Unemployment Rate Drops to 4.5% in March as Job and Earnings Growth Stall

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate FELL in March to 4.5 percent, the lowest rate in almost 10 years (May 2007);
  • Payroll jobs INCREASED 98,000 in March, the weakest job growth since last May;
  • Prior month job totals were revised down: February from a gain of 235,000 to a gain of 219,000 and January from a gain of 238,000 to an increase of 216,000 jobs;
  • Private sector payrolls rose 89,000 in March, also the weakest growth since last May;
  • Average weekly hours in March FELL to 34.3, the lowest since last November;
  • Average weekly earnings INCREASED in March to $896.60 — up $1.77 from February but the 2.4 percent year-year growth was slightly weaker than the 2.5 percent annual growth recorded in February;
  • Average hourly earnings ROSE 5¢ in March to $26.14, a 2.7 percent year-year jump; in February average, hourly earnings registered a 2.8 percent year-year improvement;
  • The number of full-time workers INCREASED 326,000 in February; the number of part-time workers ROSE 149,000;
  • Labor force participation rate HELD at 63.0 percent;
  • Employment-Population ratio ROSE to 60.1 percent, the highest level since February 2009;
  • The number of multiple jobholder went UP 138,000; multiple jobholders represent 5.2 percent of all employed individuals, up from 5.1 percent in February;

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Despite the lowest unemployment rate in almost 10 years, this has to be considered a disappointing Employment Situation report, with the weakest job growth in 10 months and downward revisions to the job totals reported for the first two months of the Trump Administration. The revisions to January and February job growth trimmed the number of new jobs by 38,000.

So, what happened?

Some of the changes can be attributed simply to the calendar as the number of retail jobs fell marking the official end of the holiday shopping season. Some too relates to the weather with 6,000 new construction jobs in March, down from the addition of 15,000 in February.

Unusually good winter weather in the Midwest and Northeast probably strengthened job growth in January and February. March was payback time.,

Offsetting the drop in retail jobs, the number of restaurant jobs grew 21,700. Restaurant jobs have been a steady source of job growth having increased for 57 consecutive months. But, those jobs remain among the lowest paying jobs.

The health care sector too remained a strong source of new jobs, adding 16,700 jobs in March, the 54th straight month of job growth. The health care sector, of course, dodged a bullet when the House cancelled a vote on a replacement for the Affordable Care Act. Since the ACA took effect, the number of health care jobs has increased by 1.5 million or just over 39,000 per month.

Wage growth, though up in March appears to be slowing slightly. Coupled with the dip in average weekly hours, it means workers have less, not more, money in their pockets. Indeed, the slight drop in weekly hours is a bad omen for future hiring. An increase in hours would mean employers have to add to staff. In the immediate aftermath of the onset of the Great Recession, hours fell below 34, dropping as low as 33.8.

Average weekly earnings fell in the construction, and manufacturing sectors. The construction sector is one of the highest paying industry sectors with average weekly earnings of $1,039.77, topped only by the utilities sector ($1,5550.86) and the mining and logging sector ($1,262.69). Manufacturing workers earned an average of $864.84 per week in March, down $2.04 from February. Construction worker earnings fell $6.97 a week in March.

The weakness in hours and the mild slowing in wage growth suggest a weaker labor market than we’d like to see but there also seems to be little basis for concern about inflationary pressures.

The overall job growth should be tempered by the increase of 138,000 multiple jobholders.

The drop in the unemployment rate though remains the redeeming factor in this report. The number of persons unemployed fell 326,000 to 7.2 million, the lowest level since September 2007. Delving into that number, the number of individuals unemployed because of layoffs dropped 190,000 in March and the number of individuals unemployed for fewer than five week dropped 232,000. Some of those could have left that bracket and are now unemployed for 5-14 weeks, but that category fell 29,000. Together that suggest that new entrants to the ranks of the unemployed don’t remain there very long.

Unemployment rates for sub-categories also showed improvement. The unemployment rate for blacks dipped to a still high 8.0 percent from 8.1 percent in February and the unemployment rate for Hispanics dropped 0.5 percent to 5.1 percent. Even the teenage unemployment rate was down, dropping 1.3 percentage points to 13.7 percent, the lowest it has been since May 2001 when it stood at 13.4 percent.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124.

