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;

Image result for 1st time unemployment insurance claims

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;

Image result for employment

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;

Image result for unemployment insurance claims

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.

Construction Activity Edges Up in August but Permits Tumble

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Home building activity, measured by housing starts IMPROVED in August, led by multi-family activity;
  • The seasonally adjusted annual rate of multi-family starts ROSE 29.3 percent while single-family starts were UP 1.9 percent;
  • Permit activity, however, slowed in August to its lowest level since last September, with single-family permit DOWN 6.1 percent from July and multi-family permits down 4.9 percent. The combined month-month drop was 5.7 percent;
  • The rate of housing completions though ROSE 2.5 percent, as single-family completions jumped 11.6 percent from July, offsetting an 18.5 percent DROP in multi-family completions.

Trends:

  • The month-month 5.7 percent decline in all permits was the largest monthly drop since February 2017 6.2 percent);
  • The SAAR of both permits and starts is down since the beginning of the year; permits are off by 10.1 percent, while the rate of starts is down 3.9 percent;
  • The pace of new home completions ROSE month-month for the first time since April.

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

Image result for homebuilding

Just one day after the National Association of Home Builders reported no change in the Housing Market Index, the Commerce Department provided an explanation in a report showing weak gains in new residential activity.

The Housing Market Index, NAHB’s yardstick for builder confidence remained at a strongly positive 67 in September.

But as the index reading was released, the NAHB also excoriated the Administration’s new tariff proposals.

The proposal to impose a 10 percent tariff on Chinese imports, the organization said, “could have major ramifications for the housing industry. With housing costs on the rise, this action translates into a tax increase on housing that will rise even more significantly on Jan. 1 when the tariff rate jumps to 25 percent.”

The tariffs the NAHB statement said “is coming on top of the current 20 percent tariffs on softwood lumber imports from Canada. The lumber tariffs have already added thousands of dollars to the price of a typical single-family home.”

The tariff boost could explain why the NAHB in its builder confidence survey noted a drop in buyer traffic last month which continued into September.

Most troubling in the government data was the drop in permits which are not affected by the weather. Permit – and construction activity – is likely to increase in the aftermath of Hurricane/Tropical Storm Florence.

Over the six months following hurricanes Harvey and Irma last year, permits jumped 9 percent with a 12 percent increase in single-family permits.

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 Fall to 49-Year Low, Again

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The number of continued claims – individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,645,000 for the week ended September 7, DOWN 55,000 from the previous week’s DOWNWARDLY REVISED 1,700,000 (revised from 1,711,000);
  • The four-week moving average of continued claims FELL 20,750 to 1,691,500.
  • There were 201,000 1st time claims for unemployment insurance for the week ended September 15 a DECLINE of 3.000 from the prior week’s unrevised report;
  • The four-week moving average of first-time claims FELL 2,250 to 205,750;
  • Four-week moving average represented 0.132 percent of employment, DOWN from 0.134 percent the previous week;

Trends:

  • The number of first-time claims DROPPED for the sixth time in the last seven weeks, falling to its lowest level since the week ended November 15, 1969 (197,000); It was the seventh time this year the number of first-time claims has fallen to the lowest level since November 1969.
  • Four-week moving average of initial claims HAS FALLEN for the fifth straight week and is at the lowest level since Dece6, 1969 when it was 204,000.
  • The number of continued claims FELL to the lowest level since August 4, 1973 (1,633,000);

Data Source: Department of Labor

Image result for employment insurance

As the number of initial and continued claims for unemployment insurance continued its limbo dance, data watchers braced for a sharp increase as the Carolinas dry out from Hurricane / Tropical Storm Florence. While the storms will eventually create new jobs as the rebuild gets under way, the immediate impact will be devastating for employment data and of course the disruption of lives.

Claims for unemployment insurance spiked by about 10 percent following storms last year (Harvey, Irene, and Maria). Claims jumped more than 15 percent following Superstorm Sandy and almost 30 percent following Hurricane Katrina.

Hitting as it did in another heavily populated area, Florence will pack an eerily similar statistical punch.

Based on its timing, Florence will also have an impact on the monthly Employment Situation Report for September due to be released October 5. The storm struck during the data collection period for both the household and payroll surveys.

