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.

1st-time Unemployment Insurance Claims Jump After Largest Drop in Two Months

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 216,000 1st-time claims for unemployment insurance for the week ended July 13, an INCREASE of8,000from the previous week’s upwardly revised 208,000 (from 209,000);
  • The four-week moving average of initial claims DROPPED 250 to 218,750;
  • Four-week moving average represented 0.139 percent of employment, UNCHANGED from the previous week;
  • The number of continued claims – individuals who had been collecting unemployment insurance — reported on a one-week lag, was 1,686,000 for the week ended July 6, DOWN 42,000 from the previous week’s UPWARDLY REVISED 1,728,000; (from 1,723,000)
  • The four-week moving average of continued claims ROSE 5,000 to 1,701,000.

Trends:

  • The four-week moving average of initial claims as a percentage of total employment fell for the eighth straight week
  • The week-week drop in continued claims was the largest in 13 weeks (week ended April 6, down 62,000)
  • Four-week moving average of continued claims ROSE for the fourth straight week

Data Source: Department of Labor

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Offering a look forward to the July Employment Situation release on August 2, the weekly report on unemployment insurance claims suggests the unemployment rate could remain at its current 3.7 percent when the data for July are published.

The unemployment rate (taken out one additional digit) rose from 3.62 percent to 3.67 percent in June.

From mid-June to mid-July, the reference weeks used by the Bureau of Labor Statistics for the unemployment rate, first-time unemployment claims barely budged, down just 1,000 and the four-week moving average of initial claims was even more stable, down just 250. Reference week comparisons for continued claims won’t be available until next week since continuing claims information is published on a one-week lag.

The Federal Reserve’s Beige Book, released Wednesday, said employment grew at a modest pace, from May 24 through July 8, the period covered by the anecdotal report, “slightly slower than the previous reporting period.”  Labor markets, the Beige Book said, “remained tight, with contacts across the country experiencing difficulties filling open positions.” The report, the Beige Book added, “noted continued worker shortages across most sectors, especially in construction, information technology, and health care.” That said, the Beige Book also indicated “some manufacturing and information technology firms in the Northeast reduced their number of workers

The “news” from the unemployment claims report was the sharp drop in continued claims for unemployment, only the third week-week decline in the last two months and the largest week-week drop since early April. Continued claims are seen as a surrogate for hiring since there are only three ways for continued claims to decline: if benefits expire (unlikely in a time of high employment), if the claimant becomes ineligible for unemployment insurance due to injury or death, or if the individual; gets a job. The decline in continued claims reflects the return to work of furloughed UAW members who collect benefits while they are laid off as auto plants retool for a new model year.

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

Housing Construction Drops in June; Single-family Gains Stem Deeper Decline

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Home building activity, measured by housing permits and starts SLIPPED in June with permits falling to a 27-month low;
  • The seasonally adjusted annual rate of total permits DROPPED 6.1 percent to a seasonally adjusted annual rate (SAAR) of 1.22 million;  
  • The SAAR of all housing starts FELL 0.9 percent;
  • Single-family permits ROSE a scant 0.4 percent, but single-family starts JUMPED 3.5 percent;
  • The rate of total housing completions FELL 4.8 percent in June; The SAAR of single-family completions DIPPED 1.8 percent while the pace of multi-family completions FELL12.9 percent.

Trends:

  • Total housing permits were down year-year for the sixth straight month; single-family starts have been down year-year for nine straight months;
  • Single-family starts were down year-year for the fifth straight month and the eighth time in the last nine months;
  • Total starts rose sharply in the Northeast and Midwest while falling in the South and West

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

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Housing sector weakness continued in June as construction activity, measured by housing permits and starts fell leaving the nation’s construction sector in a continuing struggle.

The Census and Housing and Urban Development data came just one day after the National Association of Home Builders (NAHB) reported its Housing Market Index rose slightly with builders seeing improvement in all three components of the index: current home sales, home sales six months out and buyer traffic.

The builders were perhaps encouraged by a bump up in single-family housing starts in June, according to the Census-HUD report but sales of new home remain weak according to the most recent data for May. (June new home sales will be reported next week.)

Perhaps the only positive to come out of the construction activity report was a drop in completions which could start to whittle away at costly home inventories. Builders in the past resorted to costly incentives to unload unsold new homes. Those efforts might not be necessary as mortgage rates continue to fall and completions of new single-family homes declines.