You can follow Mark Lieberman on Twitter at @foxeconomics.

 

1st Time Jobless Claims Remain Highly Volatile, Falling 10,000 in Last Week

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • 1st time claims for unemployment insurance for the week ended December 3 FELL 10,000 to 258,000;
  • The number of claims for the week ended November 28 was unchanged at 268,000
  • Filings remained under 300,000 for the 92nd straight week, the longest streak since 1970;
  • Four week moving average of first time claims INCREASED 1,000 to 252,500;
  • The four week moving average represented 0.166 percent of total employment, UP .001 percentage points from a week earlier;
  • Continuing claims for the week ended November 28 – reported on a one-week lag – DECREASED 79,000 – largest week-week drop since July 2015 — to 2,005,000;
  • The number of continuing claims for the week ended November 21 was REVISED UP 3,000 to 2,084.000;
  • Four-week moving average of continuing claims FELL 9,500 to 2,028,750;

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First time claims for unemployment insurance remained extremely volatile as the calendar turned to December, with a five-figure swing for the fifth straight week, according to the Labor Department.

The average change (regardless of direction) for the last five weeks has been 15,400 compared 6,600 for the previous five weeks. To be sure, the net change has been a drop of 7,000 claims over the last five weeks, but the wide swings suggest some instability in labor markets which would call into question the wisdom of tinkering with interest rates in the short term. Nonetheless, “body language” from the Federal Open Market Committee – the federal Reserve Board’s policy-setting arm – suggest the FOMC is poised to lower the target fed funds rate when it convenes next Tuesday. Though widely anticipated, the FOMC action could our a damper on holiday sales. Retailers had been anticipating strong sales, up about 3.6 percent, according to the National Retail Federation (NRF).

The NRF estimated retailers would add between 640,000 and 690,000 jobs to deal with the increased sales volume for the holiday season which, according to NRF, covers all of November and December.

The four week moving average, designed to smooth the volatility of the weekly numbers, is showing less of a swing in the last five weeks ranging from an increase of 1,000 to a drop of 6,000 and a net decline of 5,250 for the period dropping the total to 252,500, 6.7 percent below the level a year ago.

Despite the recent volatility, both initial claims and continuing claims have been on a relatively stable downward trajectory over the past year. Continuing claims, often seen as a surrogate for hiring, are down 10.7 percent from a year ago. The four-week moving average of continuing claims has dropped a more modest7.1 percent.

In raw numbers, continuing claims fell 241,000 in the last year with most of that decline, 137,000, since September 1.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

May New Home Sales Shake Off April Drop As  Prices Soar

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Pace of contracts for new home sales IMPROVED 2.9 percent in May, after a 7.9 percent drop in April (revised from an originally reported 11.9 percent decline)
  • Unsold inventory ROSE 4,000 to 268,000 – highest level since July 2009
  • With higher sales rate, months’ supply of new homes for sale REMAINED at 5.3 months in May;
  • Median price of a new home ROSE a staggering $35,500 from April to $345,800 – the largest month-month gain since October 2014;
  • Year-year the median price of a new home was up $49,800 (16.8 percent), the largest dollar gain since tracking began in 1964.

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Though home builder confidence was dropped at the beginning of June, sales of new homes took off in May as prices skyrocketed with average hourly and weekly earnings increased, the Census Bureau and Department of Housing and Urban Development reported Friday.

Even with the boost of sales – houses under contract –the Census Bureau and HUD had reported earlier this month a drop in the pace housing permits and starts in May suggesting even builders aren’t sensing the increased sales activity.

Unlike the report on existing home sales which is based on closings, released earlier this week, the government figures were likely not influenced by the anticipated increase in interest rates by the Federal Open Market Committee. The FOMC raised the target fed funds rate at its meeting earlier this month. While the fed funds rate does not directly affect mortgage rates, it does indirectly. By the time the May contracts advance to closing, mortgage rates will likely have risen.

But the improvement in new home sales could ripple through the rest of the economy positively boosting furniture and appliance sales to the extent builders were not offering incentives for contracts as is often the case.

A full 61 percent of the sales were for homes priced at $300,000 or higher compared with 51 percent in April. In all of 2016, 54 percent of sale were of homes priced at $300,000 or more.

