Filings for Unemployment Insurance Rise; Concern About Continued Claims Grows

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • 244,000 1st time claims for unemployment insurance for the week ended July 22, 10,000 MORE than the prior week;
  • Filings for week ended July 15 revised UP from233,000 to 234,000\
  • Four-week moving average of first time claims UNCHANGED from prior week at 244,000;
  • Moving average for week ended July 22 was UNCHANGED from prior week at .0159 percent of total employment;
  • 1,964,000 continued claims for unemployment insurance for week ended July 15, 13,000 FEWER than the previous week;
  • Continued claims for week ended July 8 UNCHANGED at 1,977,000
  • Four-week moving average of continued claims INCREASED 4,750 to 1,963,750.

Image result for unemployment claimsThe number of initial claims for unemployment insurance resumed its upward climb for the week ended July 22 after two weeks of decline, the Labor Department reported Thursday.

Perhaps more concerning was the 8th consecutive weekly increase in the four-week moving average of continued claims, the data series which can serve as a surrogate measure for hiring. In the last two months, that measure has increased 48,250 or 2.3 percent. So, while fewer workers are being laid off, their replacements, if any are not coming from the ranks of the unemployed. And, indeed, the likelihood of a new layoff getting a new job appears slim.

How this will play out in the Employment Situation report to be released August 4 remains to be seen but if the weekly report on unemployment claims is a guide, the unemployment rate will likely be unchanged and the number of new jobs will be disappointing. The moving average of continued claims rose 25,750 from mid-June to mid-July.  The increase was the average rose 50,000 from mid-December to mid-January. Next week’s report could shatter President Trump’s claims about job creation which has thus far averaged 173,000 since he was inaugurated. In the same five months last year, job growth averaged 191,000 per month. The period last year included the addition of 297,000 new jobs in June, the largest bump in payrolls in over a year,

One factor which has washed through the unemployment claims data is the blip in claims due to annual retooling in the auto industry which typically puts assembly line workers on furlough while plants are reconfigured for new models. While that should be picked up in the seasonal adjustment of raw data, it isn’t always. The United Auto Workers contract still allows furloughed auto workers to collect unemployment insurance during the retooling when they are not working.

In any case, the returning workers will not be “new” jobs and in fact, depending on the timeing of layoffs and recalls perhaps not even change the total number of automobile manufacturing jobs.

The claims reports came one day after the Federal Open Market Committee wrapped up its two-day meeting by reasserting its plan to reduce and said it would begin “relatively soon” so long as moderate economic growth continues. The Federal Reserve has been reinvesting the proceeds of maturing Treasury and agency (Fannie Mae and Freddie Mac) securities into new purchase of mortgage backed bonds as another form of economic stimulus.

Though many economists have expressed concerns of a pending slowdown, the Fed remains optimistic.

The Fed’s assets grew by about $4 trillion in treasury and mortgage-backed securities as part of its efforts to reduce borrowing costs for businesses and consumers. The economy has not achieved the target set by the FOMC of 2 percent inflation.

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.

June New Home Sales Edge Up as Prices Fall

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Pace of contracts for new home sales IMPROVED 0.8 percent in June – the fifth monthly gain this year;
  • Unsold inventory ROSE 3,000 to 272,000 – highest level since June 2009
  • With higher sales rate, months’ supply of new homes for sale ROSE to 5.4 months in June;
  • Median price of a new home FELL $13,500 from May to $310,800;
  • Year-year the median price of a new home was down $10,800 (3.4 percent)

 

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Despite a decline in builder confidence – and notably a drop in buyer traffic – the pace of new home sales improved in June, the fifth month-month gain this year, the Census Bureau and Department of Housing and Urban Development reported Wednesday

The report followed by one day, data from Case Shiller showed its home price index improved (in May) to its highest levels since the summer of 2007.

But the higher prices don’t seem to have dissuaded buyers – except perhaps for first time homebuyers many of whom are still struggling with student loan payments. Indeed a new study by the Federal Reserve Bank of New York contended student debt and higher college tuitions “can explain between 11 and 35 percent of the observed approximate eight-percentage-point decline in homeownership for 28-to-30-year-olds.”

