No Harvey Impact yet but 1st Time Unemployment Insurance Claims Rise

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 236,000 1st time claims for unemployment insurance for the week ended August 27, 1,000 MORE than the previous week;
  • The number of initial claims for the week ended August 19 was UNCHANGED at 232,000;
  • The four-week moving average of first time claims FELL 1,250 to 236,750 or 0.154 percent of total employment;
  • The number of continued claims – reported on a one-week lag – for the week ended August 19 was 1,942,000, a decline of 12,000 from the previous week’s unrevised number;
  • The four-week moving average of continuing claims DROPPED 6,250 to 1,951,500;

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The increase in first time claims for unemployment insurance for the week ended August 26, as the Department of Labor reported Thursday is just a tease as to what this report will look like in a few weeks.

If history is any guide, we can probably expect unemployment insurance claims to jump by about 100,000, In 2005, about two weeks after Hurricane Katrina ravaged Louisiana (and, not, internet rumors notwithstanding Barack Obama was not president then), initial claims which had been averaging about 320,000 per week, spiked by 96.000 and then dropped 65,000 two weeks later. Claims returned to their pre-storm average within two months.

President Obama was in the White House when Superstorm Sandy tore up the East Coast in 2012, sending first-time claims up 90,000 two weeks later.

Just as Harvey’s impact on employment will be transitory, so too will be impact of the storm be on gasoline prices, affected because it hit a refinery-rich part of the country. Analysts expect a 15¢ jump in the per gallon price of gasoline in the next couple of weeks but prices should be back to pre-storm levels in a couple of weeks.  Platforms and rigs were shut down in anticipation of the storm, which made landfall late Friday as a Category 4 storm but weakened mid-Saturday into a tropical storm. Following Katrina, gasoline prices shot up 40¢ per gallon within a month but then fell back to below pre-storm levels two months later.

Thursday’s data on claims will have no impact on the Bureau of Labor Statistics’ report Friday on the August labor market. The unemployment rate is expected to remain at 4.3 percent and non-farm payrolls to increase about 182,000 which would be below the July increase of 209,000 and the three-month average increase of 195,000.

Average hourly earnings are expected to increase 6¢ to $26.42 which would compute to a 2.6 percent annual increase and average weekly earnings are expected to slip $3.59 to $905.83 which would be 2.6 percent higher than August 2016.

You can hear Mark Lieberman tomorrow (Friday Sep. 1) at 8:45 am and again at 12:05 pm on POTUS Sirius XM 124 and 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.

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.

January Home Sales Drop Sharply for Second Straight Month

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales – closed sales — FELL sharply in January: down 3.2 percent to a seasonally adjusted annual sales rate of 5.38 million after a 2.8 percent drop in December
  • The December sales rate was REVISED DOWN 10,000 to 5.56 million;
  • Median price of an existing single-family home DIPPED 6.4 percent or $6,000 – the steepest one-month decline in two years;
  • Year-year the median price is up 5.8 percent or $13,200;
  • Number of homes available for sale ROSE 60,000 or 4.1 percent to 1.52 million;
  • The months’ supply of homes for sale in January ROSE to 3.4 – the first increase since last May

Trends:

  • Over the last two months, sales of existing single-family homes have dropped almost six percent, the largest two0-month decline since October-November 2015 when sales fell 10.7 percent;
  • The year-year decline in sales — 5.4 percent – was the largest since August 2014 when the 12-month decline was 7.2 percent;
  • The sales drop came even though the Pending Home Sales Index – measuring contracts for sale – was up for the second straight month;
  • The median price of an existing home has fallen month-month for six of the last seven months; the January price drop was the largest one-month price decline since September 2015;
  • The increase in the number of homes for sale ended a string of seven straight monthly DECLINES.

Data Source: National Association of Realtors: (NAR):

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The new tax code was expected to have an impact on homeownership and the January report on home sales (closings) suggests those concerns may have been realized sooner. That said, the inventory of homes on the market increased which could boost future sales but that increase in homes for sale could also be from homeowners who see the benefits of owning a home fading.

To be sure, one month – or in this case two months — may not signify a trend but it sure looks as if builder Donald Trump may have been a bit short-sighted.

Buyer traffic, according to the NAR improved in January but that may not have been because of interest in actually buying. Realtors know that the Sunday after Thanksgiving is a strong day for open houses. After being cooped up with football and turkey and relatives, “window-shopping” for a new home may be just the cure for home-bound boredom. The same goes for cold weather which keeps people in their apartments or homes.