According to the Bureau of Labor Statistics, “unusually severe” weather is more likely to have an impact on hours worked than the jobs count which is what the establishment survey develops. In the household survey, which produces the unemployment rate, according to the BLS: Persons who miss the entire week’s work for weather-related events are counted as employed whether they are paid for the time off or not.

The establishment survey could also be affected by the response rate of businesses surveyed. Any delayed surveys though would be included in the two revisions to the jobs numbers.

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.

Economy Adds 201K jobs in August; Unemployment Rate Holds at 3.9%

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Number of payroll jobs INCREASED 201,000 in August;
  • Unemployment rate in August REMAINED AT 3.9 percent;
  • Average weekly earnings INCREASED $3.15 in August to $937.02, a 3.1 percent year-year gain, strongest since March;
  • Average hourly earnings GREW 10¢, in August a 2.8 percent annual increase, strongest since last September
  • Private sector jobs INCREASED 204,000;
  • Number of multiple jobholders FELL 128,000, suggesting all the new jobs went to individuals who were not already working
  • Prior month job totals REVISED DOWN 50K: DOWN 10,000 in July to a growth of 147,000 jobs (from 157,000) DOWN in June to a gain of 208,000 (from the last report of a 248,000 increase);
  • The number of persons unemployed FELL 46,000 as the number of person employed DECLINED 423,000;
  • Average weekly hours REMAINED AT5 in August;
  • Labor force – FELL 469,000 in June as the labor force participation rate DROPPED to 62.7 percent (lowest since January) from 62.9 percent;
  • The number of persons NOT in the labor force INCREASED 692,000, the largest month-month increase since last October;
  • Employment-Population ratio FELL to 60.3 percent –lowest since January –from 60.5 percent in July,
  • By sector number of professional-and-business-service jobs and health-and education jobs ROSE 53,000 each;
  • The number of temp jobs INCREASED 10,000 in August (as it had in July);
  • The number of leisure and hospitality jobs grew 13,000 in August, net of a 17,500 INCREASE in food service jobs;
  • Manufacturing jobs FELL 3,000.

Trends:

  • Unemployment rate among Blacks FELL to 6.3 percent, lowest on record;
  • Three-month average of job growth fell to 185,000 lowest since January (167,000)

Data Source Bureau of Labor Statistics

Image result for employment situation report

Then August Employment Situation report from the Bureau of Labor Statistics had something for everyone. For optimists, it marked the 95th straight month the number of payroll jobs. For pessimists, it showed a surprising decline in both the labor force participation rate and the employment-population ratio as well as an increase in the number of persons not in the labor force; the largest such increase since last October.

(An optimist, of course, sees a glass half full, a pessimist sees a glass half empty and an engineer is interested in the size of the glass.)

There are some troubling signs in this report, buried in the data.

Despite a sharp jump in average weekly earnings translating to a 3.1 percent year-year growth, retailers cut back on staffing, suggesting they don’t see a boost in activity.

Of course, the increase in average weekly earnings could also be due to declines or weak increases in jobs in the two lowest paying sector: retail and leisure and hospitality, which together produced 11,100 new payroll jobs, about 8.5 percent of the total new jobs.

We should be encouraged that higher paying sectors are adding more jobs. In July 2017, the retail and leisure-and-hospitality sectors accounted for one-third of the increase in payroll jobs. The decline could be due to students returning to school, turning in their burger-flipping spatulas for laptops and textbooks.

But while the weak gain in low-paying jobs was occurring, the labor force itself shrank (thanks again to return to school) and the labor force participation rate fell. The drop in the labor force itself demands a closer look. The labor force includes all persons who have a job and all persons who want and are available for one. The latter definition might exclude a huge chunk of the students to classrooms.

The encouraging numbers in the report came in the construction sector which continues to grow tortoise-like, adding 23,000 jobs in August, the fifth consecutive monthly increase. About 13,000 of those new jobs came in the residential construction sector even though new home sales continue to decline. And, we’ve yet to feel the effects of the trade war started by the Trump Administration which will impact the cost of home construction.

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.

