Just getting started?
“Payroll processor ADP said this week that the mining industry, which includes oil and gas drilling, shed about 2,000 jobs last month after gaining an average of 3,000 a month in 2014.”
U.S. Steel to lay off more than 700 due to falling oil prices
By Len Boselovic
Jan 6 — U.S. Steel has announced plans to lay off 756 workers at steel tube plants near Cleveland and Houston, citing sharply lower oil prices.
Less than expected and still subdued:
Consumer Credit
Highlights
Consumer credit rose $14.1 billion in November though, once again, revolving credit was weak. The revolving credit component, where credit card debt is tracked, fell $0.9 billion in the month for the second contraction of the last four months. In contrast, the non-revolving credit component, as usual, posted a strong gain, up $15.0 billion and once again reflecting demand for auto loans and student loans. But revolving credit is the weak link in the consumer sector that continues to hold back gains for retail spending.
Jobless Claims
Highlights
Initial jobless claims fell 4,000 in the January 3 week to 294,000, helping to pull down the 4-week average slightly to 290,500. The average is trending about 10,000 lower than the month-ago comparison which points to steady improvement underway in the labor market.
Data on continuing claims, which are reported with a 1-week lag, are mixed. Continuing claims in the December 27 week rose a sizable 101,000 to 2.452 million but the 4-week average fell 17,000 to 2.397 million. This average has been steady around the 2.400 million mark since late November. The unemployment rate for insured workers is unchanged for a fourth week at a recovery low of 1.8 percent.Las Vegas Real Estate in December: Lowest Sales in Years, Non-contingent Inventory up 18% YoY
Weaker, and down 8% year over year, even with much lower rates.
MBA Purchase Applications
Highlights
Mortgage application activity fell sharply in the 2 weeks to January 2, down 5.0 percent for purchase applications and down 12.0 percent for refinancing applications. The trend for purchase applications, which offers an indication on underlying home purchases, is clearly negative, at a year-on-year minus 8.0 percent.
The declines come despite low mortgage rates with the average 30-year rate down slightly in the 2-week period to 4.01 percent for conforming loans ($417,000 or less). Note that today’s report covers not the usual 1-week period but, due to a holiday for MBA, a 2-week period.
Remember, this is now a forecast of Friday’s number, and not the ‘core’ ADP employment itself.
ADP Employment Report
Highlights
ADP’s estimate for private payroll growth for December is 241,000 vs the Econoday consensus for 235,000 and against ADP’s upwardly revised 227,000 for November (initial estimate 208,000). Turning to government data, the corresponding Econoday consensus for Friday’s jobs report is 238,000 vs November’s 314,000.
Imports down, but exports down as well, which could be a trend as surveys have been indicating deceleration.
International Trade
Highlights
The U.S. trade balance again narrowed and more than expected. And again, improvement was largely due to lower oil prices.
In November, the U.S. trade gap narrowed to $39.0 billion from a revised $42.2 billion in October. Market expectations were for the deficit to narrow to $41.5 billion. Exports were down 1.0 percent after gaining 1.6 percent the month before. But imports declined a sharp 2.2 percent after rising 0.7 percent in October.
Shrinkage in the overall gap was led by the petroleum goods trade gap which dropped to $11.4 billion from $15.2 billion in October. Petroleum imports were down 11.9 percent while exports rose 5.9 percent.
The goods excluding petroleum gap increased to $45.7 billion from $45.2 billion in October. The services surplus was essentially unchanged at $40.4 billion.
On a seasonally adjusted basis, the November figures show surpluses, in billions of dollars, with South and Central America ($4.3) and Brazil ($0.6). Deficits were recorded, in billions of dollars, with China ($29.8), European Union ($12.7), Germany ($6.3), Japan ($5.6), Mexico ($4.4), South Korea ($2.9), Italy ($2.3), India ($1.7), France ($1.6), OPEC ($1.6), Canada ($1.4), Saudi Arabia ($1.3), and United Kingdom ($0.2).
Overall, the November number will likely bump up estimates for fourth quarter GDP growth.
And it’s not just the first order consequences of lower oil revenues and reduced capital expenditures. There are substantial multipliers as that income gets ‘respent’ not only in Texas but throughout the US and beyond.
