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.

Housing Construction Activity Mixed in August: Starts Up, Permits Down

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing permit filings in August ROSE 5.7 percent to a seasonally adjusted annual rate (SAAR) of 1.3 million units, matching January for the fastest pace this year
  • The rate of permits for single-family home starts in August FELL 1.5 percent to an SAAR of 800,000 units;
  • The rate of permits for multi-family homes IMPROVED 19.6 percent in August to 500,000 units (SAAR), the fastest pace since last October;
  • The rate of housing starts FELL 0.8 percent in August to an SAAR of 1.18; single-family starts Improved 1.6 percent to an SAAR of 851,000 while multi-family starts FELL 6.5 percent to an SAAR of 329,000 million, the slowest pace since last November;
  • The rate of home completions in July DROPPED 10.2 percent from July with for both single- and multi-family completions declining.

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Perhaps with one eye on weather forecasts, residential construction activity generally slipped in August, a direction reflected in the monthly Housing Market Index (HMI) released Monday by the National Association of Home Builders (NAHB). Tuesday’s activity report, a product of both the Census Bureau and Department of Housing and Urban Development, did indicate a continuation of the trend toward multi-family housing and away from single-family

Change since July 2017

Permits Starts Completions
Total     
Single-Family      ↓
Multi-Family      ↑

 

 

 

 

The Bureau of Labor Statistics earlier this month reported the number of residential jobs, including specialty trade contractors, increased 13,00 in August to .2,709,000 – the strongest month-month jobs gain since February.

Single-family permits represented 61.5 percent of all permits in August, down from 61.9 percent a year ago. Starts of single-family homes through August were 72.1 percent of all starts compared with 62.5 percent a year earlier.

That could all change however in the wake of Hurricanes Irma and Harvey which will likely divert labor and material to Florida, Louisiana and Texas as part of a massive rebuilding effort. At the very least the resulting scarcity of labor and material in other parts of the country could drive up the cost of a new home.

The NAHB’s gauge of builder confidence increased in September dipped four points from the original August reading (three points after the August reading was revised downward). The confidence measure still stand at a positive 64. While one month does not constitute a trend, the direction of the change, if it continues, is not encouraging.

Builders are already under pressure from a drop in new home sales which fell in July (the most recent reporting month) to an annual rate of 571,000 – the lowest level of the year and a 9.4 percent drop from July, the steepest slide in a 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.

Storms Batter Confidence As Builders See Shortages

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Housing Market Index DROPPED four points in September (including a one-point downward revision of the August reading) to 64 (out of 100);
  • The assessments of future (six months forward) sales and buyer traffic each fell one point
  • By region, builder confidence FELL in August in the Midwest (down six points) and in the South (down four points) while improving in the West (three points) and in the Northeast (one point).

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Although rebuilding activity in the wake of Hurricanes Harvey and Irma will likely take years, builder confidence, as measured by the National Association of Home Builders (NAHB) slipped three points in early September. Th e confidence measure for August was revised down one point for a full drop of four points to a still-positive 68.

The NAHB’s confidence gauge – the Housing Market Index (HMI) – tracks assessments of current home buying, future (six months out) home buying and buyer traffic. The three-point drop in the September HMI matched June and March for the steepest one-month slide in more than three years.  The Index did not fall in the wake of Superstorm Sandy five years ago but did drop following Hurricane Katrina in 2005.

Hurricanes Harvey and Irma are likely to cause a tighter supply of labor and materials needed for building new homes across the country as material and equipment are diverted to Louisiana, Texas, and Florida.  Those supply constraints could mean higher costs reflected in the dip in confidence.

That said, the reading of 64 remains one of the higher index readings since the end of the Great Recession. The index briefly passed 70 (hitting 71 in March of this year).

The Census Bureau and Department of Housing and Urban Development will report tomorrow on new housing permits and starts albeit for August, before the storms made landfall.

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.

