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.

Unemployment Insurance Claims Fall Again; Continued Claims Average at 45-year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 218,000 1st time claims for unemployment insurance for the week ended June 16 a DECREASE of 3.000 from the prior week’s UPWARDLY REVISED (from 218,000 to 221,000) report;
  • The four-week moving average of first-time claims FELL 4,000 to 221,000;
  • Four-week moving average represented 0.142 percent of employment, DOWN from 0.145 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,723,000 for the week ended June 9, UP 22,000 from the previous week’s UPWARDLY REVISED 1,701,000 (revised from 1,697,000);
  • The four-week moving average of continued claims FELL 39,750 to 1,773,750.

Trends:

  • The number of initial claim filings fell for the fourth straight week;
  • The four-week moving average of continued claims dropped for the ninth straight week;
  • The four-week moving average of continued claims fell again to its lowest level since December 8, 1973, when it was 1,715,500.
  • The Four-week moving average of continued claims has fallen in 12 of the last 14 weeks

Data Source: Department of Labor 

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With the report a couple of weeks back that the number of job openings was larger than the number of persons counted as unemployed (according to preliminary numbers for May and “final” numbers for April), it follows that unemployment claims should remain on a downward trend.

Occasional spikes in the number of continued claims reflect a skills mismatch and don’t detract from the positive labor market news.

What doesn’t follow though is stagnant wages although the report on May payrolls showed average weekly earnings up 3.0 percent year-year, the average annual growth rate remains far below pre-recession levels.

 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.

Housing Construction Starts Hit 11-year High in May

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing permit filings in May FELL 4.6 percent to a seasonally adjusted annual rate (SAAR) of 1.30 million units;
  • The rate of permits for single-family home permits filed in May DROPPED, 2.2 percent to an SAAR of 844,000 units;
  • The rate of permit filings for multi-family homes FELL 8.8 percent in May to 457,000 units (SAAR);
  • The rate of all housing starts ROSE 5.0 percent in May to an SAAR of 1.35 million with virtually all the increase attributable to stronger single-family starts which ROSE 3.9 percent in May;
  • The rate of home completions in May INCREASED 1.9 percent from April driven by an11.0 percent jump in single-family home completions.

Trends:

  • The pace of housing starts ROSE in May to the highest level since July 2007 (1.354 million);
  • Housing permits FELL month-month for the third time (in five months) this year with the largest percentage month-month drop since February 2017;
  • Permits for single-family homes dropped to the lowest level since last September (831,000 units);
  • The 11.0 percent month-month jump in single-family home completions will likely exacerbate the inventory glut which rose in April to 300,000, the highest level since April 2009.

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

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Builders rushed material orders to get construction started on new housing in May, before the impact of higher tariffs on lumber and other components kick in.

According to Real Clear Politics the Random Lengths Framing Lumber Index which tracks lumber prices hit its highest level ever — $512 per thousand board feet – in May, a 25 percent price increase from one year ago. The RCP report said the increase in lumber prices would add about $6,400 to the cost of a new home.

The median price of a new single-family home in April, the Commerce Department reported, was $312,400.

On top of the higher lumber prices, the Trump Administration’s imposition of higher tariffs on steel could flow through to multi-family construction either increasing the cost of construction or sharply cutting home building.

Lumber is used for shingles as well as framing in home building.

The National Association of Home Builders reported Monday its Housing Market Index, measuring builder confidence, dropped two points in June (the survey is conducted in the first 10 days of the month) to 68 as the measure of buyer traffic fell to its lowest level since last November. The outlooks for current new home sales and for new home sales six months out also dropped. The index measure of 68 though means the outlook for home sales and building remains positive (index value over 50) as it has been since July 2014.

Would-be home buyers are facing the double-whammy of higher prices and higher mortgage rates.  The median rate for a 30-year fixed rate mortgage, according to Freddie Mac, was 4.62 percent last week, an increase of almost 20 percent from 3.91 percent a year ago.

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

Ho hum: Continued Claims for Unemployment Insurance Hit New Post-Recession Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 222,000 1st time claims for unemployment insurance for the week ended May 12 an INCREASE of 11.000 from the prior week’s unrevised report;
  • The four-week moving average of first-time claims FELL 2,750 to 213,250;
  • Four-week moving average represented 0.137 percent of employment, DOWN from 0.139 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,707,000 for the week ended May 5, DOWN 87,000 from the previous week’s UPWARDLY REVISED 1,794,000;
  • The four-week moving average of continued claims FELL 39,750 to 1,773,750.