That’s significant because the homeownership rate for college graduates is higher than for those without a college degree.

The National Association of Realtors reported Monday existing home sales in June fell 1.8 percent from May while the median price was up almost 4.5 percent to $263,800. The $11,300 increase in the median price of an existing home was the steepest since May 2013, when the median price of an existing home also increased $11,300 from the previous month.

The NAR report tracks closed sales while the government report on new home sales tracks contracts.

The government reported last week the number of permits and starts for new homes each rose in June with both single- and multi-family activity increasing. That data suggested better times ahead for the housing construction sector but has not yet translated into increased sales. The sales market for new (and existing) homes received a boost with a report student loan borrowers may be off the hook for billions of dollars of loan obligations because of paperwork snafus. Student loan obligations have been a speed bump for would-be buyers.

Realtors had been complaining about the lack of inventory. Indeed, the inventory of existing homes for sale slipped in June but the inventory of new home increased.
The drop in prices for new homes could draw buyers back into the market as the price drops offset an increase in mortgage rates.

 

 

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.

Filings for Unemployment Insurance Down Sharply as Holiday Impact Fades

By Mark Lieberman

Managing Director and Senior Economist

Highlight

  • There were 233,000 1st time claims for unemployment insurance for the week ended July 15, 15,000 FEWER than the prior week;
  • The number of filings for the week ended July 8 was revised up from 247,000 to 248,000;
  • The smoothing four-week moving average of first time claims was 243,750, DOWN 2,250 from the previous week’s average of 246,000; The moving average represents about .0159 percent of total employment;
  • There were 1,977,000 continued claims for unemployment insurance 28,000 MORE than the previous week’s downwardly revised 1,949,000 continued claims;
  • Four-week moving average of continued claims INCREASED 8,750 to 1,959,000.

Image result for unemployment insurance claims

With the Fourth of July fading into the rearview mirror, the labor market resumed its sideways movement with initial claims for unemployment insurance dropping but continued claims for benefits increasing, the Labor Department reported Thursday.

Indeed, one of the complicating challenges to interpreting this data report is the impact of the auto sector ad auto workers are traditionally laid off at the end of June and in early April as car manufacturers retool plants for the new model year. That practice still has an impact on unemployment data but not as much as in past years as auto manufacturers seem to use their own calendars to introduce new models.

That said, the United Auto Workers contract still allows furloughed auto workers to collect unemployment insurance during the retooling when they are not working.

During the retooling season this year, first time claims for unemployment insurance rose 12,000 over a three-week span but have since dropped 17,000 in the last two weeks, replacing chaos with some degree of order.

Continued claims – which serve as a surrogate for hiring – meanwhile are telling a different story. The last time continued claims declined, was the week ended May 20. Since then the data series has increased 58,000 or 3.0 percent. That increase suggests limited hiring out of the pool of workers on unemployment rolls; even though the number of new claims has been relatively low they still add to the total.

The pattern of continued claims – either the weekly number or the four-week moving average – setting nee record lows is long past. In mid-May, the four-week moving average of continued claims was 1,915,500 –the lowest level since April 1973. With this week’s report (continued claims are reported on a one-week lag) the four-week moving average of continued claims is at 1,959,000 – a 2.3 percent increase. Considering that week-week gyrations are usually measured in tenths of percentage points, the 2.3 percent change becomes significant.

The weekly claims reports are shaking off the impact of the July 4 holiday when claims can be filed electronically but require human intervention for processing (and verification) at a time when vacation schedules leave many government offices short-staffed.

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

Housing Construction Activity Strengthens in June

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing starts in June ROSE 8.3 percent to a seasonally adjusted 1.215 million unit — the fastest pace since February;
  • The rate of starts for both single- and multi-family homes improved: single-family starts ROSE 6.3 percent and multi-family starts were up 13.3 percent;
  • All housing permits ROSE 5.4 percent in June, the number of single family permits was up 4.1 percent and the number of multi-family permits increased 13.9 percent from June;
  • The rate of home completions ROSE 5.2 percent from June with improvements for both single- and multi-family completions.

