note on the graphs used here

sometime during the third week of March, the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs, and also left us with less options we had available and used before the upgrade...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....





Sunday, August 24, 2014

July’s state job reports, consumer prices, new home construction, existing home sales, et al

the most widely watched release of this past week was that of the July consumer price index from the BLS, while on real estate the week also saw the July report on new home construction from the Census bureau and the July report on existing home sales from the National Association of Realtors...on manufacturing, the data firm Markit released its preliminary or "flash" Manufacturing Purchasing Managers Index for August (pdf), a diffusion index which rose to 58.0 from 55.8 in July, which was its highest reading since April 2010, as new export business expanded at its fastest pace in three years, orders and new orders both increased at a faster pace than July, and employment grew at its fastest pace since March 2013...earlier, the Philadelphia Fed released their August Manufacturing Survey (pdf) covering Pennsylvania and southern New Jersey, which reported their broadest diffusion index of current activity increased from a reading of 23.9 in July to 28.0 in August, while the index for the six month outlook of manufacturing executives in their district rose to a 22 year high at at 64.4, in a diffusion index where any positive number suggests expansion...

July Regional and State Employment

this week also saw the release of the Regional and State Employment and Unemployment Summary for July, a report which further expands on the national employment situation summary of three weeks ago by breaking down the state and regional details...so while they tell us in opening that 30 states had unemployment rate increases, 8 states saw decreases, and 12 states had no change, we know that the unemployment rate data comes from the household survey with its large margin of error, and they make that point later in the report when they tell us just seven states had statistically significant monthly unemployment rate increases, led by Tennessee whose unemployment rate rose a half percent from 6.6% to 7.1%, and that the remaining 43 states and the District of Columbia had jobless rates that were not measurably different from those of a month earlier...the table with the seasonally adjusted count of the unemployed and the unemployment rate for each state is here...

as with the national report, the sections of this report that correspond to the establishment survey are more informative, in that they show the number & types of jobs added or lost in each state, ranging from the increase of 46,600 jobs in Texas and 27,600 jobs added in California, to the net decrease of 9,000 jobs in Maryland...for a breakdown of payroll employment by job type for each state over the past 3 months, and the change in employment since last July, see the following two BLS tables accompanying this release: Table 5. Employees on nonfarm payrolls by state and selected industry sector, seasonally adjusted and Table 6. Employees on nonfarm payrolls by state and selected industry sector, not seasonally adjusted ...

July Food Prices Rise 0.4% as Overall Inflation Slows to 0.1%

consumer inflation slipped to the slowest pace in 5 months in July as modest price increases in food and services offset generally lower prices for energy and other commodities...the Consumer Price Index for All Urban Consumers (CPI-U) for July from the Bureau of Labor Statistics showed that seasonally adjusted prices rose by 0.1%, down from a 0.3% increase in June, as prices for gasoline, which rose in June, fell back in July....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, was actually lower, falling to 238.250 in July from 238.343 in June, as overall prices normally fall slightly in July, but the index still remained 2.0% higher than the 233.596 reading from July of last year….with food price increases offsetting decreases in energy prices, core prices, which exclude those volatile components, were also up just 0.1%, as the unadjusted core index fell from 238.157 in June to 238.138 in July, while it was 1.9% ahead of its year ago level of  233.792...

the seasonally adjusted food index rose by 0.4% in July, after rising 0.1% in June, 0.5% in May and 0.4% in April, and it is now 2.5% higher than July a year ago....prices for food away from home rose 0.3% as prices for meals at full service restaurants rose 0.4% and prices at fast food restaurants were 0.3% higher, while prices for food at schools were unchanged after rising 1.3% in June, and prices for other food away from home fell 0.1%.... meanwhile, the price index for food at home rose 0.4% as no major food group fell in price....cereal and bakery products averaged 0.4% higher than in June, as a 1.2% increase in prices for rice, pasta and cornmeal and a 0.7% increase in the price of white bread was only partially offset by a 1.0% decrease in prices for sweetrolls, coffeecakes, doughnuts and a 0.6% decrease in prices for flour and prepared mixes...prices in the meats, poultry, fish, and eggs group rose 0.3% as egg prices rose 0.9% and chicken prices rose 0.5% while overall pork and seafood prices were unchanged and 0.4% lower ground beef prices partially offset a 1.6% increase in prices for beef roasts...on a year over year basis, overall beef prices still remained 10.4% higher and overall pork prices averaged 10.9% higher than last July....dairy products prices were also 0.3% higher in July than in June even though ice cream was 0.6% lower and cheese prices fell 0.2% because whole milk prices rose 0.2% and other dairy products rose 1.3%....meanwhile, the fruit and vegetable price index was unchanged in July as 1.8% lower prices for citrus fruits, 1.7% lower priced lettuce, 1.6% lower potatoes, and 1.5% lower apples were offset by 3.7% higher prices for other fresh fruit and 1.3% higher prices for frozen fruit and vegetables....however, prices for the beverage group rose 0.5% as a 1.1% increase in the price of roast coffee was partially offset by prices for non-alcoholic drinks and that were on net unchanged...in addition, prices for other foods at home rose 0.7% as butter prices were 2.8% higher, olives, pickles, and relishes rose 1.0%, and baby food rose 0.8% while peanut butter prices fell 1.9%... combined with a June increase of 4.2%, butter prices are now 16.5% higher than a year ago...