Trends:

  • The four-week moving average of initial claims for unemployment insurance fell to its lowest level since December 13, 1969 (210,750);
  • The number of continued claims for unemployment insurance was at its lowest level since December 1, 1973 (1,692,000)
  • The four-week moving average of continued claims fell again to its lowest level since December 22, 1973 (1,756,000);
  • The Four-week moving average of continued claims has fallen in 12 of the last 14 weeks dropping more than 160,000 in that span;
  • The four-week moving average of initial claims has fallen for four weeks in a row.

Data Source: Department of Labor

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By any measure, despite the blip up in this week’s report, claims for unemployment insurance are showing unparalleled improvement which belies the trend in earnings which have not improved in synch.

The report which does match up quite nicely with the weekly claims data is the Job Openings and Labor Turnover Survey (JOLTS) showing as it does a sharp increase in the ratio of quits to layoffs/discharges, 2.14, highest ever, in the most recent JOLTS report (for March). The ratio is another indicator of market strength, with more workers willing to quit with the confidence in their ability to land another job. Of course, those “quits” are not without cost as new workers must be trained to replace those who’ve left and the replacements will take some time to get up to speed and likely be less productive in the near term.

That, of course, argues for a bump in earnings as a retention tool but employers too are affected by the market knowing they will easily be able to replace departing employees or at least temporarily take advantage of the savings in wages.

The low levels of unemployment insurance claims have also given state unemployment insurance trust funds – from which benefits are actually paid – an opportunity to recover from the Recession when states had to borrow from the federal government to maintain unemployment insurance payouts.

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.

Housing Construction Activity Stronger Despite April Dip

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing permit filings in April FELL 1.8 percent to a seasonally adjusted annual rate (SAAR) of 1.35 million units;
  • The rate of permits for single-family home permits filed in April ROSE, 0.9 percent to a SAAR of 859,000 units;
  • The rate of permit filings for multi-family homes FELL 6.3 percent in April to 493,000 units (SAAR);
  • The rate of all housing starts FELL 3.7 percent in April to a SAAR of 1.29 million with all the decline attributable to weaker multi-family starts; the rate of single-family starts edged up 1,000 to 894,000;
  • The rate of home completions in April INCREASED 2.8 percent from March; The pace of both single-family and multi-family completions increased.

Trends:

  • The April report on single-family permits would have been stronger had it not been for an upward revision to March data;
  • The “gap” between March new home sales (latest available) and single-family completions narrowed to 160,000 (seasonally adjusted annual rate) from 215,000 in February;
  • Permits for single-family homes represented 63.5 percent of all permits in April, UP from 61.8 percent in March;
  • At the same time, single-family homes accounted for 69.5 percent of all starts, below 70 percent for the fourth straight month.

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

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Led by a continued decline in multi-family activity, housing permits and starts slipped again in April. Completions of single-family homes also dropped which could be good news reducing inventory pressures.

The decline in inventories could have been the main reason behind the report yesterday that builder confidence improved in May as reported Tuesday by the National Association of Home Builders.

But the net effect of the April report by the Census Bureau and Department of Housing Development would be to continue a dour outlook for home building one of the two basic industries fueling the U.S. economy. As significantly – or perhaps more – residential construction is an endeavor that cannot be off-shored.

That said, the impact of the Trump Administration’s imposition of higher tariffs on steel could flow through to multi-family construction either increasing the cost of construction or cutting it sharply.

Despite the month-month gyrations of these data series, home construction is actually looking stronger: total permits in the first four months of this year (unaffected by weather) and starts (which do respond to weather) are each up 7.6 percent from the same period last year. Single-family permits for the first four months of this year are up 6.3 percent over the same period a year ago and starts are up 6.7 percent.

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

Builder Confidence Improves in May, Ending Four-Month Slide

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index IMPROVED two points in May to 70;
  • The index of current sales ROSE two points to 76, the other index components — future (six months hence) sales and the index of buyer traffic – were flat to April;
  • By region, builder confidence FELL one point in the South and the West while improving five points in the Midwest and remaining flat in the Northeast.

Trends:

  • Overall index rose for the first time this year;
  • The index reading for April was revised down one point to 68, exaggerating the May jump;
  • The index has been positive (i.e. over 50) for 47 straight months

Data Source: National Association of Home Builders 

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After a dismal start to the year, with builder confidence – measured by The National Association of Home Builders (NAHB) Housing Market Index (HMI) – finally improved in the first 10 days of May, reflecting increases in both new and existing home sales.