New Home Sales Drop in July Even as Inventory Rises

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales FELL 1.7 percent in July to 627,000 (Seasonally Adjusted Annual Rate);
  • The sales pace for June was revised up 7,000; without the revision, the July month-month decline would have been less than one percent;
  • Unsold inventory increased 6,000 in July to 309,000 but the inventory for June was revised upward to 303,000 from 301,000;
  • The months’ supply of new homes for sale ROSE to 5.7 in July from 5.5 in June
  • Median price of a new home JUMPED $18,700 from June to $328,700;
  • Year-year the median price of a new home was UP $5,800 (1.8 percent)

Trends:

  • The July sales rate was the weakest since last October (618,000):
  • New home sales in July were up 1.8 percent from July 2017, despite the increase in the median price;
  • The increase in the median price of a new single-family home was only the second month-month increase this year (in March the median price rose 6.0 percent);
  • The inventory of new homes for sale has now increased in all but four months in the last two years.

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

Image result for new home sales

The standard explanation for weak home sales – new or existing – has been a lack of inventory. The report of new homes for July put the lie to that argument.

The inventory of new homes for sale at the end of the month rose for the 20th time in the last 24 months (it was flat month-month in two of those months) suggesting strongly something else is at work depressing home sales.

The sales pace in July was exactly where it was in July 2016 – some month-month gyrations notwithstanding.

In that 24-motnh span, the sales rate peaked at 712,000 last November, but also fell as low as 548,000.

Among the factors conspiring to tamp down home sales: stagnant wages despite a “seller’s” job market; mortgage interest rates creeping up (3.44 percent for a 30-year fixed rate loan in July 2016 to 4.53 percent this year and the still-present debt load of borrowers in the prime home-buying age cohort. According to a new study, more than one million borrowers default on student loans each year and nearly 40 percent are expected to default by 2023. The findings by Ameritech Financial also noted “Defaulting borrowers are less likely than their non-defaulting counterparts to be able to take on debt that requires a risk assessment like a credit card, auto loan or mortgage. Defaulters are also more likely to face bill collectors because they fell behind on their utility or medical bills.

The new sales data appears to be at odds with still high confidence levels reported by the National Association of Home Builders and with the slight uptick in single-family permits and starts in July as reported by the Census Bureau and Department of Housing and Urban Development.

Builders continue to build adding to inventories. In the last two years, completion of new single-family homes has exceeded sale by about 188,000 per month.

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.

1st Time Unemployment Claims Down Again

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 210,000 1st time claims for unemployment insurance for the week ended Aug 18 a DECREASE of 2.000 from the prior week’s unrevised report;
  • The four-week moving average of first-time claims FELL 1,750 to 213,750;
  • Four-week moving average represented 0.137 percent of employment, DOWN from 0.138 percent the previous week;
  • The number of continued claims – individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,727,000 for the week ended August 11, DOWN 2,000 from the previous week’s UPWARDLY REVISED 1,729,000 (revised from 1,721,000);
  • The four-week moving average of continued claims FELL 5,000 to 1,735,500.

Trends:

  • Four-week moving average of initial claims HAS FALLEN 11.5 percent since the beginning of the year;
  • The four-week moving average of initial claims has declined year-year for 45 straight weeks;
  • The number of continued claims is DOWN 12.1 percent since the beginning of the year;
  • The four-week moving average of continued claims has fallen 9.8 percent since the beginning of the year.

Data Source: Department of Labor 

Image result for employment

With the ongoing drop in both initial and continued claims for unemployment insurance, it may no longer be instructive to watch the weekly numbers themselves so closely. Rather these data points are perhaps better observed by taking a step back. Much like a painting by Claude Monet, the true picture is not as evident when viewed too closely.

And that distant view is of yet a better picture than the closeup with longer trends of decline which could mean, as the Federal Open Market Committee observed in the recently released minutes of its August 1 meeting, even further declines in the nation’s unemployment rate.

Of course, the Board is on guard against too precipitous a decline which is why, must to President Trump’s consternation, the FOMC is likely to raise interest rates more often than it previously suggested.

Initial claims for unemployment insurance turn into unemployment rate data as individuals remain unemployed.  Even in a seemingly robust labor market environment, individuals who become unemployed are not quickly snapped up for other jobs.