August Retail Activity Drops

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • August retail sales – measured by prices – DECLINED $989 million or 0.2 percent from July, despite a $900 million increase in gas station sales;
  • Without gasoline station sales, August retail sales FELL $1.9 billion, or 0.4 percent from July;
  • July retail activity, initially reported as up 0.6 percent from June, was revised downward to show a 0.3 percent increase
  • Excluding auto sales, which fell $1.575 billion, retail sales increased $586 million or 0.2 percent from July;
  • Year-year total sales ROSE 3.4 percent in August compared with a 3.5 percent year-year boost in July.

Image result for retail salesWith gasoline station operators boosting prices perhaps in anticipation of Hurricanes to come, gasoline prices rose sharply in August leaving consumers with little room in their wallets to take advantage of other shopping outlets, the Census Bureau reported Friday.

The monthly report set the stage for another round of price shocks when sales are reported for September.

The Census report was consistent with the Bureau of Labor Statistics Consumer Price report Thursday which showed gasoline prices up 6.3 percent in the month. The CPI survey is conducted in the first three weeks of the month which means it was unaffected by Hurricane Harvey which put major refineries offline in Houston and Louisiana.

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Though billed as a retail sales report, the Census release notes sales are not adjusted for inflation which makes it more a reflection of merchant than consumer activity. attitudes than consumer activity. As an example, gasoline “sales” rose 2.5 percent in August, the same month in which the per gallon pump price went up nearly 3.5 percent.

Prices, as interpreted from the Census report, were up at restaurants, food and beverage stores, health and personal care stores and sporting goods stores, each of which saw sales increase in August. According to the report, sales/prices at non-store retailers, essentially online stores, fell $573 million in August. Sales at clothing stores were off $211 million as shoppers took advantage of back-to-school sales,

The bump in restaurant sales/prices came in the same month in which restaurants increased staffing by 9,200, well below the 23,600 average monthly increase in restaurant jobs over the past year.

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.

1st Time Unemployment Claims Drop but Irma Impact Hasn’t Been Felt Yet

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 284,000 1st time claims for unemployment insurance for the week ended September 9 – DOWN 14,000 from the prior week;
  • The number of initial claims for the week ended September 2 was UNCHANGED at 251,000;
  • The four-week moving average of first time claims ROSE 13,000 to 263,250 or 0.172 percent of total employment, up from 0.163 percent of total employment one week earlier and the highest percentage this year,
  • Four-week moving average of first time claims was at its highest since the week ended August 13, 2016 when it was also 263,250.
  • The number of continued claims – reported on a one-week lag – for the week ended September 2 was 1,944,000, DOWN 7,000 from the previous week’s number, which was revised up 11,000 to 1,951,000
  • The four-week moving average of continuing claims DROPPED 2,500 to 1,948,500.

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Though it took just a few days for Hurricane Harvey to affect first-time filings for unemployment insurance, the timing of Hurricane Irma (making landfall in Florida last Sunday) meant it had no impact on filings for the week ended September 9 the Department of Labor reported Thursday.

Initial claims filings in Texas for the week ended September 9 remained high at 51,988 but that was down from 63,788 one week earlier. In the two weeks before the storm, the number of first-time claims filed in Texas averaged 12,700. In Louisiana, the number of initial claims filed last week was 2,142, down from 2,915 one week earlier, slightly higher than the average number of claims in the weeks prior to Harvey: 2,365.

Though claims can be filed electronically, state government workers who process the filings were not available. Because Hurricane Irma hit virtually the entire state of Florida, the impact will be felt more widely. Weekly claims filings in Florida average about 7,000 according to the Labor Department.

Excluding the storm-affected states, the claims report was generally positive showing a decrease in continuing claims which suggests hiring. Looking past the personal tragedies inflicted by both storm, they could be an economic shot in the arm for the construction sector for the years-long rebuilding effort now required. That could mean shortages of materials in other parts of the country however.

 

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.

Harvey Sparks 26 Percent Spike in 1st Time Unemployment Insurance Claims

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 298,000 1st time claims for unemployment insurance for the week ended September 2 – highest level since April 18, 2015
  • The number of initial claims for the week ended August 19 was UNCHANGED at 236,000;
  • The four-week moving average of first time claims ROSE 13,500 to 250,250 or 0.162 percent of total employment, up from 0.154 percent of total employment one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended August 19 was 1,940,000, a decline of 5,000 from the previous week’s number, which was revised up by 3,000 to 1,945,000
  • The four-week moving average of continuing claims DROPPED 4,000 to 1,948,250.