The most recent Census-HUD report on permits and starts suggested a shift back to single-family homes though the percentage of activity represented by single-family permits and starts remains below where it had been a year ago.

Single-family permits have represented about 63 percent of all permits in the first six months of this year, down from 64 percent in 2018 and almost 65 percent in 2017. Single-family starts this year have averaged about 68 percent of all housing starts, down from 69 percent a year ago and 70 percent in 2017.

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 Edges Up in July

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index ROSE one point in June to 65 (out of 100);
  • All three index components IMPROVED by one point each;
  • The measure of buyer traffic (to model homes) was revised down one point for June
  • The total index remained down year-year
  • By region, builder confidence FELL in the Northeast and Midwest but improved in the South and West.

Trends:

  • The overall Index was down year-year for the ninth straight month
  • Two index components – the measure of current sales and of sales six months out – remained down year-year for the 10th straight month;
  • The index for the West rose to 75, its highest level since May 2018

Data Source: National Association of Home Builders

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Builder sentiment continues to outpace the reality of weak new home sales, improving again in July although new home sales for May (the last reporting month) fell and new home sales sit at their lowest point of the year.

Perhaps builders are encouraged by uptick in employment for residential construction, up 6,000 in June and up 78,000 (2.8 percent) in the last year. With the June increase, residential construction jobs are at the highest level since March 2008.

The May sales data also showed inventories of unsold homes rose to 333,000 in May, an increase of 1,000 over April. New data for residential construction – housing permits and starts – are scheduled for release tomorrow.

The median price of a new home fell 8.1 percent in May to $308,000 it’s lowest level since January. The month-month decline in the median price was the largest percentage decline since the median price fell 8.3 percent in July 2016.

The weakness in new home sales is spilling over to other facets of the economy. The Census Bureau reported Tuesday sales at appliance stores slipped in June, partly due to the decline in home sales and part to the higher prices resulting from increased tariffs on aluminum and steel.

Despite those headwinds, builders look to lower interest rates for a boost to sales and thus construction. According to Freddie Mac, the average rate for a 30-year fixed-rate loan has fallen to 3.75 percent from 4.53 percent a year ago. That decline would reduce the monthly payment on a $300,000 30-year loan by about $1,358.

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 June for Fourth Straight Month

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • March retail sales ROSE 0.4 percent or $2.2 billion in June matching May’s upwardly revised 4.0 percent (from 3.0 percent) gain;
  • Sales at gasoline station FELL 2.8 percent — $1.2 billion — as the price of a gallon of gasoline dropped 5.0 percent in June;
  • Other than gasoline stations, the only store categories to show a decline in sales was electronics/appliance stores where sales FELL 0.3 percent ($24 million) from May;
  • Online sales (sales at non-store retailers) jumped 1.7 percent and ROSE to 12.4 percent of all retail sales;
  • All retail activity was up 3.4 percent year-year in June – matching May — while the Consumer Price Index rose 1.6 percent from June 2018 to June 2019.

Trends:

  • Total retail sales have increased for four straight months, the longest stretch since 2017 when sales were up for seven straight months from June through December;
  • BLS reported the number of retail jobs FELL in June and have fallen for five straight months; The number of retail jobs fell in June to the lowest level since December 2015;

Data source: Census Bureau

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Falling gasoline prices gave consumers some extra spending cash in June and they used it to send retail sales up for the fourth straight month, according to the Census Bureau. Indeed, sales at virtually every retail category improved in June, the same month in which the Consumer Price Index showed a 1.6 percent year-year increase. The Census Bureau report is not adjusted for price changes which means an increase in prices will translate into an increase in retail activity, all else being equal.

Sales at furniture and appliance stores have been struggling of late reflecting a slowdown in home sales, both new and existing, and sales at electronics and appliance stores slipped in June, the only other category of stores to show a decline in sales in June. Appliance sales have been down year-year for six straight months.

 Although the sales data are not adjusted for price changes, the higher prices on appliances resulting from increased tariffs on aluminum and steel appear to be driving up prices, discouraging consumers. The higher prices brought on by the tariff increases affect parts as well as new machines and have hit the stock prices of major appliance manufacturers.

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 him on Twitter at @foxeconomics.  