the seasonally adjusted energy price index was 0.3% lower in July as prices for energy commodities fell 0.3% while the index for energy services fell 0.4%...the decrease in energy commodity prices was anchored by a a 0.3% drop in the price of gasoline, the largest component, while fuel oil prices fell 0.7% and prices for other fuels, including propane, kerosene and firewood averaged a 2.7% increase….within energy services, the index for utility gas service fell for the 3rd consecutive month, as it was down another 0.4% after falling 2.6% in June and 1.7% in May, while the electricity price index fell 0.3% in July after rising 0.2% in June...

looking at the seasonally adjusted core components of the CPI, we find that the supergrouping of commodities less food and energy commodities was unchanged in July, while overall services less energy services saw a 0.1% increase....the index for shelter, which is almost 32% of the CPI, rose 0.3%, with rent of shelter rising 0.3%, homeowner's equivalent rent rising 0.3%, prices for lodging away from home rising 0.2%, while water & sewer bills rose 0.6% and the cost of household operations rose 0.4%....meanwhile, household furnishings and supplies, the commodity component of housing, fell 0.4% with prices for bedroom furniture, living room furniture, kitchen and dining room furniture, cookware and tableware, and window coverings all seeing prices decrease more than 1.3% in July.....the price index for apparel, now up three months in a row, rose 0.2% in July as a 2.2% increase in footwear prices and an 0.8% in prices for men's clothing was partially offset by a 1.0% decrease in women & girls apparel, with women's outwear seeing prices fall 4.6% while their prices since last July were still up 12.3%....the aggregate index for medical care increased by 0.2% as medical care commodities rose 0.3% after being up 0.7% in June on another 0.5% increase in prescription drug prices, while medical care services rose by 0.1% overall as 0.5% increases in both inpatient hospital services and outpatient hospital services was offset by a 0.5% drop in prices for eyeglasses and eyecare, 0.2% lower prices for physicians' services and 0.2% lower costs for health insurance...while the transportation composite index showed a 0.3% decrease, that index includes gasoline, which fell 0.3%; transportation commodities less fuel prices, however, were 0.1% higher, as prices for new cars and trucks rose 0.3%, prices for used cars & trucks fell 0.3%, and the price of tires rose 0.2%...however, the transportation services index fell 0.2% on a 2.1% drop in prices for car and track rentals while airfares were 0.4% higher than in June... meanwhile, the recreation index fell 0.1% as recreation commodities fell 0.8% on another 1.9% decrease in TV prices, while prices for audio equipment fell 3.0%, prices for photographic equipment fell 1.9%, prices for discs & tapes & similar media fell 1.5%, and prices for pets and pet products fell 0.9%, while recreation services rose 0.2% as a 2.0% decrease in rental of video and audio media was more than offset by 0.6% higher club fees, 0.8% higher theater and concert ticket prices, and 0.4% higher film processing......finally, the aggregate education and communication index was unchanged as education and communication commodities fell 0.2%, mostly on a 1.0% decline in prices for personal computers and peripheral equipment, while education and communication services rose 0.1% on a 0.4% increase in elementary and high school tuition and fees and a 0.4% increase in postage and delivery services....other than the aforementioned increases in food prices and women's outerwear, the only other line item among CPI components that showed an annual price change greater than 10% was televisions, which are now 15.0% cheaper than they were a year earlier... 

our FRED graph below shows the monthly change in each of the major component indexes of the CPI over the past year, with increases in prices above the dark “0” line and price decreases below it...each group of 7 color coded bars represents one month of CPI component changes, where blue shows the monthly change in the price index for food and beverages; red shows the change in the price index for all housing components, which includes rent, homeowners equivalent rent, utilities, insurance & household maintenance; mauve shows the percentage change for apparel prices, orange shows the change in the index for medical care, light green shows the change in the transportation composite, obviously volatile as it includes gasoline, while dark green shows the monthly change in the price index for education and communication and light blue shows the change in the recreation price index…this graph can also be viewed as an interactive, wherein you can expand the view to show price changes in each of these indexes going back to 1947...