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The first economic returns from Hurricane Harvey’s devastating tour of Texas are in and they’re not pretty. Initial claim filings for the week ended September 2 spiked to the highest level in 29 months, as the Department of Labor reported Thursday.

The first report after Hurricane Katrina in 2005, claim filings rose 8,000 but one week later filings shot up 96,000, an increase of 29.5 percent. Seven years later, in the aftermath of Superstorm Sandy, 1st time claims filings nationwide actually fell 2,000 before jumping 90,000, or 24.9 percent, one week later.

By contrast, the increase just one week after Hurricane Harvey was 26.3 percent (in part because the base number was historically low).

The wee-week increase in first time claims reported Thursday was the largest since the Sandy-related increase.

The history suggests more bad news economically for the weeks to come until businesses begin to staff up for the long rebuilding effort.

 

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.

Economy Slows: 156k New Jobs in August; Unemployment Rate Back Up to 4.4%; Earnings Dip

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate ROSE in August to 4.4 percent;
  • Number of jobs ROSE 156,000 in August, below year-to-date average;
  • Average weekly earnings FELL $2.10, still a 2.8 percent year-year GAIN;
  • Average workweek SLIPPED to 34.4 hours;
  • Prior month job totals REVISED DOWN: June from a gain to 231,000 jobs to a gain of 210,000; July from 209,000 to 189,000 [Without downward revisions, August job gain would have been lower.];
  • Private sector payrolls ROSE 165,000 in July; Government payrolls FELL 9,000;
  • Unemployment in August ROSE to 7,132,000 – first time above 7 million since April;
  • Average hourly earnings ROSE 3¢ in August, a 2.5 percent year-year gain;
  • The number of persons working full-time workers DECLINED 5166,000 in August; number of part-time workers INCREASED 34,000;
  • Number of manufacturing jobs INCREASED 36,000, largest month-month gain since August 2013;
  • Number of construction jobs INCREASED 28,000, largest increase since February;

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It may seem like piling on, but adding to the other woes of the Trump Administration, the labor market turned decidedly sour in August, as the unemployment rate rose and the number of new payroll jobs, while up, rose by just 156,000 the Bureau of Labor Statistics  reported Friday.

The weak report had the potential to play havoc with Wall Street as seasoned traders looked to an early getaway for Labor Day weekend, leaving trading responsibilities to less experienced personnel. It might also force the Federal Reserve to rethink its plans to gradually hike interest rates.

The August report appeared to put the brakes on what had been a successful start for the still fledgling Trump presidency as job growth in August fell below the 172,000 average monthly gain for the Administration’s first six months.

There were some bright spots in the otherwise disappointing report with growth in the number of manufacturing and construction jobs but a perennial “winner” – education and health services added just 25,000 new jobs compared with an average monthly gain of 43,000 since President Trump took office. The health component added 16,600 jobs in August down from an average monthly increase of almost 38,000.

With the end of the summer, the number of leisure and hospitality jobs increased just 16,000 in August with only 9,200 food service jobs – a typical employment mainstay of college students on summer break. There were fewer than 1,000 new retail jobs added in August, extending a prolonged slump for that sector. The 800 new jobs did however did however mark the first gain in the retail sector since January.

Perhaps most devastating to the overall economy was the decline in average weekly earnings. The drop came even though the two lowest paying occupation categories – retail and leisure and hospitality – showed very weak August job growth. The drop in earnings could mean weaker retail sales which are about 55 percent of personal consumption spending which in turn is about 2/3 of the gross domestic product.

The BLS report did not include any impact for Hurricane Harvey which devastated Texas. The BLS job surveys were completed before the storm made landfall and, the BLS said, “data collection…was largely completed prior to the storm.”

The report though did underscore the still relatively weak recovery from the decade old recession. Job growth from onset of the recession is about 6 percent. At the same point since the onset of the previous four recessions (about 116 months) the average increase in the number of jobs in the previous three recessions (1981-82, 1900-91 and 2001) was 12 percent.