To the extent the higher sales – elevated prices – are a true market reflection and not just a one-off, this report could signal a positive turn for housing. One caution: even as the trend to higher price homes was taking hold, the inventory of unsold homes rose to its highest level in eight years.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

Filings for Unemployment Insurance Rise Again

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 241,000 1st time claims for unemployment insurance for the week ended June 17, 3,000 MORE than the prior week’s upwardly revised 238,000 filings;
  • The smoothing four-week moving average of first time claims was 244,750, UP 1,500 from the previous week’s average of 243,250; the fourth straight weekly increase
  • The moving average represents about .0160 percent of total employment – the highest since early April;
  • There were 1,944,000 continued claims for unemployment insurance 8,000 MORE than the previous week;
  • Four-week moving average of continued claims though INCREASED 5,000 to 1,932,000.

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If you were looking for signs the economy might be teetering, the weekly report on first time claims and continued claims for unemployment insurance might be a good place to start. Both data series rose for the week ended June 17, the Department of Labor again reported Thursday.

The smoothing four week moving average for each data set increased as well – the fourth straight time for the initial claims series and the third for the continued claims numbers.

The somewhat unsettling report doesn’t require reaching for the panic button – at least not yet. It does though seem a bit odd the claims for unemployment insurance – initial claims a surrogate for layoffs and continued claims a surrogate for hiring – would be increasing as the unemployment rate keeps declining.

But the unemployment rate has been dropping for the wrong reason as the labor force shrinks not because hiring has exploded. Indeed, the continued claims data show just the opposite. When continued, claims rise it suggests individual collecting unemployment insurance have not been successful in their job hunts.

One of the explanations could be employers – or potential employers – are reluctant to expand their headcount at a time when the Federal Reserve is actively trying to slow the economy. That could mean good news for those who are employed who might see higher wages except that businesses are not asking their employees to work longer hours, another hint that employers are not expanding.

Thursday’s numbers do offer a glimpse into the Employment Situation report to be released July 7. That report of course is based on surveys conducted during the week of the month including the 12th calendar day.

From mid-May to mid-June, both the raw number and four week moving average of first time claims for unemployment insurance rose, pointing to a stable unemployment rate.

This is a far cry from observations just a month ago that which suggested optimism for the Employment Situation report showing how quickly circumstance change.

That doesn’t mean the Federal Open Market Committee was wrong either in raising the target fed funds rate or in its post-meeting statement last week when it said “the labor market has continued to strengthen.”

The FOMC looks ahead as it sets interest rates and by increasing the fed funds rate it gave itself room to lower them again if the economy needs a stimulus.

As the current expansion hits its eighth anniversary (since June 2009), it’s important to remember only two U.S. economic expansions have been longer: from March 1991 to March 2001 (120 months) and from February 1961 to December 1969 (106 months).

Don’t press the panic button just yet, but keep your finger poised.

You can hear Mark Lieberman tomorrow, Friday May 26, at 8:45 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

Existing Home Sales Recover in May; Median Price Hits All-time High

 By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales IMPROVED 60,000 or 1.1 percent in May to a seasonally adjusted annual sales rate of 5.62 million;
  • The April sales rate was REVISED DOWN 10,000 to 5.56 million exaggerating the May improvement
  • Median price of an existing single family home ROSE 3.2 percent or $7,800 to $252,800, the highest ever;
  • Year-year the median price is UP $13,900 or 5.8 percent; May was the 63rd straight month – since February 2012 – the median price has been up year-year;
  • Number of homes available for sale ROSE for the fifth straight month, up 2.1 percent or 40,000 to 1.96 million, the highest since last October
  • The months’ supply of homes for sale in May ROSE to 4.2, up 0.4 months from April, also the highest since last October.

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Despite a dip in the pending home sales index (PHSI), existing home sales improved in April, the National Association of Realtors (NAR)  reported Wednesday.

The home sale report tracks closings while the PHSI which tracks contracts for sale. The PHSI in February had dropped 0.9 percent. The two-month difference allows time for buyers to obtain the necessary financing.

The increase in closings came in the same month in which prices climbed, continuing a four-month run of price increases. The median price is the highest recorded by the NAR and should shake the cobwebs off potential sellers who may have been holding off putting their home on the market waiting for a better price. Indeed, the number of homes for sale edged up in May as did the months’ supply of homes for sale.

