Category Archives: Employment

mtg purch apps, ADP, Trade, ISM, Atlanta Fed

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Another setback, still up some year over year but all cash purchases are down quite a bit as well:

MBA Mortgage Applications
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Highlights
Application activity is sputtering with MBA’s composite index down a very steep 7.6 percent in the May 29 week for a 6th straight decline and the steepest decline since February. Purchase applications fell 3 percent in the week but are still up a respectable 14 percent year-on-year. Refinancing applications fell 12.0 percent in the week to their lowest level since May last year. Refinancing demand has been especially hurt by this year’s rise in interest rates though rates were down in the latest week, with the average 30-year mortgage for conforming loans ($417,000 or less) down 5 basis points to 4.02 percent.

Note the chart below, which doesn’t show much of a recovery from Q1:

ADP Employment Report
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Highlights
ADP estimates that private payrolls rose a moderate 201,000 in May which is right at the Econoday consensus for 200,000. For comparison, the consensus for private payroll growth in Friday’s employment report is a bit higher, at 215,000 with the low estimate at 185,000. ADP sometimes does and sometimes does not correctly anticipate the employment report having last month signaled weakness in what turned out to be a respectable report for April.
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The chart shows how non petroleum imports continued to rise sharply, and the May auto sales report which includes imports looks to continue to support that up trend. Petroleum imports show a lot of month to month volatility so they could very well be up substantially for the rest of the quarter, as prices were higher and US production is being forecast to decline due to the sharp drop off in drilling. So look for the US trade gap to widen, partly because of the dollar strength and partly because of fading exports and rising oil imports due to domestic production declines. The trade flows are now working against the dollar and in favor of the euro, which is being supported by a large and growing trade surplus.

International Trade
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Highlights
Second-quarter GDP looks to be getting a lift by a decline in imports, at least it will in April when the trade gap eased to $40.9 billion. The gap is on the low side of Econoday expectations and compares with March’s outsized revised gap of $50.6 billion which was distorted by a spike in imports tied to the resolution of the first-quarter port strike. Imports fell 3.3 percent in April to $230.8 billion at the same time that exports, in another positive for GDP, showed some life, up 1.0 percent to $189.9 billion.

Consumer goods show the strongest improvement on the import side, down $4.9 billion in the month and reflecting a $1.3 billion decline in cell phones as well as declines for apparel and furniture. Imports of capital goods, industrial supplies, and autos also fell. Imports of petroleum products rose $0.2 million to $15.4 billion, more than offset by a $0.9 billion rise in petroleum exports to $8.6 billion.

Strength in exports also includes capital goods, up $2.1 billion with civilian aircraft representing nearly half the total. Exports of industrial supplies and autos were also higher.

Another plus in the report is another gain for the nation’s services where the trade surplus rose to $19.8 billion from $19.4 billion in March.

Country data show a sharp easing in the gap with China, to $26.5 billion vs March’s $31.2 billion, and improvement with Mexico, to a gap of $4.4 billion vs $5.5 billion in March. The gap with Europe widened slightly to $13.3 from $12.7 billion while the gap with Japan was unchanged at $7.1 billion.

The decline in imports was of course expected given the special circumstances in March, but the gain for exports is very positive suggesting an easing in dollar-related troubles and perhaps pointing to some life in foreign demand. Today’s report includes annual revisions which increased deficits for 2013 and 2014.
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Again, the chart shows it’s not as strong as it was in q1, which means it’s contributing less growth in q2 than it did in q1, and it’s also no where near the strength of q2 2014:

ISM Non-Mfg Index
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Highlights
The ISM non-manufacturing index for May, at 55.7, came in solid but at the low end of Econoday expectations to indicate the slowest rate of monthly growth since April last year. Key readings all slowed slightly but are still very constructive with new orders at 57.9 and business activity at 59.5. Employment also slowed, down 1.4 points to 55.3 which is still a respectable rate.

Other details include a jump in exports, up 6.5 points to 55.0 in a reading that underscores this morning’s big service-sector surplus in the April trade report. Supplier delivery times, which had been slowing all year, were unchanged in May suggesting, also like this morning’s trade report, that supply-chain distortions tied to the first-quarter port strike have unwound. Input prices, likely tied to higher fuel costs, show some pressure, up 5.8 points to a 55.9 reading that’s the highest since August last year.

