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Ten Years Ago: The Sluggish Recovery Began

2 days ago

Note: This is the 15th year I’ve been writing this blog.  Sometimes it is fun to look back, especially at turning points.  Starting in January 2005, I was very bearish on housing – and in early 2007, I predicted a recession.However in 2009 I became more optimistic. For example, in February 2009, I wrote: Looking for the Sun (Note: that post shocked many readers since I had been very bearish).And here are a couple of posts I wrote exactly 10 years ago on July 15, 2009:Is the Recession Over?Show me the Engines of GrowthBack in February I pointed out that I expected to see some economic rays of sunshine this year. But I never expected an immaculate recovery forecast from the FOMC.Although I’ve argued repeatedly that a "Great Depression 2" was extremely unlikely, I think the other extreme – an

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NY Fed: Manufacturing "Business activity rebounded modestly in New York State"

2 days ago

From the NY Fed: Empire State Manufacturing Survey Manufacturing firms in New York State reported that business activity grew modestly in July. After declining substantially last month, the general business conditions index returned to positive territory, rising thirteen points to 4.3. After falling below zero last month, the index for number of employees slid further, dropping six points to -9.6, pointing to a decline in employment levels. The average workweek index, at 3.8, signaled somewhat longer workweeks. emphasis addedThis was slightly above the consensus forecast.

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Sunday Night Futures

3 days ago

Weekend:• Schedule for Week of July 14, 2019Monday:• At 8:30 AM, The New York Fed Empire State manufacturing survey for July. The consensus is for a reading of 0.5, up from -8.6.From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 and DOW futures are down slightly (fair value).Oil prices were up over the last week with WTI futures at $60.25 per barrel and Brent at $66.76 barrel.  A year ago, WTI was at $68, and Brent was at $71 – so oil prices are down about 10% year-over-year. Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.79 per gallon. A year ago prices were at $2.88 per gallon, so gasoline prices are down about 3% year-over-year.

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30 Year Mortgage Rates increase to 4.0%

3 days ago

From Matthew Graham at Mortgage News Daily: Mortgage Rates Slightly Higher to Begin Risky WeekMortgage rates moved decisively higher this week as the underlying bond market finally began shifting gears. After the Fed meeting in June, rates moved to the lowest levels in more than 2 years and had been holding in a narrow range since then. [30YR FIXED – 4.0%] emphasis added Click on graph for larger image.This is a graph from Mortgage News Daily (MND) showing 30 year fixed rates from three sources (MND, MBA, Freddie Mac).   Go to MND and you can adjust the graph for different time periods.

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Schedule for Week of July 14, 2019

4 days ago

The key reports this week are June housing starts and retail sales.For manufacturing, the Industrial Production report and the July New York and Philly Fed manufacturing surveys will be released.—– Monday, July 15th —–8:30 AM: The New York Fed Empire State manufacturing survey for July. The consensus is for a reading of 0.5, up from -8.6.—– Tuesday, July 16th —–8:30 AM: Retail sales for June is scheduled to be released.  The consensus is for 0.1% increase in retail sales.This graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales, ex-gasoline, increased by 3.0% on a YoY basis in May.9:15 AM: The Fed will release Industrial Production and Capacity Utilization for June.This graph shows industrial production

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Q2 Review: Ten Economic Questions for 2019

5 days ago

At the end of last year, I posted Ten Economic Questions for 2019. I followed up with a brief post on each question. The goal was to provide an overview of what I expected in 2019 (I don’t have a crystal ball, but I think it helps to outline what I think will happen – and understand – and change my mind, when the outlook is wrong).By request, here is a quick Q2 review. I’ve linked to my posts from the beginning of the year, with a brief excerpt and a few comments:10) Question #10 for 2019: Will housing inventory increase or decrease in 2019?"I expect to see inventory up again year-over-year in December 2019.   My reasons for expecting more inventory are 1) inventory is still historically low (inventory in November 2018 was  the second lowest since 2000), 2) higher mortgage rates, and 3)

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Q2 GDP Forecasts: Around 1.5%

5 days ago

From Merrill Lynch: We continue to track 1.7% for 2Q GDP growth. [July 12 estimate]emphasis addedFrom the NY Fed Nowcasting ReportThe New York Fed Staff Nowcast stands at 1.5% for 2019:Q2 and 1.8% for 2019:Q3. [July 12 estimate].And from the Altanta Fed: GDPNowThe GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2019 is 1.4 percent on July 10, up from 1.3 percent on July 3. [July 10 estimate]CR Note: These estimates suggest real GDP growth will be around 1.5% annualized in Q2.