The sale improvement in May came just before the Federal Open Market Committee hiked the target fed funds rate last week. While there is no direct link between the fed funds rate and mortgage interest rates (unlike credit loan loans), the Fed action will trickle down to the mortgage market. It is possible home-buyers under contract accelerated closings to avoid an increase in the mortgage interest rate, in which case some of the May closings may have been “borrowed” from June.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased for the second consecutive month, dipping to 4.01 percent in May from 4.05 percent in April. The average commitment rate for all of 2016 was 3.65 percent.

Would-be buyers still face challenges of slow-growing earnings. At the same time, in the proposed federal budget would add another hurdle by increasing the interest rate on student loans and adding a requirement that students repay the loans while still in school.

Hear Mark Lieberman every Friday, on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

Builder Confidence in Fourth Drop This Year

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Housing Market Index FELL two points in June to a still strong 67 (out of 100)
  • The May index was revised downward from the originally reported 70 to 69;
  • All three components of the Index FELL by two points each in June;
  • By region, builder confidence FELL in June in three of the four census regions, improving only in the Midwest. The index fell a sharp nine points in the West from a 12-year high 80 to 71.

The housing market continued to teeter – from lofty heights – as builders reported some loss of confidence according to the Housing Market Index for (HMI) for June reported Thursday by the National Association of Home Builders (NAHB).

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Though the index remained at a relatively high level of 67, the trend is not positive. The June decline marked the fourth month-month drop in the index this year.

The Census Bureau and Department of Housing and Urban Development will report Friday on new housing permits and starts (albeit for May) which will indicate whether builder attitudes are affecting their actions.

The slowing builder confidence fits perfectly in a narrative of a continuing weak housing market. New Home sales – tracking contracts for new homes – fell sharply in the last report from Census and HUD (for April) suggesting buyers may not be out there. The same report showed a decline in prices and an increasing inventory of homes for sale. That combination could explain why builder attitudes are souring.

Would-be homebuyers continue to face challenges from slow earnings growth, increasing interest rates and heavy student loan burdens – all of which influence a builder’s decision of whether the break ground on a new project.

Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am Eastern Time. Follow Mark Lieberman on Twitter at @ foxeconomics.

Filings for Unemployment Insurance Fall Again

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 237,000 1st time claims for unemployment insurance for the week ended June 10, 8,000 FEWER than the prior week’s unrevised 245,000 filings;
  • The smoothing four-week moving average of first time claims was 243,000 which was 1,000 more than the previous week’s average;
  • The moving average represents about .0159 percent of total employment;
  • There were 1,935,000 continued claims for unemployment insurance 6,000 MORE than the previous week;
  • The four-week moving average of continued claims INCREASED 9,000 to 1,926,750.

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When the Federal Open Market Committee said Wednesday “the labor market has continued to strengthen” as it explained its decision to increase the target fed funds rate, it had to be referring to new claims for unemployment insurance which continued an almost steady decline in the week ended June 10. It was the fifth time in the last seven weeks the number of first-time filers for unemployment insurance declined, spanning the period from the last FOMC meeting to the most recent.

With its relative stability, this data series has become less of a leading indicator as businesses have difficulty filling open positions with qualified candidates and become increasingly reluctant to reduce staff, even of marginal employees.

What is troublesome in this lengthy expansion is employers have yet to specifically increase hours which would be a signal of adding staff. BY maintaining hours and essentially maintaining staff levels, employers are essentially saying that while they might be reluctant to grow, they don’t want to shrink either and don’t feel profit pressures.

You can hear Mark Lieberman every Friday 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

FOMC BOOSTS INTEREST RATE

By Mark Lieberman

Managing Director and Senior Economist

Despite signs of a slowing economy, the Federal Open Market Committee voted 8-1 Wednesday to increase the target fed funds rate to 1 to 1 ¼ percent, a ¼ percent increase.

 

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The action came even though the Census Bureau reported earlier in the day retail sales (as measured by price) declined in May and the Bureau of Labor Statistics (BLS), earlier in the month job growth is at its weakest in almost five years. (According to the BLS, the three-month moving average of new jobs was 121,000 in May, slowest since July 2012 when it was 111,000.) In a generally upbeat meeting-end statement, the Committee said “the labor market has continued to strengthen and that economic activity has been rising moderately so far this year.”

