by Calculated Risk on 10/03/2024 03:27:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for September. The consensus is for 145,000 jobs added, and for the unemployment rate to be unchanged at 4.2%.

There were 142,000 jobs added in August, and the unemployment rate was at 4.2%.

From BofA:

Although the labor market has been soft, low jobless claims suggest that the September employment report should be decent. We forecast a 150k increase in nonfarm payrolls, compared to 142k in August ... We look for the unemployment rate to remain unchanged at 4.2%
emphasis added

From Goldman Sachs:

We estimate nonfarm payrolls rose by 165k in September, above consensus of +150k ... We estimate that the unemployment rate was unchanged on a rounded basis at 4.2%, in line with consensus.

• ADP Report: The ADP employment report showed 143,000 private sector jobs were added in September.  This was above consensus forecasts and suggests job gains above consensus expectations, however, in general, ADP hasn't been very useful in forecasting the BLS report.

• ISM Surveys: Note that the ISM indexes are diffusion indexes based on the number of firms hiring (not the number of hires).  The ISM® manufacturing employment index decreased to 43.9%, down from 46.0% the previous month.   This would suggest about 50,000 jobs lost in manufacturing. The ADP report indicated 2,000 manufacturing jobs added in September.

The ISM® services employment index decreased to 48.1%, from 50.1%. This would suggest 20,000 jobs added in the service sector. Combined this suggests 30,000 jobs lost in September, far below consensus expectations.  (Note: The ISM surveys have been way off recently)

• Unemployment Claims: The weekly claims report showed fewer initial unemployment claims during the reference week at 222,000 in September compared to 233,000 in August.  This suggests fewer layoffs in September compared to August.

• Conclusion: My guess is employment gains will be below consensus expectations.

by Calculated Risk on 10/03/2024 02:42:00 PM

What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For September, Realtor.com reported inventory was up 34.0% YoY, but still down 23.2% compared to the 2017 to 2019 same month levels. 

 Now - on a weekly basis - inventory is up 31.9% YoY.

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report: Weekly Housing Trends View—Data for Week Ending Sept. 28, 2024

• Active inventory increased, with for-sale homes 31.9% above year-ago levels

For the 47th consecutive week dating to November 2023, the number of listings for sale has grown year over year, and this week continues a string of growth rates in the mid-30% range that started in April. There were more homes for sale this week than in any week since January 2020, pre-pandemic. Much of the inventory buildup is due to more seller activity than buyer activity, but falling mortgage rates could mean more buyers enter the market in the coming weeks.

• New listings—a measure of sellers putting homes up for sale—jumped 1.7% this week compared with a year ago

The number of new listings has continued to increase, though at a slower pace. This slowdown isn’t entirely surprising, as a rate cut has been widely anticipated, eager sellers may have already acted by listing their homes in the weeks leading up to the Fed’s announcement. Looking ahead, with another rate cut expected before the end of 2024, we anticipate that more sellers will feel “unlocked,” as the prevailing mortgage rates come into closer alignment with their current rates.

Here is a graph of the year-over-year change in inventory according to realtor.com. 

Inventory was up year-over-year for the 46th consecutive week.  

However, inventory is still historically low.

New listings remain below typical pre-pandemic levels.

by Calculated Risk on 10/03/2024 11:44:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Moody's: Apartment Vacancy Rate Unchanged in Q3; Office Vacancy Rate at Record High

A brief excerpt:

From Moody’s Analytics Economists: Multifamily Performance Steadied, Office Stress Continued to Manifest, Retail Vacancy Declined, And Industrial Cooled Down

National multifamily vacancy stayed flat at 5.8%, the highest level on record since 2011. Supply side pressure was the main driver for the creep-up of vacancy since late 2022.

Moody’s Analytics (Reis) reported that the apartment vacancy rate was at 5.8% in Q3 2024, unchanged from an upwardly revised 5.8% in Q2, and up from the pandemic peak of 5.6% in Q1 2021. This is the highest vacancy rate since 2011. Note that asking rents are down slightly year-over-year.

This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999). Note: Moody’s Analytics is just for large cities.

