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.

#1

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.”

#2

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.

#3

…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. 

#4

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.”

#5

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.

The Bumpy Road Ahead: April 20 – 24

The impact of COVID-19 continued to ripple through the U.S. economy. Here are the five things we learned from U.S. economic data released during the week ending April 24.

#1The U.S. economy was in total freefall in March. The Chicago Fed National Activity Index (CFNAI) plummeted by 423-basis to a reading of -4.23. The weighted index of 85 indicators (set such that 0.00 indicates a U.S. economy expanding at its historical rate) was at its third lowest reading in its 53-year history. Only 18 of the 85 indicators made a positive contribution to the CFNAI, while 65 others made negative contributions. Among the four major categories of indicators, those suffering vast declines were those tied to production (making a -2.72 contribution to the CFNAI) and employment (-1.23). Indicators linked to personal consumption (-0.19) and sales/orders/inventories (-0.05) each had relatively modest negative impacts. The CFNAI’s three-month moving average slumped to -1.47, well below the -0.70 reading that typically signals a recession.

#2First-time jobless claims continued at a historic rate. The Department of Labor reports that there were a seasonally adjusted 4.427 million first-time claims made for unemployment insurance claims during the week ending April 18. This was a decline of 810,000 from the prior week but also was 1,859 percent above the count of first-time claims during the same week a year earlier. The first-time claims’ four week-moving average of 5,786,500 was 2,646 percent ahead of that a year earlier. Continuing jobless claims surged by 4.064 million during the week ending April 11 to 15,976,000, up an extraordinary 963 percent over the previous year. The insured unemployment rate was 11.0 percent, compared to just 1.2 percent as recently as a month ago.

#3Consumer sentiment appears to have stabilized during the latter half of April. The University of Michigan’s Index of Consumer Sentiment ended the month at a seasonally adjusted reading of 71.8 (1966Q1=100). While down a startling 17.3 points from March and 25.4 points from a year earlier, the index managed to improve by 8/10ths of a point from its mid-April reading. The current conditions index shed 29.6 points from March to 103.7 (April 2019: 112.3), while the expectations measure lost 9.6 points during the month to 70.1 (April 2019: 87.4). The press release notes that consumers will be paying close attention to the handful of states that will attempt to reopen, noting that “an incorrect decision to reopen [would have] serious repercussions” that “could cause a deeper and more lasting pessimism.” 

#4Durable goods orders plummeted in March, but core goods held relatively steady. The Census Bureau places its estimate of new orders for manufactured durable goods at a seasonally adjusted $213.2 billion down 14.4 percent from February. Transportation goods orders were in a freefall—decreasing 41.0 percent—thanks to civilian aircraft orders declining -295.7 percent (including a massive number of order cancellations) and an 18.4 percent drop in motor vehicle orders. Net of transportation goods, core durable goods slowed by a far more modest 0.2 percent. While communications equipment orders gained 3.7 percent, transactions declined for primary metals (-2.5 percent), fabricated metal products (-0.5 percent), machinery (-0.2 percent), and computers/electronics (-0.1 percent).

#5Sales of previously owned homes fell in March but stayed above year-ago levels. The National Association of Realtors reports that existing home sales slowed 8.5 percent during the month to a seasonally adjusted annualized rate of 5.27 million. Despite the drop, home sales were 0.8 percent ahead of year-ago levels. Sales fell during the month in all four Census regions: West (-13.6 percent), South (-9.1 percent), Northeast (-7.1 percent), and Midwest (-3.1 percent). There were 1.50 million unsold homes on the market at the end of March (+2.7 percent vs. February 2020, -10.2 percent vs. March 2019), the equivalent to a 3.4-month supply. The median sales price of $280,600 was up 8.0 percent from a year earlier. 

Other U.S. economic data released over the past week:
New Home Sales (March 2020, New Home Sold, seasonally adjusted annualized rate): 627,000 (-15.4% vs. February 2020, -9.5% vs. March 2019).
FHFA House Price Index (February 2020, Purchase-Only Index, seasonally adjusted): +0.7% vs. January 2020, +5.7% vs. February 2019.