(Individuals who are counted as unemployed are not automatically covered by unemployment insurance for a variety of reasons. Those who are discharged for cause, for example, could have their claims for benefits rejected. Continued claims historically have been about 28 percent of unemployment.)

We’re left with looking at trends, rather than specific data points. With that analysis in mind claims for unemployment insurance, particularly continuing claims, assume a greater significance in trend watching.

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.

1st Time Unemployment Claims Continue Down

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 212,000 1st time claims for unemployment insurance for the week ended Aug 11 a DECREASE of 2.000 from the prior week’s upwardly revised report (from 213,000 to 214,000)
  • The four-week moving average of first-time claims ROSE 1,00 to 215,500;
  • Four-week,  moving average represented 0.138 percent of employment, UNCHANGED from the previous week;
  • The number of continued claims – individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,721,000 for the week ended August 4, DOWN 39,000 from the previous week’s UPWARDLY REVISED 1,760,000 (revised from 1,755,000);
  • The four-week moving average of continued claims FELL 8,000 to 1,735,500.

Trends:

  • Four-week moving average of initial claims ROSE for the first time in six weeks;
  • The four-week moving average of first-time claims has declined year-year for 44 straight weeks;

Data Source: Department of Labor

Image result for unemployment

Initial claims for unemployment insurance continued their downward roller coaster ride last week and over a longer period, be it four weeks or 52, look positively bullish.

Whether measured as a percentage of employment or the labor force, initial claims filings have maintained a downward trajectory.

The four-week moving average of first-time claims has been down year-year four 47 weeks and the 52-week moving average has been down for 21 straight weeks.

The picture is largely the same for continued claims, a measure of hiring. The four-week moving average has been down year-year every week since January 2010!

What continues to befuddle labor economists is the stubborn nature of weekly earnings which seem to have defied laws of supply and demand, not rising dramatically even as the unemployment and the number of unemployed drops.

One possible explanation is the cut in the corporate tax rate which has removed some of the tax incentive for paying workers more.

When the corporate tax rate was 35 percent, businesses knew the government would essentially “pay” 35¢ of every additional dollar of wages. Now that the rate is 21 percent, the tax advantage is reduced. While employers have not offered that excuse or logic (?), it has affected other facets of the economy, for example, low-income housing tax credits which, with the reduction in the corporate tax rate are no longer as valuable.

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.

Construction Activity Edges Up in July; Remains Weak

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Home building activity, measured by housing permits and starts EDGED UP in July, led by single-family activity;
  • The seasonally adjusted annual rate of Single-family permits ROSE a 1.9 percent while single-starts were UP 0.9 percent;
  • As a share of the increase in all permits, single-family activity represented 84 percent and of starts, 80 percent;
  • Multi-family permits were UP 0.7 percent as did multi-family starts;
  • The rate of housing completions though FELL 1.7 percent, as single-family completions plummeted but multi-family completion increased month-month

Trends:

  • The month-month improvement in housing permits was the first in four months;
  • The SAAR of both permits and starts is down since the beginning of the year; permits are off by less than 1 percent, but the rate of starts is off almost 3.5 percent;
  • The pace of new home completions has now fallen for three straight months and for four of the last five months;

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

Image result for home building

Just one day after the National Association of Home Builders reported yet another dip in builder confidence, the Commerce Department provided an explanation in a report showing weak gains in new residential activity.

The Housing Market Index, NAHB’s yardstick for builder confidence slipped one point in August though it remains strongly positive at 67.

The index, though labeled as the August reading, is largely based on July activity which continued to show challenges for the housing sector borne out by the Commerce data. The sector must still deal with stagnant earnings, rising mortgage rates and higher material costs as a consequence of higher tariffs.

According to Freddie Mac, though the average rate for a 30-year fixed rate mortgage dipped to 4.53 percent last week from 4.59 percent one week earlier, it remains noticeably higher than the 3.89 percent rate a year ago.  The difference would cost a borrower about $112 a month on a 39-year $300,000 mortgage.

The seasonally adjusted annual rate of housings starts was about 1.6 million in January 2006 and fell to under 500,000 at the depths of the Recession. Thursday’s report of a SAAR just under $1.2 million, suggests home construction still has a long way to go.