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Hotels: Occupancy Rate Increased Year-over-year

5 days ago

From HotelNewsNow.com: STR: US hotel results for week ending 6 JulyThe U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 30 June through 6 July 2019, according to data from STR.In comparison with the week of 1-7 July 2018, the industry recorded the following:• Occupancy: +2.6% to 65.3%• Average daily rate (ADR): +2.6% to US$127.31• Revenue per available room (RevPAR): +5.2% to US$83.18emphasis addedThe following graph shows the seasonal pattern for the hotel occupancy rate using the four week average. Click on graph for larger image.The red line is for 2019, dash light blue is 2018 (record year), blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).Occupancy has been

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LA area Port Traffic Down Year-over-year in June

6 days ago

Special note: The expansion to the Panama Canal was completed in 2016 (As I noted a few years ago), and some of the traffic that used the ports of Los Angeles and Long Beach is probably going through the canal. This might be impacting TEUs on the West Coast.Container traffic gives us an idea about the volume of goods being exported and imported – and usually some hints about the trade report since LA area ports handle about 40% of the nation’s container port traffic.The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average. Click on graph for larger image.On a

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Cleveland Fed: Key Measures Show Inflation Close to 2% YoY in June, Core PCE below 2%

6 days ago

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.7% annualized rate) in June. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.2% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.1% (0.7% annualized rate) in June. The CPI less food and energy rose 0.3% (3.6% annualized rate) on a seasonally adjusted basis.Note: The Cleveland Fed released the median CPI details for June here.

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First Look at 2020 Cost-Of-Living Adjustments and Maximum Contribution Base

6 days ago

The BLS reported this morning:The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 1.4 percent over the last 12 months to an index level of 249.747 (1982-84=100). For the month, the index was unchanged prior to seasonal adjustment. CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U, and is not seasonally adjusted (NSA).• In 2018, the Q3 average of CPI-W was 246.352.The 2018 Q3 average was the highest Q3 average, so we only have to

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BLS: CPI increased 0.1% in June, Core CPI increased 0.3%

6 days ago

From the BLS: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in June on a seasonally adjusted basis, the same increase as in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.6 percent before seasonal adjustment….The index for all items less food and energy rose 0.3 in June, its largest monthly increase since January 2018….The all items index increased 1.6 percent for the 12 months ending June, a smaller increase than the 1.8-percent rise for the period ending May. The index for all items less food and energy rose 2.1 percent over the last 12 months, and the food index increased 1.9 percent. The energy index, in contrast, declined 3.4 percent over the last 12 months. emphasis addedInflation

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Weekly Initial Unemployment Claims decreased to 209,000

6 days ago

The DOL reported:In the week ending July 6, the advance figure for seasonally adjusted initial claims was 209,000, a decrease of 13,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 221,000 to 222,000. The 4-week moving average was 219,250, a decrease of 3,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 222,250 to 222,500. emphasis addedThe previous week was revised up.The following graph shows the 4-week moving average of weekly claims since 1971.Click on graph for larger image.The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 219,250.This was lower than the consensus forecast.

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Thursday: CPI, Unemployment Claims, Fed Chair Powell Testimony

6 days ago

This should be interesting: The BLS told me today that the "newest set of Labor Force projections through 2028 is set to be released Wednesday September 4th 2019".Thursday:• At 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 216 thousand initial claims, down from 221 thousand last week.• At 8:30 AM, The Consumer Price Index for June from the BLS. The consensus is for no change in CPI, and a 0.2% increase in core CPI.• At 10:00 AM, Testimony, Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the Senate Banking Committee, Washington, D.C

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FOMC Minutes: "the case for somewhat more accommodative policy had strengthened"

7 days ago

From the Fed: Minutes of the Federal Open Market Committee, June 18-19, 2019. A few excerpts: In their discussion of monetary policy decisions at this meeting, participants noted that, under their baseline outlook, the labor market was likely to remain strong with economic activity growing at a moderate pace. However, they judged that the risks and uncertainties surrounding their outlooks, particularly those related to the global economic outlook, had intensified in recent weeks. Moreover, inflation continued to run below the Committee’s 2 percent objective; similarly, inflation for items other than food and energy had remained below 2 percent as well. In addition, some readings on inflation expectations had been low. The increase in risks and uncertainties surrounding the outlook was

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Houston Real Estate in June: Sales down 5% YoY, Inventory Up 11%