A look at individual industries shows special strength for arts/entertainment/recreation and management & support services, the latter one of the strongest export industries for the nation. And in the latest hint of strength in the housing sector, both real estate and construction show strength. The only one of 18 industries to contract in the month was, once again, mining which is being hurt by low commodity prices.

The dip in employment won’t be boosting expectations for Friday’s employment report and the hawks at the Fed are certain to take note of the rise in prices. But in sum, this report is mostly positive and in line with the PMI services index released earlier this morning, both pointing to modest deceleration in what is otherwise the economy’s central strength – the service sector.
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The Atlanta Fed GDP forecast for Q2 is up to 1.1% annualized, which would be a shockingly low follow up to Q1’s -.7. And, as above, there’s a good chance May’s trade number goes the other way, sending the GDP forecast back down:
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claims, producer prices, euro comments, public sector jobs

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Just a reminder, claims measure those losing jobs who file for benefits, not new hires:

Jobless Claims
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The euro has been moving higher vs the dollar, as CB selling winds down as they reach the lower limits of their reserve targets along with fundamental support from a large and growing EU current account surplus that’s drained those euro sold by those CB’s and other sellers from global markets. This may have left the short sellers and others needing to recover euro allocations subject to a dramatic short squeeze for as long as the current account surplus continues. And this poses an extreme risk to the EU. Growth forecasts have been largely based on ‘weak euro’ and as it moves higher that growth never materializes, and instead the economy deteriorates/unemployment goes higher, etc. etc. and, making matters worse, the ECB is left ideologically bankrupt, having seen negative rates and QE do nothing more than exacerbate the deflation they were trying to reverse. All they can do is try more of the same, which will be a very depressing environment for those who have been suffering under the failed policies. All of which has the potential to accelerate the already growing support for the various anti euro forces.
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Yes, President Obama wins the Tea Party trophy for downsizing government:
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Redbook retail sales, Small business confidence, JOLTS, Japan budget

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So now they don’t have Easter to kick around anymore and they’re still weak:

Redbook
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Retail sales picked up slightly in the May 9 week as Easter-effects finally fade, but at a year-on-year plus 2.1 percent sales remain soft. Redbook reports an as-expected Mother’s Day holiday in the week and reports early buying for graduation. Tomorrow the government will post its April retail sales report which is expected to show a solid rate excluding autos.
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About the only things showing hope are some of the surveys, just like last quarter (which is now looking to be revised into negative territory):

NFIB Small Business Optimism Index
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And you have to read pretty far into this story before you realize the numbers were down vs the prior month:

BLS: Jobs Openings at 5.0 million in March, Up 19% Year-over-year

From the BLS:

There were 5.0 million job openings on the last business day of March, little changed from 5.1 million in February, the U.S. Bureau of Labor Statistics reported today. Hires were little changed at 5.1 million in March and separations were little changed at 5.0 million….

Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. … There were 2.8 million quits in March, little changed from February.

JOLTS
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Highlights
Yesterday’s labor market conditions index was very soft as is today’s JOLTS report where job openings fell 2.9 percent to 4.994 million in March from a revised 5.144 million in February. This is well below the Econoday consensus for 5.158 million.

Despite the March fall-off, workers appear to be confident in the labor market judging by their willingness to quit. The quits rate rose 1 tenth in the month to 2.0 percent. The hiring rate in the month held steady at 3.6 percent.

Last week’s employment report for April proved much better than March but was still soft, a description underscored by today’s report. Not soft, however, have been weekly jobless claims which will be posted on Thursday.

They still don’t get it:

Japan seen targeting 1% primary deficit in fiscal 2018

May 12 (Nikkei) — Japan will likely aim to cut its primary deficit to about 1% of gross domestic product by fiscal 2018 through spending cuts and other measures, with an eye toward its goal of achieving a surplus by fiscal 2020. Japan’s potential growth rate currently falls short of 1%, and its primary deficit is expected to total 3.3% of GDP this fiscal year at 16.4 trillion yen ($135 billion). According to conservative calculations by the Cabinet Office, which assume real economic growth of 1% or so and nominal growth of over 1%, Japan would face a primary deficit of 15.7 trillion yen in fiscal 2018 — equivalent to 3% of GDP.