Indeed, we won’t know for a while just how much of an impact the limit on home mortgage interest will have on transactions, but the advance report certainly isn’t favorable.

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.

New January Housing Permits Hit Highest Level Since June 2007, Led by Multi-Family

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing permit filings in January IMPROVED 7.4 percent to a seasonally adjusted annual rate (SAAR) of 1.396 million units;
  • The rate of permits for single-family home starts in JANUARY declined 1.7 percent to an SAAR of 866,000 units;
  • The rate of permits for multi-family homes rose 26.5 percent in JANUARY to 530,000 units (SAAR);
  • The rate of all housing starts ROSE 9.7 percent in JANUARY to an SAAR of 1.33 million;
  • Single-family starts ROSE 3.7 percent to an SAAR of 877,000 while multi-family starts SOARED 23.7 percent to an SAAR of 449,000;
  • The rate of home completions in December INCREASED 2.2 percent from November; Single-family completions GREW 4.3 percent while multi-family homes declined

Trends:

  • The pace of all permits rose to the highest level since June 2007 (1.41 million)
  • Single-family permits represented 62.0 percent of all permits, the lowest share since October 2016 (60.6 percent).
  • Total starts reached the highest level since October 2016 (1.328 million)
  • Multi-family housing starts rose to the highest level since January 2017 (460,000)

Data Source: Census Bureau and Department of Housing and Urban Development 

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A surge in multi-family permits drove new housing permit to the highest level in over a decade as developers responded to the habits of millennials who appear to be shunning single-family homes.

While the sharp increase in permits is welcome news for home builders whose housing market index (HMI) remained at a lofty 72 this month, according to the National Association of Home Builders which creates the index. One of the components of the index, measuring current home buying activity, reached its highest level since June 2005.

While the national homeownership rate rose to 64.2 percent in the fourth quarter – highest in more than three years – the homeownership among the under 35 age cohort, once as high as 42.8 percent, was 36.0 percent at the end of last year

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

1st Time Unemployment Claims Edge Up but Remain Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 230,000 1st time claims for unemployment insurance for the week ended February 10, an INCREASE of 7,000 from the prior week;
  • The number of initial claims for the week ended February 3 was REVISED UP 7,000 to 223,000
  • The four-week moving average of first time claims INCREASED 3,500 to 228,500;
  • Four week moving average represented 0.148 percent of employment, UP from 0.146 percent one week earlier;
  • The number of continued claims –individuals who have been collecting unemployment insurance, reported on a one-week lag – for the week ended February 3 was 1,942,000, UP 15,000 from the previous week’s UPWARDLY REVISED 1,927,000;
  • The four-week moving average of continuing claims DECLINED 5,750 to 1,941,150;

Data Source: Department of Labor 

Trends

  • Since the beginning of the year, the four-week moving average of initial claims for unemployment insurance has dropped 22,250. A drop of almost 9 percent;
  • Year-year the improvement in the four-week moving average is 6.7 percent, underscoring the long-term tightening in the labor market;

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The unemployment picture continues to stabilize as the year matures and holidays are in the rear-view mirror (next week’s Presidents’ Day observance notwithstanding). The picture has been one of steady improvement with fewer businesses shedding workers.

Inevitably, this should lead to wage increases as employers struggle to retain workers. The downside, of course is that higher wages can lead to increased inflation, which the Federal Reserve attempts to keep in check.

Forecasting inflation is a perilous chore; if the Fed steps too hard on the brakes it can bring the economy to a screeching halt with inevitable consequences. Wednesday’s Consumer Price Index report showed a 0.5 percent jump in prices in January, the largest since September and a 2.1 percent annual inflation rate, the sixth straight month CPI inflation has matched or exceeded the Fed’s 2.0 percent target.

The economy’s performance supports the view the Federal Open Market Committee will continue and perhaps accelerate its planned interest rate increases.

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.

