increased in manufacturing, reflecting the return of workers from a strike. Employment in retail trade declined.
...
he change in total nonfarm payroll employment for September was revised down by 35,000, from +297,000 to +262,000, and the change for October remained at +150,000. With these revisions, employment in September and October combined is 35,000 lower than previously reported.
emphasis added

Click on graph for larger image.

The first graph shows the jobs added per month since January 2021.

Total payrolls increased by 199 thousand in November.  Private payrolls increased by 150 thousand, and public payrolls increased 49 thousand.

Payrolls for September and October were revised down 35 thousand, combined.

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

In November, the year-over-year change was 2.79 million jobs.  Employment was up solidly year-over-year but has slowed to more normal levels of job growth recently.

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

The Labor Force Participation Rate increased to 62.8% in November, from 62.7% in October. This is the percentage of the working age population in the labor force.

The Employment-Population ratio increased to 60.5% from 60.2% (blue 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 decreased to 3.7% in November from 3.9% in October.

This was at consensus expectations, however, September and October payrolls were revised down by 35,000 combined.  

I'll have more later ...

by Calculated Risk on 12/07/2023 07:24:00 PM

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

Friday:
• At 8:30 AM ET, Employment Report for November.   The consensus is for 200,000 jobs added, and for the unemployment rate to be unchanged at 3.9%.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Preliminary for December).

by Calculated Risk on 12/07/2023 03:02:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for November. The consensus is for 200,000 jobs added, and for the unemployment rate to be unchanged at 3.9%.

There were 150,000 jobs added in October, and the unemployment rate was at 3.9%.

From BofA economists:

"Nonfarm payroll employment likely rose by 200k in November following a 150k increase in October. The main factor behind the acceleration relative to September is that two major strikes ended ahead of the November survey period. ... On the household survey, we expect the labor force participation rate to be unchanged at 62.7% as we believe cyclical gains to participation rate are diminishing. Given this and our expectation for fairly strong employment growth, we forecast the unemployment rate to be unchanged at 3.9%, though there is a risk that it rounds down to 3.8%."

From Goldman Sachs:

"We estimate nonfarm payrolls rose by 238k in November, above consensus ... Alternative measures of employment growth indicate another month of robust job growth on average, government hiring likely remained strong, and layoffs remain low. ... We estimate that the unemployment rate declined to 3.8%."

• ADP Report: The ADP employment report showed 103,000 private sector jobs were added in November.  This suggests job gains below consensus expectations, however, in general, ADP hasn't been very useful in forecasting the BLS report.

• ISM Surveys: Note that the ISM services are diffusion indexes based on the number of firms hiring (not the number of hires).  The ISM® manufacturing employment index decreased in November to 45.8%, down from 46.8% last month.   This would suggest about 40,000 job lost in manufacturing. The ADP report indicated 15,000 manufacturing jobs lost in November.

The ISM® services employment index increased to 50.7%, from 50.2%.   This would suggest about 95,000 jobs added in the service sector. Combined this suggests job gains of 50,000 in November, below consensus expectations.

• Unemployment Claims: The weekly claims report showed a larger number of initial unemployment claims during the reference week (the 5th through the 11th in November) from 200,000 in October to 235,000 in November.  This suggests more layoffs in November compared to October.

•  COVID: As far as the pandemic, the number of patients hospitalized during the reference week in November was around 13,000, down from 14,000 in October.  

•  Strikes: The CES strike report showed about 38,000 fewer workers on strike in November than in October.  This will boost employment by about 38 thousand in November.

• Conclusion: Most of the key indicators suggest a weaker employment report in November than in October.   However, the end of the strikes will boost employment, but this is probably included in the consensus estimate.   My guess is the headline number will be below the consensus.

by Calculated Risk on 12/07/2023 01:05:00 PM

Today, in the Real Estate Newsletter: The "Home ATM" Mostly Closed in Q3

Excerpt:

During the housing bubble, many homeowners borrowed heavily against their perceived home equity - jokingly calling it the “Home ATM” - and this contributed to the subsequent housing bust, since so many homeowners had negative equity in their homes when house prices declined. Note: Very few homeowners have negative equity now - unlike during the housing bubble.
...
Here is the quarterly increase in mortgage debt from the Federal Reserve’s Financial Accounts of the United States - Z.1 (sometimes called the Flow of Funds report) released today. In the mid ‘00s, there was a large increase in mortgage debt associated with the housing bubble.

In Q3 2023, mortgage debt increased $85 billion, down from $92 billion in Q2, and down from the cycle peak of $467 billion in Q2 2021. Note the almost 7 years of declining mortgage debt as distressed sales (foreclosures and short sales) wiped out a significant amount of debt.

However, some of this debt is being used to increase the housing stock (purchase new homes), so this isn’t all Mortgage Equity Withdrawal (MEW).

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

by Calculated Risk on 12/07/2023 12:23:00 PM

The Federal Reserve released the Q3 2023 Flow of Funds report today: Financial Accounts of the United States.

The net worth of households and nonprofits fell to $151.0 trillion during the third quarter of 2023. The value of directly and indirectly held corporate equities decreased $1.7 trillion and the value of real estate increased $0.5 trillion.
...
Household debt increased 2.5 percent at an annual rate in the third quarter of 2023. Consumer credit grew at an annual rate of 1.1 percent, while mortgage debt (excluding charge-offs) grew at an annual rate of 2.5 percent.

Click on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  

Net worth decreased $1.3 trillion in Q3 from an all-time high in Q2.  As a percent of GDP, net worth decreased in Q3, and is below the peak in 2021.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc.) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

The second graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q3 2023, household percent equity (of household real estate) was at 74.2% - up from 73.1% in Q2, 2023. This is close to the highest percent equity since the 1960s.

Note: This includes households with no mortgage debt.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.  

Mortgage debt increased by $85 billion in Q3.

Mortgage debt is up $2.23 trillion from the peak during the housing bubble, but, as a percent of GDP is at 46.8% - down from Q2 - and down from a peak of 73.3% of GDP during the housing bust.

The value of real estate, as a percent of GDP, decreased in Q3 - but is below the peak in Q3 2022 - but is well above the average of the last 30 years.

by Calculated Risk on 12/07/2023 11:25:00 AM

From Manheim Consulting today: Wholesale Used-Vehicle Prices Decrease in November

Wholesale used-vehicle prices (on a mix, mileage, and seasonally adjusted basis) decreased 2.1% in November from October. The Manheim Used Vehicle Value Index (MUVVI) dropped to 205.0, down 5.8% from a year ago.

“While November’s decline was only slightly less than October’s, the move lower was on our radar, given the typical seasonal downward trend that paused in August and September,” said Chris Frey, senior manager of Economic and Industry Insights for Cox Automotive. “Prices still have a chance of rising slightly in December, though we’re not predicting an odd spike or trough. Rather, we’re expecting a measured movement through the end of the month and the year, which should get us close to the January forecast for a 4% year-over-year decline by December 2023. We’ll share our 2024 forecast during our January 8 call, but current views suggest less of a roller coaster in the new year.”

The seasonal adjustment reduced the November decrease. The non-adjusted price in November declined by 2.9% compared to October, moving the unadjusted average price down 7.5% year over year.
emphasis added

Click on graph for larger image.

This index from Manheim Consulting is based on all completed sales transactions at Manheim’s U.S. auctions.

The Manheim index suggests used car prices decreased in November (seasonally adjusted) and were down 5.8% year-over-year (YoY).