New home sales, measuring contracts for the purchase of new single-family homes, improved for the second straight month in March according to latest Census Bureau data. The report of new home sales for April will be released next week.

Total residential permits improved in March (April data will be released tomorrow) although the increase was confined to multi-family structures; the annualized rate of single-family permits fell in March and has dipped in two of the first three months this year.

Housing starts followed a similar pattern in March: the total for all housing increased but single-family starts dropped.

The tax bill signed by President Trump in December reduced some tax incentives for home ownership by capping mortgage interest deductions and the deduction for local property taxes.

At the same time, the inventory of new homes for sale continues to inch up. The (annualized rate) of new homes for sale was 301,000 in March, matching February, up 13.2 percent from March 2017 and the largest since March 2009 (311,000).

The relatively high inventory of unsold homes would tend to discourage new building.

The dip in confidence coincided with a steady increase in mortgage rates. Freddie Mac reported last Thursday the rate for a 30-year fixed rate mortgage was 4.55 percent, up from 4.05 percent a year ago

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.

 

Retail Sales Up in April but Growth is Slower Than March

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • April retail sales – measured by prices – ROSE $1.48 billion or 0.3 percent from March;
  • Gasoline station sales were UP 0.8 percent – matching the increase in furniture store sales – as gasoline prices rose 6.4 percent;
  • The increase in gasoline sales station sales accounted for one-fifth of the increase in all sales although gasoline station sales represent only 8.5 percent of all retail activity;
  • The increase in retail activity came in the same month in which the Consumer Price Index rose 0.2 percent which means consumer activity increased faster than inflation;
  • Sales at clothing retailers increased 1.4 percent, the fastest growth of any retail category;
  • Sales at health and personal care stores, restaurants, electronics and sporting goods stores dipped in April.

Trends:

  • Year-year total sales ROSE 4.8 percent in April, matching the year-year increase in March;
  • The increase in retail activity came in the same month in which the Bureau of Labor Statistics reported real average weekly earnings in April were flat to March;
  • BLS also reported the number of retail jobs in April rose just 1,800 4,400 or .01 percent from March.
  • In the three months since the revised tax code boosted take home pay, retail sales have increased $5.4 billion; in the same three months in 2017, retail sales grew $518 million

Data source: Census Bureau

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Retail sales – at least based on prices – continued to reflect the higher take home pay resulting from the tax cuts enacted last December. Sales rose a solid 0,3 percent on the heels of a 0.8 percent increase (revised from the initially reported 0,6 percent gain) in March.

The increase came even as the number of retail jobs barely budged in April. Indeed, the number of retail jobs at clothing stores declined in April even though sales at clothing outlets shot up at the fastest pace since February 2017. The anomaly runs counter to the general hiring mantra of adding employees to increase sales, calculated as sales per employee.

Sales declined 0.4 percent at health and personal stores in April as the number jobs at those stores fell 1,700 or 0.2 percent.

The number of jobs at furniture stores contracted 0.2 percent while sales at those stores increased 0.8 percent.

Online sale rose 0.6 percent in April and remained at about 11 percent of all retail activity.

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.  

Continued Claims for Unemployment Insurance Hit New Post-Recession Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 211,000 1st time claims for unemployment insurance for the week ended May 5 UNCHANGED from the prior week’s unrevised report;
  • The four-week moving average of first-time claims FELL 5,500 to 216,000;
  • Four week moving average represented 0.139 percent of employment, DOWN from 0.143 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,790,000 for the week ended April 21, UP 21,000 from the previous week’s UPWARDLY REVISED 1,769,000;
  • The four-week moving average of continued claims FELL 22,000 to 1,812,500.

Trends:

  • The four-week moving average of initial claims for unemployment insurance fell to its lowest level since December 20, 1969.
  • The number of first-time claims for unemployment insurance remained below 250,000 for the 17th straight week. [350,000 is considered by labor economists to be the “tipping point” between a robust and weak labor market.]
  • While the number of continued claims increased, the four-week moving average of continued claims fell to its lowest level since This is the lowest level for this average since December 29, 1973, when it was 1,784,250.

Data Source: Department of Labor https://oui.doleta.gov/press/2018/051018.pdf

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The strong report on unemployment insurance claims followed the positive report Tuesday of the Job Openings and Labor Turnover Survey (JOLTS) which showed the strongest month-month increase in job openings in March in nearly a year.

