Retail Sales Drop in January as Online Sales Flatten

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • January retail sales – measured by prices – FELL $1.3 billion or 0.3 percent from December;
  • Virtually every category of sales, except electronics, clothing and sporting goods stores saw a decrease in January; sales at Gasoline stations were up 1.6 percent in January as the average price of a gallon of gasoline rose from $2.594 in December to $2.671 in January; were off 0.3 percent attributable to unseasonably warm temperatures;
  • Building materials and supply stores saw the largest drop in sales, a 2.4 percent decline from December

Trends:

  • Year-year total sales ROSE 3.5 percent in January, after a 5.2. percent December-December increase;
  • Online sales in January were virtually flat to December and represented 1.8 percent of total January sales, down from 11.2 percent in December;
  • With the Bureau of Labor Statistics reporting a sharp 0.8 percent increase in prices in January; the drop-in retail sales reflects demand, not price changes;

Data source: Census Bureau

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The Census Bureau’s report on retail sales was a dose of reality for retailers and indeed may have been anticipated. Two major retailers announced severe cuts just ahead of the Census report: Walmart dropping store managers and J.C. Penney eliminating almost 700 warehouse jobs.

{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.]

The retail report sets a base against which to measure the impact of the increase in take-home pay as a results of the tax code changes enacted by Congress and signed into law by the President. What remains to be seen is whether taxpayers will squirrel away those increases in anticipation of the loss of deductions also contained in the new tax law.

The drop in sales followed as well the report by the Bureau of Labor Statistics two weeks ago of a 7.7 percent gain in retail jobs in January. Retail employment was down 0.2 percent from January 2017 to last month and fell by about 2,400 in 2017. In 2016, retail employment grew by about 17,000.

The dip in retail sales could have an impact on first quarter GDP since retail sales are about55 percent of consumer spending which is about 2/3 of GDP.

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.  

Economy Adds 200k Jobs in January; Unemployment Rate remains 4.1%; Earnings Contract

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Number of payroll jobs INCREASED 200,000 in February compared with working age population growth of 671000;
  • Prior month job totals REVISED DOWN net 24,000: UP 12,000 in December to a gain of 160,000 (from the initial report of a 148,000 increase) but DOWN 36,000 in November to a revised growth of 216,000 jobs (from 252,000);
  • Average weekly earnings FELL $2.25 to $917.18, a 2.5 percent year-year gain DOWN from December’s 2.9 percent year-year growth;
  • Unemployment rate in December remained at 4.1 percent;
  • The number of persons holding multiple jobs ROSE 198,000 in January, accounting for most of the month’s increase in jobs;
  • Average hourly earnings GREW 9¢, a 2.8 percent year-year growth;
  • Average weekly hours fell to 34.3, contributing to both the drop in weekly wages and the increase in jobs;
  • The labor force (the sum of employed and unemployed) was 161.1 million in January, up about 518,000 from 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 was 95.7 million in January, up from 95.5 million in December but the numbers are not directly comparable because of the “population controls” BLS uses each January, adjusting numbers for changes in population;
  • Private sector payrolls ROSE 196,000 in January;
  • Employment-Population ratio remained at 60.1 percent;
  • Number of construction jobs INCREASED 60,000, with 19,000 new residential construction jobs;
  • Health care and leisure-hospitality jobs each INCREASED 26,000 in January;
  • Number of retail jobs ROSE 15,4000 – following a drop of 25,600 in December;
  • Number of leisure-hospitality jobs also GREW in January, UP 35,000

Trends

  • Three-month average increase in payroll jobs was 192,000, down from 216,000 in the prior three months;
  • Number of new entrants to the labor force (as unemployed) was 645,000 in January, UP from 581,000 in December;
  • Unemployment rate for Blacks, which had dropped to an all-time low of 6.8 percent in December, jumped to 7.7 percent in January;
  • Unemployment rate for those without a high school diploma FELL to 5.4 percent in January from 6.3 percent in December, sign of a tighter labor market;

Data Source Bureau of Labor Statistics

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The January employment situation report provides cover for the Federal Open Market Committee to raise interest rates which even without Fed action have been creeping up.

The robust labor market was clear in Friday’s report from the Bureau of Labor Statistics showing as it did the fifth month-month gain of more than 200,000 jobs in the 12-month old Trump Administration. To be sure, a sizable of that increase have been in low-paying retail and leisure-hospitality jobs, but still, more jobs are more jobs.

