Housing Starts, Permits Slow in December

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing permit filings in December EDGED DOWN 0.1 percent to a seasonally adjusted annual rate (SAAR) of 1.302 million units;
  • The rate of permits for single-family home starts in December INCREASED 1.8 percent to an SAAR of 881,000 units, highest level since August 2007 (916.000)
  • The rate of permits for multi-family homes FELL 3.9 percent in December to 421,000 units (SAAR);
  • The rate of all housing starts DROPPED 8.2 percent in December to an SAAR of 1.192 million;
  • Single-family starts FELL 11.8 percent to an SAAR of 836,000 while multi-family starts IMPROVED 1.4 percent to an SAAR of 356,000;
  • The rate of home completions in December INCREASED 2.2 percent from November; Single-family completions GREW 4.3 percent while multi-family homes declined

Trends:

  • The pace of all permits has dropped for three of the last four months but is still 2.8 percent ahead of 2016;
  • Single-family permits were up for the fourth straight months; multi-family permits were down for the third time in the last four months;
  • The rate of housing starts has fallen month-month eight times in 2017 and the December pace was off 6.1 percent from December 2016;
  • Virtually all the decline in housing starts was due to a fall in the pace of single-family starts which was down 11.8 percent in December;
  • The SAAR of home completions rose in December for only the second time in the last six months.

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

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The slowdown in housing activity in December calls into question the strong endorsement of the Republican tax law changes which over time are likely to have a negative impact on the nation’s housing market.

The caps on the home mortgage interest deduction and local property tax deduction should, if basic economic laws haven’t also been changed, increase the net cost of homeownership which will bring values and prices down.

Home building was already under some price pressures in the wake of rebuilding following fall hurricanes which raised the prices of building materials and labor.  While builders could recapture those higher costs with higher prices, the tax law changes might undercut those efforts.

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 Dips in December But Remains Strong

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index SLIPPED two points in January to 72;
  • The index of current sales FELL one point to 79, the index of future (six months hence) sales also DROPPED one point to 78 and buyer traffic FELL four points to 54;
  • By region, builder confidence Fell in three of the four Census regions, improving only in the Northeast.

Trends:

  • The drop in confidence was the first since last September;
  • At 72, the index is at its second highest level since June 2005
  • The index has been over the tipping point of 50 for 56 straight months and has been up year-year for four straight months;
  • The increase in the index in the Northeast reversed an eight-point decline in the index for that region in December.

Data Source: National Association of Home Builders

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The National Association of Home Builders (NAHB) Housing Market Index (HMI) offered the first glimpse into the impact of the changes in the changes in the federal tax laws and the early reading is slightly negative.

While the index (also considered a measure of builder confidence) slipped slightly, the decline may be too small to offer any deep read on the immediate impact of the tax changes on the nation’s housing market.

To be sure, the tax bill signed into law just before Christmas, removes or limits some of the incentives of home buying by capping the amount of real estate taxes and mortgage interest that can be deducted on federal tax returns.

What is apparent is the tax changes did little to slow building activity – at least according to survey participants – who may not learn for a while whether the market has changed. After all, this survey is based on builder not buyer attitudes.

The Census Bureau and Department of Housing and Urban Development will report tomorrow on new housing permits and starts albeit for December.

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 December, Led by Online Activity

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • December retail sales – measured by prices – ROSE $1.7 billion or 0.4 percent from November when they were UP $4.2 billion or 0.9 percent (revised from the originally reported 0.8 percent increase);
  • Every category of sales, except electronics, clothing and sporting goods stores saw an increase in December; sales at clothing stores were off 0.3 percent attributable to unseasonably warm temperatures;
  • Gasoline station sales increased 0.03 percent in December even as the price of a gallon of gasoline fell 3.4 percent from $2.564 to $2.477.

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Trends:

  • Year-year total sales ROSE 5,2 percent in December, the strongest December-December growth since 2011 when sales were up 6.1 percent;
  • Non-store sales represented 11.2 percent of total sales, a record high;
  • With the Bureau of Labor Statistics reporting a scant 0.1 percent increase in prices in December; the jump in retail sales reflects demand, not price changes;

Data source: Census Bureau  

The Census Bureau’s report on retail sales was good news for the nation’s retailers who saw (or heard) cash registers ringing up stronger sales without reflecting price changes.

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

With increases in take-home pay because of the GOP tax changes it would not be unexpected to see retail sales continuing to climb.

But the report came just a day after Walmart announced plans to shutter 63 Sam’s Club discount warehouse stores, adding to a growing list of retailers reducing their brick-and-mortar operations. The Walmart announcement came the same day the retail giant said it was raising the hourly pay of its “associates” and paying bonuses.

The bonus payments accompanied by layoffs is similar to what AT&T did shortly after the tax bill was passed.