July 2014 CPI components bar graph

Housing Starts and Building Permits Increase in July

the Census report on New Residential Construction for July (pdf) gives us broad estimates of new housing permits, new housing starts, and housing completions based on a survey of a small percentage of permit offices visited by Census field agents, and is widely watched and reported on for new housing starts....in July, starts on new housing units were estimated to be at a seasonally adjusted annual rate of 1,093,000, which was 15.7 percent (±10.9%) above the revised June estimate of 945,000 annually, and 21.7 percent (±10.7%) above the annual rate of 898,000 housing starts estimated in July a year ago...the numbers in parenthesis means that Census is 90% confident that housing units started in July were at a seasonally adjusted rate between 4.8% and 26.5% greater than the pace in June, and between 11.0% and 32.4% greater than the pace of a year ago...the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 101,000 total units were started in July, up from 90,500 in June, with 61,600 of those single family dwellings...meanwhile, construction was started on 38,200 apartment units in buildings with 5 or more units, a 25 year high for apartment unit starts, with the caveat that the margin of error on that apartment data is ± 33.8%...with this release, previously reported single family starts in June were revised up from 58,500 to 62,200 while units started in buildings with more than 5 units were revised from 25,700 to 26,600...

the monthly data on new building permits have a much narrower margin of error that new housing starts and hence are probably a better monthly indicator of new construction trends than the volatile and often revised starts data... in July, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,052,000, which was 8.1 percent (±1.8%) above the revised June annual rate of 973,000 and 7.7 percent (±1.8%) above the 977,000 annual rate estimated for new permits in July of last year...those estimates were extrapolated from the unadjusted estimate of 97,100 new permits issued in July, which was up from the estimated 92,300 permits issued in June...of those units permitted in June, 61,000 (±1.1%) were for single family homes, and 33,200 (±1.0%) represented permits for housing units in building with 5 or more units...our FRED graph on this report below, which can also be viewed as an interactive at the FRED site, shows the seasonally adjusted annual rate of housing units started in thousands monthly in blue, and the annual rate of housing units authorized by building permits monthly in red since 2000…note that the number in thousands shown monthly for both metrics is an estimate of how many units would be permitted or started over an entire year if that month’s pace were continued over 12 months… 

July 2014 new homes

Existing Homes Selling at a 5.15 Million a Year Clip in July

according to the July report on existing home sales from the National Association of Realtors, 5.15 million homes would sell annually if July's seasonally adjusted home sales were extrapolated at the same rate over an entire year; those adjusted sales were up 2.4% from the downwardly-revised seasonally adjusted annual rate of 5.03 million completed home transactions in June, but still 4.3% below the 5.38 million-unit annual sales rate of July last year...before the seasonal adjustment and conversion to an annualized figure, an estimated 494,000 homes sold in July, down 2.4% from the estimated 506,000 homes that sold in June, and down 4.8% from the estimated 519,000 homes that sold in July a year ago...while seasonally adjusted data indicates that homes sales increased in every region of the country except the Northeast, where they were statistically unchanged, the unadjusted data (pdf) indicates that homes sales were down in every region of the country except the Northeast, where they were up 14.3%...

the median home selling price for all housing types was $222,900 in July, up 0.4% from the downwardly revised median price of $222,000 in June and 4.9% higher than the $212,400 median sales price in July of last year, in home price data that is not seasonally adjusted…the average home sales price was $268,700, up from $268,100 in June and $259,000 in July a year ago, with regional average home prices ranging from $342,800 in the West to an average of $210,200 for homes sold in the Midwest...foreclosed homes, which sold for an average of 20% below the price of similar homes in their market, accounted for 8% of June sales, while short sales, at 3% of the total, were discounted by an average of 11%...sales of distressed properties were the lowest portion in 6 years; foreclosed homes, which sold for an average of 20% below the price of similar homes in their market, accounted for 6% of July sales, while short sales, at 3% of the total, were discounted by an average of 14%.....the pie graph below, taken from an NAR graphic summary of July data, shows the percentage of homes sold in in July in each of several prices ranges; while it’s obvious most homes were sold for below $250,000, those selling for over $500,000 still accounted for a substantial 12% of all sales..  

July 2014 existing home sales prices

the median time on the market for all homes was 48 days in July, up from 44 days in June, and up from a median of 42 days on the market in July a year ago…those who bought houses with cash accounted for 29% of transactions in July, down from 32% of sales in June and the lowest percentage of all cash transactions for any month since January 2013...those identified by realtors as investors accounted for 16% of all transactions, unchanged from May and also unchanged from the 16%  investor share of sales a year earlier...the percentage of first time home buyers rose for the second month in a row to 29% in July, from 28% in June, as interest rates for a 30 year mortgage averaged 4.13% in July, down from 4.16% in June; and the lowest average mortgage interest rate in 14 months...an inventory of 2.37 million existing homes remained available for sale at the end of July, which would be a 5.5-month supply of unsold homes at the July sales pace, unchanged from June but up from 2.24 million, or a 5.0 month supply in July a year earlier...