Retail Sales Drop in January as Online Sales Flatten

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • January retail sales – measured by prices – FELL $1.3 billion or 0.3 percent from December;
  • Virtually every category of sales, except electronics, clothing and sporting goods stores saw a decrease in January; sales at Gasoline stations were up 1.6 percent in January as the average price of a gallon of gasoline rose from $2.594 in December to $2.671 in January; were off 0.3 percent attributable to unseasonably warm temperatures;
  • Building materials and supply stores saw the largest drop in sales, a 2.4 percent decline from December

Trends:

  • Year-year total sales ROSE 3.5 percent in January, after a 5.2. percent December-December increase;
  • Online sales in January were virtually flat to December and represented 1.8 percent of total January sales, down from 11.2 percent in December;
  • With the Bureau of Labor Statistics reporting a sharp 0.8 percent increase in prices in January; the drop-in retail sales reflects demand, not price changes;

Data source: Census Bureau

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The Census Bureau’s report on retail sales was a dose of reality for retailers and indeed may have been anticipated. Two major retailers announced severe cuts just ahead of the Census report: Walmart dropping store managers and J.C. Penney eliminating almost 700 warehouse jobs.

{The Census Bureau retail sales report states clearly that it is not adjusted for price changes which means if the same item which sold for $1 in one is sold for $2 the next month, the report would show a 100 percent increase.]

The retail report sets a base against which to measure the impact of the increase in take-home pay as a results of the tax code changes enacted by Congress and signed into law by the President. What remains to be seen is whether taxpayers will squirrel away those increases in anticipation of the loss of deductions also contained in the new tax law.

The drop in sales followed as well the report by the Bureau of Labor Statistics two weeks ago of a 7.7 percent gain in retail jobs in January. Retail employment was down 0.2 percent from January 2017 to last month and fell by about 2,400 in 2017. In 2016, retail employment grew by about 17,000.

The dip in retail sales could have an impact on first quarter GDP since retail sales are about55 percent of consumer spending which is about 2/3 of GDP.

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.  

Economy Adds 200k Jobs in January; Unemployment Rate remains 4.1%; Earnings Contract

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Number of payroll jobs INCREASED 200,000 in February compared with working age population growth of 671000;
  • Prior month job totals REVISED DOWN net 24,000: UP 12,000 in December to a gain of 160,000 (from the initial report of a 148,000 increase) but DOWN 36,000 in November to a revised growth of 216,000 jobs (from 252,000);
  • Average weekly earnings FELL $2.25 to $917.18, a 2.5 percent year-year gain DOWN from December’s 2.9 percent year-year growth;
  • Unemployment rate in December remained at 4.1 percent;
  • The number of persons holding multiple jobs ROSE 198,000 in January, accounting for most of the month’s increase in jobs;
  • Average hourly earnings GREW 9¢, a 2.8 percent year-year growth;
  • Average weekly hours fell to 34.3, contributing to both the drop in weekly wages and the increase in jobs;
  • The labor force (the sum of employed and unemployed) was 161.1 million in January, up about 518,000 from December;
  • Labor force participation rate – a key determinant of economic growth – was UNCHANGED from November at 62.7 percent
  • Employment GREW 104,000 in December; unemployment DECREASED 40,000;
  • The number of persons not in the labor force was 95.7 million in January, up from 95.5 million in December but the numbers are not directly comparable because of the “population controls” BLS uses each January, adjusting numbers for changes in population;
  • Private sector payrolls ROSE 196,000 in January;
  • Employment-Population ratio remained at 60.1 percent;
  • Number of construction jobs INCREASED 60,000, with 19,000 new residential construction jobs;
  • Health care and leisure-hospitality jobs each INCREASED 26,000 in January;
  • Number of retail jobs ROSE 15,4000 – following a drop of 25,600 in December;
  • Number of leisure-hospitality jobs also GREW in January, UP 35,000

Trends

  • Three-month average increase in payroll jobs was 192,000, down from 216,000 in the prior three months;
  • Number of new entrants to the labor force (as unemployed) was 645,000 in January, UP from 581,000 in December;
  • Unemployment rate for Blacks, which had dropped to an all-time low of 6.8 percent in December, jumped to 7.7 percent in January;
  • Unemployment rate for those without a high school diploma FELL to 5.4 percent in January from 6.3 percent in December, sign of a tighter labor market;

Data Source Bureau of Labor Statistics

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The January employment situation report provides cover for the Federal Open Market Committee to raise interest rates which even without Fed action have been creeping up.

The robust labor market was clear in Friday’s report from the Bureau of Labor Statistics showing as it did the fifth month-month gain of more than 200,000 jobs in the 12-month old Trump Administration. To be sure, a sizable of that increase have been in low-paying retail and leisure-hospitality jobs, but still, more jobs are more jobs.