Again, seems most all US periods of expansion were assisted by ‘borrowing to spend’ that would have been avoided, including the s and l credit boom of the 80’s that drove the Reagan years, the .com/y2k boom of the late 90’s, the sub prime expansion 10 years or so ago, and now, maybe the shale credit expansion boom that looks to have delayed the recession that otherwise would have set in after the tax hikes and sequesters of 2013. Japan, on the other hand, has been careful to not allow that type of thing to happen ever since it’s regretted credit boom of the late 80’s…
Plunging Oil Prices Test Texas’ Economic Boom
Jan 7 (WSJ) — The Lone Star State’s economy has been a national growth engine since the recession ended, expanding at a rate of 4.4% annually between 2009 and 2013, twice the pace of the U.S. as a whole. One in seven jobs created nationally during the 50-month expansion has been created in Texas, where the unemployment rate, at 4.9%, is nearly a percentage point lower than the national average. Analysts at the Federal Reserve Bank of Dallas estimate that a 45% decline in the price of oil will reduce Texas payrolls by 125,000. Payrolls were up 447,900 in November from a year earlier, or 3.9%. The Dallas Fed estimate implies growth of more than 300,000, or nearly 3%, even with a lower oil price, still faster than the national average of 2%.
Texas drilling permits dropped 50 percent, Railroad Commission reports
By James Osborne
Oil drilling activity in Texas is falling dramatically, as the steep decline in crude prices since the summer takes hold, state regulators reported Tuesday.
The Texas Railroad Commission issued 1,353 permits for oil drilling last month, 50 percent less than it did the previous month. And in the months ahead, that will likely translate to rigs being shut down and layoffs across oil fields in West and South Texas.
“There’s more to come in the months ahead,” said Pavel Molchanov, an energy analyst with Raymond James. “This isn’t pleasant, but this is how the market rebalances itself.”
For now drilling rig counts are holding relatively steady, as companies wind down their contracts. Since peaking in October, the number of drilling rigs operating in the United States has declined by just 5 percent, according to the oil field service company Baker Hughes.
That number should continue a steady decline as companies make the decision to delay drilling on their leased land.
In recent weeks companies including Conoco Phillips and Marathon have both announced their drilling budgets for next year will be 20 percent less than 2014. For smaller companies, which fill out the bulk of the oil field, the reductions are even more dramatic.
Even so, oil production in Texas continues to grow, as existing wells flow and new wells come online. The Railroad Commission reported Texas produced 2.2 millions barrels a day in October, a modest increase from the previous month.
West Texas Intermediate, the U.S. benchmark, closed at $57 Tuesday, down more than 45 percent over the past five months. If that price holds, analysts are predicting U.S. production will continue to grow into mid-2015, at which point it will flatline though to the end of the year.
“2016 depends on what happens to oil prices between now and then. We think prices will be higher a year from now but there’s a lot of moving parts,” Molchanov said.
With cash sales down and mtg purchase apps still down year over year seems total sales would be down as well:
MBA Purchase Applications
Highlights
The purchase index showed a little life in the December 19 week, up 1.0 percent to help lift the year-on-year rate from the negative middle single digits to the low single digits at minus 1.0 percent.
New jobless claims remain low largely as a function of time since the last recession.
We’ll see what happens as oil sector cuts go into effect.
Jobless Claims
Philadelphia Fed Survey
Highlights
Growth is still very strong in the Philly Fed manufacturing region but just not as strong as November’s great surge. The Philly Fed’s general conditions index slowed to 24.5 from 40.8 in November. Outside of November, the latest reading is the strongest since March 2011.
But details in the report do show across-the-board slowing including for new orders, at 15.7 vs November’s 35.7, unfilled orders at 1.5 vs 7.1, employment at 7.2 vs 22.4, and shipments, at 16.1 vs November’s 31.9. It was this 31.9 reading that first signaled what proved to be a great month for manufacturers based on Monday’s November industrial production report where the manufacturing component surged 1.1 percent.
But November looks to be an impossible comparison for the manufacturing sector this month though the rate of growth is still very strong. Other details in today’s report include steady and muted readings for prices and a steady reading for inventories. The 6-month outlook remains very strong though once again less strong than November, at 51.9 vs 57.7.
Today’s report follows Monday’s contractionary reading in the Empire State report and Tuesday’s slowing in the PMI manufacturing flash, a report that offered very similar indications to this report. Watch tomorrow for the manufacturing report from the Kansas City Fed.