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, August 17, 2014

July’s retail sales, industrial production, & producer prices; June’s job openings and business inventory; 2nd Qtr household debt

in contrast to last week, when all of the releases covered June data, the most important releases this week were on July data, giving us our first look at the economy in the 3rd quarter...the major releases this week were the July advance report on retail sales from the Census Bureau, the July G17 on industrial production from the Fed, and the July producer price index from the BLS...in addition, we also saw the 2nd quarter report on household household debt and credit from the NY Fed, and the June Job Openings and Labor Turnover Survey, a report that's gained a following after it was cited by Janet Yellen as including key employment indicators she follows....this week also saw the first regional survey on manufacturing from Fed District banks; on Tuesday, the August Empire State Manufacturing Survey from the New York Fed, polling manufacturers in New York and northern New Jersey, reported that their broadest diffusion index for general business conditions fell 11 points from the 4 year high of 25.6 in July to 14.7 in August, still indicating growth for the month, in an index where any positive number indicates expanding business for area manufacturers..

also, in the last major June report which will likely result in negative revisions to 2nd quarter GDP, the Census Bureau released the Manufacturing and Trade Inventories and Sales report for June, commonly covered as the business inventories report, which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers' shipments increased by 0.3 percent (±0.2%) from May to $1,346.7 billion in June, which was 4.7 (±0.6%) above the total monthly sales level of June of last year; manufacturers sales were estimated at $499,828 million, retailer's sales were estimated at $392,456 million, and merchant wholesalers accounted for $454,447 million of the overall total....meanwhile, total manufacturer's and trade inventories were estimated to have increased 0.4 percent (±0.1%) from May to a seasonally adjusted $1,743.1 billion in June, which was up 5.8 percent (±0.4%) from June a year earlier...seasonally adjusted inventories of manufacturers were estimated to be valued at $653,775 million, inventories of retailers were estimated to be valued at $555,825 million, and inventories of wholesalers were estimated to be valued at $533,486 million at the end of June...the month end total business inventories to total sales ratio, a metric which is watched to determine if inventories are becoming excessive, was at 1.29, unchanged from May and up fractionally from 1.28 in June a year ago..

July Retail Sales Flat with 0.2% June Increase Unrevised

the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $439.8 billion for the month, virtually unchanged (±0.5%)* from June's sales of $439.8 billion, which themselves were unrevised with a gain of of 0.2 percent (±0.2%)* over May sales; July's sales were also estimated to be 3.7 percent (±0.9%) above those of July a year ago...before the seasonally adjustment, July estimated sales, extrapolated from surveys of a small sampling of retailers, were reportedly at $446,251 million, up from $438,735 million in June but down from $464,429 million in May, and up 4.2% from $428,090 million in July a year ago....

to break down the details of the July retail sales estimate, we'll again start by including a picture of the table of monthly and yearly percentage changes in sales by business type from the Census pdf.....the first double column gives us the seasonally adjusted percentage change in sales for each type of retail business type from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance estimates (now called "preliminary") as of this report, likewise for each business type, with the May to June change under "May 2014 revised" and the revised June 2013 to June 2014 percentage change in the last column shown...for reference, here is what those June percentage changes looked like before this month's revision...  

July 2014 retail sales table

as you can see, the weakness in July sales is evident across most business types, with only the miscellaneous store retailers, who account for less than 2% of the total, managing a monthly gain as large as 0.9%... the seasonally adjusted 0.2% decline in motor vehicle and parts sales to $87,640 million was a drag on sales overall, but even without the decrease in sales from the automotive sector, retail sales still only managed a 0.1% increase....food and clothing sales provided some stability; clothing store sales were up 0.4% to $21,205 million, food and beverage store sales were up 0.3% to $49,558 million, and sales by restaurants and bars were up 0.2% to $47,281 million...meanwhile, general merchandise store sales were off 0.5% to $55,155 million, while non-store or online sales slipped 0.1% to $39,768 million, with electronic and appliance stores both showing sales down by the same margin...

while overall retail sales for June were little revised, several of the retail groups saw significant revisions in their reported sales for the month... building material and garden supply outlets, which were reported with 1.0% lower sales in June, have been revised to show a 1.0% gain for the month; June sales at bars and restaurants were also reversed, from a decrease of 0.3% to an increase of 0.2%...in addition, food and beverage stores were revised from an increase of 0.4% to an increase of 0.9%, while miscellaneous stores sales were revised from up 0.1% to up 0.9%...meanwhile, sales at general merchandise stores had been reported up 1.1% and they've been revised to a 0.4% increase, and clothing store sales were revised from an increase of 0.8% to an increase of 0.2%, while sales at gas stations, which were first reported 0.3% higher, have been revised to indicate they were 0.8% lower...

Industrial Production Increases 0.4% in July as Capacity Utilization Edges Up 0.1% to 79.2%

the Fed's July release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.4% over a June reading which was revised from an increase of 0.2% to an increase of 0.4% as the May to June increase was revised from a 0.5% increase to a 0.3% increase...the industrial production index itself, which is benchmarked to 2007 production equal to 100.0, rose to a record high 104.4 from an unrevised June index level of 103.9, while May's industrial production index was revised from 103.7 to 103.5...the manufacturing index, which accounts for roughly 70% of the industrial composite, rose 1.0% in July to 100.7, the highest since November 2007 and first time that index has exceeded 100.0 since January 2008; in addition, the manufacturing index for June was revised up from 99.7 to 99.8 and the index is now 4.9% higher than the level of July 2013..... meanwhile the seasonally adjusted utility index, reflecting a milder than normal July in most of the country, fell another 3.4% in July after falling 0.7% in June and at 96.9 is now 9.7% below the levels of January, when it first spiked 4.1% due to the colder than normal weather...rounding out the industry groups, the mining index, which includes oil & gas production, increased by 0.3% to 130.5 in July, after increasing a revised 1.3% to 130.1 in June, and is now 8.6% higher than a year ago...