It’s obviously too early to tell if new jobs will result from the new tax law, though it is likely the increase in take-home pay because of revised withholding tables and rates could provide a spending boost by those who don’t put the money aside in anticipation of a surprise in April 2019.

The troubling aspect of the report was the drop in both average weekly hours and consequentially the drop in average weekly earnings. Ideally a growing economy should produce more, not fewer hours of work, with the increase in hours raising the need for new or additional hires.

That the increase in jobs was matched by an increase in multiple job holders suggests families are still struggling to make ends meet.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124. and today (Friday February 2) on the Midday Briefing on POTUS.You can follow Mark Lieberman on Twitter at @foxeconomics.

1st Time Unemployment Claims Decline; Continued Claims Fall Year-Year for Eight Years

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 230,000 1st time claims for unemployment insurance for the week ended January 27, a DECREASE of 1,000 from the prior week;
  • The number of initial claims for the week ended January 20 was REVISED DOWN 2,000 to 231,000
  • The four-week moving average of first time claims DROPPED 5,000 to 234,500;
  • Four week moving average represented 0.152 percent of employment, DOWN from 0.155 percent one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended January 20 was 1,953,000, UP 13,000 from the previous week’s UPWARDLY REVISED 1,940,000;
  • The four-week moving average of continuing claims INCREASED 12,000 to 1,9232,750;

Data Source: Department of Labor

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Trends

  • In the last 12 months, the four-week moving average of first time claims for unemployment insurance has fallen 4.6 percent.
  • The four-week moving average has improved year-year for the last 15 straight weeks and virtually every week since mid-June 2016, interrupted by the aftershock of last summer’s hurricanes.
  • The four-week moving average of continued claims has dropped (meaning people are leaving the unemployment insurance rolls) every week since the week ended January 23, 2010 – a span of eight years. The Ferris wheel that is weekly report on unemployment insurance claim filing was climbing last week as we finished the last four-day work week of the month with only one more until Spring.

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.

1st Time Unemployment Claims Up

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 233,000 1st time claims for unemployment insurance for the week ended January 20, an INCREASE of 17,000 from the prior week;
  • The number of initial claims for the week ended January 13 was REVISED DOWN 4,000 to 216,000
  • The four-week moving average of first time claims DROPPED 3,500 to 240,000;
  • Four week moving average represented 0.156 percent of employment, DOWN from 0.159 percent one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended January 6 was 1,937,000, DOWN 28,000 from the previous week’s UPWARDLY REVISED 1,965,000;
  • The four-week moving average of continuing claims DROPPED 3,500 to 1,9201,000;

Data Source: Department of Labor 

Trends

  • The revision to the number of 1st time claims filings for the week ended January 13, made that week’s tally the lowest since the week ended February 17, 1973;
  • From mid-December to mid-January, the number of first time claims fell 14,000 but the moving average rose 1,500.

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The Ferris wheel that is weekly report on unemployment insurance claim filing was climbing last week as we finished the last four-day work week of the month with only one more until Spring.

It won’t be until the end of February that holidays will stop complicating the analysis of this weekly report.

The real impact of these data points will start to show up in the continued claims numbers reflecting as they do the need for workers either to replace those who have been laid off or for new positions. The next Employment Situation report from the Bureau of Labor Statistics will be released on Groundhog Day.

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.

New Home Sales Plummet in December

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales PLUNGED 9.3 percent in December to 625,000 (seasonally Adjusted Annual Rate);
  • Unsold inventory ROSE 11,000 to 295,000
  • Median price of a new home ROSE $500 from November to $335,400;
  • Year-year the median price of a new home was up $8,400 (2.6 percent)

Trends:

  • The (percentage) drop in new home sales (contract signings) was the steepest in 16 months (August 2016: down 9.6 percent from the previous month);
  • The pace of new home sales has fallen month-month in four of the last six months, but remains up year-year;
  • Sales fell in all four census regions, led by the South where contract signings dropped 36,000 the steepest month-month decline since March 2015;
  • The inventory of unsold homes is at its highest level since April 2009 (300,000) the depth of the Great Recession;
  • The increase in the inventory of unsold homes was the steepest one-month climb since April 2006;
  • Median price of a new single-family home is at its highest level since Census-HUD began tracking in 1963.

Data Source: Census Bureau and Department of Housing and Urban Development 

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The National Association of Home Builders might want to rethink its ringing endorsement of the new tax law.

Heading into the first months of the new law new home sales fell off the table in December with forecasts suggesting the new law will cut deeply into all home sales.

