by Calculated Risk on 10/31/2024 02:55:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for October. The consensus is for 120,000 jobs added, and for the unemployment rate to be unchanged at 4.1%.

There were 254,000 jobs added in September, and the unemployment rate was at 4.1%.

From BofA:

We expect nonfarm payrolls to rise by 100k in Oct after coming in at 254k in Sep. ... the u-rate should move back up to 4.2%, in part due to hurricane distortions.
emphasis added

From Goldman Sachs:

We estimate nonfarm payrolls rose by 95k in October, below consensus of +105k and the three-month average of +186k. Alternative measures of employment growth were mixed, and strikes and the recent hurricanes likely weighed on payrolls growth this month. ... We estimate that the unemployment rate was unchanged at 4.1%, in line with consensus.

• ADP Report: The ADP employment report showed 233,000 private sector jobs were added in October.  This was well above consensus forecasts and suggests job gains above consensus expectations, however, in general, ADP hasn't been very useful in forecasting the BLS report (this also doesn't include the Boeing strike and probably misses some of the hurricane impact).

• ISM Surveys: Note that the ISM indexes are diffusion indexes based on the number of firms hiring (not the number of hires).  The indexes will be released after the employment report.

• Unemployment Claims: The weekly claims report showed more initial unemployment claims during the reference week at 242,000 in October compared to 222,000 in September.  This suggests more layoffs in October compared to September (likely due to hurricanes).

• Strikes: The CES strike report shows 41,000 additional employees on strike during the reference period in October. This will reduce the headline jobs number.

• Hurricane Impact: Analysts are trying to estimate the distortion from Hurrican Milton.  In September 2005, the initial BLS report showed a loss of 35 thousand jobs due to the impact of Hurricanes Katrina and Rita (Katrina hit in late August, and Rita during the reference period in September).  This was eventually revised to a gain of 57 thousand (still well below the average for the year of 210 thousand per month.  Milton also made landfall during the reference period, so the BLS will try to adjust for impact.

• Conclusion: Employment gains have average 167 thousand over the last 6 months. Subtracting 41 thousand for the strikes, and maybe 50 thousand for the hurricane impact would suggest employment gains will be below consensus expectations.

by Calculated Risk on 10/31/2024 11:32:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Freddie Mac House Price Index Increased in September; Up 3.6% Year-over-year

A brief excerpt:

Freddie Mac reported that its “National” Home Price Index (FMHPI) increased 0.28% month-over-month on a seasonally adjusted (SA) basis in September. On a year-over-year basis, the National FMHPI was up 3.6% in September, down from up 4.0% YoY in August.  The YoY increase peaked at 19.1% in July 2021, and for this cycle, bottomed at up 0.9% YoY in May 2023. ...

As of September, 11 states were below their previous peaks, Seasonally Adjusted. The largest seasonally adjusted declines from the recent peak were in Florida (-2.2%), Louisiana (-1.8%), Arizona (-1.7%), North Carolina (-1.5), and Arkansas (-1.3%).

For cities (Core-based Statistical Areas, CBSA), here are the 30 cities with the largest declines from the peak, seasonally adjusted. Austin continues to be the worst performing city. However, 17 of the 30 worst performing cities are now in Florida!

And 9 of the 12 worst performing cities are in Florida.

There is much more in the article.

by Calculated Risk on 10/31/2024 08:40:00 AM

The BEA released the Personal Income and Outlays report for September:

Personal income increased $71.6 billion (0.3 percent at a monthly rate) in September, according to estimates released today by the U.S. Bureau of Economic Analysis. Disposable personal income (DPI), personal income less personal current taxes, increased $57.4 billion (0.3 percent) and personal consumption expenditures (PCE) increased $105.8 billion (0.5 percent).

The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.3 percent. Real DPI increased 0.1 percent in September and real PCE increased 0.4 percent; goods increased 0.7 percent and services increased 0.2 percent.
emphasis added

The September PCE price index increased 2.1 percent year-over-year (YoY), down from 2.3 percent YoY in August, and down from the recent peak of 7.0 percent in June 2022.

The PCE price index, excluding food and energy, increased 2.7 percent YoY, unchanged from 2.7 percent in August, and down from the recent peak of 5.4 percent in February 2022.

The following graph shows real Personal Consumption Expenditures (PCE) through September 2024 (2017 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

Personal income was slightly below expectations, and PCE was slightly above expectations.

Inflation was close to expectations.

by Calculated Risk on 10/31/2024 08:30:00 AM

The DOL reported:

In the week ending October 26, the advance figure for seasonally adjusted initial claims was 216,000, a decrease of 12,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 227,000 to 228,000. The 4-week moving average was 236,500, a decrease of 2,250 from the previous week's revised average. The previous week's average was revised up by 250 from 238,500 to 238,750.
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 236,500.

The previous week was revised up.

Weekly claims were below the consensus forecast.

by Calculated Risk on 10/30/2024 08:05:00 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 230 thousand initial claims, up from 227 thousand last week.

• Also at 8:30 AM, Personal Income and Outlays for September. The consensus is for a 0.4% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.3%. PCE prices are expected to be up 2.1% YoY, and core PCE prices up 2.6% YoY.

• At 9:45 AM, Chicago Purchasing Managers Index for October. The consensus is for a reading of 46.0, down from 46.6 in September.

by Calculated Risk on 10/30/2024 12:38:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Fannie and Freddie: Single Family and Multi-Family Serious Delinquency Rates Increased in September

Excerpt:

Single-family serious delinquencies increased slightly in September, and multi-family serious delinquencies increased.