in addition to the breakdown of industrial production into the three major industry groups, this release also reports indexes for industrial production by market group...among final products and nonindustrial supplies, which rose by 0.6% in July, seasonally adjusted production of consumer goods rose by 0.5% after rising a revised 0.2% in June; production of consumer durables rose 4.7% on an 8.5% increase in the output of automotive products, which are now up 19.8% year over year, while production of appliances, furniture and carpeting rose 1.8% in July and output of home electronics was 1.5% above June production...meanwhile, production of non-durable goods was down 0.7% for the month on a 1.5% drop in  energy output and a 0.4% drop in production of non-energy non-durables...of the later, clothing production was up 2.0%, while output of paper products fell 1.4%, production of food was 0.6% lower, and output of chemical products was unchanged....since last July, production of durable goods had increased by 12.0%, led by the increase in automotive production, and production of non-durable goods has risen 2.1% on a 5.0% increase in clothing output, while output of consumer energy products has increased 2.7%..

meanwhile, seasonally adjusted production of business equipment rose 1.3% in July after falling by a revised 0.3% in June as production of transit equipment rose 3.9% while production of information processing equipment rose 0.1% and production of industrial equipment rose 0.7%...for the year ending July, output of business equipment rose by 7.0% on the strength of an 11.7% increase in production of transit equipment, while output of industrial equipment rose 6.9% and production of information processing equipment rose 1.7%...in addition, production of defense and space equipment rose by 0.9% in July and grew by 4.3% over the year...in addition, production of supplies for use in construction rose 0.8% for the month and was 5.3% ahead of year ago output, while production of business supplies was unchanged for the month and up 2.2% for the year...meanwhile, production of raw and intermediate materials that would input into other production processes rose by 0.3% in July with output of consumer parts, equipment parts, and textiles all rising by more than 1.0%, with only output of energy materials falling by 0.6%...for the year, production of intermediate materials was up 5.5% with a 14.8% increase in parts for consumer goods leading production of intermediate durable goods to an 8.5% year over year increase..

with industrial production increasing 0.4% in July, capacity utilization, which is the percentage of our plant and equipment that was in use during the month, likewise rose, but by just 0.1%, from 79.1% in June to 79.2% in July, suggesting new capacity was added during the month...77.8% of our total manufacturing capacity was in use during July, up from 77.2% in June, and up from the manufacturing utilization rate of 75.8% in July of last year...the operating rate for NAICS classified durable goods manufacturers was at 78.5% in July, up from 77.9%, led by an 84.8% operating rate for manufactures of electrical equipment, appliances, and components, while the July operating rate for NAICS classified manufacturers of non-durables was at 78.4%, up from 78.3% in June, with the oil and coal products industry operating at 82.8% of capacity while textile and textile product mills were only operating at a 70.2% rate.... meanwhile, capacity utilization by the 'mining' industry fell from 89.9% to 89.4%, reflecting the increase in oil and gas rig counts during the month; while the operating rate for utilities obviously fell with lower production, from 78.7% to 75.9%.......our FRED graph for this report below shows the percentage of capacity in use for all industries monthly since 2007 in pink, while it shows the the seasonally adjusted industrial production index values for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007, at which time they were all benchmarked to equal 100.0… 

July 2014 industrial production

July Producer Prices Inch Up 0.1% on Services

according to the Producer Price Index for July from the BLS, the seasonally adjusted producer price index for final demand rose 0.1% after rising 0.4% in June and falling 0.2% in May, and now indicates wholesale prices are 1.7% above year earlier levels...in July, the index for final demand for services rose by 0.1%, as the index for final demand of transportation and warehousing services, a measure of the margins received by such services, rose by 0.5%, while the margins for final demand trade rose 0.2%, while producer prices for services other than trade, transportation, and warehousing were unchanged, as a 1.9% decrease in prices for consumer loan services was offset by a 2.0% increase in portfolio management services....meanwhile, the price index for final demand for goods, aka 'finished goods', was unchanged after rising 0.5% in June, as a 0.6% decrease in the price index for final demand energy offset a 0.4% increase in the price index for final demand for food and a 0.2% increase in core wholesale goods...among wholesale finished food prices, oilseeds were priced 16.5% lower, fresh eggs were off 12.9%, grains were 12.2% lower, and producer prices for fish were 11.% higher inJune, while a 2.1% drop in wholesale gasoline prices was the major factor in the drop in energy prices...

this report also showed the price index for processed goods for intermediate demand rose 0.1%, as a 0.4% increase in intermediate processed foods and feeds and a 0.3% increase in intermediate core producer prices was offset by a 0.3% decrease in prices for intermediate processed energy goods....meanwhile, the price index for intermediate unprocessed goods fell 2.7% on a 0.4% drop in producer prices for for unprocessed foods and feeds and a 6.4% decline in the index for raw energy materials, while prices for unprocessed nonfood materials less energy were unchanged......finally, the price index for services for intermediate demand rose 0.3% in July, mostly on a 0.3% increase in the index for prices for services less trade, transportation, and warehousing for intermediate demand and a 0.5% increase in prices for transportation and warehousing services for intermediate demand...over the 12 months ended in July, the index for services for intermediate demand rose 1.7%...