Acknowledging job gains “have moderated,” the FOMC said, “the unemployment rate has declined, household spending has picked up in recent months, and business fixed investment has continued to expand.”

Only Neel Kashkari, president of the Minneapolis Federal Reserve Bank, voted against the decision to increase the fed funds rate. After holding rates near zero for seven years, the FOMC in December 2015 voted to increase the target rate and has now done so three more times.

The fed funds rate is the rate banks charge each other for overnight borrowing. The prime interest rate, the rate which banks charge their best customers, is generally set at 3 percentage points above the fed funds rate.

The change in the fed funds target rate will have the most immediate impact on outstanding credit card balances. The rate card issuers charge is generally tied to the fed funds rate. Rates on mortgages, auto loans and student loans will not be directly affected but could rias as the impact of the fed funds increase ripples through the financial system leave the target fed funds rate unchanged at 0-1/4 percent.

In its statement, the Committee renewed its plans to gradually reduce the size of the Federal Reserve’s balance sheet – but not immediately. The Committee said the Fed will continue to reinvest the proceeds of its mortgage backed and other bonds, as they mature.  But, the FOMC said, it “currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.”

By qualifying its plans to reduce its investments, the FOMC gave investors and other market watchers yet another sign to observe about the FOMC’s views on the economy. Should the Fed not reduce its balance sheet it would signal concerns about the economy.

Hear Mark Lieberman on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, every Friday at 6:20 am Eastern Time. You can follow him on Twitter at @foxeconomics.

 

Gasoline Price Drop Pushes Retail Activity Down

 

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • May retail sales – measured by prices – DECLINED $1.2 billion or 0.3 percent from April, led by a $923 million drop in gasoline sales as the per gallon price dropped;
  • Even without gasoline station sales, retail sales FELL $278 million, or 0.1 percent;
  • Sales at virtually every category of stores declined though sales at non-store retailer, mail order, improved 0.8 percent.
  • The initial report that April sales had increased 0.4 percent was unchanged
  • Year-year total sales ROSE 3.9 percent in May compared with a 4.5 percent year-year boost in April.

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Responding to still stagnant incomes retail sales, as measured by retail prices, dropped in May the Census Bureaureported Wednesday.

The monthly report underscores lingering concern in the retail sector – particularly brick-and-mortar outlets as non-store retail sale improved.

The monthly report, which is not adjusted for inflation, is more a reflection of merchant attitudes than consumer activity. As an example, gasoline “sales” dropped $923 million or 2.4 percent in May, the same month in which the per gallon price of a gallon of gasoline dropped 1.08 percent suggesting that even with the lower price, motorists scaled back on their driving.

Separately, the Bureau of Labor Statistics (BLS) reported Wednesday the consumer price index for May dropped 0.1 percent in May and year-year CPI –the inflation rate — was up 1.87 percent, down from the 2.2 percent inflation rate reported for April.

The retail sales release came just hours before the Federal Open Market Committee was set to report on its deliberations about interest rates. The retail sales (price) report suggested a slowdown in the economy.

That said the BLS reported the weak inflation coupled with a slight recovery in wages – though still showing slow growth – meant “real earnings” — changes in wages less inflation – improved 0.3 percent in May.

Prices, according to the retail sales report, were down in all but four store categories in addition to non-store retailers: furniture, food and beverage, clothing stores, health and personal care stores and restaurants. The dip in restaurant sales/prices came in the same month in which restaurants increased staffing by 30,300. The other store categories which saw sales drop however also reduced staff.

The Census report suggested retailers dropped price in May in response to flagging sales which could mean a ripple effect through other aspects of the economy such as durable goods orders, wholesale trade and imports. The dip in furniture store sales reflects not only price changes but a slowdown in home sales.

Hear Mark Lieberman on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, every Friday at 6:20 am Eastern Time. You can follow him on Twitter at @foxeconomics.

