October Retail Activity Slows From Torrid September

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • October retail sales – measured by prices – ROSE $1.1 billion or just 0.2 percent from September when they were UP $8.9 billion or 1.9 percent;
  • Increase came despite a sharp month-month drop (in dollar volume) in building supply store and gasoline station sales;
  • Excluding auto sales, which ROSE $701 million, October retail sales increased $433 million or 0.1 percent from September;
  • Year-year total sales ROSE 4.3 percent in October compared with a 4.7 percent year-year growth in September

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After a flurry of price increases in September –some in response to hurricanes Harvey and Irma – retail sales, as measured by prices, settled back in October, increasing by just 0.2 percent compared with the 1.9 percent increase immediately after the storms, the Census Bureau  reported Wednesday.

Sales at building supply stores, which jumped 3.0 percent in September indeed declined in October; gasoline station sales which soared 6,4 percent in September dropped as well in October.

The outsized increase at building supply stores can be seen as a direct result of the hurricanes with limited supplies to meet an increased demand. The same [phenomenon occurred following hurricane Katrina in 2005 and hurricane Sandy in 2012.

The strong retail prices leading to higher sales came even as the number of employees in retail stores has fallen, down 100,00o or 0.6percent since January. Several large retailers have announced plans to eliminate or scale back hiring for the holiday shopping season.

Gasoline sales fell as the price of a gallon of gasoline dropped 5.2 percent from September to October to $2.505 in October from $2.643 in September. Gasoline prices jumped 26¢ per gallon in the aftermath of hurricane Harvey, the largest one-month price increase since March 2012.

Though billed as a retail sales report, the Census release notes sales are not adjusted for inflation which makes it more a reflection of merchant than consumer activity. attitudes than consumer activity.

Prices, as interpreted from the Census report, were up at every store category except building and garden supply, gasoline stations and non-store retailers.

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 and Continued Unemployment Claims Tick Up

By Mark Lieberman

Managing Director and Senior EconomistHighlights

  • There were 239,000 1st time claims for unemployment insurance for the week ended November 4, UP 10,000 from the prior week;
  • The number of initial claims for the week ended October 26 was unchanged at 229,000.
  • The four-week moving average of first time claims FELL 1,250 to 231,250, the sixth straight weekly decline;
  • Four week moving average represented 0.150 percent of employment, down from 0.151 percent one week earlier;
  • The number of continued claims – reported on a one-week lag – was up 17,000 for the week ended October 19 to 1,901,000;
  • The four-week moving average of continuing claims DROPPED 750 to 1,895,250 – the 12th decline in the last 13 weeks.

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With initial claims for unemployment jumping by 2,000 in Puerto Rico, first-time claims went up by 10,000 the Department of Labor reported Thursday.

That Puerto Rico had an outsized impact on the number of claims nationally is testimony to how low claims have been of late as employers seem to be jealously guarding their workers. At the same time the steady decline in the moving average of continued claims, suggests hiring is increasing and that laid off workers are a prime talent pool.

All else being equal (and it never is) the data suggesting a tighter labor market should mean higher wages though average hourly and weekly earnings, as reported last week in the Bureau of Labor Statistics’ monthly Employment Situation release did not reflect that.

Higher earnings tend to fuel inflation by increasing demand, exactly what the Federal Reserve is looking for. When the Federal Open Market Committee met last month, it held interest rates steady but is expected to increase rates when it meets next on December 12-13.

December traditionally had not been a meeting at which the FOMC raised rates, fearing the impact on holiday retail shopping but the old “rules” are just that, old in a new economic paradigm. FOMC actions could shift again when President Trump’s choice to head the Federal Reserve, current Fed Governor Jerome K. Powell becomes Fed Chair (assuming Senate confirmation. That transition would take place at the end of January when the term of current Fed Chair Janet Yellen expires.