2nd Quarter Household Debt Slips 0.2% with Delinquencies at a 7 Year Low

the New York Fed’s 2nd Quarter Report on Household Debt and Credit (pdf), indicated that total household debt, including real estate debt, slipped by $18 billion in the 2nd quarter to $11.63 trillion, a 0.2% decrease from the 1st quarter debt level...mortgages, the largest component of the aggregate, fell by 0.8% or $69 billion to $8.10 trillion, and home equity lines of credit fell by $5 billion to $521 billion, a 1.0% drop, while non-housing debt rose by 1.9%, with increases in all categories, as auto loan balances increased by $30 billion; student loan balances increased by $7 billion; credit card balances increased by $10 billion, and other non-housing credit balances increased by $9 billion....while up 4.3% from the $11.15 trillion debt level of the 2nd quarter last year, aggregate household debt still remains 8.2% below the peak of $12.68 trillion reached in the 3rd quarter of 2008...

the first bar chart below from this 31 page graphic presentation shows the components of total household debt nationally for each quarter since the beginning of 2003, with each bar on the graph representing a quarter of a year, and within each bar is a color coded representation of the amount in trillions of dollars of each type of debt that was outstanding at the end of that given quarter…in each bar, orange represents the amount of mortgage debt that was outstanding at the end of that quarter, violet indicates the amount of home equity loans outstanding, green is the amount of auto loans outstanding, blue is unpaid credit card debt, red are student loans outstanding, and grey is ‘other’ debt outstanding in the quarter….we can see that the aggregate total debt outstanding has been increasing over the past year, despite being flat this quarter, and that student loan debt has now expanded to 10% of the total, or one seventh of the amount of mortgage debt...note that although mortgage debt is considerably lower than at the peak, this report and its graphics does not distinguish between mortgage debt that has been paid off and mortgage debt that has been extinguished through a foreclosure or a short sale....

2nd quarter 2014 household debt components

>delinquency rates improved on all types of debt in the second quarter, with 6.2% of debt at some stage of delinquency, the lowest delinquency rate since the 3rd quarter of 2007, in contrast to an overall delinquency rate of 6.6% at the end of the first quarter...of the $724 billion of debt that was delinquent at the end of the quarter,  $521 billion was classified as seriously derogatory, meaning it was more than 90 days past due...new delinquencies also fell, with just 1.2% of current mortgage balances transitioning into delinquency during the quarter, the lowest new mortgage delinquency rate since 2000....the next bar graph below uses the same color coding for the type of loans represented as the graph above and covers the same time period; in this one, each bar has a color coded representation of the amount of newly delinquent loans by type as they first became delinquent in each quarter; here we can see a pretty clear peak with over $400 billion of household debt becoming delinquent for the first time in the last quarter of 2008; we can also see that newly delinquent student debt, or the red in each bar, has become larger as time goes on, and also clearly see how newly delinquent mortgage debt in orange dropped seasonally in the most recent quarter, just as was noted by the MBA 2nd quarter delinquency survey last week…  

2nd quarter 2014 household debt new delinquencies

June Job Openings at a 13 Year High

according to Job Openings and Labor Turnover Survey for June (JOLTS) from the Bureau of Labor Statistics, seasonally adjusted job openings rose by 92,000 to 4,671,000 in June, while jobs open at the end of May were revised down by 58,000 from the originally reported 4,635,000 openings to 4,577,000....job openings in professional and business services rose by 46,000 and job openings in retail sales rose by 22,000, while job openings in accommodation and food services fell by 56,000 in June after rising by 55,000 in May....job openings as a percentage of the employed labor force rose to 3.3% from 3.2% in May, up from 2.8% a year earlier and up from 2.7% in January...based on 9,474,000 officially unemployed in June, there would be 2.1 unemployed who were actually looking for work during June for every job opening; that, of course, does not count those who might have wanted a job but didn't look for work during the month...

this JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which include retirements and death.... in June, seasonally adjusted new hires totaled 4,830,000, up 92,000 from the 4,738,000 hired or rehired in May, as the hiring rate as a percentage of all employed rose from 3.4% to 3.5%, and up from 3.2% a year earlier...total hiring in the professional and business services category increased by 68,000 to 1,031,000 in June, while hiring in construction fell by 37,000 to 264,000....total separations also rose, from 4,530,000 in May to 4,547,000 in June, as the separations rate as a percentage of the employed remained unchanged at 3.3%, while it was up from 3.1% a year ago...subtracting the 4,547,000 total separations from the total hires of 4,718,000 would imply an increase of 283,000 jobs in June, slightly less than the revised payroll job increase of 298,000 for June reported by the BLS establishment survey two weeks ago, a difference not unexpected between these two surveys that both have wide confidence intervals...