Image result for housing construction

With the advent of weather, housing construction activity spurted in June with the rate of both starts and permits (not dependent on weather) improving, the Census Bureau and Department of Housing and Urban Development reported Wednesday. The government report came on the heels of a decline in builder confidence in July (a measurement taken in the first 10 days of the month) according to the Housing Market Index (HMI) of the National Association of Home Builders.

Change since May 2017

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

 

 

 

 

The Bureau of Labor Statistics earlier this month reported the number of residential jobs, including specialty trade contractors, increased by 6,000 in June.

All three components of the HMI components fell July. The components gauging current sales conditions dropped two points to 70 while the index charting sales expectations in the next six months dropped two points to 73. At the same time, the component measuring buyer traffic slipped one point to 48.  Any number over 50 indicates that more builders view conditions as good than poor

The government data suggested better times ahead for the housing construction sector. The sales market for new (and existing) homes received a boost with a report student loan borrowers may be off the hook for billions of dollars of loan obligations because of paperwork snafus. Student loan obligations have been a speed bump for would-be buyers.

Mortgage interest rates moved up at the beginning of July to their highest levels in more than two months which could spark a buying spree among those who want to lock in rates before they go still higher as a consequence of the Federal Open Market Committee’s action raising the benchmark federal funds rate last month.

While the housing construction report was generally good, it showed a shift to multi- versus single-family building. Sing-family permits represented 64.7 percent of all permits issued in June, down from 66.7 percent in May. At 64.7 percent, the single-family share of permits matched April for the second lowest share this year. The single-family share is still higher than it was in 2016 when it averaged 62.4 percent of all permits.

Home building activity is not an isolated economic statistic. In addition to directly influencing construction sector employment, it has an impact on retail sales of appliances, furniture and other household decorating items.

The homebuilder confidence could have been affected by the increase in the “gap” between new home completions and sales in May (the last month for which both data sets are available). According to Census and HUD reports for completions and sales, builders finished 185,000 more new homes than were sold in May. In April, sales exceeded completions by 181,000.

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

Filings for Unemployment Insurance Down After Three Week-Week Increases

By Mark Lieberman

Managing Director and Senior Economist

Highlight

  • There were 247,000 1st time claims for unemployment insurance for the week ended July 8, 3,000 FEWER than the prior week’s filings;
  • The number of filings for the week ended July 1 was revised up from 248,000 to 250,000;
  • The smoothing four-week moving average of first time claims was 245,750, UP 2,250 from the previous week’s average of 243,500; The moving average represents about .0160 percent of total employment;
  • There were 1,965,000 continued claims for unemployment insurance 20,000 MORE than the previous week’s downwardly revised 1,945,000 continued claims;
  • Four-week moving average of continued claims INCREASED 7,250 to 1,949,250.

Image result for unemployment insurance claims report

In a holiday-shortened week, first time claims for unemployment insurance fell for the first time in four weeks, the Labor Department  reported Thursday. While a decline is on the surface good news, the mid-week July 4 holiday doesn’t automatically mean the labor market has righted itself.

To be sure, the data are seasonally adjusted which means the holiday should be accounted for but day-off patterns are not that easy to account for.

The last time July 4 fell on a Tuesday – 2006 – the number of initial claims rose 26,000 for the week ended July 8 but settled back the following week, declining 23,000. In those pre-recession days, the number of filings for the week ended July 8, 2006 was 342,000 and the following week 319,000.

The process of filing claims has changed in the last 11 years with most states now allowing claims to be filed by phone or online. Still, human beings get involved in the process by verifying the claims. It’s hard to say how many state employees turned the Tuesday holiday into a week’s vacation which would have delayed the process, a phenomenon not necessarily accounted in the seasonal adjustment. That said, it could take a few weeks for the unemployment insurance claims data to be straightened out.

What we’re left with though is a relatively low total number of first time claims (and continued claims which are reported on a one-week lag. The low level of claims seems to reinforce the JOLTS (Job Openings and Labor Turnover Survey) report earlier this week showing a sharp drop in the number of job openings. The JOLTS report did however show a slight uptick in the number of discharges and layoffs. The pace of layoffs and discharges this year is slightly under the nearly 17 million layoffs and discharges in 2016.At the height of the recession in 2009 there were 26.5 million layoffs and discharges.

The last time initial claims increased for three straight weeks was in April 2016.

