by Calculated Risk on 11/03/2024 09:59:00 AM

Most analysts expect the FOMC will cut the federal funds rate at the meeting this week by 25bp lowering the target range to 4 1/2 to 4 3/4 percent.   

Currently almost all market participants are expecting a 25bp cut this week.  Market participants are also pricing in another 25bp cut in December.

From BofA:

We expect the Fed to cut rates by 25bp in November. ... Chair Powell’s message in the press conference should remain optimistic, particularly given the recent robust data flow. Powell is likely to emphasize data dependence once again, and provide little forward guidance about the policy path.
emphasis added

From Goldman:

We continue to expect the FOMC to lower the fed funds rate by 25bp at the November and December meetings.

Projections will NOT be released at this meeting. For review, here are the September projections. 

Since the last projections were released, economic growth has been above expectations, the unemployment rate is below expectations, and somewhat inflation lower than expected (although there are some "base effects" that might push PCE inflation up in Q4).  

The FOMC will look through the employment report released Friday because of the impact of hurricanes and the Boeing strike on job gains in October.

The BEA's second estimate for Q3 GDP showed real growth at 2.8% annualized, following 3.0% annualized real growth in Q2, and 1.6% in Q1.  Current estimates for Q4 GDP are around 2.6%.  That would put real growth in 2024, Q4 over Q4, at 2.5% - well above the top end of the September FOMC projections.  

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2024	2025	2026	2027
Sept 2024	1.9 to 2.1	1.8 to 2.2	1.9 to 2.3	1.8 to 2.1
June 2024	1.9 to 2.3	1.8 to 2.2	1.8 to 2.1	---

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 4.1% in October.  This is below the low end of the September projections.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2024	2025	2026	2027
Sept 2024	4.3 to 4.4	4.2 to 4.5	4.0 to 4.4	4.0 to 4.4
June 2024	3.9 to 4.2	3.9 to 4.3	3.9 to 4.3	---

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of September 2024, PCE inflation increased 2.1 percent year-over-year (YoY). This is below the low end of the September projections.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2024	2025	2026	2027
Sept 2024	2.2 to 2.4	2.1 to 2.2	2.0	2.0
June 2024	2.5 to 2.9	2.2 to 2.4	2.0 to 2.1	---

PCE core inflation increased 2.7 percent YoY in September. This is in the range of FOMC projections for Q4.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2024	2025	2026	2027
Sept 2024	2.6 to 2.7	2.1 to 2.3	2.0	2.0
June 2024	2.8 to 3.0	2.3 to 2.4	2.0 to 2.1	---

by Calculated Risk on 11/03/2024 07:11:00 AM

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

For deaths, I'm currently using 4 weeks ago for "now", since the most recent three weeks will be revised significantly.

Note: "Effective May 1, 2024, hospitals are no longer required to report COVID-19 hospital admissions, hospital capacity, or hospital occupancy data."  So I'm no longer tracking hospitalizations.

COVID Metrics
	Now	Week Ago	Goal
Deaths per Week	905	985	≤3501
1my goals to stop weekly posts, 🚩 Increasing number weekly for Deaths ✅ Goal met.

Click on graph for larger image.

This graph shows the weekly (columns) number of deaths reported.

Although weekly deaths met the original goal to stop posting, I'm continuing to post now that deaths are above the goal again.  

Weekly deaths are triple the low of 302 in early June but are now declining and will likely continue to decline based on wastewater sampling.

And here is a graph I'm following concerning COVID in wastewater as of October 31st:

This appears to be a leading indicator for COVID hospitalizations and deaths.

COVID in wastewater is declining - only about 50% higher than the lows of last May - suggesting weekly deaths will continue to decline.

by Calculated Risk on 11/02/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Case-Shiller: National House Price Index Up 4.2% year-over-year in August

• Fannie and Freddie: Single Family and Multi-Family Serious Delinquency Rates Increased in September

• Inflation Adjusted House Prices 1.5% Below 2022 Peak

• Freddie Mac House Price Index Increased in September; Up 3.6% Year-over-year

• Lawler: Mortgage Rates Have Surged Since the Federal Reserve Cut Interest Rates Last Month

• A Proposal to Address the Housing Crisis

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

by Calculated Risk on 11/02/2024 08:11:00 AM

The FOMC meets this week and is expected to cut rates.

----- Monday, November 4th -----
No major economic releases scheduled.

----- Tuesday, November 5th -----
All day: U.S. Election

8:30 AM: Trade Balance report for September from the Census Bureau.  The consensus is for the deficit to be $73.5 billion in September, from $70.4 billion in August.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

10:00 AM: the ISM Services Index for October.  The consensus is for a decrease to 53.3 from 54.9.

----- Wednesday, November 6th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

----- Thursday, November 7th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 224 thousand initial claims, up from 216 thousand last week.

2:00 PM: FOMC Meeting Announcement. The Fed is expected to cut rates 25bp at this meeting.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Friday, November 8th -----
10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for November).

by Calculated Risk on 11/01/2024 09:10:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 1.5% Below 2022 Peak

Excerpt:

It has been over 18 years since the bubble peak. In the August Case-Shiller house price index on Tuesday, the seasonally adjusted National Index (SA), was reported as being 75% 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 3% above the bubble peak.

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 $300,000 in January 2010, the price would be $433,000 today adjusted for inflation (44% 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. The last graph shows the 5-year real return based on the Case-Shiller National Index.
...
The second graph shows the same two indexes in real terms (adjusted for inflation using CPI).