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china pmi, ADP, productivity

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Still slipping in Q2

China : PMI Composite
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Highlights
HSBC China Composite PMI, which covers both manufacturing and services, indicated an expansion of Chinese business activity in April but at a weaker pace. Activity growth slowed to a three month low with a reading of 51.3, down from 51.8 in March. The slower expansion of total business activity was largely driven by a stagnation of manufacturing output in April, following three months of growth.

Another weak forecast for Friday’s employment report:

ADP Employment Report
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Highlights
ADP correctly signaled a weak employment report for March and it’s signaling another weak report for April, at only 169,000 for its private payroll gauge which is far under the Econoday concensus for 205,000 and just under the low estimate for 170,000. ADP’s estimate for March is now revised 14,000 lower to 175,000. For comparison, the Econoday consensus for private payroll growth in Friday’s employment report is 223,000 with the low estimate at 170,000. ADP doesn’t always move the markets but it may today, raising talk of another soft employment report on Friday

This tells me business has more employees than it needs and most likely will adjust accordingly:

Productivity and Costs
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Cleveland Fed on low wage growth, Atlanta Fed Q2 gdpnow, factory orders

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Behind the Slow Pace of Wage Growth

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Factory Orders
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Highlights
Boosted by aircraft and also by motor vehicles, factory orders rose an as-expected 2.1 percent in March. March’s gain ends what were 7 straight declines as February, which was initially at plus 0.2 percent, is revised now to minus 0.1 percent. The 7 straight declines are the most striking evidence of how hard the manufacturing sector has been hit, by the strong dollar that weakens exports and also specific trouble in the energy sector due to the downturn in oil.

But in March, the sector got a big boost from civilian aircraft, an industry where big monthly swings are normal, but also from motor vehicle & parts where orders rose 6.0 percent in what is one of the very strongest gains of the recovery. Excluding transportation, however, orders were unchanged compared to only a 0.1 percent gain in February, with the latter revised down sharply from an initial reading of plus 0.8 percent.

Energy equipment rebounded 4.8 percent in the month but following a long streak of declines including an 18.5 percent drop in February. Industrial machinery was also down on the month. Other industries on the plus side include computers and defense capital goods.

Orders for capital goods in general were mixed, up only 0.1 percent on the core, which excludes aircraft, and extending their downward slope.

Other readings include a sizable 0.5 percent rise in shipments. Another plus is a small rise in unfilled orders which have been especially weak. Inventories held steady relative to sales, with the inventory-to-sales rate unchanged at 1.35.

The pop in March ends the first quarter on a positive note but the early indications on the second quarter, despite expectations of an outsized weather boost, have all been soft.
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Remember all that cheerleading last year about how NOW capex was going to pick up?
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No chance of recession?
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GDP detail, EU unemployment, personal income, ECI, Jobless Claims, chicago pmi, Bloomberg consumer comfort

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Note the inventory build:
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Note the ‘bending of the curve’ for nominal spending that almost never happens:
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A bit of a disconnect between headline car sales and car sales’ contribution to GDP?
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Disposable income has ratched down twice recently- once from the recession and jump in unemployment, and again with the tax hikes:
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European Union : Unemployment Rate
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Highlights
The Eurozone labour market made limited progress in March. Joblessness fell a further 36,000 to 18.105 million but the unemployment rate held steady at 11.3 percent, a tick above market expectations.

Amongst the larger member states the national jobless rate was unchanged in France (10.6 percent) and Germany (4.7 percent) and declined another tick to 23.0 percent in Spain. However, Italy saw its rate jump 0.3 percentage points to 13.0 percent, just a couple of ticks short of last November’s record high. Top of the pile was again Greece (25.7 percent in January) while Germany remained at the bottom.

Youth unemployment was also unchanged at 22.7 percent following a downward revision to the February rate.

The income lost due to falling oil revenues might be starting to show and the growth rate remains near stall speed:

Personal Income and Outlays
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Highlights
March consumer spending rebounded 0.4 percent (and was up 3.0 percent from a year ago) from a revised increase of 0.2 percent in February. But the data suggest that people remain somewhat cautious in their spending despite months of cheaper gasoline and rising confidence. Consumer spending generates more than two thirds of GDP and is a key driver of growth. Spending on services increased 0.2 percent from the prior month. Spending on goods added 1.0 percent after three consecutive monthly declines, including a 1.8 percent increase in purchases of durable goods like trucks and washing machines that are designed to last at least three years.