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 Bounces Back with 261,000 New Jobs in October; Unemployment Rate Falls to 17-Year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate FELL in October to 4.1 percent, lowest since December 2000 when it was 3.9 percent;
  • Number of jobs INCREASED 261,000 in October;
  • Average weekly earnings FELL 35¢ to $913.63, a 2.4 percent year-year gain down from the 2.8 percent year-year increase in September;
  • The number of persons not in the labor force ROSE 962,000 – the sharpest increase since April 2014 – and the Labor Force itself FELL 765,000. The largest drop since October 2013
  • Average workweek REMAINED at 34.4 hours;
  • Prior month job totals REVISED UP 90,000: UP 51,000 in September turning a loss of 33,000 jobs to a gain of 18 and UP 39,000 in August to a revised growth of 208,000 jobs;
  • Private sector payrolls ROSE 252,000 in October; Government payrolls ROSE 9,000 with more than half of the increase (5,000 jobs) at the federal level;
  • Both employment and unemployment FELL in October: Employment (persons with jobs DROPPED 484,000 and unemployment FELL to 281,000
  • Number of food service jobs INCREASED 89,000 recovering almost all the 98,000 jobs lost following hurricanes Harvey and Irma
  • Number of construction jobs INCREASED 11,000, principally among residential specialty trade contractors;
  • Number of retail jobs FELL for the seventh time in eight months, down to 15.82 million, lowest since May 2016.

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Despite a rebound from a month ago, the Bureau of Labor Statistics monthly Employment Situation report still showed concerns about the nation’s labor market.

The 261,000 growth in payroll jobs brought the year-to-date monthly average of growth to 169,000, below the average growth of 192,000 for the first 10 months of last year.

To be sure, the unemployment rate fell to 4.1 percent, the lowest in almost 17 years, but the reduction was achieved by a drop in the entire labor force (made up of persons employed and unemployed). Employment (people with jobs) fell 484,000 – the largest month-month decline in four years – and unemployment dropped as well. Thus, arithmetic, not labor gains, accounted for the drop in the unemployment rate.

Average weekly earnings declined dropping the year-year growth in weekly earnings back to 2.4 percent, the lowest earnings pace in seven months.

Part of the reason for the slowdown in earnings growth can be found in the detail of the jobs increase. Almost 41 percent 106,000 of the new jobs came in the low-paying leisure and hospitality sector and 83.5 percent of those jobs were food service jobs. The average weekly earnings in the leisure and hospitality sector of $406.12 is less than half the average weekly earnings overall, $912.63.

The number of persons employed full-time dropped 23,000 while the number of part-timers fell 415,000. The number of multiple jobholders dropped 178,000, also contributing to an earnings decline.

The expected bounce back in the construction sector due to hurricane rebuilding efforts has yet to materialize with the number of construction jobs up just11,000. It took four-to-five months for the number of construction jobs to spurt following Superstorm Sandy in 2012. The number of construction jobs increased an average of 50,000 per month following hurricane Katrina.

While the overall unemployment rate dropped in October, among the major worker groups, the results were uneven. The unemployment rate for adult men fell 0.1 percentage point and for adult women dropped 0.3 percentage. But, the unemployment rate for teens jumped 0.8 percent to 13.7 percent and for blacks or African-Americans (BLS terminology) 0.5 percentage points to 7.5 percent.

The weak earnings growth had an immediate impact: in perhaps an omen for holiday shopping, the number of retail jobs declined in October as several major retail chains have announced plans to reduce or eliminate holiday hiring.

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 and Continued Claims Fall Again

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 229,000 1st time claims for unemployment insurance for the week ended October 26, DOWN 5,000 from the prior week;
  • The number of initial claims for the week ended October 19 was revised UP 1,000 to 234,000;
  • The four-week moving average of first time claims DROPPED 7,259 to 232,500, the fifth straight weekly decline;
  • Four week moving average represented 0.152 percent of employment, down from 0.156 percent one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended October 12 was 1,884,000, DOWN 15,000 from the previous week and the lowest since December 29, 1973 when it was 1,805,000;
  • The four-week moving average of continuing claims DROPPED 3,250 to 1,895,750 – the 11th decline in the last 12 weeks.

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On the eve of a critical employment situation report, the Department of Labor reported Thursday yet another decline in first time claims for unemployment insurance. While the report will have no impact on Friday’s employment report for October, it does show a continuing positive trend with declining layoffs and improved hiring.

What remains to be seen is whether workers will benefit from the tighter labor market with higher wages.

The claims report – and its implications – could raise concerns about one of the “benefits” of the tax revision proposal in Congress which has, as one of its aims, increasing jobs. With the nation’s economy approaching “full employment,” an elusive ill-defined term, arguing for a tax cut to create jobs relies on specious reasoning.