In addition to accounting for an increasing share of total sales, non-store retailers also saw a 12.2 percent year-year increase in activity, the strongest of any store category,

Last week, the Bureau of Labor Statistics reported the number of retail jobs fell 20,300 in December from November. The number of retail jobs dropped 66,500 from December 2016 to December 2017.

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 Increase as Holiday Jobs Ends

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 261,000 1st time claims for unemployment insurance for the week ended January 6, an INCREASE of 11,000 from the prior week;
  • The number of initial claims for the week ended December 30 was UNCHANGED at 225,000
  • The four-week moving average of first time claims ROSE 9,000 to 250,750;
  • Four week moving average represented 0.163 percent of employment, UP from 0.157 percent one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended December 30 was 1,867,000, DOWN 35,000 from the previous week;
  • The four-week moving average of continuing claims DECREASED 5,500 to 1,913,250;

Data Source: Department of Labor

Trends

  • 1st time claims for unemployment insurance have increased for four straight weeks with weekly filings increasing 36,000 in that period;
  • The four-week moving average rose for the third consecutive week, up 14,000 or 5.9 percent over that period
  • Four-week moving average of first time claims as a percentage of total employment rose to its highest level since the beginning of October;
  • Continued claims fell to the lowest level in almost 45 years;

The turn of the calendar typically brings with a slight bump up in unemployment insurance claims as those who were hired for the holiday season lose their jobs. The phenomenon also makes the claims data somewhat unreliable at this time of the year.

Compounding the analytical challenge for January claims data will be the Martin Luther King Day observance next week. Although claims can be filed electronically, state workers will have one day less to process those 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.

Economy Adds 148k Jobs in December; Unemployment Rate remains 4.1% Earnings Growth Falters

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Number of payroll jobs INCREASED 148,000 in December compared with working age population growth of 160,000 per Bureau of Labor Statistics report for December;
  • Prior month job totals REVISED DOWN net 11,000: DOWN 17,000 in November to a gain of 211,000 (from the initial report of a 228,000 increase) but UP 6,000 in October to a revised growth of 252,000 jobs (from 244,000);
  • Average weekly earnings ROSE $3.11 to $918.74, a 2.8 percent year-year gain DOWN from November’s 3.0 percent year-year growth;
  • Unemployment rate in December remained at 4.1 percent;
  • The number of persons holding multiple jobs ROSE 305,000 in December after a gain of 133,000 in November;
  • The labor force (the sum of employed and unemployed) ROSE 64,000 in December;
  • Labor force participation rate – a key determinant of economic growth – was UNCHANGED from November at 62.7 percent
  • Employment GREW 104,000 in December; unemployment DECREASED 40,000;
  • The number of persons not in the labor force ROSE 96,000 in December;
  • Average workweek REMAINED at 34.5 hours unchanged from November;
  • Private sector payrolls ROSE 146,000 in November;
  • Employment-Population ratio remained at 60.1 percent;
  • Number of construction jobs INCREASED 30,000, with 17,000 new residential construction jobs continuing to reflect the rebuild following hurricanes Harvey and Irma;
  • Health care and leisure-hospitality jobs each INCREASED 29,000 in December;
  • Number of retail jobs FELL 20,000 – following an increase of 16,000 in November;
  • Number of temporary jobs INCREASED 7,000 in December.

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Trends

  • Average monthly increase in payroll jobs in 2017 was 171,000, down from 187,000 in 2016 signaling a slowdown in labor growth.
  • Average number of new entrants to the labor force was 692,000 in 2017, down from 819.000 in 2016; Number of re-entrants 2,078 in 2017, down from 2,039 in 2016 suggesting a tighter labor market;
  • Average monthly increase in weekly wages was $2.09 in 2017, up from $1.85 in 2016, due to slower increase in low-paying retail and leisure and hospitality jobs in 2017.
  • Number of new payroll jobs grew faster than the working age population in seven of the 12 months in 2017; jobs grew faster than population in only five months of 2016;
  • Average monthly growth in employment was 149,000 in 2017, down from 192,000 in 2016;
  • Average monthly growth in full-time employment was 206,000 in 2017, up from 137,000 in 2016;

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 Claims Flat Leading to Christmas

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 245,000 1st time claims for unemployment insurance for the week ended December 23, UNCHANGED from the prior week after four straight wee-week declines;
  • The number of initial claims for the week ended December 16 was also UNCHANGED;
  • The four-week moving average of first time claims ROSE 1,750 to 237,750;
  • Four week moving average represented 0.155 percent of employment, UP from 0.153 percent one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended December 16 was 1,943,000, UP 7,000 from the previous week;
  • The four-week moving average of continuing claims DECREASED 4,250 to 1,919,750.

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Some 245,000 workers found coal in their stockings in the week leading up to Christmas, the Department of Labor reported Thursday with its weekly report on first-time claims for unemployment insurance.