Freddie Mac reported that the Single-Family serious delinquency rate in September was 0.54%, up from 0.52% August. Freddie's rate is down slightly year-over-year from 0.55% in September 2023.  This is below the pre-pandemic lows.

Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble and peaked at 3.17% in August 2020 during the pandemic.Fannie Mae reported that the Single-Family serious delinquency rate in September was 0.52%, up from 0.50% in August. The serious delinquency rate is down year-over-year from 0.54% in September 2023.  This is also below the pre-pandemic lows.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59% following the housing bubble and peaked at 3.32% in August 2020 during the pandemic.

There is much more in the article.

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

From the NAR: Pending Home Sales Advanced 7.4% in September

ending home sales rose in September, according to the National Association of REALTORS®. All four major regions experienced month-over-month gains in transactions. Year-over-year, the Northeast and West registered increases while sales remained steady in the Midwest and South.

The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – jumped 7.4% to 75.8 in September, the highest level since March (78.3). Year-over-year, pending transactions ascended 2.6%. An index of 100 is equal to the level of contract activity in 2001.

“Contract signings rose across all regions of the country as buyers took advantage of the combination of lower mortgage rates in late summer and more inventory choices,” said NAR Chief Economist Lawrence Yun. “Further gains are expected if the economy continues to add jobs, inventory levels grow, and mortgage rates hold steady.”
...
The Northeast PHSI expanded 6.5% from last month to 65.6, up 3.3% from September 2023. The Midwest index surged 7.1% to 75.0 in September, identical to the previous year.

The South PHSI improved 6.7% to 89.0 in September, unchanged from a year ago. The West index ballooned by 9.8% from the prior month to 64.0, up 12.3% from September 2023.
emphasis added

This was well above expectations. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in October and November. The NAR also included their forecast:

In the next two years, Yun foresees slower home price appreciation and corresponding increases in sales.

“After two years of sluggish home sales in 2023 and 2024, existing-home sales are forecasted to rise to 4.47 million in 2025 and more than 5 million in 2026,” Yun said. “During the next two years, expect a slower rate of growth in home prices that’s roughly in line with the consumer price index because of additional supply reaching the market.”

Yun predicts the median existing-home price will rise to $410,700 in 2025 and to $420,000 in 2026. The annual 30-year fixed mortgage rate will slide to 5.9% in 2025 but then move higher to 6.1% in 2026

.

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

From the BEA: Gross Domestic Product, Third Quarter 2024 (Advance Estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.8 percent in the third quarter of 2024, according to the "advance" estimate released by the U.S. Bureau of Economic Analysis. In the second quarter, real GDP increased 3.0 percent.
...
The increase in real GDP primarily reflected increases in consumer spending, exports, and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The increase in consumer spending reflected increases in both goods and services. Within goods, the leading contributors were other nondurable goods (led by prescription drugs) and motor vehicles and parts. Within services, the leading contributors were health care (led by outpatient services) as well as food services and accommodations. The increase in exports primarily reflected an increase in goods (led by capital goods, excluding automotive). The increase in federal government spending was led by defense spending. The increase in imports primarily reflected an increase in goods (led by capital goods, excluding automotive).

Compared to the second quarter, the deceleration in real GDP in the third quarter primarily reflected a downturn in private inventory investment and a larger decrease in residential fixed investment. These movements were partly offset by accelerations in exports, consumer spending, and federal government spending. Imports accelerated.
emphasis added

PCE increased at a 3.7% annual rate, and residential investment decreased at a 5.1% rate. The advance Q2 GDP report, with 2.8% annualized increase, was below expectations.

I'll have more later ...

by Calculated Risk on 10/30/2024 08:15:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 233,000 Jobs in October; Annual Pay was Up 4.6%

– Private sector employment increased by 233,000 jobs in October and annual pay was up 4.6 percent year-over-year, according to the October ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”). ...

“Even amid hurricane recovery, job growth was strong in October,” said Nela Richardson, chief economist, ADP. “As we round out the year, hiring in the U.S. is proving to be robust and broadly resilient.”
emphasis added

This was well above the consensus forecast of 110,000. The BLS report will be released Friday, and the consensus is for 140,000 non-farm payroll jobs added in October. Note: ADP doesn't include the Boeing strike, and probably was impacted less by the hurricanes than the BLS report.

by Calculated Risk on 10/30/2024 07:00:00 AM

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

Mortgage applications decreased 0.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending October 25, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 0.1 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 6 percent from the previous week and was 84 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 10 percent higher than the same week one year ago.

“Mortgage applications were essentially flat last week as rates increased for the fourth time in five weeks, driven by bond market volatility in advance of the presidential election and the next FOMC meeting. The 30-year fixed rate, at 6.73 percent, was at its highest level since July 2024,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “After a brief burst of activity in September when rates were almost 60 basis points lower, overall applications have declined 27 percent, driven by a pullback in refinances. Government refinances accounted for a large part of the decrease, dropping 12 percent over last week.”

Added Kan, “Purchase applications increased compared to a holiday-shortened week and were 10 percent higher than a year ago. While near-term purchase application activity has weakened, we continue to expect housing demand from younger homebuyers to support purchase growth over the next few years as for-sale inventory loosens gradually.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.73 percent from 6.52 percent, with points increasing to 0.69 from 0.64 (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 10% year-over-year unadjusted. 

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

Purchase application activity is up about 10% from the lows in late October 2023, but still about 9% below the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index increased significantly as mortgage rates declined last month but decreased over the last five weeks as rates moved back up.