further breaking down the seasonally adjusted job separations, we find 2,534,000 quit their jobs in June, 47,000 more than the revised 2,487,000 who quit their jobs in May, while the quits rate, an indicator of worker confidence which is being watched by the Fed, remained unchanged at 1.8% of total employment.....in addition to those who quit, another 1,622,000 were either laid off, fired or otherwise discharged in June, down 126,000 from 1,701,000 discharges in May, which left the discharges rate at 1.2% of all those who were employed during the month....meanwhile, other separations, which includes retirement and death, were at 391,000 in June, up a bit from 387,000 in May, for an 'other separations' rate of 0.3%, which was unchanged....our FRED graph for this report below shows job openings in blue in thousands monthly since January 2005, and monthly hires in orange and monthly separations in violet over the same span.note that when separations in purple were above  hires in orange we were losing jobs...the two major components of separations are also included, the count of layoffs and firings is tracked in red, while the number of those quitting their jobs monthly is shown in green.... 

June 2014 JOLTS

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, August 10, 2014

June’s trade deficit, the 2nd quarter MBA delinquency survey, and the June Mortgage Monitor

the key economic release this week was on our international trade for June from the Commerce Dept, which appears will result in an upward revision to 2nd quarter GDP...the other monthly economic reports released this week were also on June data and included:

  • the Full Report on Manufacturers’ Shipments, Inventories, & Orders for June from the Census Bureau (pdf), which showed new orders for manufactured goods rose by $5.7 billion or 1.1% to a record high of $503.2 billion, factory shipments rose by $2.5 billion or 0.5% to a record $499.8 billion, factory inventories rose by $1.8 billion or 0.3% to a record high at $653.8 billion, and unfilled factory orders rose by $10.4 billion or 1.0% to $1,098.5 billion, which was also the highest level value of unfilled orders on record.... 
  • the Fed's G-19 report on Consumer Credit for June, which showed that seasonally adjusted consumer borrowing increased at an annual rate of 6.5% in June, or by $17.2 billion over May to $3,211.2 billion outstanding at the end of the month...revolving credit, which is mostly credit card debt, grew at an annual rate of 1.3%, increasing to $873.1 billion in May from $872.1 billion in May, while non-revolving debt, which includes long term borrowing for items such as cars and tuition, but not real estate, rose In June at an annual rate of 8.4% to a seasonally adjusted $2,338.1 billion in June from $2,321.8 billion in May...
  • the Wholesale Trade report on Sales and Inventories for June (pdf) from the Census Bureau, which estimated that seasonally adjusted sales of merchant wholesalers increased by 0.2 percent (+/-0.7)* to $454.4 billion for the month and by 6.5 percent (+/-1.8%) over the sales of June 2013, not adjusted for inflation, while seasonally adjusted wholesale inventories at the end of June were 0.3 percent (+/-0.4%)* higher than the downwardly revised May figure at $533.5 billion, a level 7.9% (+/-0.9%) higher than a year earlier...May's inventory increase was revised from a gain of 0.5% to a gain of 0.3%, implying a similar revision to 2nd quarter GDP..

in addition, the Institute for Supply Management published their July Non-Manufacturing ISM Report On Business, which generates diffusion indices resulting from their survey of service industry purchasing managers; their headline Non-Manufacturing Composite Index (MNI) came in at 58.7%, up from last month's 56.0% and a record high for this index, which was first published in January 2008...

Trade Deficit Falls 7.2% in June to $41.5 Billion

the June report on our International Trade in Goods and Services from the Commerce Department indicated that our seasonally adjusted trade deficit in goods and services was at $41.5 billion for the month, down from the revised trade deficit of $44.7 billion in May, as our exports rose $0.3 billion to $195.9 billion on a $0.2 billion increase to $136.9 billion in our goods exports and a $0.1 billion increase to $59.0 billion in our services exports, while our imports fell $2.9 billion to $237.4 billion on a $2.9 billion increase to $197.2 billion in our imports of goods while our imports of services were virtually unchanged at $40.2  billion...the May trade deficit was revised up from the previously reported $44.4 billion...you may recall that in computing second quarter GDP last week, the BEA assumed an decrease in both exports and imports, so the larger than expected decrease in imports and small increase in exports both suggest upward revisions to 2nd quarter GDP, although the data isn't directly comparable, because all GDP amounts are inflation adjusted and at a seasonally adjusted annual rate vs the monthly data reported here...