If the timing of July 4 this year complicated the interpretation of claims data, just wait until next year when July 4 falls on a Wednesday!

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.

Job Openings Fall in May; Hiring is on Record Pace

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Job openings at the end of May FELL 5.0 percent from April to 5.67 million – lowest level since January;
  • Hiring INCREASED 8.5 percent in May, up 429,000 from April; At 5.47 million, hiring was at its highest level since November 2006;
  • The ratio of unemployed to job opening in May EDGED UP to 1.21 in May from 1.18 in April
  • In May, there were 3.2 million quits, the most since February 2001, a sign that workers’ willingness to leave their jobs is increasing along with confidence of finding a new job.

Image result for JOLTS

In a month with relatively weak job creation – just 152,000 according to the Bureau of Labor Statistics – the ratio of unemployed to jobs openings increased – albeit slightly – the BLS reported in its monthly in after the monthly Job Openings and Labor Turnover Survey (JOLTS).  Tuesday’s JOLTS report  showed a sharp drop in job openings suggesting a reluctance by businesses to expand.

The number of job openings at the end of May exceeded the number of hires in the month, a sign employers may be having difficulty finding candidates for available jobs, an indicator of higher wages to come in a period of labor scarcity. But, at the same time in May the number of “quits” increased for the 9h time in the last 12 months, another indicator of an improving labor market as workers feel confident in their ability to get a new job.

The JOLTS report tracks the ins and outs of the labor market as contrasted with the BLS Employment Situation report which reports net changes. Differences can result though as the same individual can be counted in more than one category.

Despite the drop in job openings at the end of May, businesses added 222,000 jobs in June, the second highest monthly gain this year. According to the BLS, a “job opening” means a specific position exists and there is work available for that position, full-time or part-time. The job can be permanent, short-term, or seasonal and there is active recruiting for workers from outside the establishment location that has the opening. Openings for positions with start dates more than 30 days in the future are not included in the job openings count for a specific month.

Job hires through May are on a pace to total 63.6 million, about 1.3 percent more than the 62.8 million hires in 2016, and the most since the JOLTS survey began in 2001.

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.

Economy Added 222k Jobs in June; Unemployment Rate Ticks Up to 4.4%; Earnings Rise

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate ROSE in June to 4.4 percent, the first month-month increase since January;
  • Number of jobs rose 222,000 in June to 146,404,000;
  • Prior month job totals were revised UP a combined 47,000: April from a gain of 174,000 to a gain of 207,000 and May from a gain of 138,000 to an increase of 152,000 jobs;
  • Three month moving average of payroll increases JUMPED to 194,000 from 136,000
  • Private sector payrolls ROSE 187,000 in May after growing 159,000 in April and 194,000 in May;
  • Average weekly hours in June ROSE to 34.5 which led to an INCREASE in average weekly earnings of $4.01 to $905.63;
  • Average weekly earnings ROSE year-year at 2.8 percent, matching April for the fastest growth since May 2011;
  • Average hourly earnings ROSE 4¢ in June, a 2.5 percent year-year gain;
  • The number of persons working full-time workers ROSE 355,000 in June; the number of part-time workers DROPPED 224,000;
  • Labor force participation rate IMPROVED 0.1 percentage point in June to 62.8 percent after two straight months of decline; when the recession began the participation rate was 66.0 percent;
  • Employment-Population ratio ROSE to 60.1 percent; when the recession began, it was 62.9 percent;
  • The low-paying retail and leisure-hospitality sectors accounted for almost 20 percent of the new payroll jobs, healthcare sector added 59,100 jobs, almost 27.7 percent of the total;
  • Government payrolls GREW 35,000.

Followers of the weekly report on new claims for unemployment insurance probably shouldn’t have been surprised that the unemployment rate edged up in June in the Bureau of Labor Statistics Employment Situation report released Friday.  Week-week, first time claims have increased for three weeks in a row for the first time since April 2016 and continued claims are up five straight weeks for the first time since 2009.