According to the August report, the number of persons not in the labor force grew 128,000; in the preceding six months, the average increase in the number of persons not in the labor force was 49,000. The labor force in August increased by just 77,000; in June and July the labor force increased by a combined 710,000. While the labor force participation rate remained at 62.9 percent in August, the employment-population (“e-pop”) ratio slipped from 60.2 percent to 60.1 percent. E-pop measures employment as a percent of the over-16 population without adjusting for those in school or otherwise not available or looking for work.

The report reflected recent increases in first-time claims for unemployment insurance as the number of individuals unemployed for five weeks or less increased 89,000. In the previous six months, the number of persons unemployed for five weeks or less fell an average of 56,000 per month.

The teen-age unemployment rate which had been trending down in recent months jumped up in August to 13.6 percent from 13.2 percent in July. That said, the unemployment rate for those without a high school diploma fell to 6.0 percent in August from 6.9 percent in July while the unemployment rate for high school graduates (but no college) increased to 5.1 percent in August from 4.5 percent in July.

As another sign of a tightening labor market, the number of temp jobs increased in August by just 100.

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.

 

July Existing Home Sales At Slowest Pace in a Year; Inventory Continue to Drop

 By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales TUMBLED 1.3 percent or 70,000 in July to a seasonally adjusted annual sales rate of 5.44 million, the weakest since last August;
  • The June sales rate was REVISED DOWN 10,000 to 5.51 million;
  • Median price of an existing single family home FELL 1.9 percent or $5,000 to $258,300; the median price is still up 6.2 percent of or $15,100 from last July;
  • Year-year the median price was UP for the 65th straight month – since February 2012.
  • Number of homes available for sale DROPPED for the second straight month, down 1.0 percent or 20,000 to 1.92 million
  • The months’ supply of homes for sale in July REMAINED at 4.2, down from 4.8 months a year ago;

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More woes for the housing market. Following a report Wednesday that new home sale fell 9.4 percent in July, the National Association of Realtors (NAR) reported a 1.3 percent drop in existing home sales in the same month.

The NAR report measures closed transaction while the government report on existing home sales tracks contracts. There is no parallel report for closings on sales of new homes.

The NAR report was not entirely a surprise since the association’s report on contracts (Pending Homes Sales Index) for sale of existing home two months ago – roughly the time lag between contract and closing – showed a drop of 0.7 percent.

The real disappointment in the home sales report though was that the inventory of homes for sale fell 20,000 to 1.92 million or a 4.2 months’ supply of homes for sale at the current sales pace. The inventory decline is consistent with reports that aging baby boomers are keeping their homes off the market. The inventory of homes on the market, the NAR said, has fallen year-year for 26 straight months.

That decline is contributing to stagnant sales as the choice for would-be buyers is limited. Buying a home is not a transaction for which a buyer would compromise.

 

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 drop in closings came in the same month in which prices fell, an unusual phenomenon which has occurred only three times in the last 13 months – last December when the median price dropped 0.9 percent ($2,200 to $232,200) as sales dipped 1.6 percent and last July when the median price fell 1.8 percent ($4,400 to $243,200) as sales fell 2.7 percent. There isn’t necessarily a direct relationship between the median price and closings, but it is a factor in the mix. Probably a more significant factor is mortgage rates which, according to the weekly Freddie Mac Survey, climbed slightly from 3.90 percent in June to 3.97 percent in July.

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 Claims for Unemployment Insurance Edge Up

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 234000 1st time claims for unemployment insurance for the week ended August 19, 2,000 MORE than the previous week;
  • The number of initial claims for the week ended August 12 was UNCHANGED at 232,000;
  • The four-week moving average of first time claims FELL 2,750 to 237,750 or 0.155 percent of total employment;
  • The number of continued claims – reported on a one-week lag – for the week ended August 12 was 1,955,000, unchanged from the previous week’s upwardly revised (by 1,000) number;
  • The four-week moving average of continuing claims DROPPED 2,750 to 1,957,500;

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The increase in first time claims for unemployment insurance for the week ended August 19, as the Department of Labor reported Thursday probably less significant than the stable continued claims figure, 1,954,000.

