The Decline Continued in April: May 18 – 22

Like just about everything else, the housing market slammed on the brakes in April. Here are the five things we learned from U.S. economic data released during the week ending May 22.


Forward-looking economic indicators show business activity fell sharply again in April (but not as drastically as March). The Conference Board’s Leading Economic Index (LEI) shed 4.6 points in April to a reading of 98.8 (2016=100), down 11.7 percent from a year earlier. Four of ten LEI components made positive contributions to the measure, including stock prices and the interest rate spread. The other six components pulled down the LEI, led by average manufacturing hours, jobless claims, and building permits. The coincident index nosedived by 9.4 points to 96.6, down 9.4 percent from April 2019. Of the index’s four components, the two tied to nonfarm payrolls and industrial production pulled the index down. The lagging index, however, advanced by 4.5 points to 115.3 that left the measure up 7.3 percent over the past year. The press release said the broad-based drop in the LEI “suggests that an imminent re-opening of some sectors does not imply a fast rebound for the economy at large.”


Sales of previously owned homes were not immune to the pandemic in April. The National Association of Realtors reports that existing home sales sank 17.8 percent during the month to a seasonally adjusted annualized rate (SAAR) 4.330 million units. This was the biggest single-month percentage drop in home sales in a decade, leaving the measure at its lowest mark since July 2010. Sales were down in all four Census regions on both a month-to-month and year-to-year basis. Beyond softer demand, holding back sales was the number of homes on the market. There were 1.470 million homes on the market at the end of April, down 1.3 percent from March and 19.7 percent from April 2019, and the equivalent to a 4.1 month supply. The median sales price of $286,800 was up 7.4 percent from a year earlier.


…neither were housing starts. The Census Bureau estimates privately-owned housing starts plummeted 30.2 percent during April to a seasonally adjusted annualized rate (SAAR) of 891,000 units. This was the data series’ largest single-month decline (going back to 1959) and left starts at its lowest level since 2015. Single-family home starts were down 25.4 percent from March while the multi-family home (5+ units) starts were off 40.3 percent. Starts fell sharply in all four Census regions on both a month-to-month and year-to-year basis. Looking towards the future, annualized count of issued building permits slumped 20.8 percent to 1.074 million units (also a five-year low). Home completions slowed 8.1 percent to an annualized 1.176 million units. 


Homebuilder confidence rebounded a smidge in May. The National Association of Home Builders’ Housing Market Index added seven points during the month to a seasonally adjusted reading of 37, after plummeting 42 points in April. (An HMI reading below 50 means that more homebuilders see the housing market as “poor” versus being “good.”). The HMI recovered some of its April losses in three of four Census regions: West (+12 points to 44), South (up eight points to 42), and Midwest (adding seven points to 32). The HMI shed another two points in the Northeast, however. The present sales index added six points to 52 while the expected sales index advanced by ten points to 46 and prospective traffic measure moved forward by eight points to 21. The press release noted that “[l]ow interest rates are helping to sustain demand.”


Payrolls shriveled as the unemployment rate rose in all 50 states and the District of Columbia in April. The Bureau of Labor Statistics indicates that the unemployment rate hit new data series highs (going back to 1976) in 43 states, with the highest rates reported in Nevada (28.2 percent), Michigan (22.7 percent), Hawaii (22.3 percent). Only four states had unemployment rates below ten percent: Nebraska (8.3 percent), North Dakota (8.5 percent), Utah (9.7 percent), and Maryland (9.9 percent). States reporting the largest payroll declines were California (-2,344,700), New York (-1,827,300), and Texas (-1,298,900). Payrolls also were below their year-ago levels in all 50 states and the District of Columbia. 

Other U.S. economic data released over the past week:
Jobless Claims (Week ending May 16, First-Time Claims, seasonally adjusted): 2,438,000 (-249,000 vs. the previous week, +2,225,000 vs. the same week a year earlier). 4-week moving average: 3,042,000 (+1,274.9% vs. the same week a year earlier).
FOMC minutes

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Retail Sales, Industrial Production & Prices: All Grim: May 11 – 15

Just about everything declined in April. Here are the five things we learned from U.S. economic data released during the week ending May 15.

#1Retail sales fell hard in April. The Census Bureau estimates retail and food establishment sales hemorrhaged 16.4 percent to a seasonally adjusted $403.9 billion. This was 21.5 percent under April 2019 sales totals. Sales tumbled 12.4 percent at auto dealers and 22.8 percent at gas stations. Net of both, core retail sales were 16.2 percent behind that from March. Virtually every retail segment suffered double-digit sales declines: apparel (-78.8 percent), electronics/appliances (-60.6 percent), furniture (-58.7 percent), sporting goods/hobby (-38.0 percent), restaurants/bars (-29.5 percent), department stores (-28.9 percent), health/personal care (-15.2 percent), and groceries (-13.2 percent). The only retail segment to report a sales gain was nonstore retailers (e.g., internet retailers) with an 8.4 percent advance.