Personal income was flat on the month the weakest reading since December 2013. On the year, income was up 3.8 percent.

The Federal Reserve acknowledged that the economy slowed during the winter months, but they blamed the weakness on “transitory factors.” Officials said in a statement they “continue to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace.”

Personal consumption expenditures price index undershot the Fed’s 2 percent target increasing 0.3 percent in March from a year earlier, the same increase as the previous month. Excluding the volatile food and energy categories, prices climbed 1.3 percent in March from a year earlier for the fourth consecutive month.
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A bit higher than expected but I attribute this to hiring getting ahead of itself as reported employment gains have been outrunning growth of output:

Employment Cost Index
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In the 12 months through March, labor costs jumped 2.6 percent, the largest rise since the fourth quarter of 2008. That is still below the 3 percent threshold that economists say is needed to bring inflation closer to the Fed’s 2 percent target.

Lower than expected and the Fed knows it shows separations and not new hires, though it has correlated to hiring historically:

Jobless Claims
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Highlights
The Fed is ready now to pull the trigger at anytime and today’s jobless claims data may have their finger a little itchy. Initial claims, not skewed by special factors, plunged 34,000 in the April 25 week to 262,000 which is the lowest level since all the way back to April 2000. The 4-week average is down 1,250 to a 283,750 level which is just below a month-ago and is also a 15-year low.
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Bloomberg Consumer Comfort Index
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Highlights
Bloomberg’s consumer confidence index declined for a third consecutive week to a six-week low of 44.7 as Americans took a less favorable view of their finances and the slowdowns at factories and oilfields soured attitudes among men. Sentiment among men showed one of the biggest decreases in the past four years, while confidence in the Midwest slumped by the most in more than a decade. While the Bloomberg comfort gauge cooled from an almost eight-year high reached earlier this month, it remains well above last year’s average of 36.7, which was the best since 2007.

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sea container counts, state labor force stats, mtg purchase apps, existing home sales, FHA home prices, Japan headline

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March 2015 Sea Container Counts Are Not Strong Even Though the Labor Troubles Are Over

By Steve Hansen

The West Coast Ports labor dispute is over, and appears the backlog has been eliminated causing a spike in exports. However, not only is year-to-date volumes contracting for both imports and exports – but March exports are contracting month-over-month and year-over-year. This is indicating weak economic conditions domestically and globally.

U.S. March Labor Force Comparison Statistics (Table)

By Chris Middleton

April 21 (Bloomberg) — Following is a comparison of U.S. labor force figures as reported in the national employment situation release and the monthly regional and state employment report. Total state figures are calculated by Bloomberg News.

Each state series is subject to larger sampling and nonsampling errors than the national series. Summing them compounds the state level errors and can cause significant distortions at the aggregate level. Due to these statistical limitations, the Bureau of Labor Statistics does not compile a “sum-of-states” employment series and cautions users that such a series is subject to a relatively large and volatile error structure.
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Oil States See Slumping Employment as Texas Loses 25,000 Jobs in March

April 21 (WSJ) — While the U.S. economy continued to add jobs last month, states that rely heavily on the oil industry experienced significant cuts. Job losses hit particularly hard in Texas (down 25,400 jobs) and Oklahoma (down 12,900), leading the nation in losses. North Dakota lost 3,000 jobs, a significant cut in such a small state. All told, 31 states and Washington, D.C., saw a drop in employment in March, and only 18 states saw employment rising. The broad deterioration was a reversal from February, a month in which only 13 states saw decreases and 36 states and D.C. saw an increase.

Purchase apps up some from still very depressed levels, but cash sales have been falling so total sales not necessarily higher.

And year over year up but last year’s sales were even more depressed by the exceptionally cold winter.

