Housing Construction Activity Stronger Despite April Dip

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing permit filings in April FELL 1.8 percent to a seasonally adjusted annual rate (SAAR) of 1.35 million units;
  • The rate of permits for single-family home permits filed in April ROSE, 0.9 percent to a SAAR of 859,000 units;
  • The rate of permit filings for multi-family homes FELL 6.3 percent in April to 493,000 units (SAAR);
  • The rate of all housing starts FELL 3.7 percent in April to a SAAR of 1.29 million with all the decline attributable to weaker multi-family starts; the rate of single-family starts edged up 1,000 to 894,000;
  • The rate of home completions in April INCREASED 2.8 percent from March; The pace of both single-family and multi-family completions increased.

Trends:

  • The April report on single-family permits would have been stronger had it not been for an upward revision to March data;
  • The “gap” between March new home sales (latest available) and single-family completions narrowed to 160,000 (seasonally adjusted annual rate) from 215,000 in February;
  • Permits for single-family homes represented 63.5 percent of all permits in April, UP from 61.8 percent in March;
  • At the same time, single-family homes accounted for 69.5 percent of all starts, below 70 percent for the fourth straight month.

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

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Led by a continued decline in multi-family activity, housing permits and starts slipped again in April. Completions of single-family homes also dropped which could be good news reducing inventory pressures.

The decline in inventories could have been the main reason behind the report yesterday that builder confidence improved in May as reported Tuesday by the National Association of Home Builders.

But the net effect of the April report by the Census Bureau and Department of Housing Development would be to continue a dour outlook for home building one of the two basic industries fueling the U.S. economy. As significantly – or perhaps more – residential construction is an endeavor that cannot be off-shored.

That said, the impact of the Trump Administration’s imposition of higher tariffs on steel could flow through to multi-family construction either increasing the cost of construction or cutting it sharply.

Despite the month-month gyrations of these data series, home construction is actually looking stronger: total permits in the first four months of this year (unaffected by weather) and starts (which do respond to weather) are each up 7.6 percent from the same period last year. Single-family permits for the first four months of this year are up 6.3 percent over the same period a year ago and starts are up 6.7 percent.

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 Improves in May, Ending Four-Month Slide

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index IMPROVED two points in May to 70;
  • The index of current sales ROSE two points to 76, the other index components — future (six months hence) sales and the index of buyer traffic – were flat to April;
  • By region, builder confidence FELL one point in the South and the West while improving five points in the Midwest and remaining flat in the Northeast.

Trends:

  • Overall index rose for the first time this year;
  • The index reading for April was revised down one point to 68, exaggerating the May jump;
  • The index has been positive (i.e. over 50) for 47 straight months

Data Source: National Association of Home Builders 

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After a dismal start to the year, with builder confidence – measured by The National Association of Home Builders (NAHB) Housing Market Index (HMI) – finally improved in the first 10 days of May, reflecting increases in both new and existing home sales.

New home sales, measuring contracts for the purchase of new single-family homes, improved for the second straight month in March according to latest Census Bureau data. The report of new home sales for April will be released next week.

Total residential permits improved in March (April data will be released tomorrow) although the increase was confined to multi-family structures; the annualized rate of single-family permits fell in March and has dipped in two of the first three months this year.

Housing starts followed a similar pattern in March: the total for all housing increased but single-family starts dropped.

The tax bill signed by President Trump in December reduced some tax incentives for home ownership by capping mortgage interest deductions and the deduction for local property taxes.

At the same time, the inventory of new homes for sale continues to inch up. The (annualized rate) of new homes for sale was 301,000 in March, matching February, up 13.2 percent from March 2017 and the largest since March 2009 (311,000).

The relatively high inventory of unsold homes would tend to discourage new building.

The dip in confidence coincided with a steady increase in mortgage rates. Freddie Mac reported last Thursday the rate for a 30-year fixed rate mortgage was 4.55 percent, up from 4.05 percent a year ago

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 April but Growth is Slower Than March

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • April retail sales – measured by prices – ROSE $1.48 billion or 0.3 percent from March;
  • Gasoline station sales were UP 0.8 percent – matching the increase in furniture store sales – as gasoline prices rose 6.4 percent;
  • The increase in gasoline sales station sales accounted for one-fifth of the increase in all sales although gasoline station sales represent only 8.5 percent of all retail activity;
  • The increase in retail activity came in the same month in which the Consumer Price Index rose 0.2 percent which means consumer activity increased faster than inflation;
  • Sales at clothing retailers increased 1.4 percent, the fastest growth of any retail category;
  • Sales at health and personal care stores, restaurants, electronics and sporting goods stores dipped in April.

