by Calculated Risk on 12/05/2024 08:30:00 AM

The DOL reported:

In the week ending November 30, the advance figure for seasonally adjusted initial claims was 224,000, an increase of 9,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 213,000 to 215,000. The 4-week moving average was 218,250, an increase of 750 from the previous week's revised average. The previous week's average was revised up by 500 from 217,000 to 217,500.
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 increased to 218,250.

The previous week was revised up.

Weekly claims were close to the consensus forecast.

by Calculated Risk on 12/04/2024 08:00:00 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 220 thousand initial claims, up from 213 thousand last week.

• Also at 8:30 AM: Trade Balance report for October from the Census Bureau. The consensus is the trade deficit to be $78.8 billion.  The U.S. trade deficit was at $84.4 billion in September.

by Calculated Risk on 12/04/2024 02:09:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the November 2024 seasonally adjusted annual sales rate (SAAR) of 507 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 507 thousand SAAR in November, up from a revised 463 thousand in October, and up 3.7% from 489 thousand SAAR in November 2023.  

Usually, heavy truck sales decline sharply prior to a recession.  Sales were solid in November, and sales for October were revised up significantly.

As I mentioned yesterday, light vehicle sales increased in November.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.  Vehicle sales were at 16.50 million SAAR in November, up from 16.25 million in October, and up 6.7% from 15.46 million in November 2023.

by Calculated Risk on 12/04/2024 02:00:00 PM

Fed's Beige Book

Economic activity rose slightly in most Districts. Three regions exhibited modest or moderate growth that offset flat or slightly declining activity in two others. Though growth in economic activity was generally small, expectations for growth rose moderately across most geographies and sectors. Business contacts expressed optimism that demand will rise in coming months. Consumer spending was generally stable. Many consumer-oriented businesses across Districts noted further increases in price sensitivity among consumers, as well as several reports of increased sensitivity to quality. Spending on home furnishings was down, which contacts attributed to limited household mobility. Demand for mortgages was low overall, though reports on recent changes in home loan demand were mixed due to volatility in rates. Commercial real estate lending was similarly subdued. Still, contacts generally reported financing remained available. Capital spending and purchases of raw materials were flat or declining in most Districts. Sales of farm equipment were a notable headwind to overall investment activity, and several contacts expressed concerns about the future prices of equipment given ongoing weakness in the farm economy. Energy activity in the oil and gas sector was flat but demand for electricity generation continued to grow at a robust rate. The rise in electricity demand was driven by rapid expansions in data centers and was reportedly planned to be met by investments in renewable generation capacity in coming years.

Labor Markets

Employment levels were flat or up only slightly across Districts. Hiring activity was subdued as worker turnover remained low and few firms reported increasing their headcount. The level of layoffs was also reportedly low. Contacts indicated they expected employment to remain steady or rise slightly over the next year, but many were cautious in their optimism about any pickup in hiring activity.
...
Prices

Prices rose only at a modest pace across Federal Reserve Districts. Both consumer-oriented and business-oriented contacts reported greater difficulty passing costs on to customers.
emphasis added

by Calculated Risk on 12/04/2024 10:05:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 1.4% Below 2022 Peak

Excerpt:

It has been over 18 years since the bubble peak. In the September Case-Shiller house price index released last week, 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 $434,000 today adjusted for inflation (45% 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 1.4% below the recent peak, and the Composite 20 index is 1.6% below the recent peak in 2022. The real National index increased in September, however, the Composite 20 index decreased slightly in real terms.

It has now been 28 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 12/04/2024 10:00:00 AM

(Posted with permission). The ISM® Services index was at 52.1%, down from 56.0% last month. The employment index decreased to 51.5%, from 53.0%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 52.1% November 2024 Services ISM® Report On Business®

conomic activity in the services sector expanded for the fifth consecutive month in November, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 52.1 percent, indicating expansion for the 51st time in 54 months since recovery from the coronavirus pandemic-induced recession began in June 2020.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In November, the Services PMI® registered 52.1 percent, 3.9 percentage points lower than October’s figure of 56 percent. The reading in November marked the ninth time the composite index has been in expansion territory this year. The Business Activity Index registered 53.7 percent in November, 3.5 percentage points lower than the 57.2 percent recorded in October, indicating a fifth month of expansion after a contraction in June. The New Orders Index also recorded a reading of 53.7 percent in November, 3.7 percentage points lower than October’s figure of 57.4 percent. The Employment Index landed in expansion territory for the fourth time in five months; the reading of 51.5 percent is a 1.5-percentage point decrease compared to the 53 percent recorded in October.
emphasis added

The PMI was below expectations.

by Calculated Risk on 12/04/2024 08:15:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 146,000 Jobs in November; Annual Pay was Up 4.8%

Private sector employment increased by 146,000 jobs in November and annual pay was up 4.8 percent year-over-year, according to the November ADP® National Employment ReportTM produced by ADP Research in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”). ...

“While overall growth for the month was healthy, industry performance was mixed,” said Nela Richardson, chief economist, ADP. “Manufacturing was the weakest we've seen since spring. Financial services and leisure and hospitality were also soft.”
emphasis added

This was below the consensus forecast of 166,000. The BLS report will be released Friday, and the consensus is for 183,000 non-farm payroll jobs added in October.

by Calculated Risk on 12/04/2024 07:00:00 AM

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

Mortgage applications increased 2.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 29, 2024. This week’s results include an adjustment for the Thanksgiving holiday.

The Market Composite Index, a measure of mortgage loan application volume, increased 2.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 30 percent compared with the previous week. The Refinance Index decreased 1 percent from the previous week and was 7 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index decreased 30 percent compared with the previous week and was 21 percent lower than the same week one year ago.

“Mortgage rates fell to their lowest level in over a month last week, with the 30-year fixed rate decreasing to 6.69 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The recent strength in purchase activity continues, supported by lower rates and higher inventory levels, which are giving prospective buyers more options compared to earlier in the year. The purchase index increased for the fourth straight week to its highest level since January 2024. Conventional refinance applications declined despite the lower rates, but FHA and VA refinances rebounded from a week ago.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.69 percent from 6.86 percent, with points decreasing to 0.67 from 0.70 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
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 21% year-over-year unadjusted (due to timing of Thanksgiving - this was up sharply last week). 

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

Purchase application activity is up about 29% from the lows in late October 2023 and is now above the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index increased as mortgage rates declined in September but has decreased as rates moved back up.

by Calculated Risk on 12/03/2024 08:29:00 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 November. This report is for private payrolls only (no government).  The consensus is for 166,000 jobs added, down from 233,000 in October.

• At 10:00 AM, the ISM Services Index for November.  The consensus is for 55.5, down from 56.0.

• At 1:45 PM, Discussion, Fed Chair Jerome Powell, Moderated Discussion, At the New York Times DealBook Summit, New York, N.Y.

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

by Calculated Risk on 12/03/2024 05:39:00 PM

Wards Auto released their estimate of light vehicle sales for November: U.S. Light-Vehicle Sales Surprise on High Side Again in November (pay site).

Improved affordability, and possibly relief from the end of contentious national elections, appeared to bring more consumers into dealer showrooms in November, leading sales to post their biggest year-over-year increase in 2024.

Click on graph for larger image.

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

Sales in November (16.50 million SAAR) were up 2.9% from October, and up 6.7% from November 2023.

Sales in November were well above the consensus forecast.

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