There is much more in the article.

by Calculated Risk on 10/03/2024 10:00:00 AM

(Posted with permission). The ISM® Services index was at 54.9%, up from 51.5% last month. The employment index decreased to 48.1%, from 50.1%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 54.9% September 2024 2024 Services ISM® Report On Business®

Economic activity in the services sector expanded for the third consecutive month in September, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 54.9 percent, which is the highest reading since February 2023 and indicates sector expansion for the 49th time in 52 months.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In September, the Services PMI® registered 54.9 percent, 3.4 percentage points higher than August’s figure of 51.5 percent. The reading in September marked the seventh time the composite index has been in expansion territory this year. The Business Activity Index registered 59.9 percent in September, 6.6 percentage points higher than the 53.3 percent recorded in August, indicating a third month of expansion after a contraction in June. The New Orders Index expanded to 59.4 percent in September, 6.4 percentage points higher than August’s figure of 53 percent. The Employment Index contracted for the first time in three months; the reading of 48.1 percent is a 2.1-percentage point decrease compared to the 50.2 percent recorded in August.
emphasis added

The PMI was well above expectations.

by Calculated Risk on 10/03/2024 08:30:00 AM

The DOL reported:

In the week ending September 28, the advance figure for seasonally adjusted initial claims was 225,000, an increase of 6,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 218,000 to 219,000. The 4-week moving average was 224,250, a decrease of 750 from the previous week's revised average. The previous week's average was revised up by 250 from 224,750 to 225,000.
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 decreased to 224,250.

The previous week was revised up.

Weekly claims were above the consensus forecast.

by Calculated Risk on 10/02/2024 07:01:00 PM

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

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 224 thousand initial claims, up from 218 thousand last week.

• At 10:00 AM, the ISM Services Index for September.

by Calculated Risk on 10/02/2024 02:03:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the September 2024 seasonally adjusted annual sales rate (SAAR) of 477 thousand.

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 288 thousand SAAR in May 2020.  

Heavy truck sales were at 477 thousand SAAR in September, down from 501 thousand in August, and down 4.7% from 501 thousand SAAR in September 2023.  

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

by Calculated Risk on 10/02/2024 11:04:00 AM

Today, in the Calculated Risk Real Estate Newsletter: FHFA’s National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

A brief excerpt:

Here are some graphs on outstanding mortgages by interest rate, the average mortgage interest rate, borrowers’ credit scores and current loan-to-value (LTV) from the FHFA’s National Mortgage Database through Q2 2024 (just released).
...
Here is some data 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 2024.

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. The percent of outstanding loans under 4% peaked in Q1 2022 at 65.2% (now at 56.2%), and the percent under 5% peaked at 85.5% (now at 74.6%). These low existing mortgage rates makes it difficult for homeowners to sell their homes and buy a new home since their monthly payments would increase sharply. This is a key reason existing home inventory levels are so low.

There is much more in the article.

by Calculated Risk on 10/02/2024 08:15:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 143,000 Jobs in September; Annual Pay was Up 4.7%

Private sector employment increased by 143,000 jobs in September and annual pay was up 4.7 percent year-over-year, according to the September ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”). ...

“Stronger hiring didn't require stronger pay growth last month,” said Nela Richardson, chief economist, ADP. “Typically, workers who change jobs see faster pay growth. But their premium over job-stayers shrank to 1.9 percent, matching a low we last saw in January.”
emphasis added

This was above the consensus forecast of 110,000. The BLS report will be released Friday, and the consensus is for 145,000 non-farm payroll jobs added in September.

by Calculated Risk on 10/02/2024 07:00:00 AM

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

Mortgage applications decreased 1.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending September 27, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index decreased 3 percent from the previous week and was 186 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 9 percent higher than the same week one year ago.

“Last week’s incoming data showed an economy that is still growing at a solid pace, even as inflation continues to decline. As a result, mortgage rates were up modestly, with the 30-year fixed mortgage rate increasing slightly to 6.14 percent,” said Mike Fratantoni, MBA’s SVP and Chief Economist. With this move, refinance application volume declined on the week but remains almost three-times as high as last year’s pace.”

Added Fratantoni, “The news for the week was that more homebuyers appear to be entering the market. Purchase application activity was up for the week and increased more than 9 percent compared to last year at this time. Inventories of both new and existing homes have been increasing over the course of 2024, meaning that potential buyers have properties to look at and now have somewhat lower mortgage rates leading to better affordability.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.14 percent from 6.13 percent, with points increasing to 0.61 from 0.57 (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 up 9% year-over-year unadjusted. 

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

Purchase application activity is up about 19% from the lows in late October 2023, but still about 1% 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 for two years - but has increased significantly recently as mortgage rates declined.