by Calculated Risk on 6/05/2024 10:00:00 AM

(Posted with permission). The ISM® Services index was at 53.8%, up from 49.4% last month. The employment index increased to 47.1%, from 45.9%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 53.8% May 2024 Services ISM® Report On Business®

Economic activity in the services sector grew in May after contracting in April for the first time since December 2022, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 53.8 percent, indicating sector expansion for the 46th time in 48 months.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In May, the Services PMI® registered 53.8 percent, 4.4 percentage points higher than April’s reading of 49.4 percent. The contraction in April ended a string of 15 months of services sector growth following a composite index reading of 49 percent in December 2022; the last contraction before that was in May 2020 (45.4 percent). The Business Activity Index registered 61.2 percent in May, which is 10.3 percentage points higher than the 50.9 percent recorded in April. The New Orders Index expanded in May for the 17th consecutive month after contracting in December 2022 for the first time since May 2020; the figure of 54.1 percent is 1.9 percentage points higher than the April reading of 52.2 percent. The Employment Index contracted for the fifth time in six months, though at a slower rate in May with a reading of 47.1 percent, a 1.2-percentage point increase compared to the 45.9 percent recorded in April.
emphasis added

The PMI was above expectations.

by Calculated Risk on 6/05/2024 08:15:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 152,000 Jobs in May; Annual Pay was Up 5.0%

Private sector employment increased by 152,000 jobs in May and annual pay was up 5.0 percent year-over-year, according to the May, according to the April ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”). ...

“Job gains and pay growth are slowing going into the second half of the year,” said Nela Richardson, chief economist, ADP. “The labor market is solid, but we're monitoring notable pockets of weakness tied to both producers and consumers.”
emphasis added

This was below the consensus forecast of 174,000. The BLS report will be released Friday, and the consensus is for 180,000 non-farm payroll jobs added in May.

by Calculated Risk on 6/05/2024 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 5.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending May 31, 2024. This week’s results include an adjustment for the Memorial Day holiday.

The Market Composite Index, a measure of mortgage loan application volume, decreased 5.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 16 percent compared with the previous week. The Refinance Index decreased 7 percent from the previous week and was 5 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 16 percent compared with the previous week and was 13 percent lower than the same week one year ago.

“Mortgage rates moved slightly higher last week, with the 30-year conforming rate reaching 7.07 percent – its highest level since early May – despite incoming data indicating somewhat slower economic growth,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “After adjusting for the Memorial Day holiday, both purchase and refinance application volumes were down, with purchase activity specifically 13 percent below last year’s level.”

Added Fratantoni, “Government purchase volume was down less, helped by growth in VA applications. The market is relying on first-time homebuyer demand, and many first-time buyers do use government lending programs.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.07 percent from 7.05 percent, with points increasing to 0.65 from 0.63 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is down 13% year-over-year unadjusted.  

Red is a four-week average (blue is weekly).  

Purchase application activity is up slightly from the lows in late October 2023, and below the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index declined sharply in 2022, and mostly flat lined since then with a slight increase recently.

by Calculated Risk on 6/04/2024 08:18:00 PM

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

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

• At 8:15 AM, The ADP Employment Report for May. This report is for private payrolls only (no government). The consensus is for 174,000 payroll jobs added in May, down from 192,000 in April.

• At 10:00 AM, the ISM Services Index for May.   The consensus is for a reading of 50.5, up from 59.4.

by Calculated Risk on 6/04/2024 02:13:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the May 2024 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new record high of 570 thousand SAAR in April 2019.

Click on graph for larger image.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 308 thousand SAAR in May 2020.  

Heavy truck sales were at 512 thousand SAAR in May, down slightly from 512 thousand in April, and down 9.4% from 565 thousand SAAR in May 2023.  

Usually, heavy truck sales decline sharply prior to a recession.   Heavy truck sales are solid. 

by Calculated Risk on 6/04/2024 10:39:00 AM

Today, in the Real Estate Newsletter: Asking Rents Mostly Unchanged Year-over-year

Brief excerpt:

Tracking rents is important for understanding the dynamics of the housing market. For example, the sharp increase in rents helped me deduce that there was a surge in household formation in 2021 (See from September 2021: Household Formation Drives Housing Demand). Now that household formation has slowed, and multi-family completions have increased, rents are under pressure.