Continued claims, of course, represent those individuals who’ve been receiving and continue to receive unemployment insurance. Though that number for the week ended August 12 (this data series is reported on a one-week lag) is below what is was a year ago, 2,157,000, the number of continued claims remains stubbornly high. Indeed, despite declining in each of the last two weeks, the four-week moving average of continued claims remains close to its six-month high, even in what is considered a still-strong economy.

The data on continued claims reflects how successful those who are unemployed are in getting replacement jobs. It deals only with quantity not quality.

The two data series also provide insight into what next week’s (Friday September 1) Employment Situation might look like. From mid-July to mid-August both the number and four-week moving average of initial unemployment insurance claims fell, 2,000 and 3,500 respectively suggesting fewer layoffs than the prior month. At the same time both the number and four week moving average of continued claims also hinting hiring indeed picked up. The drop in the data for continued claims though followed two months in which the number and average of continued claims rose dramatically.

The continued claims series is a rough surrogate for hiring since getting a job is one of only three ways an individual drops out of the tally of those collecting unemployment insurance. The other reasons are that benefits or the individual expires. Since the rates of benefit expirations and death rates have been relatively constant, getting a new job is the most likely reason for the drop in continued claims.

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.

July New Home Sales Tumble as Prices Rise

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Pace of contracts for new home sales TUMBLED 9.4 percent in July – the steepest month-month drop since last August – to 571,000, the weakest since last December;
  • Unsold inventory ROSE 4,000 to 276,000 – highest level since June 2009
  • Sales pace for May and June was revised up 13,000 and 20,000 respectively, inflating the July drop;
  • With higher July sales rate, months’ supply of new homes for sale ROSE to 5.8 months in July, highest since January 2016;
  • Median price of a new home ROSE $2,100 from June to $313,700;
  • Year-year the median price of a new home was up $18,700 (6.3 percent)

Image result for new home sales

New home sales saw their steepest drop in nearly a year in July as both mortgage rates and prices ticked up, the Census Bureau and Department of Housing and Urban Development reported Wednesday. http://www.census.gov/construction/nrs/pdf/newressales_201707.pdf

The average rate for a 30-year fixed rate mortgage in July, according to the weekly Freddie Mac survey, was 3.97 percent, up from 3.90 percent in June. The average rate fell back to 3.91 percent in the first three weeks of August.

The drop in contracts for sale of new homes came as builder confidence bounced back up in the beginning of August to 68 (out of 100) from 64 in July. The confidence level was likely influenced by the drop in rates which builders felt/hoped would lead to a boost in sales. Indeed, the index of buyer traffic – reflecting builders’ assessment of would-be buyers “kicking the tires” of new homes – was up to 48 in the beginning of August (from 48in July).

The swoon in new home sales came in a month considered one of the peaks of home sales as buyers try to settle in before the beginning of a new school year. A coincident indicator – sales/prices at home furnishings stores – rose in July for the third straight month. According to the National Association of Home Builders, buyers of new homes spend, on average, about $10,600 to decorate and spruce up a new home in the first year of ownership 2.6 times as much as other home owners in a typical year.

So, the dip in July new home sales could be another signal of a slowing economy. Add to the weak sales number, the increase in the inventory of homes for sale to the highest level in more than eight years and we could be in an economic tailspin, at least in the construction sector. ‘

The number of residential construction jobs rose in July to the highest level since October 2008, but home builders might be hard-pressed to sustain that given the continued increase in the inventory of unsold homes and declining sales. Indeed, housing permits and starts dropped in July. At the same time, millennials don’t appear to be rushing to buy homes, creating their own version of “the American Dream,” having been frightened by the mortgage meltdown.

That said those in prime homebuying age cohort – 25 to 34 – (at least those who haven’t been forced to move back in with their parents) seem to be opting for rental or condo units which carry less of an investment of time.

Builders certainly think so, though they may have been late to that party, as the share of permits and starts for multi-family rather than single-family homes continues to creep up.

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.