Of course, the reduced inventory of new homes has affected sales. The seasonally adjusted annual rate of new home sales in June was 631,000, down from a pre-Recession high of nearly 1.4 million.

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 Resume Decline, But Exansion Sputters

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 213,000 1st time claims for unemployment insurance for the week ended Aug 4 a DECREASE of 6.000 from the prior week’s upwardly revised report (from 218,000 to 219,000)
  • The four-week moving average of first-time claims DROPPED 500 to 214,250;
  • Four-week moving average represented 0.137 percent of employment, DOWN from 0.138 the previous week;
  • The number of continued claims – individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,755,000 for the week ended July 28, UP 29,000 from the previous week’s UPWARDLY REVISED 1,726,000 (revised from 1,724,000);
  • The four-week moving average of continued claims ROSE 3,000 to 1,745,250.

Trends:

  • Four-week moving average of initial claims fell for the fifth week in a row for the first time since last November;
  • The four-week moving average of first-time claims has declined year-year for 43 straight weeks;
  • After falling for 11 straight weeks (from April to mid-June) the four-week moving average of continued claims has not increased in four of the last five weeks.

Data Source: Department of Labor

Image result for labor market

On the heels of a meh JOLTS (Job Openings and Labor Turnover Survey) Tuesday, the Department of Labor Thursday reported a drop in the number of first-time claims for the week ended last Saturday.

While the two reports don’t necessarily feed into each other, they are related in that one of the surest ways to get off the unemployment rolls (as reported in the continued claims report) is to get a job. According to the JOLTS data, the number of job openings barely budged in June (the most recent reporting month) up just 3,000 to 6,662,000. Also, in June, the number of hires dropped 96,000 to 5,651,000.

The slowdown in hiring is one explanation as to why the number of continued claims – measuring those who are still collecting unemployment benefits – rose in the last week and why the four-week moving average of continued claims rose as well.

According to the JOLTS data, the number of unemployed per job opening rose in June in six occupational sectors: professional and business services, construction, trade, education and health services, transportation and leisure and hospitality.

The number of layoffs in the construction sector, one of the country’s core occupational sectors, rose in June as the number of hires fell.

The JOLTS data taken with the initial claims reports suggest a slowing in the labor market which will only exacerbate the stagnant wages environment plaguing the labor market, suggesting the 4.1 percent GDP growth of the second quarter might have been an aberration and not the new norm for the nation’s economy.

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.

Economy Adds Disappointing 157K jobs in July; Unemployment Rate Drops Back to 3.9%

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Number of payroll jobs INCREASED 157,000 in July;
  • Unemployment rate in July FELL to 3.9 percent;
  • Average weekly earnings DROPPED 28¢ in July to $933.23, a 2.8 percent year-year gain, down from a 3.0 percent year-year gain in June;
  • Average hourly earnings GREW 7¢, in June a 2.5 percent annual increase
  • Private sector jobs INCREASED 170,000;
  • Number of multiple jobholders grew 453,000, almost 3x the number of “new” jobs;
  • Prior month job totals REVISED up 59K: UP 35,000 in June to a growth of 248,000 jobs (from 213,000) UP in May to a gain of 268,000 (from the last report of a 244,000 increase);
  • The number of persons unemployed FELL 284,000 as 287,000 fewer individuals re-entered the labor force;
  • The number of person employed ROSE, 389,000;
  • Average weekly hours SLIPPED to5 in July from 34.6 in June;
  • Labor force – ROSE 105,000 in June;
  • The number of persons NOT in the labor force INCREASED 96,000;
  • Labor force participation rate REMAINED at 62.9 percent;
  • Employment-Population ratio ROSE to 60.5 percent,
  • By sector number of professional and business service jobs ROSE 51,000 paced by a 27,900 increase in temp jobs; number of leisure and hospitality jobs grew 40,000 with 33,800 new food service jobs; number of retail jobs INCREASED 7,100;
  • Manufacturing jobs INCREASED 37,000.