It harkens back to President George W. Bush’s rationale for a tax cut when he took office in 2001, Initially, he argued, the tax cut was necessary to return the government surplus to taxpayers. When the surplus became a deficit, he argued the tax cut was needed as an economic stimulus.

Jobs don’t seem to be the issue today with economists forecasting the Bureau of Labor Statistics’ (BLS) Employment Situation report could show a gain of perhaps 300,000 payroll jobs in October, bouncing back from the loss of 33,000 jobs in September. The BLS is likely to report a revision to the September numbers. The BLS has revised September payrolls higher in all eight years of the current recovery and expansion, by as little as 3,000 in 2015 and as much as 124,000 in 2009. The average upward revision has been 53,000 which would turn September’s job loss into a gain. In the two other years for which a jobs loss was initially reported – 2009 (down 263,000) and 2010 (down 95,000), the revisions merely cut to jobs loss (to 133,000 in 2009 and 24,000 in 2010).

What seems remarkable but flies under the radar in analyses of the report on first time claims is how small a percentage of employment the number of claims is. As awful as it may sound for those affected, the nation needs a little unemployment to allow businesses to start up or expand.

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.

Homeownership Rate Edges UP in 3Q; Household Formations Lag

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Homeownership rate in 3Q 2017 was 63.9 percent, UP from 63.7 percent in 2Q and 62.5 percent a year ago;
  • Homeownership rate is at its highest since 4Q 2014;
  • 430,000 MORE household owned homes in 3Q than in 2Q
  • 47,000 MORE vacant homes for sale in 3Q than in 1Q
  • 204,000 FEWER households at end of 3Q than 2Q

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The nation’s housing market improved in the third quarter with an increase in the homeownership rate, the Census Bureau and Department of Housing and Urban Development reported Tuesday.

The homeownership rate which had been moving sideways in a relatively narrow range for the last years, improved 0.2 percentage points to 63.7 percent in the third quarter, despite sluggish sales of both new and existing single-family homes.

The reason for the growth in the home ownership rate (the percentage of households owning homes) is due largely to a quarter-quarter drop in the number of households.

The homeownership rate peaked at 69.2 percent in 2004 and dropped to a 48-year low of 62.9 percent in the second quarter last year.

According to the National Association of Realtors (NAR), sales of existing single-family homes have fallen in five of the first eight months this year and in August were down 1.5 percent year-year. The number of new home sales though rose sharply in August according to a combined Census Bureau-Department of Housing and Urban Development report. The NAR data tracks closings while the government reports on contracts for sale.

The decline in the number of households means there might be fewer buyers of homes – new or used – and continues to reflect a trend of millennials struggling to strike out on their own either because they can’t find suitable jobs or because the jobs they do find make living on their own, as a new household, a financial challenge.

According to Tuesday’s report, the percentage of senior-citizens (over 65) owning homes jumped in the third quarter to 78.9 percent from 78.2 percent in the second quarter. The percentage of under-35 homeowners rose to 35.6 percent but remains well below its pre-Recession high of 43.0 percent.

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

 

Case Shiller Home Price Indices Up Again in August

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Case Shiller CoreLogic national Home Price Index IMPROVED in August for the 19th straight month though the growth was the weakest since February;
  • The 10- and 20-city indices GREW for the 10th straight month;
  • 10- and 20-city year-year index growth was strongest in more than three years;
  • Index improved in 19 of the 20 cities surveyed in August, falling only in San Francisco (by 0,1 percent);
  • Year-year prices were UP in all 20 cities but the August-August increase slowed in six cities.

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Home prices grew again in August according to the monthly Case Shiller CoreLogic Home Price Index released Tuesday, but momentum may be slowing.

The national home price index jumped 0.54 percent in August to 195.05, its ninth consecutive monthly record high. The 10-city index improved 0.45 percent to 216.49 and the 20-city index was up 0.42 percent to 202.87. The August growth for all three was weaker than the improvements in July,

The market for existing single-family homes has been slowed dur to a lack of supply as potential sellers have been reluctant to list their homes despite – or because of – rising prices, with concerns about finding affordable replacement housing.

The National Association of Realtors reported the median price of an existing single-family home fell $5,000 in Auguste, 1.9 percent, to $253,100 as the number of homes for sale fell to 1.87 million the lowest level since March. The inventory computes to a 4.2-month supply of existing homes for sale.