It’s obviously too early to tell if new jobs will result from the new tax law, though it is likely the increase in take-home pay because of revised withholding tables and rates could provide a spending boost by those who don’t put the money aside in anticipation of a surprise in April 2019.

The troubling aspect of the report was the drop in both average weekly hours and consequentially the drop in average weekly earnings. Ideally a growing economy should produce more, not fewer hours of work, with the increase in hours raising the need for new or additional hires.

That the increase in jobs was matched by an increase in multiple job holders suggests families are still struggling to make ends meet.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124. and today (Friday February 2) on the Midday Briefing on POTUS.You can follow Mark Lieberman on Twitter at @foxeconomics.

1st Time Unemployment Claims Decline; Continued Claims Fall Year-Year for Eight Years

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 230,000 1st time claims for unemployment insurance for the week ended January 27, a DECREASE of 1,000 from the prior week;
  • The number of initial claims for the week ended January 20 was REVISED DOWN 2,000 to 231,000
  • The four-week moving average of first time claims DROPPED 5,000 to 234,500;
  • Four week moving average represented 0.152 percent of employment, DOWN from 0.155 percent one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended January 20 was 1,953,000, UP 13,000 from the previous week’s UPWARDLY REVISED 1,940,000;
  • The four-week moving average of continuing claims INCREASED 12,000 to 1,9232,750;

Data Source: Department of Labor

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Trends

  • In the last 12 months, the four-week moving average of first time claims for unemployment insurance has fallen 4.6 percent.
  • The four-week moving average has improved year-year for the last 15 straight weeks and virtually every week since mid-June 2016, interrupted by the aftershock of last summer’s hurricanes.
  • The four-week moving average of continued claims has dropped (meaning people are leaving the unemployment insurance rolls) every week since the week ended January 23, 2010 – a span of eight years. The Ferris wheel that is weekly report on unemployment insurance claim filing was climbing last week as we finished the last four-day work week of the month with only one more until Spring.

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 Up

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 233,000 1st time claims for unemployment insurance for the week ended January 20, an INCREASE of 17,000 from the prior week;
  • The number of initial claims for the week ended January 13 was REVISED DOWN 4,000 to 216,000
  • The four-week moving average of first time claims DROPPED 3,500 to 240,000;
  • Four week moving average represented 0.156 percent of employment, DOWN from 0.159 percent one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended January 6 was 1,937,000, DOWN 28,000 from the previous week’s UPWARDLY REVISED 1,965,000;
  • The four-week moving average of continuing claims DROPPED 3,500 to 1,9201,000;

Data Source: Department of Labor 

Trends

  • The revision to the number of 1st time claims filings for the week ended January 13, made that week’s tally the lowest since the week ended February 17, 1973;
  • From mid-December to mid-January, the number of first time claims fell 14,000 but the moving average rose 1,500.

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The Ferris wheel that is weekly report on unemployment insurance claim filing was climbing last week as we finished the last four-day work week of the month with only one more until Spring.

It won’t be until the end of February that holidays will stop complicating the analysis of this weekly report.

The real impact of these data points will start to show up in the continued claims numbers reflecting as they do the need for workers either to replace those who have been laid off or for new positions. The next Employment Situation report from the Bureau of Labor Statistics will be released on Groundhog Day.

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 Plummet in December

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales PLUNGED 9.3 percent in December to 625,000 (seasonally Adjusted Annual Rate);
  • Unsold inventory ROSE 11,000 to 295,000
  • Median price of a new home ROSE $500 from November to $335,400;
  • Year-year the median price of a new home was up $8,400 (2.6 percent)

Trends:

  • The (percentage) drop in new home sales (contract signings) was the steepest in 16 months (August 2016: down 9.6 percent from the previous month);
  • The pace of new home sales has fallen month-month in four of the last six months, but remains up year-year;
  • Sales fell in all four census regions, led by the South where contract signings dropped 36,000 the steepest month-month decline since March 2015;
  • The inventory of unsold homes is at its highest level since April 2009 (300,000) the depth of the Great Recession;
  • The increase in the inventory of unsold homes was the steepest one-month climb since April 2006;
  • Median price of a new single-family home is at its highest level since Census-HUD began tracking in 1963.

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

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The National Association of Home Builders might want to rethink its ringing endorsement of the new tax law.

Heading into the first months of the new law new home sales fell off the table in December with forecasts suggesting the new law will cut deeply into all home sales.