7 days ago

From the HAR: Houston Home Sales Fall Shy of Last June’s Record, But Continue to Outpace 2018Despite continued strength in the Houston real estate market fueled by more robust inventory and low interest rates, June home sales could not match the historic levels of a year earlier, in June of 2018. According to the latest monthly report from the Houston Association of REALTORS® (HAR), single-family home sales were down 3.4 percent. However, on a year-to-date basis, sales are still outpacing 2018’s record volume.June marked the first month of 2019 with declining single-family home sales, due to the record-breaking levels of one year earlier. Realtors sold a total of 8,097 units versus 8,385 a year earlier. That translates to a 3.4 percent decline. On a year-to-date basis, however,

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Merrill: "The Fed cut is on for July"

7 days ago

A few excerpts from a Merrill Lynch research note: The Fed cut is on for July Fed Chair Powell delivered a dovish testimony, hinting strongly at an upcoming cut. We now expect a 25bp cut at the July 31st meeting followed by two more cuts at the next two meetings. We are sticking with our forecast of a cumulative 75bp of easing … The Fed seems to be willing to dismiss the better data from the US and instead is focusing on the weaker global data. Indeed, when Powell was asked if the strong jobs report changed his views on cuts, he stated "no". Rather Powell emphasized that "it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook. Inflation pressures remain muted."

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Fed Chair Powell: "Semiannual Monetary Policy Report to the Congress"

7 days ago

From Fed Chair Powell: Semiannual Monetary Policy Report to the CongressOur baseline outlook is for economic growth to remain solid, labor markets to stay strong, and inflation to move back up over time to the Committee’s 2 percent objective. However, uncertainties about the outlook have increased in recent months. In particular, economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the U.S. economy. Moreover, a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling, and Brexit. And there is a risk that weak inflation will be even more persistent than we currently anticipate. We are carefully monitoring these developments, and we will continue to assess their implications for the

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MBA: Mortgage Applications Decreased in Latest Weekly Survey

7 days ago

From the MBA: Mortgage Applications Decreased in Latest MBA Weekly SurveyMortgage applications decreased 2.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 5, 2019. This week’s results include an adjustment for the Fourth of July holiday…. The Refinance Index decreased 7 percent from the previous week and was 88 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index decreased 18 percent compared with the previous week and was 6 percent higher than the same week one year ago….“Mortgage applications were down slightly, even after adjusting for the July 4th holiday, as we saw

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Wednesday: Fed Chair Powell Testimony, FOMC Minutes

8 days ago

Wednesday:• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.• At 10:00 AM, Testimony, Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the House Financial Services Committee, Washington, D.C• At 2:00 PM, FOMC Minutes, Meeting of June 18-19, 2019

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Las Vegas Real Estate in June: Sales down 11% YoY, Inventory up 89% YoY

8 days ago

This is a key former distressed market to follow since Las Vegas saw the largest price decline, following the housing bubble, of any of the Case-Shiller composite 20 cities. The Greater Las Vegas Association of Realtors reported Local home prices increase slightly after three-month holding pattern, GLVAR housing statistics for June 2019Local home prices broke out of a three-month holding pattern to post a slight increase during June, according to a report released Tuesday by the Greater Las Vegas Association of REALTORS® (GLVAR)….The total number of existing local homes, condos and townhomes sold during June was 3,626. Compared to one year ago, June sales were down 11.1% for homes and down 12.0% for condos and townhomes. …At the current sales pace, Carpenter said Southern Nevada still

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BLS: Job Openings "Mostly Unchanged" at 7.3 Million in May

8 days ago

Notes: In May there were 7.449 million job openings, and, according to the May Employment report, there were 5.888 million unemployed. So, for the fifteenth consecutive month, there were more job openings than people unemployed. Also note that the number of job openings has exceeded the number of hires since January 2015 (over 4 years).From the BLS: Job Openings and Labor Turnover Summary The number of job openings was little changed at 7.3 million on the last business day of May, the U.S. Bureau of Labor Statistics reported today. Over the month, hires fell to 5.7 million and separations edged down to 5.5 million. Within separations, the quits and the layoffs and discharges rates were unchanged at 2.3 percent and 1.2 percent, respectively. … The number of quits was little changed in

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Small Business Optimism Index Decreased in June

8 days ago

CR Note: Most of this survey is noise, but there is some information, especially on the labor market and the "Single Most Important Problem".From the National Federation of Independent Business (NFIB): June 2019 Report: Small Business Optimism IndexOptimism faded modestly in June, with the Small Business Optimism Index slipping 1.7 points to 103.3, reversing the gain posted in May but still leaving optimism at historically high levels. ..Thirty-six percent of all owners reported job openings they could not fill in the current period, down 2 points from May but still high. A seasonally-adjusted net 19 percent plan to create new jobs, down 2 points. emphasis added Click on graph for larger image.This graph shows the small business optimism index since 1986.The index decreased to 103.3 in

