Tight Inventory Chokes the Housing Market: February 19 – 23

Existing home sales slowed for a second straight month, but overall business activity remains stout. Here are the five things we learned from U.S. economic data released during the week ending February 23. (OK, there are only four things, as it was a slow week)

#1A lack of homes for sale depressed the real estate market in January. The National Association of Realtors reports that sales of previously owned homes declined 3.2 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.38 million units. This left the sales pace 4.8 percent below that of January 2017, the largest year-to-year decline in existing home sales since the summer of 2014. Sales slowed in all four Census regions on both a month-to-month and year-to-year basis. Sales were down for the month by 6.0 percent in the Midwest, 5.0 percent in the West, 1.4 percent in the Northeast, and 1.3 percent in the South. Inventories, while growing a bit during the month, remained very tight. There were 1.52 million homes available for sale at the end of January (representing a mere 3.4 month supply of homes), up 4.1 percent for the month but still 9.5 percent smaller than year ago inventories levels. As a result, the median sales price of $240,500 was 5.8 percent above that of a year earlier. The press release lays blame on the “utter lack of sufficient housing supply and its influence on higher home prices” for the decrease in sales activity.

#2Forward-looking economic indicators suggest healthy economic growth during (at least) the first half of 2018. The Conference Board’s Leading Economic Index (LEI) grew by 1.1 points during January to a seasonally adjusted 108.1 (2016=100). The LEI has grown by 6.2 percent over the past year. Eight of the ten LEI components made a positive contribution to the index, led by building permits, new orders for manufactured goods and stock prices. The coincident index inched up by 1/10th of a point to 103.0 and up 2.2 percent over the past year. Three of the four coincident index components made positive contributions: nonfarm payrolls, personal income net of transfer payments, and manufacturing/trade sales. The lagging index also added 1/10th of a point to 104.0 (+2.5 percent versus January 2017), with three of seven components making positive contributions: prices for services, consumer debt as a percentage of personal income, and the prime rate charged by banks. The press release noted that LEI data point to “with widespread strengths coming from financial conditions, manufacturing, residential construction, and labor markets.”

#3Jobless claims decades remained near multi-decade lows. First-time claims made for unemployment insurance benefits dropped by 7,000 during the week ending February 17 to a seasonally adjusted 222,000, down 25,000 from the same week a year ago. The Department of Labor reports four-week moving average declined by 2,250 during the week to 226,000, down 7.9 percent from a year earlier. Except for the reading two weeks earlier, this was the lowest point for the moving average of first-time jobless claims since March 1973. 2,360,760 people were receiving some form of unemployment insurance benefits during the week ending February 3, 5.9 percent below the count during the same week a year earlier.Jobless Claims 1970-2018 022318

#4Inventories of crude oil, gasoline, and distillates are much smaller than they were a year ago. The Energy Information Administration finds commercial crude oil inventories, which does not include the oil held in the Strategic Petroleum Reserve, declined by 1.6 million barrels during the week of February 16 to 420.5 billion barrels. This was 18.9 percent smaller than crude oil inventories during the same week a year earlier. Gasoline inventories grew slightly (300,000 barrels) during the same week 249.3 million barrels (-2.8 percent versus the week of February 17, 2017). Inventories of distillate fuel oil shrank by 2.4 million barrels to 138.9 million barrels, 15.9 percent below year-ago inventories. 

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

As 2017 Ends, Jobless Claims Remain Low and Sentiment Eases: December 25 – 29

Employers issued relatively few pink slips during the final days of the year. Here are the five things we learned from U.S. economic data released during the week ending December 29.