The historic average of the supply of existing homes for sale is 6.0 months.

Per the Case-Shiller data, prices rose fastest in August in Las Vegas (1.0 percent), San Diego (0.9 percent) and Phoenix (0.7 percent).

Regionally, month-month the price index was up 0.6 percent in August in the Northeast, up 0.5 percent in the Midwest, 0.4 percent in the West and 0.3 percent in the South.

Year over year price increases were led by Seattle (13.2 percent), the only city to experience a double-digit percentage increase. Year-year price increases in Seattle, Dallas, Portland, Minneapolis, Tampa and Miami were weaker in August than in July.

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.

Pending Home Sales Index Flat in September With Supply Constraints

Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • National Association of Realtors’ September Pending Home Sales Index (PHSI) was FLAT to August at 106.0, the lowest level since January 2015;
  • PHSI for August was revised down from 106.3 to 106.0;
  • August decline was the steepest since January;
  • Year-year the index is also DOWN 3.5 percentage points.

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Even after the government’s new home sales report showed a sharp increase in September, the National Association of Realtors’ Pending Home Sales Index (PHSI)  was unchanged, hinting at more disappointing home sales. The PHSI, like the government report, measures homes under contract for sale. The PHSI has declined in six of the first nine months of this year.

The NAR blamed weak inventories – limiting buyer choice – for the weak report and weak sales outlook. The Census Bureau reported 1,201,000 vacant homes for sale at the end of the second quarter, the lowest total since the end of the first quarter of 2002 when there were 1,197,000 vacant homes for sale.

According to the Census figures, 7,450,000 homes were “held off market” at the end of the second quarter, the highest total in over a year. At the end of the first quarter of 2016, 7,572,000 homes were “held off market.”

Homes that were destroyed in Texas and Florida will only add to the supply constraints while at the same time increasing demand. That said, the purchase of a home is not a decision on which buyers will compromise.

But pending home sales were weakening in the South even before hurricanes Harvey and Irma made landfall. Indeed, the PHSI in the South has dropped for five of the last six months, according to the NAR.

The index fell 2.3 percent in the South in September while rising in the other three Census regions: up 1.9 percent in the West, 1.4 percent in the Midwest and 1.2 percent in the Northeast.

Nationally the PHSI fell 3,5 percent year-year, the largest annual decline since April when the index was off 3.7 percent from the prior 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 Claims Rise But Still Show Improving Labor Market

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 233,000 1st time claims for unemployment insurance for the week ended October 19, UP 10,000 from the prior week;
  • The number of initial claims for the week ended October12 was revised UP 1,000 to 223,000;
  • The four-week moving average of first time claims DROPPED 9,000 to 239,500, the fourth straight weekly decline;
  • Four week moving average represented 0.156 percent of employment, down from 0.162 percent one week earlier and the lowest since late August;
  • The number of continued claims – reported on a one-week lag – for the week ended October 12 was 1,893,000, DOWN 3,000 from the previous week and the lowest since December 29, 1973 when it was 1,805,000;
  • The four-week moving average of continuing claims DROPPED 4,500 to 1,903,500.

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The labor market appears fully recovered from storms which battered Texas, Florida and Puerto Rico, at least according to the weekly report of first time claims for unemployment insurance reported by the Department of Labor.

Initial claims fell sharply in Florida and were essentially unchanged in Texas for the week ended October 19 although they did increase in Puerto. But the Labor Department noted the claims procedure in Puerto Rico remains disrupted because of hurricane Maria.

Be that as it may, the numbers continue to look good. Since mid-September – the “reference week” used by the Bureau of Labor Statistics for developing the monthly Employment Situation report – initial claims dropped 14 percent and the four-week moving average declined 7.5 percent, a good sign for the unemployment rate.

The n umber of continued claims – a surrogate for hiring – is down (meaning more people with jobs) a little under one percent and the four week moving average is down just over two percent.

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.