1st-time Unemployment Insurance Claims Show Largest Drop in Two Months

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 209,000 1st-time claims for unemployment insurance for the week ended July 6, a DECREASE of13,000from the previous week’s upwardly revised 222,000 (from 221,000);
  • The four-week moving average of initial claims DROPPED 3,250 to 219,250;
  • Four -week moving average represented 0.140 percent of employment, DOWN from 0.142 percent the previous week;
  • The number of continued claims – individuals who had been collecting unemployment insurance — reported on a one-week lag, was 1,723,000 for the week ended June 29, UP 27,000 from the previous week’s UPWARDLY REVISED 1,696,000; (from 1,686,000)
  • The four-week moving average of continued claims ROSE 5,750 to 1,694,750.

Trends:

  • The week-week drop in initial claims for unemployment insurance was the largest since initial claims fell 16,000 for the week ended May 11;
  • Four-week moving average of 1st-time claims fell for the first time in five weeks;
  • The week-week increase in continued claims – a surrogate for hiring – was the third in a row and fifth in the last six weeks.

Data Source: Department of Labor

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The report on initial claims for unemployment always gets a bit wonky in and around holiday weeks as workers who process claims (even though they can be filed electronically) take time off surrounding holidays. The analysis of this week’s report was further complicated by annual retooling furloughs at auto plants. Furloughed United Auto Workers (UAW) employees qualify for unemployment insurance for their time off, inflating claims.

That said, the only concern from this week’s Labor Department data might come from the slow but steady increase in continued unemployment insurance claims reflecting those who have been collecting benefits for at least two weeks. A decrease in continued claims suggests an increase in hiring, one of the handful of ways of getting off unemployment rolls while an increase suggests just the opposite.

That data point should turn downward as furloughed workers return to their assembly line posts.

One statistic that remains consistently positive is the tracking claims as a percentage of those employed (a necessary prerequisite for claiming unemployment insurance). That ratio has remained in a minuscule range of 0.129 percent to 0.146 percent this year down dramatically for the depth of the Great Recession 10 years ago when it hovered around 0.48 percent.

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

Job Openings, Hiring Fell in May

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Hiring in May FELL 4.4 percent from its record-setting April pace to 5.73 million
  • Job openings at the end of May FELL 0.7 percent (49,000) to 7.32 million;
  • The ratio of job openings per unemployed SLIPPED to 1.24 in May from 1.27 in April.

Trends:

  • Job openings exceeded unemployed for the 15th month in a row;
  • Job openings fell in May for the second straight month, the first back-to-back monthly declines since December 2016-January 2017;
  • The ratio of “quits” to layoffs and discharges remained at 2:1 signaling continued confidence in the labor market.

Data Source: Bureau of Labor Statistics

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The Bureau of Labor Statistics provided a belated explanation for the surprise drop in jobs in its May Employment Situation report in the most recent Job Openings and Labor Turnover Survey. The JOLTS report detailed a sharp drop in hiring in May, the same month in which, according to the BLS, the nation’s economy added a surprisingly low 72,000 jobs.

The drop in hiring – down 4.4 percent from April – was the steepest month-month decline since January 2016 when hiring fell 6.0 percent from December 2015. That said, the nation remains on a pace for more hires in 2019 than in 2018: 69.4 million, up from 68.9 million in 2018.

Not only do the overall JOLTS numbers show more job openings than unemployed, but every major industry grouping shows a similar phenomenon underscoring the oft-discussed skills mismatch which is keeping some people in the ranks of the unemployed.

Most notably, there are 4.6 openings per unemployed in the professional and business services sector and 3.1 unemployed per job opening in trade jobs, both wholesale and retail. The latter suggests business-(almost)-as-usual despite the ongoing trade war as the Trump Administration continues to use tariffs as a foreign policy tool.

One of the more encouraging but least explicable data elements according to the JOLTS report was an almost 20 percent jump in construction job openings. The spike came as the number of unemployed construction workers fell by a third from April to May: 439,000 down to 294,000 despite the falling residential building permits and starts.  From April to May the number of single-family housing starts dropped 0.9 percent; year-year single-family housing starts were down almost five percent.