Trends:

  • Year-year total sales ROSE 4.8 percent in April, matching the year-year increase in March;
  • The increase in retail activity came in the same month in which the Bureau of Labor Statistics reported real average weekly earnings in April were flat to March;
  • BLS also reported the number of retail jobs in April rose just 1,800 4,400 or .01 percent from March.
  • In the three months since the revised tax code boosted take home pay, retail sales have increased $5.4 billion; in the same three months in 2017, retail sales grew $518 million

Data source: Census Bureau

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Retail sales – at least based on prices – continued to reflect the higher take home pay resulting from the tax cuts enacted last December. Sales rose a solid 0,3 percent on the heels of a 0.8 percent increase (revised from the initially reported 0,6 percent gain) in March.

The increase came even as the number of retail jobs barely budged in April. Indeed, the number of retail jobs at clothing stores declined in April even though sales at clothing outlets shot up at the fastest pace since February 2017. The anomaly runs counter to the general hiring mantra of adding employees to increase sales, calculated as sales per employee.

Sales declined 0.4 percent at health and personal stores in April as the number jobs at those stores fell 1,700 or 0.2 percent.

The number of jobs at furniture stores contracted 0.2 percent while sales at those stores increased 0.8 percent.

Online sale rose 0.6 percent in April and remained at about 11 percent of all retail activity.

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.  

Continued Claims for Unemployment Insurance Hit New Post-Recession Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 211,000 1st time claims for unemployment insurance for the week ended May 5 UNCHANGED from the prior week’s unrevised report;
  • The four-week moving average of first-time claims FELL 5,500 to 216,000;
  • Four week moving average represented 0.139 percent of employment, DOWN from 0.143 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,790,000 for the week ended April 21, UP 21,000 from the previous week’s UPWARDLY REVISED 1,769,000;
  • The four-week moving average of continued claims FELL 22,000 to 1,812,500.

Trends:

  • The four-week moving average of initial claims for unemployment insurance fell to its lowest level since December 20, 1969.
  • The number of first-time claims for unemployment insurance remained below 250,000 for the 17th straight week. [350,000 is considered by labor economists to be the “tipping point” between a robust and weak labor market.]
  • While the number of continued claims increased, the four-week moving average of continued claims fell to its lowest level since This is the lowest level for this average since December 29, 1973, when it was 1,784,250.

Data Source: Department of Labor https://oui.doleta.gov/press/2018/051018.pdf

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The strong report on unemployment insurance claims followed the positive report Tuesday of the Job Openings and Labor Turnover Survey (JOLTS) which showed the strongest month-month increase in job openings in March in nearly a year.

Job Openings in March of this year increased 472,000 to 6.55 million, the highest total on record. It stands to reason then continued claims for unemployment insurance – a surrogate for hiring — would drop with more opportunities for employment. Indeed, the ratio of unemployed to job openings fell in March to 1.01, also the lowest on record.

And, as a further sign of the strong labor market, the ratio of “quits” (voluntary departures other than retirement) to layoffs and discharges rose to 2.14, a record high as more workers felt secure enough in their ability to find new employment. The JOLTS data provided further background to eh employment situation report for April which showed the unemployment rate dropped to 3.9 percent.

And the continued claims for unemployment insurance data suggested further improvement, dropping again to new post-recession lows.

With the ongoing strength in the labor market, the Federal Open Market Committee to remains on track for further interest rate increases despite Thursday’s report CPI inflation rose to 2.5 percent 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.