Job Openings in March of this year increased 472,000 to 6.55 million, the highest total on record. It stands to reason then continued claims for unemployment insurance – a surrogate for hiring — would drop with more opportunities for employment. Indeed, the ratio of unemployed to job openings fell in March to 1.01, also the lowest on record.

And, as a further sign of the strong labor market, the ratio of “quits” (voluntary departures other than retirement) to layoffs and discharges rose to 2.14, a record high as more workers felt secure enough in their ability to find new employment. The JOLTS data provided further background to eh employment situation report for April which showed the unemployment rate dropped to 3.9 percent.

And the continued claims for unemployment insurance data suggested further improvement, dropping again to new post-recession lows.

With the ongoing strength in the labor market, the Federal Open Market Committee to remains on track for further interest rate increases despite Thursday’s report CPI inflation rose to 2.5 percent in April.

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.

Unemployment Rate Drops to 3.9%; Economy Adds a Disappointing 164K jobs in April; Wage Growth Remains Weak

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate in April DROPPED to9 percent after six straight months at 4.1 percent;
  • Unemployment rate for Blacks dropped to 6.6 percent, a record low, from 6.9 percent in March;
  • Number of payroll jobs INCREASED 164,000 in April; the number of multiple jobholders increased 58,000, 35.4 percent of the total increase in jobs;
  • Private sector jobs INCREASED 168,000, which means government jobs (all levels) DIPPED 4,000;
  • Average weekly earnings ROSE $1.38 in April to $925.98, a 2.5 percent year-year gain;
  • Average hourly earnings GREW 4¢, in March to $26.84 a 2.6 percent annual increase;
  • Prior month job totals REVISED UP net 30,000: March’s 103,000 increase was REVISED UP by 32,000 to a growth of 135,000 jobs but February’s last-reported 326,000 job gain was trimmed by 2,000 to 324,000;
  • Average weekly hours REMAINED at 34.5 in March;
  • Labor force – DROPPED 236,000 in April after contracting 158,000 in March;
  • The number of persons NOT in the labor force INCREASED 000; labor force participation rate FELL BACK 0.1 percentage points to 62.8 percent;
  • Employment-Population ratio DROPPED at 60.3 percent in April from 60.4 percent in March;
  • All industry sectors gained jobs except wholesale trade which shed 9,800 jobs; Number of construction jobs INCREASED 17,000, including 7,500 new residential construction jobs;
  • Number of retail jobs increased 1,800 and leisure-and-hospitality jobs increased 18,000.

Trends:

  • The 2.5 percent (year-year) increase in average weekly earnings marked a sharp decline from 3.2 annual growth in March
  • Monthly job growth has averaged 187,000 in the 15 months since President Trump took office; in the last 15 months of the Obama administration, the economy added an average of 209,000 jobs per month;
  • Number of persons working full-time increased 319,000 in April while the number working part-time dropped 350,000.
  • Number of new entrants to the labor force (as unemployed) was 623,000 in April, down slightly from 625,000 in March;

Data Source Bureau of Labor Statistics

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The April report suggested the March report was not a fluke. March data showed a gain of 135,000 new jobs after an outsized 324,000 increase in February and had originally been seen as regression to the mean but April’s numbers were perhaps a bit more realistic

The fall in the unemployment rate was not unexpected given the trend of the weekly reports on new claims for unemployment insurance, Claims have generally been falling since the beginning of the year as employers grow increasingly frustrated in their ability to fill vacant positions; as a result, they hold on to the staff they have.

Employers though have not been using wages to increase or maintain their workforce. With few, if any, wage increase, employees have little incentive to quit one job to take another. Indeed, the number of “job leavers,” (the BLS term for quits, dropped to 815,000 in April from 864,000 in March.

That annual increase in earnings – both hourly and weekly – remained relatively weak, is a double quandary not only because of the tight labor market but because the two lowest paying industry sectors – retail and leisure-and-hospitality added just 11.0 percent of the total number of new jobs. As recently as six month ago, retail and leisure-and-hospitality represented 40.6 percent of new jobs.

Employment in April (as distinct from jobs) grew a scant 3,000 while the number of persons unemployed dropped 239,000. The shrinking number (unemployed) and a shrinking denominator (employed plus unemployed) resulted in the drop in the unemployment rate.

Another indicator of a tight labor market in an otherwise expanding economy, average weekly hours, remained flat at 34.5 for the third straight months. An increase in average weekly hours typically portends more jobs.