Unemployment Rate Drops to 4.3% in May but Jobs Growth Slows

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate FELL in May to 4.3 percent, the lowest in16 years (May 2001);
  • Payroll jobs INCREASED 138,000 in May, yielding a 3-month average job gain of 121,000 – weakest since July 2012 (111,000)
  • Prior month job totals were revised down a combined 66,000: March from a gain of 79,000 to a gain of 50,000 and April from a gain of 211,000 to an increase of 174,000 jobs;
  • With the revision, the March payroll increase was the weakest since May 2016;
  • Private sector payrolls ROSE 147,000 in May after growing 173,000 in April;
  • Average weekly hours in May REMAINED at 34.4;
  • Average weekly earnings INCREASED in May to $901.97, up $1.38 from April after a $4.33 increase in April;
  • Weekly earnings ARE UP 2.5 percent year-year;
  • Average hourly earnings ROSE 4¢ in May to $26.22, a 2.5 percent year-year gain;
  • The number of full-time workers DROPPED 367,000 in May; the number of part-time workers INCREASED 166,000;
  • Labor force participation rate DIPPED 0.2 percentage point in May to 62.7 percent, the second consecutive monthly decline;
  • Employment-Population ratio FELL to 60.0 percent, first decline in five months;

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In a strong signal the new administration’s economic honeymoon may be over, the economy added 138,000 jobs in May bringing the three-month average of payroll increase to 121,000, the weakest in almost five years.

The Bureau of Labor Statistics’ May Employment Situation release also reported the nation’s unemployment rate fell to 16-year low of 4.3 percent due largely to a sharp decline in the labor force participation rate. Indeed, the number of persons not in the labor force – meaning they are neither employed nor looking for work – increased 608,000 – the largest increase in a year though that could be due to an influx of new college graduates. The unemployment rate for college graduates however actually declined to 2.3 percent.

Though recent comments by Federal Reserve Governors suggest the central bank will continue its course of raising interest rates when the Board of Governors meets in about two weeks, the weakness suggested by the employment report could throw that schedule off track. The FOMC may wait until the next inflation report which is scheduled for June 14, the second day of the Committee’s two-day meeting.

Whatever the explanation, the report marked a huge disappointment for the Trump Administration though the slowdown in job growth could be offered as a rationale for the President’s tax cut initiative and might spark the long-awaited infrastructure program President Trump promised repeatedly during last year’s campaign.

Payroll totals were dragged down by a decline in retail jobs which fell 6,100 in May, the fourth straight month of declines in that sector. Major retailers have been cutting back following disappointing year end sales with many announcing store closings as consumers shift away from brick-and-mortar facilities to online shopping. The number of jobs at “non-store” retailers increased to 562,700 in May, one of the few retail categories to show an increase in jobs. Indeed, the 2,900 new jobs in that category was the largest increase of any retail category in May. An increase in non-store retail sales doesn’t automatically translate to an increase in jobs in that sector as increasingly customers are called upon to perform tasks which had been done by employees such as completing order forms. That, along with other computerized tasks such a processing payments have combined to reduce the number of retail jobs.

That plus the slow growth in earnings which dampens retail activity combine to mean few jobs.

The construction sector, according to the release, showed its strongest gains in three months in May, adding 11,000 payroll jobs with improving weather. The job increase was the strongest since February, but swill below the average monthly gain in the previous 12 months. Most of the increase came in residential construction despite recent signs of weakness in home sales. The pace of new home sales fell 11.4 percent from March to April, according to most recent Census Bureau – Department of Housing and Urban Development data.

Leisure and Hospitality jobs continued to increase, adding 31,000 slots in May, most of them, 30,300, low-paying restaurant jobs. The number of professional and business service jobs increased by 38,000 but almost 13,000 were temp jobs. Combined with the increase in part time jobs, it signals an increasing lack of confidence on the part of employers to make permanent staff increases.

The release offered other tidbits suggesting growing weakness in the economy: while new unemployment, those unemployed for fewer than 14 weeks, declined, longer term unemployment increased. Some of the decline in shorter term unemployment may be the result of individuals “aging through” the process, that is moving from being unemployed for fewer than 14 weeks to 15 weeks or longer. And, while the number of “re-entrants” to unemployment increased – that is individuals deciding to once again look for work – the number of new entrants decreased either because they got jobs or aren’t bothering to look, consistent with the increase in the number of persons not in the labor force.

At the same time, there were some positives: the unemployment among black Americans improved in Mya to 7.5 percent – the lowest since December 2000 – from 7.9 percent in April.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124.

You can follow Mark Lieberman on Twitter at @foxeconomics.