Image result for employment report

If there were any surprises in this monthly report, they came from the establishment survey tracking jobs (unlike the population survey which tracks people who fill them). With only one exception, the number of jobs increased in every industry sector. The exception was the information sector where a drop in publishing and broadcasting jobs led to an overall decline of 4,000 payroll slots

The biggest story of the June report was the bump in earnings. Average weekly earnings rose in large measure because of the increase in the work week; weekly earnings showed a relatively strong 2.8 percent year-year growth. Quite possibly the increase in the workweek was the result of an increase in unemployment.

Even the beleaguered manufacturing sector added jobs – albeit 1,000. The construction sector improved by 16,000 jobs, absorbing a loss of 1,500 residential construction jobs, reflecting the tightening housing market.

Employers continue to demonstrate caution with an increase in temp hiring of 13,400 which could either be the result of summer vacation fill-ins or s reluctance to make permanent additions to staff. It’s not as if there isn’t a pool of workers out there. Indeed, the number of persons unemployed increased in June for the first time since January. Of course, the increase could be related to the end of school. The number of “new entrants” to the ranks of unemployed rose in June to 682,000 from 656,000 in May. At the same time the number of “re-entrants” to the labor force dropped from 2,100,000 in May to 2,043,000 in June.

The unemployment rate increased quite simply because of an increase in unemployment which went from 6,861,000 to 6,977,000. The increase in the unemployment rate was not spread evenly among demographic groups. The unemployment rate for teenagers dropped a full percentage point to a still high 13.3 percent. The unemployment for Blacks fell to 7.1 percent in June from 7.5 percent in May and for Hispanics fell to 4.8 percent in June from 5.2 percent in May.

The unemployment rate for college graduates rose 0.1 percentage points to2.4 percent. Although still very low the unemployment rate for college grads bears watching since college graduates are more likely to be homeowners than those without a college degree.

The increase in government payrolls came entirely from new hiring by local governments. The increase of 4,000 federal jobs was offset by a drop of 4,000 state government jobs.

Leisure and hospitality employment was boosted by 29,300 new restaurant hires as the summer vacation season heated up. The calendar also contributed to a drop in education jobs, down 14,100 from May, but an uptick in arts, entertainment and recreation jobs of about 6,900.

The number of individuals with two or more jobs rose 50,000 in June to 7,639,000 which could mean not all the 222,000 new jobs went to persons who were out of work.

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.

 

Filings for Unemployment Insurance Up Third Straight Week

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 248,000 1st time claims for unemployment insurance for the week ended July 1, 4,000 MORE than the prior week’s 244,000 filings;
  • The number of filings for the week ended June 24 was unchanged.
  • The smoothing four-week moving average of first time claims was 243,000, UP 750 from the previous week’s average of 242,250; The moving average represents about .0158 percent of total employment – DOWN from the previous week;
  • There were 1,956,000 continued claims for unemployment insurance 11,000 MORE than the previous week’s upwardly revised 1,942,000 continued claims;
  • Four-week moving average of continued claims INCREASED 6,750 to 1,944,750.

For the first time in over a year initial claims for unemployment increased for the third straight week, up 4,000 to 248,000 for the week ended July 1, the Labor Department reported Thursday.

Image result for unemployment

While a week-week increase of 4,000 initial claims is not by itself large, it did represent a 1.6 percent over the previous week. It is of course significant to the individuals who filed the claims and are out of work. That said, and it is to be sure little solace to the newly laid off, it comes at a time when the labor market remains tight. The bump up in continued claims – the fifth consecutive weekly increase – suggests the new claimants may have w somewhat more difficult task in finding employment.

The last time initial claims increased for three straight week was in April 2016 and the last time continued claims were up for five straight weeks was at the height of the Recession when they increased for 23 consecutive weeks from December 2008 through May 2009.

Claims data are particularly hard to interpret during holiday periods and the period covered by these data sets in the run-up to the July 4th holiday was no exception. That the holiday came mid-week only adds to the complications. Certainly, few employers would hire juts as the new hire gets a day off, so it likely any hiring was pushed off until the following week (which won’t show up in the continued claims data for two weeks since they are reported with a lag.