#2Industrial production suffered its biggest decline in more than a century in April. Industrial production nosedived 11.2 percent as factories closed or slowed production. This was the biggest single-month decline ever in the 101-year history for the Federal Reserve data series. Manufacturing output slumped 13.7 percent, following March’s 5.5 percent drop. Durable goods production slowed 19.3 percent, hurt by (among other things) a nearly total stoppage in automobile output, and significant declines for primary metal products, aerospace equipment, and furniture. Nondurables production decelerated 8.2 percent with sharp drops for textiles mills, apparel/leather, printing, and petroleum/coal products. Utility output slowed 0.9 percent while mining output sank 6.1 percent with oil and gas well drilling seeing its biggest decline in the 48-year data series’ history. 

#3Consumer and wholesale prices tumbled in April. The Consumer Price Index (CPI) dropped a seasonally adjusted 0.8 percent during the month, following a 0.4 percent decline in March, per the Bureau of Labor Statistics. Energy prices plummeted 10.1 percent, with gasoline prices diving 20.6 percent. Meanwhile, food prices jumped 1.5 percent. Net of energy and food, core CPI declined 0.4 percent, pulled down by price drops for apparel (-4.7 percent), transportation services (-4.7 percent), used cars/trucks (-0.4 percent), and medical care commodities (-0.1 percent). Medical care services prices gained 0.5 percent. Headline CPI has risen a mere 0.3 percent over the past year, but core CPI has a 12-month comparable of +1.4 percent. The BLS noted its difficulties collecting price data since mid-March.

Meanwhile, the Producer Price Index (PPI) for final demand fell for the third consecutive month with a seasonally adjusted 1.3 percent decline. The Bureau of Labor Statistics’ core wholesale price measure, which nets out foods, energy, and trade services, pulled back 0.9 percent. Energy PPI plunged 19.0 percent (wholesale gasoline prices: -56.6 percent), while food PPI decreased 0.5 percent. Core goods PPI (net of energy and food) fell 0.4 percent. Trade services PPI rose 1.6 percent. Wholesale prices have fallen 1.2 percent over the past year, while the core measure was off 0.3 percent from April 2019.

#4Small business owner sentiment weakened again in April. The Small Business Optimism Index from the National Federation of Independent Business lost 5.5 points during the month to a seasonally adjusted 90.9 (1986=100). Over the past two months, the index shed 13.6 points to its lowest reading since March 2013. Nine of ten index components fell during the month, including double-digit drops for measures linked to expected real sales, earnings trends, current job openings, and whether it is a good time to expand. The one measure that advanced in April tracked expected economic conditions.

#5Job openings and hiring slowed, separations skyrocketed in March. The Bureau of Labor Statistics estimates there were a seasonally adjusted 6.191 million open jobs at the end of the month, down 813,000 from February, off 15.9 percent from the same month a year earlier, and the fewest reported since May 2017. Industries with sharp double-digit year-to-year percentage declines in job openings included leisure/hospitality (-31.6 percent), construction (-31.4 percent), manufacturing (-27.4 percent), trade/transportation/utilities (-15.9 percent), and health care/social assistance (-12.0 percent). There were 5.206 million hires in March, down 658,000 for the month, and 8.5 percent from a year earlier. Meanwhile, job separations surged by more than 8.9 million to 14.517 million (+161.4 percent versus March 2019). Layoffs swelled 569.7 percent from a year earlier to 11.372 million. 

Other U.S. economic data released over the past week:
Jobless Claims (Week ending May 2, First-Time Claims, seasonally adjusted): 2,981,000 (-195,000 vs. the previous week, +2,764,000 vs. the same week a year earlier). 4-week moving average: 3,616,500 (+1,510.9% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (May 2020-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 73.7 (vs. April 2020=71.8, vs. May 2019=100.0).
Import Prices (April 2020, All Imports): -2.6% vs. March 2020, -6.8% vs. April 2019. Nonfuel Imports: -0.5% vs. March 2020, -1.0% vs. April 2019.
Export Prices (April 2020, All Exports): -3.3% vs. March 2020, -7.0% vs. April 2019. Nonagricultural Exports: -3.3% vs. March 2020, -7.3% vs. April 2019.
Business Inventories (March 2020, Manufacturers and Trade Inventories, seasonally adjusted): $2.013 trillion (-0.2% vs. February 2020, -0.3% vs. March 2019).
Treasury Budget (April 2020, Deficit Over First Seven Months of FY2020): -$1.481 trillion (+179.0% vs. First Seven Months of FY2019).
Treasury International Capital (March 2020, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$238.1 billion (vs. February 2020: +$14.4 billion, vs. March 2019: -$21.5 billion).

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements.

More Records Fall: May 4 – 8

The employment report highlighted a week full of dismal economic data. Here are the five things we learned from U.S. economic data released during the week ending May 8.