Trends:

  • Increase in the number of multiple jobholders was the largest since October 2014 (481,000)
  • Multiple jobholders represented 5.0 percent of all jobholders in July, up from 4.7 percent in June;
  • Month-month increase in temporary jobs (27,900) was the largest since September 2016 (35,500).

Data Source Bureau of Labor Statistics

Image result for labor market

The June Employment Situation report from the Bureau of Labor Statistics was another mixed bag: a smaller than expected increase in the number of payrolls (157,000 versus market consensus of 190,000) but a decline in the unemployment rate.

Why the dichotomy?

For starters, the increase in good-producing jobs has leveled off, albeit at a still strong monthly average of 52,000 for the last three months, down from 60,000 for the first four months of the year.

The drop in the unemployment rate itself stems from a faster increase in the labor force (the sum of those employed and those unemployed) – up 1.8 million in the last year — than the decline in the number of persons unemployed (679,000). It also reflects a slowdown in the number of individuals re-entering the job market.

The number of re-entrants average 2,200 per month in the last two years as the economy was recovering from the Recession to an average of 1,950 in the first seven months of this year.

What’s more intriguing perhaps is the labor force participation rate – the percentage of the over-16 population either employed or unemployed – has been unchanged in the last year at 62.9 percent, well below pre-recession levels.

And below the headline numbers of jobs and the unemployment rate remains the stubbornly stagnant wage picture which seems to defy normal laws of labor supply and demand. With the unemployment rate generally at its lowest level of this century, year-year growth in hourly wages is a full percentage point below where it was the last time the unemployment was as low as it is now.

Taken together that suggests an out of synch economy unless we’re in the midst of a new paradigm.

All that would be fine if prices were stable, but we’ve seen an inexorable – albeit relatively small – increase in the cost of living along with a slowing in key economic sectors. With the Federal Open Market Committee remaining on course to increase interest rates, the situation could only get worse.

Home sale activity, for example, remains slow. As a result, residential construction jobs represent 1.9 percent of all jobs, down from 2.5 percent at their peak. Instead, low-paying leisure and hospitality jobs – primarily food service jobs, now account for almost 11 percent of all jobs.

We’ve yet to feel the effects of the trade war started by the Trump Administration which will impact the cost of home construction.

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 Unemployment Insurance Inch Up

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 218,000 1st time claims for unemployment insurance for the week ended July 28 an INCREASE of 1.000 from the prior week’s unrevised report;
  • The four-week moving average of first-time claims DROPPED 3,500 to 214,500;
  • Four-week moving average represented 0.138 percent of employment, DOWN from 0.140 the previous week;
  • The number of continued claims – individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,724,000 for the week ended July 21, DOWN 23,000 from the previous week’s UPWARDLY REVISED 1,747,000 (revised from 1,745,000);
  • The four-week moving average of continued claims FELL 4,500 to 1,741,750.

Trends:

  • Initial claims rose for the second week in a row and the fourth time in the last six weeks;
  • The four-week moving average of first-time claims has declined year-year for 42 straight weeks;
  • The drop in the four-week moving average of continued claims was the first in four weeks.

Data Source: Department of Labor 

Image result for unemployment claims

The Federal Open Market Committee in announcing its interest rate decision Wednesday said, “job gains have been strong, on average, in recent months, and the unemployment rate has stayed low” and the weekly report on first-time claims for unemployment insurance, despite an upward tick, put numbers behind the commentary. Noting recent trends, the FOMC said the labor market conditions “realized and expected.”

And so, the labor strength continues, with the numbers to be released tomorrow in the monthly Employment Situation release likely to provide further statistical reinforcement.

Only 12 of the 92 economic forecasts received by Reuters see the unemployment rate remaining at 4.0 percent with virtually all the others anticipating the unemployment rate will drop back to 3.9 percent. Three forecasters see it dropping further, to 3.8 percent, the level in May.

The more critical number to be reported Friday, to be sure, is the year-year growth in average weekly earnings which rose 2.5 percent in June, the smallest year-year increase since January when it went up 2.2 percent.

The claims report continued the pattern of the improving labor picture, unlikely to change unless it continues unable to resist pressures on several fronts: tariffs which could affect food production, manufacturing, and home building.

Last week’s report on Gross Domestic Product notwithstanding, the economy remains vulnerable.

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.