In the “good news” department, the number of job openings in the manufacturing sector jumped to 509,000 in May, the highest level since publication of JOLTS data began in December 2000

If there is any worrisome sign in the May JOLTS data it comes from the drop in the number of job openings: the third month-month drop in the first five months of this year, matching the number of month-month declines in all of 2018.

You can hear Mark Lieberman on P.O.T.U.S Morning Briefing (Sirius 124) every Friday at 6:20 am Eastern Time. Follow him on Twitter at @foxeconomics.

Pending Home Sales Index Inches Up in May

Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • National Association of Realtors’ May Pending Home Sales Index (PHSI) ROSE 1.1 percent from April to 105.4;
  • Year-year the index was DOWN 0.5 percent.

Trends:

  • The Index remained over 100 for the fifth time this year;
  • Index is down year-year for 17 straight months.

Data Source: National Association of Realtors (NAR)

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Pushing past concerns about rising home prices – and relying more on falling interest rates — the National Association of Realtors’ pending home sales index rose in May after slipping in April.

Still the index — which tracks contracts for sale – remained below year-earlier levels and suggests the home sales market still has hurdles to overcome.

Existing home sales rose 2.5 percent in May even though contracts for sales shot up 3.9 percent two months earlier.

Freddie Mac, meanwhile Thursday, reported the average rate for a 30-year fixed rate mortgage dropped to 3.73 percent from 3.83 percent one week earlier, the lowest rates for a 30-year loan since November 2016.

The Census Bureau and Department of Housing and Urban Development reported earlier this week contracts for the sale of new homes fell 7.8 percent in May.

The lower interest rates should bring more existing homes to market tempting empty-nesters who had been on the sidelines and thus increasing the inventory of “used” homes for sale. The inventory of new homes for sale edged up in May to an annualized rate of 333,000 from 332,000 in April. Realtors have attributed the stagnant market for existing homes to limited inventory.

Still, sellers could be disappointed if buyers are turned away due to an increase in home prices. Case Shiller CoreLogic reported this week its national home price index showed prices continuing to rise, up 0.93 percent in April, the sharpest month-month increase in a year.

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.

1st-time Unemployment Insurance Claims Show Largest Jump in Two Months

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 227,000 1st-time claims for unemployment insurance for the week ended June 15, AN INCREASE of10,000from the previous week’s upwardly revised 217,000 (from 216,000);
  • The four-week moving average of initial claims ROSE 2,250 to 221,250;
  • Four-week moving average represented 0.146 percent of employment, UP from 0.145 percent the previous week;
  • The number of continued claims – individuals who had been collecting unemployment insurance — reported on a one-week lag, was 1,688,000 for the week ended June 15, UP 22,000 from the previous week’s UPWARDLY REVISED 1,666,000; (from 1,662,000)
  • The four-week moving average of continued claims ROSE 6,500 to 1,686,750.

Trends:

  • The week-week increase in initial claims for unemployment insurance was the largest since claims jumped 37,000 for the week ended April 20;
  • Four-week moving average of 1st-time claims rose for the third week in a row;
  • The increase in continued claims – a surrogate for hiring – was the 6th in the last nine weeks since continued claims were flat in mid-April.

Data Source: Department of Labor

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Initial claims for unemployment experienced a slight spike for the last full week of June with no immediate cause for panic. The increase came during an annual retooling at auto plants prepping for a new model year. Under terms of the United Auto Workers (UAW) contract, furloughed production workers can apply for unemployment insurance during their temporary layoff without objection from automakers.

But while the temporary blip up in first time claims can be explained away without cause for alarm, the increase in continued claims – which preceded the upward blip in first-time claims – suggests different issues.

Typically, there are three ways to come off unemployment rolls: getting a job, benefits expiration or if the laid off worker is no longer available for work. The recent history of continued claims – up a net 34,000 or 2 percent, since mid-April –coupled with weak job creation in May and a 2.3 percent drop in job openings since the beginning of the year all suggest a tighter labor market.

The numbers also hint at an increase in the unemployment rate for June when the Bureau of Labor Statistics issues the Employment Situation report next week. Despite a dip in first time claims for unemployment insurance, the preliminary report from the Labor Department hints the 49-year low unemployment rate could be in jeopardy when the Bureau of Labor Statistics releases its June Employment Situation report on July 5 given an increase in first time claims from mid-May to mid-June and only a slight reduction in the smoothing four-week moving average for initial claims since the middle of May.