And, the pre-Christmas week wasn’t good for unemployed jobseekers as the number of continued claims rose 7,000 from the previous week indicating employers weren’t dipping into unemployment ranks to add to payrolls.

The weeks leading up to Christmas are historically not a good time for the labor market. Last year, for example, first time claims for unemployment insurance rose a net 13,000 in the two weeks leading to Christmas and continued claims rose 77,000. In 2015, initial claims were up 15,000 and continued claims rose 40,000.

About the only “good news” the labor market received was President Trump signing the tax cut bill. Starting in February, when new withholding tables kick in, salaried workers could start seeing an improvement in take-home pay. Though the higher take home pay will likely be temporary at best, putting more cash in workers’ pockets could flip the polling on the tax bill to being more positive.

Of course, other aspects of the bill – a greater tax break for the top 1 percent, the cap on the deductibility of state and local taxes as a deduction – will also go into effect next week, but will not be felt until April 2019 (conveniently after the November 2081 congressional elections).

As to unemployment insurance claims, we should expect to see greater volatility than normal over the next few weeks as temporary employees hired for end-of-year sales are gradually removed from payrolls. At the same time, holidays will also disrupt the smooth flow of unemployment, despite the application of seasonal adjustments.

All that said, the numbers are providing mixed signals for the Bureau of Labor Statistics’ Employment Situation report for December to be released January 5.

Initial claims for unemployment insurance rose 5,000 from mid-November to mid-December but the four-week moving average of first-time claims fell 4,000 in the same period. The increase would suggest a higher number of unemployed in the January 5 report, but the decrease in the moving average suggests just the opposite.

Continued claims dropped 17,000 from mid-November to mid-December pointing to improved hiring but the four-week moving average of continued claims rose 8,000 in the same period suggesting limited hiring.

 

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

1st Time Unemployment Claims Rise Sharply; Largest Jump in Three Months.

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 245,000 1st time claims for unemployment insurance for the week ended December 16, an increase of 20,000 from the prior week, the largest week-week jump since the beginning of September when claims were affected by storms;
  • The number of initial claims for the week ended December 9 was UNCHANGED at 225,000
  • The four-week moving average of first time claims ROSE 1,250 to 236,000;
  • Four week moving average represented 0.153 percent of employment, unchanged from one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended December 9 was 1,932,000, UP 43,000 from the previous week;
  • The four-week moving average of continuing claims INCREASED 4,250 to 1,923,000, the highest level since the end of September.

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Layoffs jumped in mid-December as employers assessed the strength of end of year activity and as a result initial claims for unemployment insurance saw their largest jump in more than two months, the Department of Labor reported Thursday.

It was the first increase in initial claims since mid-November.

At the same time, the Labor Department reported a sizable jump in continued claims suggesting employers may have put the brakes on hiring even as layoffs increased.

The report offered mixed signals for the December Employment Situation report to be released January 5; from mid-November to mid-December initial claims increased 5,000 but the four-week moving average of first-time claims dropped 4,000. An increase in the number of claims generally suggests an increase in the number of people unemployed and the unemployment rate.

Since the data on continued claims is reported with a one-week lag, mid-month to mid-month comparisons will not be available for another week.

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 Starts Improve in November but Permits Fall

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing permit filings in November DROPPED 1.4 percent to a seasonally adjusted annual rate (SAAR) of 1.298 million units;
  • The rate of permits for single-family home starts in November INCREASED 1.4 percent to an SAAR of 862,000 units, highest level since August 2007 (916.000)
  • The rate of permits for multi-family homes FELL 6.4 percent in November to 436,000 units (SAAR);
  • The rate of housing starts INCREASED 3,3 percent in November to an SAAR of 1.297 million;
  • Single-family starts ROSE 5.3 percent to an SAAR of 930,000 while multi-family starts DIPPED 1.6 percent to an SAAR of 367,000;
  • The rate of home completions in November FELL 6.1 percent from October with completions for both single-family and multi-family homes decreasing

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Even as builder confidence, according to the National Association of Home Builders, climbed to its highest level since 1999,  permits for new homes slipped in November, according to a report by the Census Bureau and Department of Housing and Development  released Tuesday.

Change since October 2017

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

 

 

 

 

The report on permits and starts was largely influenced by single family activity as the pace of multi-family permits and starts in November dropped from October. Home building remains precarious in the wake of the new tax bill which removes incentives for homeownership by limiting the deductibility of mortgage interest and property tax payments.

Starts and permits improved in the South, a reflection of building activity following hurricanes Harvey and Irma.

The improvement in residential construction activity came in the same month in which the number of housing construction jobs increased to 2.73 million, the highest level since September 2008. Residential construction jobs have increased in nine of the last 12 months.