Indeed, the National Association of Realtors (NAR) Wednesday reported a sharp decline in December sales, down 3.6 percent from November. The NAR report covered closings in December. NAR will report on December contract signings next week.

The NAR’s Pending Home Sales Index (PHSI) doesn’t move in lockstep with the new home sales report, if anything the new homes report is slightly more optimistic. In the last 12 months, the new home sales report showed negative month-month changes five times while the PHSI was down month-month seven time. In the previous 12 months, the PHSI dropped month-month five times while new home sales fell month-month four times.

Even though the two reports might be considered apples and oranges, there is a pattern developing which could be exacerbated as the reality of the revised tax code begins to sink in. In sum, the new tax provisions removed or curtailed two major incentives for home buying: capping the amount of mortgage interest and property taxes which can be deducted.

Nonetheless home builders, the monthly Housing Market Index (HMI) generated by NAHB remain confident. The HMI fell just two points to 72 in January. Any reading over 50 is said to be positive as it means more builders are optimistic than pessimistic. But, one of the components of the HMI – buyer traffic – fell four points to 54 in the survey conducted in the first 10 days of January.

Perhaps as an acknowledgement of the decline in inventories, the government reported earlier this month the pace of starts of new single-family homes fell 11.8 percent.

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.

December Home Sales Drop Even as Prices Barely Budge; Inventories Skid

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales – closed sales –FELL sharply in December: down 3.6 percent to a seasonally adjusted annual sales rate of 5.57 million after a 5.1 percent increase in November
  • The November sales rate was REVISED DOWN 30,000 to 5.78 million;
  • Median price of an existing single-family home DIPPED $400 or 0.2 percent to $246,800;
  • Year-year the median price ROSE 6.3 percent or $14,600;
  • Number of homes available for sale FELL 190,000 or 11.4 percent to 1.48 million;
  • The months’ supply of homes for sale in December FELL to 3.2 – the weakest since the data have been collected — from 3.5 in November.

Trends:

  • The month-month percentage decline in existing home sales was the largest since February when sales fell 3.9 percent;
  • The sales drop came two months after the Pending Home Sales Index – measuring contracts for sale –had increased 3.5 percent;
  • The median price of an existing home has fallen month-month for five of the last six months;
  • The number of homes for sale has fallen for seven straight months for the first time since NAR has been keeping records 2008.

Data Source: National Association of Realtors: (NAR):

Image result for existing home sales

In advance of the tax code changes which are expected to cut into home sales, the National Association of Realtors posted disappointing numbers for the end of 2017.

Disappointing because not only because the December sales (closings) represented a drop from November but because the main leading indicator – pending home sales (contracts) had been strong in October. Given the 2-month lag between contract and closings, that strength should have translated into stronger closing activity.

Sales dropped in every census region, led by a 7.5 percent decline in the Northeast, perhaps attributable to weather. The Northeast also saw a 4.5 percent price drop from November.

The fundamentals arguing against an increase in home sales remain unchanged and perhaps have gotten even worse with the Administration’s decision to cap mortgage interest and property tax deductibility. The impact of both provisions of the new law will likely be to make home-owning more expensive and tilt the preference to renting.

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.

1st Time Unemployment Claims Drop to 45-Year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 220,000 1st time claims for unemployment insurance for the week ended January 13, a DROP of 41,000 from the prior week;
  • The number of initial claims for the week ended January 6 was UNCHANGED at 261,000
  • The four-week moving average of first time claims FELL 6,250 to 244,500;
  • Four week moving average represented 0.159percent of employment, DOWN from 0.163 percent one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended January 6 was 1,952,000, UP 76,000 from the previous week;
  • The four-week moving average of continuing claims INCREASED 4,000 to 1,921,000;

Data Source: Department of Labor

Trends

  • 1st time claims for unemployment insurance dropped top their lowest level in 44 years: week ended February 24, 2973 when 218,000 were filed;
  • The 41,000 week-week decline was the largest since the week ended February 6, 2010 when the number of filings fell 42,000 from the previous week.

With most holiday related layoffs behind them employers could turn back to the concept of right-sizing which would mean holding onto experienced, accomplished staff.

That seems to be exactly what happened in the first full week of 2018 – with one caveat: the week included a run-up to a three-day weekend, never the best time to make personnel moves.

Holidays do of course complicate economic data reports so again, we don’t expect labor movements to be easy to interpret for a few weeks.

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.