In real terms (using CPI), the National index is 1.5% below the recent peak, and the Composite 20 index is 1.6% below the recent peak in 2022. Both indexes increased in August in real terms.

It has now been 27 months since the real peak in house prices. Typically, after a sharp increase in prices, it takes a number of years for real prices to reach new highs (see House Prices: 7 Years in Purgatory)

by Calculated Risk on 11/01/2024 09:07:00 AM

The headline jobs number in the October employment report was below expectations, and August and September payrolls were revised down by 112,000 combined.   The participation rate and the employment population ratio declined, and the unemployment rate was unchanged at 4.1%.

Earlier: October Employment Report: 12 thousand Jobs, 4.1% Unemployment Rate

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 125 thousand workers Not Seasonally Adjusted (NSA) net in October.  This was lower than last year and suggests slightly less real retail sales this holiday season as last year.

This was seasonally adjusted (SA) to a loss of 6.4 thousand retail jobs in October.

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 years old participation rate decreased in October to 83.5% from 83.8% in September.

The 25 to 54 employment population ratio decreased to 80.6% from 80.9% the previous month.

Both are above pre-pandemic levels and near the highest level this millennium.

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 October.   

Part Time for Economic Reasons

From the BLS report:

"The number of people employed part time for economic reasons was little changed at 4.6 million in October. These individuals would have preferred full-time employment but 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 October to 4.56 million from 4.62 million in September.  This is above the pre-pandemic levels.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 7.7% from 7.7% in the previous month. This is down from the record high in April 2020 of 23.0% and up from the lowest level on record (seasonally adjusted) in December 2022 (6.5%). (This series started in 1994). This measure is above 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 1.61 million workers who have been unemployed for more than 26 weeks and still want a job, essentialy unchanged from 1.63 million the previous month.

This is down from post-pandemic high of 4.174 million, and up from the recent low of 1.050 million.

This is above pre-pandemic levels.

Job Streak

Through October 2024, the employment report indicated positive job growth for 46 consecutive months, putting the current streak in a tie for 3rd place of the longest job streaks in US history (since 1939).  It appears this streak will survive the annual benchmark revision (that will revise down job growth).

Headline Jobs, Top 10 Streaks
	Year Ended	Streak, Months
1	2019	100
2	1990	48
3 tie	2007	46
3 tie	20241	46
5	1979	45
6 tie	1943	33
6 tie	1986	33
6 tie	2000	33
9	1967	29
10	1995	25
1Currrent Streak

Summary:

The headline jobs number in the October employment report was below expectations, and August and September payrolls were revised down by 112,000 combined. The participation rate and the employment population ratio declined, and the unemployment rate was unchanged at 4.1%.

This report was impacted by strikes (especially Boeing) and the hurricanes.  This makes interpreting this report difficult.

by Calculated Risk on 11/01/2024 08:30:00 AM

From the BLS: Employment Situation

Total nonfarm payroll employment was essentially unchanged in October (+12,000), and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in health care and government. Temporary help services lost jobs. Employment declined in manufacturing due to strike activity.
...
The change in total nonfarm payroll employment for August was revised down by 81,000, from +159,000 to +78,000, and the change for September was revised down by 31,000, from +254,000 to +223,000. With these revisions, employment in August and September combined is 112,000 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 12 thousand in October.  Private payrolls decreased by 28 thousand, and public payrolls increased 40 thousand.

Payrolls for August and September were revised down 112 thousand, combined.

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

In October, the year-over-year change was 2.17 million jobs.  Employment was up solidly year-over-year (Although the annual benchmark revision will lower the year-over-year change).

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

The Labor Force Participation Rate decreased to 62.6% in October, from 62.7% in September. This is the percentage of the working age population in the labor force.

The Employment-Population ratio decreased to 60.0% from 60.2% in September (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 was unchanged at 4.1% in October from 4.1% in September.

This was below consensus expectations, and August and September payrolls were revised down by 112,000 combined.  

This report was impacted by strikes and hurricanes.

I'll have more later ...

by Calculated Risk on 10/31/2024 08:01:00 PM

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

Friday:
• At 8:30 AM ET, Employment Report for October.   The consensus is for 120,000 jobs added, and for the unemployment rate to be unchanged at 4.1%.

• At 10:00 AM, ISM Manufacturing Index for October.  The consensus is for 47.6, up from 47.2. 

• Also at 10:00 AM, Construction Spending for September.  The consensus is for no change in spending.

• All day, Light vehicle sales for October.

by Calculated Risk on 10/31/2024 04:41:00 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 27.6% 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 Oct. 26, 2024

• Active inventory increased, with for-sale homes 27.6% above year-ago levels.

For the 51st consecutive weeks dating back to November 2023, the number of listings for sale has grown year-over-year. This week’s growth was lower than last week’s, the fifth week of slowing growth, and the lowest annual change since April. Much of the inventory build up is due to more seller activity than buyer activity. However, if mortgage rates keep rising in the short term, we could see a decline in both seller and buyer activity.

• New listings–a measure of sellers putting homes up for sale-increased 0.7% this week compared to one year ago.

The number of new listings on the market was lower than the same week last year. The recent upward trajectory of mortgage rates could largely discourage sellers from listing their homes ...

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

Inventory was up year-over-year for the 51st consecutive week.  

However, inventory is still historically low.

New listings remain below typical pre-pandemic levels.

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.