According to the report, completions of new homes declined in November, both for single-family and multi-family housing. The decline in single-family completions will exacerbate inventory concerns. According to the most recent government report on new home sales, the months’ supply of new homes for sale dropped in 4.9 in October from 5.2 in September and 5.9 in August.

Completions in October exceeded new home sales by a seasonally adjust annual rate of 103,000, the narrowest margin since March 2015 when completions exceeded sales by 95,000.

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 Jumps in December to Eight-month High

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Housing Market Index SURGED five points in December to 74, its highest level in more than 17 years
  • All three index components IMPROVED led by an eight-point gain in buyer traffic to 58, its highest level since the index began in 1985;
  • By region, builder confidence ROSE 11 points in the Midwest eight points in the West

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Even as Congress inches toward passage of a tax bill with potentially devastating consequences for housing, builder confidence jumped in December to its highest level since June 1999, reaching 74, a five-point gain from October, the National Association of Home Builders (NAHB) reported Monday.

The tax bill, which threatens to upend government incentives for home ownership is expected to be voted on by Congress Tuesday. Under the bill, deductions for mortgage interest and property tax payments would be sharply curtailed, increasing the net cost of owning a home.

Without those incentives, home prices are expected to drop which could explain builder optimism as new homes become more affordable even as the cost of ownership loses its tax advantages.

Builders appeared buoyant, improving their assessment of the near-term market for home buying and the market six months hence. Indeed, the survey, conducted at the beginning of each month, indicated buyer traffic to model homes had improved and was at its highest level since the NAHB survey began in 1985.

It remains difficulty to classify the purchase of a home: is it an investment or do the ongoing expenses of mortgage and tax payments represent the monthly purchase of shelter. The tax treatment of mortgage interest and real estate taxes has historically served to reduce the net burden of those expenses.

But, the NAHB seemed to ignore the negative aspects the tax bill might have on homeownership when it endorsed the conference committee version of the bill: “NAHB fully supports the final conference report on tax reform legislation and commends the work of House-Senate conferees,” the association said in a weekend statement. “This comprehensive overhaul of the nation’s tax code will help middle-class families, maintain the nation’s commitment to affordable housing and ensure that small businesses are treated fairly relative to large corporations. Lower tax rates and a fair tax code will spur economic growth and increase competitiveness, and that is good for housing. We urge the House and Senate to move quickly to pass this legislation.”

The Census Bureau and Department of Housing and Urban Development will report tomorrow on new housing permits and starts albeit for November.

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.

 

Holiday Shopping, Storm Rebuild Boost Retail Sales in November

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • November retail sales – measured by prices – ROSE $3.9 billion or 0.8 percent from October when they were UP $2.7 billion or 0.5 percent (revised from the originally reported 0.2 percent increase);
  • Every category of sales, except auto, saw an increase in November; Auto was off 0.2 percent from October;
  • Gasoline station sales increased 2.8 percent due in large measure to a 2.4 percent increase in the per gallon price of gasoline from $2.505 to $2.564.
  • Year-year total sales ROSE 5,5 percent in November compared with a 4.8 percent year-year growth in October

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Boosted by Black Friday and Cyber Monday promotions, retail sales measured by prices rose sharply in November with the second largest month-month gain of the year, the Census Bureau  reported Thursday.

Sales at non-store retailers – online sales – led the charge with a 2.3 percent month-month gain in November, the largest since July 2015 when son-store retail sales grew 2.7 percent.

Sales at electronics and appliance stores rose 2.1 percent in November, a combination of holiday shopping and rebuilding in the aftermath of hurricanes Irma and Harvey. Rebuilding efforts because of the storms also boosted sales at building material and garden supply stores and at furniture and home furnishing stores Sales were up month-month 12. Percent in each category. The historic average monthly growth in sales at furniture and home furnishing stores had been 0.3 percent and at building and garden supply stores 0.4 percent.

Not all the increases are necessarily the result of volume. Though billed as a retail sales report, the Census release notes sales are not adjusted for inflation which makes it more a reflection of prices than consumer activity. But with retailers offering their usual Black Friday sales and discounts, the increase in retail activity means consumer spending is up, a positive for Gross Domestic Product. Retail sales represent about 55 percent of consumer spending which itself is about 67 percent of GDP.

The increases in activity by store category generally followed the increase in retail employment in November with a couple of exceptions. Jobs at non-store retailers and electronics and appliance stores each decline in November, even as sales at those store categories increased.

The improvement in retail activity knocks another support from the rationale offered for the massive tax cut which is closing in on Congressional passage. According to data compiled by Business Insider the top 20 percent of earners save almost 24 percent of their income (the top 1 percent save 51 percent of their income) suggesting a tax cut aimed at higher income earners will not provide a boost to the economy.

That said, the Federal Reserve, in announcing its increase in the target fed funds rate Wednesday, provided only a lukewarm endorsement of the tax cut in terms of its boost to the economy.

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.