Unemployment Rate Drops to 3.9%; Economy Adds a Disappointing 164K jobs in April; Wage Growth Remains Weak

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate in April DROPPED to9 percent after six straight months at 4.1 percent;
  • Unemployment rate for Blacks dropped to 6.6 percent, a record low, from 6.9 percent in March;
  • Number of payroll jobs INCREASED 164,000 in April; the number of multiple jobholders increased 58,000, 35.4 percent of the total increase in jobs;
  • Private sector jobs INCREASED 168,000, which means government jobs (all levels) DIPPED 4,000;
  • Average weekly earnings ROSE $1.38 in April to $925.98, a 2.5 percent year-year gain;
  • Average hourly earnings GREW 4¢, in March to $26.84 a 2.6 percent annual increase;
  • Prior month job totals REVISED UP net 30,000: March’s 103,000 increase was REVISED UP by 32,000 to a growth of 135,000 jobs but February’s last-reported 326,000 job gain was trimmed by 2,000 to 324,000;
  • Average weekly hours REMAINED at 34.5 in March;
  • Labor force – DROPPED 236,000 in April after contracting 158,000 in March;
  • The number of persons NOT in the labor force INCREASED 000; labor force participation rate FELL BACK 0.1 percentage points to 62.8 percent;
  • Employment-Population ratio DROPPED at 60.3 percent in April from 60.4 percent in March;
  • All industry sectors gained jobs except wholesale trade which shed 9,800 jobs; Number of construction jobs INCREASED 17,000, including 7,500 new residential construction jobs;
  • Number of retail jobs increased 1,800 and leisure-and-hospitality jobs increased 18,000.

Trends:

  • The 2.5 percent (year-year) increase in average weekly earnings marked a sharp decline from 3.2 annual growth in March
  • Monthly job growth has averaged 187,000 in the 15 months since President Trump took office; in the last 15 months of the Obama administration, the economy added an average of 209,000 jobs per month;
  • Number of persons working full-time increased 319,000 in April while the number working part-time dropped 350,000.
  • Number of new entrants to the labor force (as unemployed) was 623,000 in April, down slightly from 625,000 in March;

Data Source Bureau of Labor Statistics

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The April report suggested the March report was not a fluke. March data showed a gain of 135,000 new jobs after an outsized 324,000 increase in February and had originally been seen as regression to the mean but April’s numbers were perhaps a bit more realistic

The fall in the unemployment rate was not unexpected given the trend of the weekly reports on new claims for unemployment insurance, Claims have generally been falling since the beginning of the year as employers grow increasingly frustrated in their ability to fill vacant positions; as a result, they hold on to the staff they have.

Employers though have not been using wages to increase or maintain their workforce. With few, if any, wage increase, employees have little incentive to quit one job to take another. Indeed, the number of “job leavers,” (the BLS term for quits, dropped to 815,000 in April from 864,000 in March.

That annual increase in earnings – both hourly and weekly – remained relatively weak, is a double quandary not only because of the tight labor market but because the two lowest paying industry sectors – retail and leisure-and-hospitality added just 11.0 percent of the total number of new jobs. As recently as six month ago, retail and leisure-and-hospitality represented 40.6 percent of new jobs.

Employment in April (as distinct from jobs) grew a scant 3,000 while the number of persons unemployed dropped 239,000. The shrinking number (unemployed) and a shrinking denominator (employed plus unemployed) resulted in the drop in the unemployment rate.

Another indicator of a tight labor market in an otherwise expanding economy, average weekly hours, remained flat at 34.5 for the third straight months. An increase in average weekly hours typically portends more jobs.

Two sectors which perennially lead job growth, dis so again in April: professional and business services added 54,000 new jobs compared with an average monthly growth of 43,000 in the last year; health care added 30,000 jobs just under the monthly average growth of 32,000 in the last year.

The number of temp jobs, often considered a leading indicator of overall job growth, increased 10,300, slightly ahead of the average growth of 9,500 i9n the last 12 months.

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.

Continued Claims for Unemployment Insurance Hit 44-Year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 211,000 1st time claims for unemployment insurance for the week ended April 28 an INCREASE of 2,000 from the prior week;
  • The number of initial claims for the week ended April 21 was UNCHANGED at 211,000;
  • The four-week moving average of first-time claims FELL 7,550 to 221,500;
  • Four-week moving average represented 0.143 percent of employment, DOWN from 0.148 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,756,000 for the week ended April 21, DOWN 77,000 from the previous week’s DOWNWARDLY REVISED 1,833,000;
  • The four-week moving average of continued claims FELL 15,500 to 1,833,250.