Two sectors which perennially lead job growth, dis so again in April: professional and business services added 54,000 new jobs compared with an average monthly growth of 43,000 in the last year; health care added 30,000 jobs just under the monthly average growth of 32,000 in the last year.

The number of temp jobs, often considered a leading indicator of overall job growth, increased 10,300, slightly ahead of the average growth of 9,500 i9n the last 12 months.

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.

Continued Claims for Unemployment Insurance Hit 44-Year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 211,000 1st time claims for unemployment insurance for the week ended April 28 an INCREASE of 2,000 from the prior week;
  • The number of initial claims for the week ended April 21 was UNCHANGED at 211,000;
  • The four-week moving average of first-time claims FELL 7,550 to 221,500;
  • Four-week moving average represented 0.143 percent of employment, DOWN from 0.148 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,756,000 for the week ended April 21, DOWN 77,000 from the previous week’s DOWNWARDLY REVISED 1,833,000;
  • The four-week moving average of continued claims FELL 15,500 to 1,833,250.

Trends:

  • The reading of 1.756,000 continued claims for unemployment insurance was the lowest since December 8, 1973 when there were 1,717,000 continued claims;
  • The 77,000 week-week drop in continued claims was the largest decline since November 26. 2016 when continued claims also fell 77,000 week-week;
  • The number of first-time claims for unemployment insurance remained below 250,000 for the 16th straight week. [350,000 is considered by labor economists to be the “tipping point” between a robust and weak labor market.]
  • Measured against the total labor force (see Advisor Perspectives graph below), continued claims are at a record low.

Data Source: Department of Labor

Initial Claims

Unemployment insurance claims continue to play a game of limbo with no apparent limit to how low they can go. (of course they could drop to zero but that would cause a different set of problems.) Claims for unemployment insurance have fallen in half of the first 18 weeks this year with a net decline of 50,000 – from 261,000 for the week ended January 6 to this week’s tally of 211,000.

To be sure there have been some weeks in which initial filings increased, but the average wee-week decline has been 12,444 compared with the average increase of 7,000. Ther were two weeks in which claim filings were unchanged from the previous week.

The Federal Open Market Committee is surely taking notice of the tight labor market.

“Job gains,” the FOMC said in the post-meeting statement issued Wednesday, “have been strong, on average [reflected in the declining level of continued claims for unemployment insurance], in recent months, and the unemployment rate has stayed low.”

The unemployment rate is poised to drop still further when the Bureau of Labor Statistics releases its Employment Situation report for April tomorrow.

The consensus forecast calls for an increase of 193,000 jobs (after an increase of just 103,000 in March and an unemployment rate of 4.0 percent which would be the lowest since December 2000 when it was 3.9 percent.

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.

Pending Home Sales Index Essentially Flat in March

Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • National Association of Realtors’ March Pending Home Sales Index (PHSI) ROSE 0.4 percent from February to 107.6;
  • PHSI for February was revised down from 107.5 to 107.1;
  • Year-year the index was DOWN 3.3 percentage points;

Trends:

  • The March increase was the second straight monthly increase; PHSI has declined only once (January) in the last six months;
  • Index is down year-year for the third straight months;
  • PHSI is essentially tracking the Census Bureau’s new homes report (also based on contracts for sale) which was flat in January and rose in February and March

Data Source: National Association of Realtors (NAR) 

Image result for pending home sales

With some sleight of hand, the National Association of Realtors’ Pending Home Sales Index showed a slight increase in March – although not much – as the February reading was revised downward.

The NAR continued to blame a lack of inventory for the sideways movement in the PHSI but the bottom line is that the “increase” existing home sales notwithstanding – despite a blip up in March closings – continue to struggle.

A recent rise in mortgage interest rates added to the challenges faced by sellers – and would-be buyers – perhaps exacerbating or exacerbated by the changes in the tax law which capped the mortgage interest.

The increase in the PHSI should, all else being equal, mean a bump up in closings for April and May but the drop in the PHSI in January did not mean a drop in closings in March. Indeed, closings jumped likely because buyers feared a further increase in mortgage rates.

Mortgage rates reported by Freddie Mac last Thursday jumped to the highest level in over four years. And, according to the latest NAR data the inventory of homes for sale was down year-year and remains below the average of the last 12 months. NAR reported a 3.6-month supply of homes for sale; the sixth straight the months’ supply has been below four, the longest stretch since the NRA began calculating the months’ supply in 1999.

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