From ApartmentList.com: Apartment List National Rent Report

The national median rent increased by 0.5% in May and now stands at $1,404, but the pace of growth slowed slightly this month. This is typically the time of year when rent growth is accelerating amid the busy moving season, so sluggish growth this month indicates that the market is headed for another slow summer.

Since the second half of 2022, seasonal declines have been steeper than usual and seasonal increases have been more mild. As a result, apartments are on average slightly cheaper today than they were one year ago. Year-over-year rent growth nationally currently stands at -0.8 percent and has now been in negative territory since last summer.

CoreLogic: “Attached Single-Family Rental Prices Post First Annual Decrease in 14 Years”

U.S. single-family rent growth continued to slowly increase year over year in March to 3.4%.

After registering a 2.9% annual gain in February, attached rental appreciation lost ground in March, posting a -0.6% loss.

There is much more in the article.

by Calculated Risk on 6/04/2024 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings changed little at 8.1 million on the last business day of April, the U.S. Bureau of Labor Statistics reported today. Over the month, both the number of hires and total separations were little changed at 5.6 million and 5.4 million, respectively. Within separations, quits (3.5 million) and layoffs and discharges (1.5 million) changed little.
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 decreased in April to 8.06 million from 8.36 million in March.

The number of job openings (black) were down 19% year-over-year. 

Quits were down 3% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

by Calculated Risk on 6/04/2024 08:00:00 AM

Notes: This CoreLogic House Price Index report is for April. The recent Case-Shiller index release was for March. The CoreLogic HPI is a three-month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic: Monthly US Home Price Gains Dip Below Seasonal Average in April

• U.S. year-over-year single-family home price appreciation was 5.3% in April, the same as in March.

• All states posted annual appreciation in March, led by New Hampshire (12%), New Jersey (11%) and South Dakota (10.8%).

• Of the 10 tracked major U.S. metro areas, San Diego (9.9%) overtook Miami (9.7%) for the top spot.
...
Annual U.S. home price appreciation remained above 5% in April, with three states posting double-digit gains. By next spring, national price gains are projected to slow to 3.4%, with only a few states putting up increases of higher than 6%. This slow cooling reflects not only the increasing number of homes on the market in some parts of the country, but also elevated, 30-year, fixed-rate mortgages, which remain around 7%, a major factor influencing America’s continuing housing affordability challenges.

“Home price growth continues to slow, as a comparison with a strong 2023 spring is still impacting year-over-year differences,” said Dr. Selma Hepp, chief economist for CoreLogic. “Nevertheless, the April uptick in mortgage rates to this year’s high has cooled some of the typical spring homebuyer demand, which pulled monthly gains of 1.1% below the March-to-April average.”

“The home price slowing also highlights buyers’ increased sensitivity to rising interest rates, as well as the anticipation that presumed lower rates down the road will help ease the affordability crunch,” Hepp continued. “Also, the price cooling is more pronounced in markets where there has been an influx of inventory and/or new construction, as well as those where additional homeownership costs (such as insurance, taxes and HOA fees) have risen relatively faster.”
emphasis added

This was the same YoY increase as reported for March, and down from the 5.8% YoY increase reported at the beginning of 2024.

by Calculated Risk on 6/03/2024 09:11:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Fully Erase Last Week's Spike

Sharp improvements in the bond market led to another nice drop in mortgage rates. The average lender is now back to the lowest levels in nearly 2 weeks, but not yet back to the recent lows seen on May 15th. [30 year fixed 7.11%]
emphasis added

Tuesday:
• At 10:00 AM ET, Job Openings and Labor Turnover Survey for April from the BLS.

by Calculated Risk on 6/03/2024 06:55:00 PM

Wards Auto released their estimate of light vehicle sales for May: May U.S. Light-Vehicle Sales Continue 2024 Trend of Slow, Steady Growth (pay site).

Further confirming as a theme for 2024, growth in May largely was centered in the most affordable CUV and car segments. Other sectors during the first five months of 2024 have either recorded sporadic gains or fell into steady decline, including some, such as fullsize pickups, that are coming off lengthy periods of strong results. So far in 2024, market strength is with more affordable small and midsize CUVs and small sedans.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and Wards Auto's estimate for May (red).

Sales in May (15.90 million SAAR) were up 1.0% from April, and up 2.5% from May 2023.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Sales in May were at the consensus forecast.