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

New Home Sales Fall Again in May

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales FELL 7.8 percent in May to a seasonally adjusted annual rate (SAAR) of 626,000;
  • The April sales pace originally reported as 673,000 was revised up to 679,000
  • The unsold inventory of new homes EDGED UP 1,000 or 0.3 percent in May to 333,000;
  • With the slower sales rate, the months’ supply of new homes for sale ROSE to 6.4 in May from 5.9 in April;
  • Median price of a new home TUMBLED $27,100, or 8.1 percent, from April to $308,000.

Trends:

  • The number of contracts for the sale of new homes fell month-month for the second month in a row for the first time since last summer;
  • The month-month percentage decline in the median price of a new home in May matched the increase in the median price in April;
  • In its separate report on new home completions, the Census Bureau, said last week builders had finished 890,000 single-family homes – 264,000 more than sales.

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

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Builder confidence slipped a bit in early June and the Census Bureau and Department of Housing and Urban Development offered an explanation as new home sales fell for the second straight month. Even as the median price of a new home in May gave back the 8.1 percent price increase in April, the lower prices did not draw buyers back into the market.

The median price of a new home fell month-month for the third time this year: the average price drop, $20,700, exceeding the average gain in the other two months, $20,500.

Not only did new home sales drop month-month in May, but they fell year-year for the first time since December, another sign the housing market is teetering.

The Census-HUD report tracks contracts for sale not closings. The National Association of Relators’ parallel report on pending home sales is due next week.

New home sales fell most sharply in the West dropping from an SAAR of 195,000 in April to 125,000 in May.

The Census-HUD report followed the report from the National Association of Home Builders showing builder confidence fell in early June to a still solid 62 from 64; the NAHB’s buyer traffic report, measuring potential buyers kicking tire at model homes, remains below 50 which is the tipping point between a positive and negative outlook. The buyer traffic measure has been below 50 for eight straight months.

The dour sales report comes at the beginning of a traditional home buying season when prospective homeowners try to settle in a new home between the end and the beginning of the school year.

Meanwhile, the number of residential construction jobs, according to the Bureau of Labor Statistics, rose about 5,000 from April to May to 2,901,000.

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.

Case Shiller Home Prices Index Increases at Fastest Pace in a Year

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Case Shiller CoreLogic indices ROSE in April with the strongest gains in a year;
  • The 10- and 20-year indices also ROSE year-year but at more slowly than in March;
  • The price index ROSE in all 20 cities surveyed in April compared with March when 19 cities showed month-month increases;
  • The April increases were slower than March in six cities;
  • Year-year the price index ROSE in April in all 20 cities surveyed but the year-year increase was slower in 8 of the 20 cities than nit had been in March

Trends:

  • The price index rose in all four census regions led by 1.1 percent increases in the Northeast and Midwest;
  • The price index rose for the 16th straight month in Miami but fell for the third straight month in New York;

Data Source: S&P Case Shiller/Core Logic

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Home values rose for the second straight month in April, according to the Case Shiller Core-Logic Home Price Index but the year-year growth in values continued to slow.

The month-month price gains in April were the strongest since April 2018 which could bring potential sellers back into the market while putting another obstacle in the path of buyers. But the price increases come as mortgage rates have been dropping. Realtors have been citing weak inventories as a reason for slow sales of existing single-family homes, a condition which may be resolved with the price increases.

Indeed, it may be the higher prices which draw buyers back into the market, hoping to secure deals before prices go up further. The Case Shiller survey covered the same month in which the National Association of Realtors reported the median price of an existing single-family home rose 2.8 percent. Existing home sales represent about 90 percent of all home sales.

Month-month price increases were led in April by Boston where prices rose 1.9 percent followed by Detroit and San Francisco (1.6 percent), Chicago (1.2 percent), Portland and Seattle (1.1 percent)  and Atlanta, Charlotte and Los Angeles (1.0 percent).

Year-year price increases were led by Las Vegas (7.1 percent), Phoenix (6.0 percent) and Seattle (5.6 percent).

Prices rose 1.1 percent in the Midwest, 1.0 percent in the West, 0/9 percent in the Northeast and 0.7 percent in the South.

Hear Mark Lieberman this Friday on P.O.T.U.S. radio’s Morning Briefing, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.