Trends:

  • The reading of 1.756,000 continued claims for unemployment insurance was the lowest since December 8, 1973 when there were 1,717,000 continued claims;
  • The 77,000 week-week drop in continued claims was the largest decline since November 26. 2016 when continued claims also fell 77,000 week-week;
  • The number of first-time claims for unemployment insurance remained below 250,000 for the 16th straight week. [350,000 is considered by labor economists to be the “tipping point” between a robust and weak labor market.]
  • Measured against the total labor force (see Advisor Perspectives graph below), continued claims are at a record low.

Data Source: Department of Labor

Initial Claims

Unemployment insurance claims continue to play a game of limbo with no apparent limit to how low they can go. (of course they could drop to zero but that would cause a different set of problems.) Claims for unemployment insurance have fallen in half of the first 18 weeks this year with a net decline of 50,000 – from 261,000 for the week ended January 6 to this week’s tally of 211,000.

To be sure there have been some weeks in which initial filings increased, but the average wee-week decline has been 12,444 compared with the average increase of 7,000. Ther were two weeks in which claim filings were unchanged from the previous week.

The Federal Open Market Committee is surely taking notice of the tight labor market.

“Job gains,” the FOMC said in the post-meeting statement issued Wednesday, “have been strong, on average [reflected in the declining level of continued claims for unemployment insurance], in recent months, and the unemployment rate has stayed low.”

The unemployment rate is poised to drop still further when the Bureau of Labor Statistics releases its Employment Situation report for April tomorrow.

The consensus forecast calls for an increase of 193,000 jobs (after an increase of just 103,000 in March and an unemployment rate of 4.0 percent which would be the lowest since December 2000 when it was 3.9 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.

Pending Home Sales Index Essentially Flat in March

Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • National Association of Realtors’ March Pending Home Sales Index (PHSI) ROSE 0.4 percent from February to 107.6;
  • PHSI for February was revised down from 107.5 to 107.1;
  • Year-year the index was DOWN 3.3 percentage points;

Trends:

  • The March increase was the second straight monthly increase; PHSI has declined only once (January) in the last six months;
  • Index is down year-year for the third straight months;
  • PHSI is essentially tracking the Census Bureau’s new homes report (also based on contracts for sale) which was flat in January and rose in February and March

Data Source: National Association of Realtors (NAR) 

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With some sleight of hand, the National Association of Realtors’ Pending Home Sales Index showed a slight increase in March – although not much – as the February reading was revised downward.

The NAR continued to blame a lack of inventory for the sideways movement in the PHSI but the bottom line is that the “increase” existing home sales notwithstanding – despite a blip up in March closings – continue to struggle.

A recent rise in mortgage interest rates added to the challenges faced by sellers – and would-be buyers – perhaps exacerbating or exacerbated by the changes in the tax law which capped the mortgage interest.

The increase in the PHSI should, all else being equal, mean a bump up in closings for April and May but the drop in the PHSI in January did not mean a drop in closings in March. Indeed, closings jumped likely because buyers feared a further increase in mortgage rates.

Mortgage rates reported by Freddie Mac last Thursday jumped to the highest level in over four years. And, according to the latest NAR data the inventory of homes for sale was down year-year and remains below the average of the last 12 months. NAR reported a 3.6-month supply of homes for sale; the sixth straight the months’ supply has been below four, the longest stretch since the NRA began calculating the months’ supply in 1999.

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.

Homeownership Rate Flat in 1Q

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Homeownership rate in 1Q 2018 was 64.2 percent, UNCHANGED from 4Q but up from 63.6 percent in 1Q 2017;
  • 208,000 FEWER household owned homes in 1Q than in 4Q
  • 100,000 FEWER vacant homes for sale in 1Q than in 4Q

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The nation’s housing market remained flat in the first quarter the Census Bureau and Department of Housing and Urban Development reported Thursday.

The homeownership rate which had been growing from the first quarter through the fourth quarter a year ago hit a wall remaining at 64.2 percent. The rate, while still up from the 63.7 percent President Trump inherited from the fourth quarter of 2016, was though below the 65.3 percent average for all the Obama years.