 

Filing for Unemployment Insurance at Steady State

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 234,000 1st time claims for unemployment insurance for the week ended May 20, 1,000 FEWER than the prior week’s upwardly revised 233,000 filings;
  • The smoothing four-week moving average of first time claims was 235,720, DOWN 5,750 from the previous week’s average of 241,500;
  • The moving average represents about .0154 percent of total employment
  • The moving average of 1st time claims fell to the lowest level since April 1973
  • There were 1,923,000 continued claims for unemployment insurance 24,000 MORE than the previous week;
  • Four-week moving average of continued claims though DROPPED 16,000 to 1,920,250, the lowest level since January 1974!

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With an eye toward next week’s employment situation report, the Department of Labor again reported data showing a calm, stable picture of unemployment insurance claims. The number of first time claims filers edged up by 1,000. (regardless of direction). Since the beginning of the year, first time unemployment claims had moved (up or down) by almost 13,000.

The Department of Labor report Thursday also showed the moving average of claims – first time or continued – again hit the lowest levels in decades, another signal of the increasingly tight labor market. While that may be good news for job-seekers, and to some extent jobholders, the tighter labor market could bite the economy by stifling growth as new or expanding businesses struggle to find staff.

The claims data also signal optimism for the monthly report on new jobs and the unemployment rate. Initial claims for unemployment insurance in mid-May were down 10,000 from mid-April and the four-week moving average dropped 1,750 both suggesting the unemployment rate could continue to trend down. Similar data points for continued claims showed the weekly numbers were down 64,000 from mid-April to mid-May and the moving average was down 76,750.

Continued claims are seen as a surrogate for hiring. The decline suggests a strong hiring report which would be the third of the four released in the fledgling Trump Administration.

The tight labor market – which could produce higher wages (see Economics 101 for supply and demand) – could accelerate plans by the Federal Open Market Committee to boost interest rates in an effort to stop the economy from overheating. Higher rates would, among other things, reduce demand by both consumers and businesses.

An economic slowdown may be in the offing nonetheless as the current expansion approaches its eighth anniversary (since June 2009). Only two U.S. economic expansions have been longer: from March 1991 to March 2001 (120 months) and from February 1961 to December 1969 (106 months).

You can hear Mark Lieberman tomorrow, Friday May 26, at 8:45 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

April Existing Home Sales Drop as Prices Increase

 By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales DROPPED 130,000 or 2.3 percent in April to a seasonally adjusted annual sales rate of 5.57 million;
  • The March sales rate was REVISED UP 10,000 to 5.71 million making it the fastest pace since July 2007;
  • Median price of an existing single family home ROSE 3.5 percent or $8,200 to $244,800 in April, the third straight month-month increase;
  • Year-year the median price is UP $13,900 or 6.0 percent; April was the 62nd straight month – since February 2012 – the median price has been up year-year;
  • Number of homes available for sale ROSE for the fourth straight month, up 7.2 percent or 130,000 to 1.93 million, but remained under 2 million for the sixth straight month;
  • The months’ supply of homes for sale in April ROSE to 4.2, up 0.4 months from March, the largest month-month increase since February 2016l.

In another sign of a weakening real estate market, the National Association of Realtors (NAR)  https://www.nar.realtor/news-releases/2017/05/existing-home-sales-slip-23-percent-in-april-days-on-market-falls-to-under-a-month  reported Wednesday existing home sales declined in April. Indeed, it was the second time this year after increasing in all but four months last year.

The weak sales report – based on closings – came on the heels of a Census report that new home sales – based on contracts – dropped 11.4 percent in April, the sharpest month-month decline in almost four years.

On top of the sales data, the NAR reported the median price of a single family home continues to increase, a bit of good news amidst the negative sales volume. The higher prices could draw more sellers to the market, improving the choice for buyers.

While the months’ supply of homes for sale rose, suggesting an improved sales market, the increase was due more to the drop in the sales rate than the increase in inventory.

But would-be buyers still face challenges of slow-growing earnings. At the same time, in the proposed federal budget would add another hurdle by increasing the interest rate on student loans and adding a requirement that students repay the loans while still in school.

The NAR report covered the period just after the Federal Open Market Committee hiked the target fed funds rate which sent mortgage rates higher. When the FOMC raised rates in December, it took about two months for the increase to show up in mortgage rates.

Hear Mark Lieberman every Friday, on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.