MBA Mortgage Applications
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Highlights
Mortgage applications for home purchases have definitely been showing life this spring, up 5.0 percent in the April 17 week. This is the 4th increase in 5 weeks. Helping purchase demand are low rates, down 4 basis points in the week to an average 3.83 percent for conforming loan balances ($417,000 or less). Low rates, however, aren’t doing much to stimulate refinancing demand with this index up only 1.0 percent in the week. Watch for existing home sales later this morning at 10:00 a.m. ET.
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Up a bit more than expected, but still depressed as well. And few distressed sales raise the median price so a ‘quality adjusted’ price would be more informative. And with the last slowdown coincident with a rate spike maybe the Fed isn’t ready to risk that again?

Existing Home Sales
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Highlights
This winter’s heavy weather may very well have held down the housing market which appears to be heading into the spring with new momentum. Existing home sales surged 6.1 percent in March to a 5.190 million annual rate. This is near high-end expectations and the best rate since September 2013. In percentage terms, the 6.1 percent gain is the strongest since December 2010 and among the very highest in the 16-year history of the series.

Sales of single-family homes jumped 5.5 percent in the month to a 4.590 million rate while condos really jumped, up 11.1 percent to a 600,000 rate. All regions show solid gains in total sales led by the Midwest at 10.1 percent with the South at the rear, though still up a solid 3.8 percent.

Price data all show strength with the median price up a very strong 5.1 percent to $212,100. Year-on-year, the median is up 7.8 percent for the best reading since February last year. This is a bit below the year-on-year sales rate of 10.4 percent which hints at further pricing power ahead.
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Again, I’d like to see what this looks like excluding distressed sales:

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Bank of Japan to cut fiscal 2015 inflation forecast

April 1 (Nikkei) — The Bank of Japan is considering lowering its 1% inflation forecast for fiscal 2015 amid the continued slump in oil prices and a slow recovery in domestic consumption.

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Housing starts, Italy Merchandise Trade, UK opinion chart, ECB euro policy musings

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Moving up some but still relatively low, but as previously discussed,
this is about people losing jobs, not new hires:

Jobless Claims
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And yet another lower than expected release:

Housing Starts
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Just anecdotal evidence of what happens as the euro is pushed down by CB portfolio selling to ‘equate supply and demand’ etc.

Italy : Merchandise Trade
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Highlights
The seasonally adjusted merchandise trade balance was in a sizeable E4.6 billion surplus in February, up from an unrevised E3.9 billion excess in January.

The headline gain was attributable to a tidy bounce in exports which, up 2.5 percent on the month, essentially reversed their January decline. Capital goods saw a 7.6 percent rise while consumer goods were up 0.2 percent and energy 2.7 percent. Intermediates fell 0.5 percent. Overall exports were 3.7 percent higher than in February 2014, a marked acceleration versus their minus 4.2 percent January rate.

Low odds of the UK going for fiscal expansion:
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Not to forget every Fed member recognizes their role in ‘managing expectations’ as they all believe that the economic performance has a large psychological component. That is, if people were led to believe things were getting worse that would cause a downturn.

Beige Book: U.S. Economy Powers Through Headwinds

By Jefferey Sparshott

April 15 (WSJ) — The U.S. economy continued to expand across most of the country in February and March, though a strong dollar, falling oil prices and harsh winter weather slowed activity in some sectors, according to the Federal Reserve’s latest survey of regional economic conditions. The Fed found modest or moderate growth in eight of its 12 districts. Elsewhere, the pace of economic activity was described as steady, slight or continuing to expand. Minutes of the March meeting showed “several” officials thought June would be the right time, though others said it would be better to wait.

Possible narrative?:
China told Draghi that if the ECB not to go to negative rates and QE or they would retaliate by selling their euro reserves. So Draghi did exactly that to induce a ‘devaluation’ to support EU net exports. The ploy worked, for as long as it lasts. When the CB reserve liquidation fades, the euro will appreciate until the current account surplus turns to a deficit, reversing prior gains in output and employment, and dashing any hoped of growth and employment:

ECB’s Mario Draghi Says Stimulus Is Working

By Brian Blackstone and Todd Buell

April 15 (WSJ) — ECB President Mario Draghi said there is “clear evidence the monetary policy measures we put in place have been effective.” Mr. Draghi said, “The euro area economy has gained further momentum since the end of 2014. We expect the economic recovery to broaden and strengthen substantially.”

German GDP forecasts hiked on weak euro

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