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 of 2016.

According to the National Association of Realtors (NAR), sales of existing single-family homes in the first quarter averaged 5.51 million (seasonally adjusted annualized rate) down from the 5.54 million in 2017.

New home sales though averaged 668,000 in the first quarter, up from 617,000 in 2017.

Though the homeownership rate has come back, — it had fallen to 62.9 percent in 2Q 16 – it remains far below the 69.2 percent reached in 2Q 2006. One of the reasons is the change of preferences of younger families. From 2000 through 2010 and average of 54 percent of those aged 30-34 owned homes; since then an average of 47.1 percent of those in that age cohort were homeowners. The lower percentage could be directly attributed to the Great Recession when those 30-34 were watching their parents or their friends’ parents struggle in the mortgage meltdown. Since then, of course, while mortgages may have stabilized, that same age cohort has been saddled with student loans which make homeownership more of a dream.

According to Thursday’s report, the percentage of senior-citizens (over 65) owning homes has fallen from almost 81 percent to under 79 percent in the same period.

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.

 

Initial Claims for Unemployment Insurance Drop to 49-year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 209,000 1st time claims for unemployment insurance for the week ended April 21 a DECREASE of 24,000 from the prior week;
  • The number of initial claims for the week ended April 14 was REVISED UP 1,000 to 233,000;
  • The four-week moving average of first-time claims FELL 2,500 to 229,250;
  • Four-week moving average represented 0.148 percent of employment, DOWN from 0.149 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,837,000 for the week ended April 14, DOWN 29,000 from the previous week’s UPWARDLY REVISED 1,866,000;
  • The four-week moving average of continued claims FELL 9,750 to 1,849,750.

Trends:

  • The 209,000 new claims for unemployment insurance was the lowest since December 6, 1969, when 207,000 claims were filed;
  • The 24,000 week-week drop in filings was the largest decline since January 13 when filings fell 45,000 week-week;
  • The number of first-time claims for unemployment insurance remained below 250,000 for the 15th straight week. [350,000 is considered by labor economists to be the “tipping point” between a robust and weak labor market.]
  • The four-week moving average of continued claims fell to its lowest level since January 5, 1974, when it was 1,838,500

Data Source: Department of Labor

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Claims for unemployment insurance continue to fall at a remarkable pace, falling for 9 of the first 15 weeks this year with an average wee-week decline of 12,400.

The ongoing drop in claims filings suggests a true labor shortage may be in the offing which, while bad news for employers could be good news for job-seekers and jobholders if employers respond to the shortage with wage increases.

The next employment situation report May 4 should show if employers are hiking pay or increasing overtime; either way should mean more in worker pockets.

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.

New Home Sales Up in March for Second Straight Month

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales ROSE 4.0 percent in March to 694,000 (Seasonally Adjusted Annual Rate);
  • Unsold inventory was flat to February at 301,000, computing to a 5.2-month supply
  • Median price of a new home ROSE $11,400 from February to $337,200;
  • Year-year the median price of a new home was up $15,500 (4.8 percent)

Trends:

  • The pace of sales has risen 7.8 percent since December and is up 8.8 percent year-year;
  • The inventory of unsold homes is at its highest level since March 2009 (311,000) the depth of the Great Recession;
  • The dollar increase in the median price of a new single-family home failed to offset the $17,500 decline in median price in January and February;

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

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So, the obituary for home sale – and building activity – may have been premature.

Despite changes to the tax code discouraging homeownership, contracts for sale of new single-family homes rose in March for the second straight month. This report, which reflects future sales, is probably more significant than the report by the National Association of Realtors which covered closings on sales of existing (pre-owned) homes.

The increase in contracts for the sale of new single-family homes was the sharpest since last November when the pace of contracts rose 15.4 percent, possibly due to concerns about the tax law then wending its way through Congress. At that point the provisions relating to real estate taxes and home mortgage interest were more draconian than they turned out to be.

That’s not to say housing and home building are back to where they were. There still appears to be a reluctance to invest in a new single-family home as suggested by the high unsold inventory. The number of new home completions in March continues to exceed sales adding to the inventory of unsold homes. Inventory as measured by months’ supply also remains relatively low reducing choices for potential m=home buyers.

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.