#1First-time jobless claims remained near a 40+ year low as 2017 wrapped up. The Department of Labor reports that there were a seasonally adjusted 245,000 initial claims made for unemployment insurance benefits during the week ending December 23. This was unchanged from the week before and 13,000 below the number of first-time claims from the same week a year earlier. More remarkable, the jobless count has been below 300,000 claims every week since March 21,2015, with the measure remaining for much of 2017 near levels not consistently seen since 1973(!). The four-week average of first-time claims inched up by 1,750 to 237,750 claims. This was 7.2 percent below the moving average from a year ago. During the week ending December 9, 2.004 million people were receiving some form of unemployment insurance benefits, 6.4 percent below that a year earlier.First-Time Jobless Claims-2007-2017-122917

#2Another second measure of consumer sentiment eased during December. The Conference Board’s Consumer Confidence Index lost 6.5 points during the month to a seasonally adjusted 122.1 (1985=100). This was up from the 113.3 reading from December 2016. The decline occurred despite survey respondents growing slightly more confident about current business conditions—the present conditions index added 1.7 points during the month to 156.6. The expected conditions index, however, plummeted by 11.9 points to 99.1. 35.7 percent of survey respondents report that jobs are “plentiful” while 15.2 percent report them being “hard to get,” with the latter being a 16-year low. The press release noted that “consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018.” During the previous week, we learned that the University of Michigan’s Index of Consumer Sentiment had lost 2.6 points to a seasonally adjusted reading of 95.9 (1966Q1=100).

#3Home purchase contract signings inched up during November. The Pending Home Sales Index (PHSI) from the National Association of Realtors added 2/10ths of a point during the month to a seasonally adjusted reading of 109.5. This was the PHSI’s highest point since June. The index jumped 4.1 percent in the Northeast and edged up 0.4 percent in the Midwest while pulling back modestly in both the West (-1.8 percent) and South (-0.4 percent). The PHSI has grown 0.8 percent over the past year, with positive 12-month comparables in the South (+2.0 percent), Northeast (+1.1 percent), and Midwest (+0.8 percent). Meanwhile, contract signings to purchase a previously owned home in the West were 2.3 percent below that of a year earlier. While the press release notes that the “housing market is closing the year on a stronger note,” it warned that potential buyers were being “stifled by tight supply and higher prices.”

#4Home prices continued to rise in October. The 20-city Case-Shiller Home Price Index grew 0.2 percent without seasonal adjusted and jumped 0.7 percent after adjustments for seasonal variation. The measure of home prices has risen 6.4 percent over the past year, putting the index just 1.3 percent below its pre-recession peak back in 2006. The index gained on a seasonally adjusted basis in all 20-tracked markets with increases greater than 1.0 percent in Las Vegas (+1.4 percent) and San Francisco (+1.2 percent). The press release states that rising home prices have been the result of “low interest rates, low unemployment and continuing economic growth” but also notes that higher prices are making renting “more attractive than buying.” 

#5Agricultural prices jumped in November. The Department of Agriculture reports that the prices received by farmers swelled 4.2 percent during the month, its first monthly gain since May. The measure has increased 9.1 percent since November 2016. The prices received for livestock production surged 8.1 percent (and was up 18.0 percent from the same month a year earlier), as poultry & egg prices jumped 15.0 percent and that of metal animals grew 7.2 percent. Dairy product prices increased 1.0 percent. Meanwhile, prices received for crop production slumped 1.0 percent during November but was still 1.1 percent above the prices received a year earlier. Prices fell for vegetables/melons (-6.1 percent) and grain/oilseed (-3.5 percent) but gained 1.4 percent for fruit/tree nuts.

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

One More Look at September Labor Market Trends: November 6 – 10

The latest Job Openings and Labor Turnover report finds hiring slowed during September. Here are the five things we learned from U.S. economic data released during the week ending November 10.