PMI Services Flash
Highlights
Markit’s sample of US service providers reports abrupt slowing in growth so far in December, to 53.6 vs 56.2 in the final November reading and 56.3 in the mid-month November reading. December’s flash is the lowest reading since the heavy weather of February.
Growth in this sample peaked in June and has been slowing the past 6 months, underscored by further moderation this month in new business. The rise in backlog work is the slowest in 5 months. Markit’s sample is still hiring though job creation is the weakest in 8 months. Price pressures are muted reflecting lower fuel-related costs for inputs and lack of pricing power for prices charged.
Today’s report points to tangible slowing for the bulk of the economy going into year end, and it follows weak indications so far this month from the manufacturing economy posted on Monday by the Empire State report and on Tuesday by Markit’s manufacturing sample.
If sales are going to fall off it will be after the layoffs and capital expenditure cuts from the fall in crude prices take place:
Jobless Claims
Highlights
Jobless claims data are low but still are still trending higher than a month ago in comparisons that do not point to further improvement for the monthly employment report. Initial claims did fall 3,000 in the December 6 week to 294,000 but the 4-week average, up slightly to 299,250, is still about 15,000 higher than in early November.
Continuing claims tell the same story, up a steep 142,000 to 2.514 million in lagging data for the November 29 week. This is the highest level since mid August. The 4-week average, up 28,000 to 2.386 million, is also up about 15,000 vs the month-ago comparison. The unemployment rate for insured workers ticked higher for the first time since late August, up 1 tenth to 1.9 percent.Retail Sales
Highlights
Retail sales in November came in strong despite lower gasoline prices. Retail sales in November posted a 0.7 percent boost after rebounding 0.5 percent in October Market expectations were for 0.4 percent rise for November. Autos jumped a notable 1.7 percent after gaining 0.8 percent in October. Excluding autos, sales increased 0.5 percent after rising 0.4 percent in October. Forecasts were for a 0.1 percent boost.
Gasoline station sales fell on lower prices. Sales declined 0.8 percent after a 1.3 percent drop in October. Excluding both autos and gasoline sales advanced 0.6 percent in November after a 0.7 percent rise the prior month. The median market forecast was for 0.5 percent.
Within the core strength was broad based, led by building materials & garden equipment (up 1.4 percent); clothing & accessories (up 1.2 percent); and nonstore retailers (up 1.0 percent).
Today’s retail sales report is favorable for fourth quarter GDP in the personal consumption component. Currently, the consumer sector is leading the recovery with confidence and spending up.
Import and Export Prices
Highlights
Cross-border price pressures are nowhere to be found in the import & export price report where import prices dropped 1.5 percent in November, the 5th straight drop and the steepest since June 2012, and export prices fell 1.0 percent for the 4th straight drop and matching the steepest drop since June 2012. The year-on-year rate for import prices is at minus 2.3, the steepest negative reading since April 2013, with export prices at minus 1.9, the steepest since October 2013.
And it’s not just oil-related prices that are falling. Excluding petroleum, import prices fell 0.3 percent in the month for a 4th straight drop and the steepest since April this year while export prices, excluding both food and fuels for this reading, fell 0.5 percent for a third straight drop. The year-on-year reading for ex-petroleum import prices is at only plus 0.1 percent with ex-food & ex-fuel export prices at minus 0.4 percent.
A look at finished goods shows extended declines for nearly all readings. Prices of imported motor vehicles are down 0.1 percent in the month for a 1.0 percent year-on-year decline while prices of exported consumer goods are down 0.3 percent for both the monthly and year-on-year comparisons.
The strong dollar is an important factor that is keeping import prices down, but it’s more than the dollar as evidenced by the export side of the data. Falling oil prices are having a spillover effect throughout the global price picture. Today’s data point to very soft readings for tomorrow’s producer price report and they won’t be lifting expectations for Wednesday’s consumer price report.Business Inventories
Highlights
Total business inventories rose slightly in October, up 0.2 percent, but show no significant change relative to business sales which slipped 0.1 percent. The stock-to-sales ratio is unchanged for a 3rd straight month at 1.30.
Good quick read and charts on tax receipts, ‘labor markets’ etc.
A Matter, It Seems, Of Faith
By Jeffrey P. Snider
My RT interview starts at the 4 min mark.
The cut it into segments that will appear at a later date.
