by Calculated Risk on 1/05/2012 10:00:00 AM

The December ISM Non-manufacturing index was at 52.6%, up from 52.0% in November. The employment index increased in December to 49.4%, up from 48.9% in November. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: December 2011 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in December for the 25th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. "The NMI registered 52.6 percent in December, 0.6 percentage point higher than the 52 percent registered in November, and indicating continued growth at a slightly faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 56.2 percent, which is the same reading as reported in November, reflecting growth for the 29th consecutive month. The New Orders Index increased by 0.2 percentage point to 53.2 percent. The Employment Index increased 0.5 percentage point to 49.4 percent, indicating contraction in employment for the third time in the last four months. The Prices Index decreased 1.3 percentage points to 61.2 percent, indicating prices increased at a slower rate in December when compared to November. According to the NMI, 11 non-manufacturing industries reported growth in December. Respondents' comments are mixed and vary by industry and company. Economic growth continues to be slowed by the lag in employment."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was below the consensus forecast of 53.4% and indicates slightly faster expansion in December than in November.

by Calculated Risk on 1/05/2012 08:40:00 AM

The DOL reports (press release added):

In the week ending December 31, the advance figure for seasonally adjusted initial claims was 372,000, a decrease of 15,000 from the previous week's revised figure of 387,000. The 4-week moving average was 373,250, a decrease of 3,250 from the previous week's revised average of 376,500.

The following graph shows the 4-week moving average of weekly claims since January 2000.

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 this week to 373,250.

This is the lowest level for the 4-week average since June 2008.

And here is a long term graph of weekly claims:

The 4-week moving average is still falling and is now well below 400,000.

This suggests fewer layoffs and more payroll jobs added in December.

All current Employment Graphs

by Calculated Risk on 1/05/2012 08:15:00 AM

ADP reports:

Private-sector employment increased by 325,000 from November to December on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The ADP National Employment Report, created by Automatic Data Processing, Inc. (ADP®), in partnership with Macroeconomic Advisers, LLC, is derived from actual payroll data and measures the change in total nonfarm private employment each month. The estimated gain in employment from October to November was revised down slightly to 204,000 from the initially reported 206,000.

This was well above the consensus forecast of an increase of 160,000 private sector jobs in December. The BLS reports on Friday, and the consensus is for an increase of 150,000 payroll jobs in December, on a seasonally adjusted (SA) basis.

Government payrolls have been shrinking by about 24,000 per month this year. So this suggests around 325,000 private nonfarm payroll jobs added, minus 24,000 government workers - or around 301,000 total jobs added in December. Of course ADP hasn't been very useful in predicting the BLS report.

by Calculated Risk on 1/05/2012 12:36:00 AM

Reis reported that the apartment vacancy rate (82 markets) fell to 5.2% in Q4 from 5.6% in Q3. The vacancy rate was at 6.6% in Q4 2010 and peaked at 8.0% at the end of 2009.

From the WSJ: Apartment-Vacancy Rate Tumbles to 2001 Level

The nation's apartment-vacancy rate in the fourth quarter fell to its lowest level since late 2001 ... In the fourth quarter, the vacancy rate fell to 5.2% from 6.6% a year earlier and 5.6% at the end of the third quarter, according to Reis.

During the depths of the downturn, landlords had to offer incentives such as flat-screen TVs and months with no rent to attract tenants. But in the fourth quarter of 2011, landlords in 71 of the 82 of the markets that Reis follows were able to raise rents. ... Nationwide, landlords raised asking rents an average of 0.4% in the fourth quarter, to $1,064 a month. That's up from $1,026 in 2009.

But rent increases showed signs of moderating in some markets and, overall, they were less than Reis had expected.

Click on graph for larger image.

This graph shows the apartment vacancy rate starting in 2005.

Reis is just for large cities, but this decline in vacancy rates is happening just about everywhere. More from Bloomberg: U.S. Apartment Vacancies Decline to a Decade Low of 5.2%, Rents Increase

“The sector is benefiting from some of the lowest figures for new construction on record,” Calanog said. “By 2013, the influx of new units may begin eroding any benefit the sector derives from tight supply conditions.”

A total of 8,865 new units became available in the fourth quarter, the second-fewest for any three-month period in Reis records dating to 1999. The first quarter of 2011 had the fewest units, at 7,473.

For all of 2011, 37,678 units were completed, the lowest annual total in 31 years of Reis data. The previous record was 49,303 in 1993 during the savings and loan crisis.

A few key points we've been discussing all year:
• Apartment vacancy rates are falling fast.

• A record low number of multi-family units were completed in 2011.

• Multi-family starts are increasing, and that is helping both GDP and employment growth this year. These new starts will not be completed until 2012 or 2013, so vacancy rates will probably continue to decline.

by Calculated Risk on 1/04/2012 09:10:00 PM

A few interesting reads ...

• From FT Alphaville: ‘Tis (still) the seasonality, ISM edition. An interesting discussion of seasonality, and how recent the recent ISM survey might be overstating strength.

• From the NY Fed: Forecasting with Internet Search Data. This is an attempt to get more recent information since data is released with a lag. I tried this with "New Homes" and it appears to track, but it is a little too noisy to use to predict new home sales from the Census Bureau.

• From Jon Lansner at the O.C. Register: Van line: Calif. jumps to No. 7 U.S. destination

Allied Van Lines’ 44th annual “Magnet States Report” says that at least by its own business patterns California is back as on the “inbound list” — states with more folks moving in than out. ... Illinois had the most net outbound losses followed by Pennsylvania, Michigan, New Jersey and New York.

• From Tim Duy at Fed Watch: Still Cautious Heading Into 2012

Bottom Line: I want to believe the recent improvement in the tenor of economic data signals that activity is set to accelerate substantially in 2012. But the ups and downs on the past two years smoothed out to nothing exciting or catastrophic, just a moderate path of activity that remains woefully insufficient to return the US economy to its pre-recession trend. For now, I will stick to that middle ground, while remaining watchful of the all-too-many downside risks that leave me just a little bit sleepless each night.

Earlier:
• U.S. Light Vehicle Sales at 13.56 million SAAR in December
• From the Federal Reserve: The U.S. Housing Market: Current Conditions and Policy Considerations
• Question #6 for 2012: Unemployment Rate