Indeed, the National Association of Realtors (NAR) Wednesday reported a sharp decline in December sales, down 3.6 percent from November. The NAR report covered closings in December. NAR will report on December contract signings next week.

The NAR’s Pending Home Sales Index (PHSI) doesn’t move in lockstep with the new home sales report, if anything the new homes report is slightly more optimistic. In the last 12 months, the new home sales report showed negative month-month changes five times while the PHSI was down month-month seven time. In the previous 12 months, the PHSI dropped month-month five times while new home sales fell month-month four times.

Even though the two reports might be considered apples and oranges, there is a pattern developing which could be exacerbated as the reality of the revised tax code begins to sink in. In sum, the new tax provisions removed or curtailed two major incentives for home buying: capping the amount of mortgage interest and property taxes which can be deducted.

Nonetheless home builders, the monthly Housing Market Index (HMI) generated by NAHB remain confident. The HMI fell just two points to 72 in January. Any reading over 50 is said to be positive as it means more builders are optimistic than pessimistic. But, one of the components of the HMI – buyer traffic – fell four points to 54 in the survey conducted in the first 10 days of January.

Perhaps as an acknowledgement of the decline in inventories, the government reported earlier this month the pace of starts of new single-family homes fell 11.8 percent.

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.

December Home Sales Drop Even as Prices Barely Budge; Inventories Skid

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales – closed sales –FELL sharply in December: down 3.6 percent to a seasonally adjusted annual sales rate of 5.57 million after a 5.1 percent increase in November
  • The November sales rate was REVISED DOWN 30,000 to 5.78 million;
  • Median price of an existing single-family home DIPPED $400 or 0.2 percent to $246,800;
  • Year-year the median price ROSE 6.3 percent or $14,600;
  • Number of homes available for sale FELL 190,000 or 11.4 percent to 1.48 million;
  • The months’ supply of homes for sale in December FELL to 3.2 – the weakest since the data have been collected — from 3.5 in November.

Trends:

  • The month-month percentage decline in existing home sales was the largest since February when sales fell 3.9 percent;
  • The sales drop came two months after the Pending Home Sales Index – measuring contracts for sale –had increased 3.5 percent;
  • The median price of an existing home has fallen month-month for five of the last six months;
  • The number of homes for sale has fallen for seven straight months for the first time since NAR has been keeping records 2008.

Data Source: National Association of Realtors: (NAR):

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In advance of the tax code changes which are expected to cut into home sales, the National Association of Realtors posted disappointing numbers for the end of 2017.

Disappointing because not only because the December sales (closings) represented a drop from November but because the main leading indicator – pending home sales (contracts) had been strong in October. Given the 2-month lag between contract and closings, that strength should have translated into stronger closing activity.

Sales dropped in every census region, led by a 7.5 percent decline in the Northeast, perhaps attributable to weather. The Northeast also saw a 4.5 percent price drop from November.

The fundamentals arguing against an increase in home sales remain unchanged and perhaps have gotten even worse with the Administration’s decision to cap mortgage interest and property tax deductibility. The impact of both provisions of the new law will likely be to make home-owning more expensive and tilt the preference to renting.

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

1st Time Unemployment Claims Drop to 45-Year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 220,000 1st time claims for unemployment insurance for the week ended January 13, a DROP of 41,000 from the prior week;
  • The number of initial claims for the week ended January 6 was UNCHANGED at 261,000
  • The four-week moving average of first time claims FELL 6,250 to 244,500;
  • Four week moving average represented 0.159percent of employment, DOWN from 0.163 percent one week earlier;
  • The number of continued claims – reported on a one-week lag – for the week ended January 6 was 1,952,000, UP 76,000 from the previous week;
  • The four-week moving average of continuing claims INCREASED 4,000 to 1,921,000;

Data Source: Department of Labor

Trends

  • 1st time claims for unemployment insurance dropped top their lowest level in 44 years: week ended February 24, 2973 when 218,000 were filed;
  • The 41,000 week-week decline was the largest since the week ended February 6, 2010 when the number of filings fell 42,000 from the previous week.

With most holiday related layoffs behind them employers could turn back to the concept of right-sizing which would mean holding onto experienced, accomplished staff.

That seems to be exactly what happened in the first full week of 2018 – with one caveat: the week included a run-up to a three-day weekend, never the best time to make personnel moves.

Holidays do of course complicate economic data reports so again, we don’t expect labor movements to be easy to interpret for a few weeks.

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, 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.