New Home Sales Hit 10-year High

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Pace of contracts for new home sales SURGED 28.9 percent in September to 667,000 (seasonally Adjusted Annual Rate), the largest month-month increase in more than 25 years (Jan 1992: 21.1 percent)
  • Unsold inventory WAS FLAT to August at 179,000
  • Sales pace for August was revised up 1,000 to 561,000, with the largest revision, up 15,000, coming in the hurricane-afflicted South;
  • With faster September sales rate, months’ supply of new homes for sale FELL back 5.0 percent, the lowest since March;
  • Median price of a new home ROSE $15,900 from August to $319,700;
  • Year-year the median price of a new home was up $4,900 (1.6 percent)

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Making up for ground lost to two mammoth storms, the pace new home sales spurted in September to 667,000, the fastest pace in 10 years (October 2007: 727,000) the Census Bureau and Department of Housing and Urban Development reported.

The September sales increase included a 26 percent increase in sale in the South which was ravaged by Hurricanes Harvey and Irma.

At the same time, the median price of a new home rose 15.9 percent or $15,900 to $319,700, bouncing back from a 6.1 percent drop in August.

The government report tracks contracts for sale of newly built homes. The sales report from the National Association of Realtors, which reflects resales of homes, showed a modest (0.7 percent) gain in September. The NAR report on contracts for sale (pending home sales) is scheduled for release next week.

The average rate for a 30-year fixed rate mortgage, according to the weekly Freddie Mac survey, dropped from 3.88 percent in August to 3.81 percent in September, the lowest this year.

Some of the increase in September sales may be attributed to the storms as families reinvested insurance proceeds from destroyed homes.

The strong September sales pace will exacerbate home building pressures as inventories are depleted and builders face higher prices for both materials and labor to build new homes. Both housing permits and starts ticked down in September according to a government report last week. Starts of new single-family homes fell 4.6 percent, the sharpest decline in almost a year. Completions of new single-family homes rose 4.6 percent suggesting buyers are snapping up new homes as soon as they are completed.

Indeed, the “gap” between new home sales and completions contracted in September to its narrowest since March 2015. In September 781,000, single family homes were completed 114,000 than were sold. Completions outpaced sales by 262,000 in July.

The “gap,” while not halting the inventory growth certainly slows it providing an incentive for increased building activity.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

1st Time Unemployment Claims, Continued Claims Each Fall to 44-year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 222,000 1st time claims for unemployment insurance for the week ended October 14 – DOWN 22,000 from the prior week – to the lowest level since March 31, 1973;
  • The number of initial claims for the week ended October 7 was revised UP 1,000 to 244,000;
  • The four-week moving average of first time claims DECLINED 9,500 to 248,250;
  • Four week moving average represented 0.162 percent of employment, down from 0.168 percent one week earlier
  • The number of continued claims – reported on a one-week lag – for the week ended September 30 was 1,888,000, DOWN 16,000 from the previous week and the lowest since December 29, 1973 when it was 1,805,000;
  • The four-week moving average of continuing claims DROPPED 22,750 to 1,906,000, the lowest level since January 12, 1974 when it was 1,881,000.

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The week before hurricanes Harvey, Irma and Maria upset lives – some fatally — and property, there were 236,000 first time claims for unemployment insurance. With recovery in process – though still sketchy in Puerto Rico and the U.S. Virgin Islands – claims fell below that level in the week ended Oct 14 to a 44 year low, the Department of Labor http://www.oui.doleta.gov/press/2017/101917.pdf reported Thursday.

Claims data from Puerto Rico and the Virgin Islands remain uncertain with both communications and transportation in disarray, but nevertheless, the current week’s data show a remarkable swing with a net decline of 14,000. Claims rose 62,000 for the week ended September 2 when Houston was rocked by Harvey and 9,000 after Irma swept through Florida. But claims dropped 85,000 in the intervening weeks – including 47,000 in the last three weeks alone.

The result is the labor picture is looking stronger than it has in years.

But, as the Job Openings and Labor Turnover Survey suggested, there remains a “skills gap” with more job openings than hires which should produce higher wages to continue to stimulate sales. Of course, that’s until Federal Open Market Committee steps in to “remove the punchbowl just as the party heats up.”

The FOMC meets twice more before the year ends with another rate hike likely at at least one of those meetings.

The claims numbers also suggest the next employment report from the Bureau of Labor Statistics could show a sizable jump in payrolls wiping out the 33,000 drop registered for September. The Employment Situation report is likely too to to show another drop in the unemployment rate with increased hiring for the rebuilding efforts in Texas and Florida.

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.