#1All the job gains since the Great Recession are gone. Nonfarm employment shrank by a startling 20.500 million (seasonally adjusted) in April, by far the steepest decline in payrolls ever for the Bureau of Labor Statistics data series going back to 1939. The estimate of 131.405 million employed people was at its lowest point since January 2011. Private-sector payrolls dropped 19.520 million workers, split between 2.355 million in the goods-producing side of the economy and 17.165 million in the service sector. Job losses cut across every sector of the economy with the most significant hits in leisure/hospitality (-7.653 million), retail (-2.107 million), professional/business services (-2.128 million), health care/social assistance (-2.087 million), manufacturing (-1.330 million), construction (-975,000), and local government (-801,000).

A separate survey of households puts the unemployment rate at 14.7 percent, compared to 3.5 percent just two months earlier. Even worse, the BLS acknowledges that this figure likely understates actual unemployment as there was a surge in the count of workers “classified as employed but absent from work.” As it suspects that most of these people are genuinely unemployed, the real unemployment rate is likely five percentage points higher than reported above. Further, 6.432 million people left the labor market, putting the labor force participation rate at a 48-year low of 60.2 percent (its lowest point since 1973). The same measure for adults aged 25 to 54 fell by 2.7 percent points to 79.8 percent (its lowest reading since April 1983). If a worker has not lost their job, they may be working fewer hours—the count of part-time workers desiring full-time work surged 88.8 percent in April to 10.741 million. The broadest measure of labor underutilization—the U-6 series—hit 22.8 percent in April, compared to 8.7 percent during the previous month and 6.7 percent as recently as December.

U.S. Unemployment Rate Data: April 2020
U.S. Unemployment Rate Data: April 2020

#2The service sector also broke its winning streak in April. The NMI, the headline index of the Institute for Supply Management’s Nonmanufacturing Report on Business, tumbled by 10.7 points to a reading of 41.8. The NMI had not been below a reading of 50.0—the threshold between an expanding and contracting service sector—since December 2009. All four major components of the NMI—business activity, new orders, employment, and supplier deliveries—pointed towards a shrinking service sector. Sixteen of 18-tracked service sector industries contracted in April, led by declines for arts/entertainment/recreation, agriculture, and retail. The press release noted purchasing managers’ concerns “about the continuing coronavirus impacts on the supply chain, operational capacity, human resources, and finances, as well as the uncertain timelines for the resumption of business and a return to normality.”

#3Factory orders sank in March. New factory orders hemorrhaged 10.3 percent during the month to a seasonally adjusted $445.8 billion, the largest single-month decline in the 28-year history of the Census Bureau measure. Transportation goods orders decreased 41.3 percent, hurt by massive cancelations for civilian aircraft and a drop for automobiles. Net of transportation, core factory orders dropped 3.7 percent, with declines for nondurable goods, primary metals, fabricated metal products, and machinery countering increased orders for electrical equipment/appliances. Shipments fell for a third consecutive month, shedding 5.2 percent to $473.6 billion (non-transportation goods shipments dropped 3.6 percent). 

#4International trade decelerated in March. The Census Bureau and Bureau of Economic Analysis report that exports plunged by $20.0 billion to a seasonally adjusted $187.7 billion (-10.9 percent vs. March 2019). Meanwhile, imports dove $15.4 billion to $232.2 billion (-11.9 percent versus March 2019). The resulting -$44.4 billion deficit was up $4.6 billion from February but off 15.7 percent from a year earlier. The goods deficit widened by $4.6 billion to -$65.6 billion while the services surplus shrank by less than $0.1 billion to +$21.2 billion. Exports fell for industrial supplies/materials (including crude oil and other petroleum products), automotive vehicles, and other capital goods. Imports declined for consumer goods (cell phones and gem diamonds) and automotive vehicles.

#5Consumer credit contracted in March. Consumers held $4.209 trillion in outstanding non-real estate-backed credit balances at the end of March, per the Federal Reserve. This was down $12.1 billion from the prior month but still up 3.7 percent from the same month a year earlier. Revolving (credit card) balances shrank by their fastest pace since 1989, -$28.2 billion, to $1.066 trillion. Nonrevolving credit balances (i.e., auto and college loans) grew by $16.1 billion to $3.143 trillion. Revolving credit balances were up a mere 0.5 percent from a year earlier, while nonrevolving credit balances advanced 4.9 percent.

Other U.S. economic data released over the past week:
Jobless Claims (Week ending May 2, First-Time Claims, seasonally adjusted): 3,169,000 (-677,000 vs. the previous week, +2,944,000 vs. the same week a year earlier). 4-week moving average: 4,173,500 (+1,788.5% vs. the same week a year earlier).
Productivity (Q1 2020, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): -2.5% vs. Q4 2019, +0.3% vs. Q1 2019.
Wholesale Trade (March 2020, Inventories of Merchant Wholesalers, seasonally adjusted): -0.8% vs. February 2020, -2.0% vs. March 2019.
Bankruptcies (12-month Period Ending March 31, 2020, Bankruptcy Filings): 764,282 (-1.1% vs. 12-month period ending March 31, 2019).
Senior Loan Officer Opinion Survey (April 2020): Lenders “tightened their standards and terms significantly on commercial and industrial (C&I) loans to firms of all sizes.”

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.