#1The pace of hiring slowed a bit in September even with the number of job openings remaining at record highs. The Bureau of Labor Statistics indicates that employers had a seasonally adjusted 6.093 million job openings at the end of September, up a mere 3,000 from August but 7.5 percent ahead of the year-ago count. Industries with substantially large year-to-year percentage gains in job openings included wholesale trade (+31.4 percent), manufacturing (+30.4 percent), transportation (+21.8 percent), and health care/social assistance (+9.8 percent). On the other hand, both the federal government (-20.6 percent) and retailers (-2.7 percent) reported having fewer open positions than they did back in September 2016. Employers hired a seasonally adjusted 5.273 million workers during September, down 147,000 from August but still up 1.8 percent from the September 2016 count. Hiring rose over the past year in manufacturing (+20.2 percent), construction (+18.9 percent), financial activities (+9.6 percent), and health care/social assistance (+6.8 percent). Hiring fell versus a year earlier in retail (-9.2 percent) and the government (-4.6 percent). 5.240 million people left their jobs during September, off 33,000 from August but still 6.0 percent ahead of the year-ago pace. The number of people who had quit their job increased by 89,000 during the month to 3.182 million (+3.4 percent versus September 2016) while layoffs slowed by 78,000 to 1.703 million (+12.3 percent versus September 2016).job openings and hiring-2003-2017 111017

#2Wholesalers added to their inventories add a slower rate during September as sales jumped. The Census Bureau reports that merchant wholesaler inventories grew 0.3 percent during the month to a seasonally adjusted $609.5 billion. While this was down from August’s 0.8 percent gain, it leaves wholesale inventories up 4.6 percent from September 2016 levels. Stockpiles of durables expanded 0.3 percent during September while those of nondurables increased 0.4 percent. Wholesaler sales surged 1.3 percent during September—following a 1.9 percent gain in August—to a seasonally adjusted $480.5 billion (+8.5 percent). Durable goods sales jumped 0.7 percent during the month while those of nondurables rose 1.8 percent (including a 12.6 percent surge in petroleum sales).

#3Layoff activity remained muted during the first days of November. The Department of Labor estimates there were a seasonally adjusted 239,000 first-time claims made for unemployment insurance benefits during the week ending November 4. This was up 10,000 from the prior week but down 11,000 from the same week a year ago. The four-week moving average of first-time claims slipped by 1,250 to 231,250. The four-week moving average was 9.7 percent below that of the same week a year ago. During the week ending October 21, 1.639 million people were receiving some form of unemployment insurance benefits, 8.1 percent below the count receiving the same during the same week a year earlier.

#4Consumers added to their debt load in September. Per the Federal Reserve, consumers had a seasonally adjusted $3.788 trillion in outstanding consumer debt (not including mortgages and other real estate backed debt) at the end of September, this was up $20.8 billion from August and 5.6 percent from a year earlier. Nonrevolving debt balances (e.g., auto and college loans) jumped by $14.4 billion to $2.782 trillion (+5.6 percent versus September 2016). Revolving debt balances (e.g., credit cards) crossed over the trillion dollar mark for the first time at $1.006 trillion. This represented a $6.4 billion bump up from August and was 5.6 percent ahead of year-ago levels.

#5Bankers report easing leading standards to their commercial customers during Q3. A “modest net percentage” of banks responding to the Federal Reserve’s October 2017 Senior Loan Officer Opinion Survey on Bank Lending Practices indicated that they had eased lending standards for the commercial and industrial (C&I) loans in recent months. These “eased” standards took the form of expanded credit lines, lower costs for credit lines, narrowed spreads of loan rates over the banks’ cost of funds, eased loan covenants, and lower interest spreads. Increased competition among lenders was the most significant driver for the relaxed lending standards to commercial borrowers. Banks were more likely to have maintained their current lending standards for their residential real estate loan offerings while tightening standards and terms on credit cards and car loans. Demand for residential real estate loans, credit cards, and auto loans all have weakened during the past quarter.

Other U.S. economic data released over the past week:
University of Michigan Index of Consumer Sentiment (November 2017-preliminary, Index (1966Q1=100, seasonally adjusted):  97.8 (vs. October 2017: 100.7; November 2016: 93.8).

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