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Tuesday: Job Openings

9 days ago

From Matthew Graham at Mortgage News Daily: Mortgage Rates Under Some PressureMortgage rates began the day in slightly lower territory compared to last Friday afternoon, but they’d risen noticeably from Wednesday to Friday. The recovery seen this morning wasn’t enough to get them back in line with Wednesday’s levels. To make matters slightly worse, by the afternoon, rates started to move up yet again. [Most Prevalent Rates 30YR FIXED – 3.875%]emphasis addedTuesday:• At 6:00 AM ET, NFIB Small Business Optimism Index for June.• At 10:00 AM, Job Openings and Labor Turnover Survey for May from the BLS.

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Seattle Real Estate in June: Sales down 3.5% YoY, Inventory up 69% YoY from Low Levels

9 days ago

The Northwest Multiple Listing Service reported Buyers Getting "Some Relief" as Key Indicators Point to Strong Summer for Housing MarketInventory, pending sales and prices all increased during June compared to a year ago, according to the latest report from Northwest Multiple Listing Service. The same report, which covers 23 counties in Washington state, shows year-over-year drops area-wide in both the volume of new listings and closed sales….House hunters had a broader selection to consider as inventory at month end totaled 16,800 active listings, about 9.5 percent larger than at the same time a year ago. Brokers added 11,977 new listings during the month, a drop from both a year ago when they added, 13,153 new listings, and from May, when they added 14,689 new listings.About half the

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House Prices to National Average Wage Index

9 days ago

One of the metrics we’d like to follow is a ratio of house prices to incomes. Unfortunately most income data is released with a significantly lag, and there are always questions about which income data to use (the average total income is skewed by the income of a few people).And for key measures of house prices – like Case-Shiller – we have indexes, not actually prices.But we can construct a ratio of the house price indexes to some measure of income.For this graph I decided to look at house prices and the National Average Wage Index from Social Security.Note: For a different look at house prices and income, see this post (using median income). Click on graph for larger image.This graph shows the ratio of house price indexes divided by the National Average Wage Index (the Wage index is

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U.S. Heavy Truck Sales up 12% Year-over-year in June, Near All Time High

9 days ago

The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the June 2019 seasonally adjusted annual sales rate (SAAR).Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand in May 2009, on a seasonally adjusted annual rate basis (SAAR). Then sales increased more than 2 1/2 times, and hit 479 thousand SAAR in June 2015.Heavy truck sales declined again – mostly due to the weakness in the oil sector – and bottomed at 366 thousand SAAR in October 2016.Click on graph for larger image.Since 2016, heavy truck sales have increased to near the all time high (the high was 561 in April 2006).Heavy truck sales were at 544 thousand SAAR in June, up from 537 thousand SAAR in May, and up from 485 thousand SAAR in June 2018.

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Merrill: "Data cools call for July cuts"

9 days ago

A few excerpts from a Merrill Lynch research note: The June employment report was strong with job growth of 224K … leaving us comfortable with our view that the Fed will not cut in July and wait until September to deliver the first rate reduction. … last week’s data were extremely important in dictating Fed action. So what did we learn? No fireworks from the G20 meeting, the ISM manufacturing index held in expansion territory at 51.7 and job creation was robust. The combination does not point to an immediate cut. At a minimum, this takes a 50bp cut off the table but should also prompt the Fed to argue for waiting for more data.This puts the spotlight on Fed Chair Powell at the Semi-Annual Monetary Policy testimony on Wednesday. … We would argue that since the June meeting, the evidence

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Sunday Night Futures

10 days ago

Weekend:• Schedule for Week of July 7, 2019Monday:• At 3:00 PM, Consumer Credit from the Federal Reserve.From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 and DOW futures are down slightly (fair value).Oil prices were down over the last week with WTI futures at $57.63 per barrel and Brent at $64.36 barrel.  A year ago, WTI was at $74, and Brent was at $77 – so oil prices are down about 20% year-over-year. Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.75 per gallon. A year ago prices were at $2.85 per gallon, so gasoline prices are down about 4% year-over-year.

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Public and Private Sector Payroll Jobs During Presidential Terms

10 days ago

By request, here is another update of tracking employment during Presidential terms.  We frequently use Presidential terms as time markers – we could use Speaker of the House, Fed Chair, or any other marker.NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I’ll just stick to the beginning of each term.Important: There are many differences between these periods. Overall employment was smaller in the ’80s, however the participation rate was increasing in the ’80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of

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