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

Layoffs Skyrocketed in Mid-March: March 23 – 27

The first set of data reflecting the impact of the COVID-19 pandemic—jobless data—came out last week. Here are the five things we learned from U.S. economic data released during the week ending March 27.

#1COVID-19 layoffs led to a record number of jobless claims. The Department of Labor reports there were a seasonally adjusted 3.283 million first-time claims made for unemployment insurance benefits during the week ending March 21. The number of initial claims was up by more than 3 million filings from the prior week, 1,164 percent from the same week a year ago, and shatters the previous record of 695,000 claims back in October 1982. The press release noted that job cuts came from many industries, including the service sector (“particularly accommodation and food service”), health care/social assistance, arts/entertainment/recreation, transportation/warehousing, and manufacturing industries. As large as the number was, the data likely are underestimating actual layoff activity (due to capacity issues on claim filing websites and not all laid-off workers being aware of their eligibility for benefits).

#2Growth in personal income held steady in February but sputtered for personal spending. The Bureau of Economic Analysis reports that personal income rose at a seasonally adjusted 0.6 percent in February, matching the previous month’s growth rate. Disposable personal income—which nets out personal taxes—jumped 0.5 percent during the month with the “real” measure—which adjusted for inflation—increased 0.4 percent. Personal consumption expenditures (PCE) grew by a more modest 0.2 percent (matching January’s increase) while real PCE inched up 0.1 percent. Real spending on goods fell by 0.2 percent, including durable goods expenditures slumping 0.7 percent. Edging up was real spending on nondurable goods (+0.1 percent) and services (+0.2 percent). The savings rate bloomed by 3/10ths of a percentage point to +8.2 percent (its highest reading since last March). Over the past year, real disposable income has risen 2.2 percent, while the 12-month comparable for real spending was +3.0 percent.

#3Meanwhile, economic activity picked up in February. The Chicago Fed National Activity Index (CFNAI), a weighted index of 85 economic indicators, added 49-basis points during the month to a reading of +0.16 (its best mark since last November and indicative of economic growth higher than the historical average). Forty-four of the 85 indicators made positive contributions to the CFNAI, with the other 41 measures having negative impacts on the headline index. Also, all of the advance came from production-related indicators, with much smaller positive contributions coming from indicators tied to employment and personal consumption/housing. Measures linked to sales/orders/inventories made a small negative contribution. The CFNAI’s three-month moving average deteriorated by ten-basis points to -0.21. The Federal Reserve Bank of Chicago’s website included this statement: “The data through February were unlikely to have been affected much by the COVID-19 outbreak.” This will not be true for March’s report. 

#4Q4 2019 was likely the final quarter of economic growth for a while. The Bureau of Economic Analysis’ final estimate of Gross Domestic Product (GDP) for the last three months of 2019 finds the U.S. economy expanded 2.1 percent on a seasonally adjusted annualized basis. This matched the two previous estimates of Q4 GDP growth and followed growth rates of +2.1 percent and +2.0 percent during the two prior quarters. GDP increased 2.3 percent for all of 2019, down from gains of 2.9 percent in 2018 and 2.4 percent in 2017. The same report shows corporate profits grew an annualized 2.6 percent in Q4 after contracting 0.2 percent during the prior quarter. For all of 2019, corporate profits were flat when compared to 2018. We will see the first estimate of Q1 data—the first GDP report reflecting coronavirus impacts—on April 29.

#5New home sales slowed in February. The Census Bureau estimates new home sales declined 4.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 765,000 units. Despite the decline, sales were 14.3 percent above year-ago levels. February sales slumped in the West (-17.2 percent) and Midwest (-7.3 percent) but advanced in the Northeast (+38.9 percent) and South (+1.0 percent). All four Census regions enjoyed year-to-year sales increases. There were 319,000 homes available for sale at the end of the month, off 0.9 percent for the month and 6.7 percent from a year earlier. This was the equivalent to a 5.0 month supply of homes. 

Other U.S. economic data released over the past week:
FHFA House Price Index (January 2020, Purchase-Only Index, seasonally adjusted): +0.3% vs. December 2019, +5.2% vs. January 2019.

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