The Labor Department data will not show up in the Employment Situation report from the Bureau of Labor Statistics to be released tomorrow. But that report will reflect that from mid-May to mid-June – the moving average of first-time claims (a surrogate for the unemployment rate) rose 4,000 and the moving average of continued claims (reflecting hiring) was up 7,500). The BLS reports are based on surveys done during the week of the months including the 12th,

Those numbers point to what might be a correction in the steadily declining unemployment rate and a further slowdown in hiring. The BLS reported the economy added 138,000 jobs in May, down from 174,000 in April.

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

Filings for Unemployment Insurance Up Again

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 244,000 1st time claims for unemployment insurance for the week ended June 24, 2,000 MORE than the prior week’s 242,000 filings;
  • The number of filings for the week ended June 17 was revised upward by 1,000 to 242,000;
  • The smoothing four-week moving average of first time claims was 242,250, DOWN 2,750 from the previous week’s average of 245,000; the average dropped because the 20,000 week-week increase reported five weeks ago dropped out of the computation;
  • The moving average represents about .0158 percent of total employment – DOWN from the previous week;
  • There were 1,948,000 continued claims for unemployment insurance 6,000 MORE than the previous week’s downwardly revised 1,942,000 continued claims;
  • Four-week moving average of continued claims INCREASED 7,250 to 1,938,750.

Image result for claims for unemployment insurance

Initial claims for unemployment dipped slightly for the week ending June 24 according to the Labor Department, not a cause for alarm, but just creeping concern.

It’s really hard to sound alarm bells for week-to-week gyrations in this series when the level of first time But, even though the smoothing four week moving average for initial claims dropped, that doesn’t mean the pressure is off.

In a nutshell, the movements in these data sets are inconsistent with low unemployment rate we’ve experienced but consistent with the slowdown in job creation. new jobs, another example of the economy treading water as businesses seem reluctant to expand. Indeed, the attitudes suggest a lack of confidence which could be harmful to the economy, limiting new investments and hiring.

That said, these data series are difficult to interpret in holiday weeks. The only certainty out of them is the predictive “power for the Employment Situation Report to be released July 7 by the Bureau of Labor Statistics. The weekly claims reports suggest no significant change in the unemployment rate for Jun and another slowdown in job creation.

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.

Pending Home Sales Index Down for Third Straight Month

Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • National Association of Realtors’ Pending Home Sales Index (PHSI) SLIPPED 0.8 percentage points in May to 108.5, the third straight month-month decline
  • The index is at its lowest level since January
  • Year-year the index DROPPPED 1.7 percentage points, the second consecutive month-month decline.

Image result for pending home sales

With a still-tight inventory of existing single-family homes, the Pending Home Sale Index (PHSI) dipped again in May, signaling weaker sales (closings) in July, the National Association of Realtors  reported Wednesday.

With the third straight monthly drop in pending home sales, realtors should be bracing for a difficult summer.

A pending home sale is a necessary precursor to a completed sale. Although pending home sales dipped in March, which would have signaled a drop in May closings, completed transaction actually rose in May as buyers rushed to close before the Federal Open Market Committee increased interest rates. Well, the FOMC acted in June and now that rate hike is baked into mortgage rates.

Rates have hovered around 3.9 percent even after the FOMC raised rates but the rates have not drawn either buyers or sellers into the market. Indeed, the NAR itself found in its own quarterly survey fewer renters think it’s a good time to buy a home, and respondents overall are less confident about the economy and their financial situation than earlier this year.

At the same time, sellers are waiting for prices to firm, or their own finances to improve and their reluctance to list their homes means the few buyers out there have less of a choice.

It’s not just existing home sales which are suffering. To be sure the government reported last week the pace of contracts for sale for new homes improved only slightly in May. The Census Bureau report on new home sales parallels the NAR report.

The Census (and Department of Housing and Urban Development) data showed buyers are looking for larger, more expensive homes. The median price of a new home in May was up 11.5 percent to a record $345,800 – an increase of $35,800. But even that increase did not significantly add to the inventory of new homes for sale.

Just as the median price of an existing home increased for the fourth straight month in May, the growth in inventory has slowed.

An increase in home sales, as suggested by the NAR and government reports, would be welcome news for the real estate and construction sectors but higher prices are a two-edged sword as earnings continue to increase very slowly. With inflation creeping up as well, along with interest rates, prospective buyers could be caught in a dollar squeeze.

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