factors in the May to June increase in exports included a $411 million increase in our exports of consumer goods to $17,158 million, largely on a $423 million increase in our exports of pharmaceutical preparations, and a $163 million increase to $13,654 million in our exports of automotive vehicles, parts, and engines; we also exported $42,232 million worth of industrial supplies and materials in June, $51 million more than May, as a $316 million increase in exports of organic chemicals and a $226 million increase in our exports of crude oil were mostly offset by $314 million lower exports of other petroleum products, $272 million less exports of natural gas, and a $234 decrease in exports of fuel oil...similarly, our exports of capital goods were up by just $33 million to $45,677 million as a $513 increase in our exports of civilian aircraft was offset by decreases of $278 million in our exports of telecommunications equipment and $179 million in other industrial machinery not itemized separately...meanwhile, our exports of food, feeds and beverages fell by $264 million to $11,701 million on a $324 million decrease in our exports of soybeans and a $109 million decrease in our exports of fish and shellfish, which was only partially offset by an increase of $117 million in our exports of nuts...in addition, our exports of goods not categorized by end use fell by $518 million to $5,120 million...

end use categories of imports that saw seasonally adjusted decreases in June included consumer goods, imports of which fell by $1,279 million to $45,793 million on a $1,124 million decrease in our imports of cellphones and similar household products, and automotive vehicles, parts, and engines, imports of which fell by $1,074 million to $27,466 million...at $55,268 million, we also imported $548 million less industrial supplies and materials in June, as a $381 increase in our imports of crude oil was more than offset by decreases of $594 million in our imports of fuel oil and $699 million in our imports of other petroleum products...our imports of capital goods fell by $259 million to $49,363 million on a $162 million decrease in imports of oilfield equipment, a $143 million decrease in telecommunications equipment imports, and a $124 million decrease in imports of industrial machinery not itemized separately, offset in part by a $343 million increase in imports of computers...meanwhile our imports of foods, feeds, and beverages rose by $235 million to $10,834 million on a $201 million increase in our imports of oils and oilseeds, while our imports of goods not categorized by end use rose by $36 million to $6,293 million....

our FRED bar graph below shows the monthly change in exports in blue and the monthly change in imports in red over the past two years, with the net of them resulting in the change in the balance of trade, which is shown in brown...each group of three bars represents one month’s of trade data, with positive changes above the ‘0’ line and negative changes below it; note that when exports (blue) increase in a given month, they add to the trade balance change in brown; and when exports decrease, they subtract from the brown trade balance bar, while the action of imports on the balance is just the reverse, ie, when imports increase in a given month, they subtract from the brown trade balance for the month, but when imports decrease, the balance of trade rises as a result…the interactive version of this bar graph at FRED loads with 20 years of trade data, which you can view monthly by moving your cursor across the graph, or use the sliders across the bottom of the graph to adjust the time period viewed...

June 2014 trade balance

Mortgage Delinquency and Foreclosure Reports

we're also going to take a look at two private reports on the ongoing mortgage crisis that were released this week: the Mortgage Monitor for June (pdf) from Black Knight Financial Services (BKFS, formerly LPS Data & Analytics) and the 2nd Quarter National Delinquency Survey from the MBA (Mortgage Bankers Association); both of these reports cover essentially the same data on home mortgages: those that are delinquent, or behind on their payments, and those that are in the process of being foreclosed...the Mortgage Monitor is a monthly report that we've covered monthly for several years, while the MBA National Delinquency Survey is only released quarterly and is seasonally adjusted based on patterns of mortgage delinquency that have repeatedly occurred annually...since both of these reports are of mortgage conditions as of the last day of June, comparing them side by side should give us a more complete picture into the ongoing mortgage crisis than looking at one or the other in isolation... 

MBA Reports 6.04% of Mortgages Delinquent, 2.49% in Foreclosure at End of 2nd Quarter

according to the MBA, the seasonally adjusted national delinquency rate, which is the percentage of homeowners who were late at least one house payment late but not in foreclosure, fell to 6.04% of all mortgage loans outstanding at the end of the 2nd quarter, down from 6.11% at the end of the second quarter, and down from a delinquency rate of 6.96% at the end of the 2nd quarter a year ago, and also the lowest level since the first quarter of 2008...in addition, they report that 2.49% of all mortgage loans were in the foreclosure process at the end of the quarter, down from 2.65% at the end of the 1st  quarter and from 3.33% at the end of the 3rd quarter last year, which was also the lowest percentage foreclosure inventory since 2008...new foreclosure actions were initiated on 0.40% of mortgages in the 2nd quarter, down from the 0.45% rate of new foreclosures in the 1st quarter...the serious delinquency rate, which combines the percentage of mortgages in foreclosure with those that are more than 90 days behind on their housepayments but still not in foreclosure, fell to 4.80% in the 2nd quarter from 5.04% in the 1st quarter, and was well below the serious delinquency rate of 5.88% a year earlier...combining those at least one payment overdue on their mortgage with those seriously delinquent or in foreclosure gives us a total percentage of 8.53% of homeowners who were behind on their mortgage at the end of the quarter, or still more than one in twelve...these percentages over time are illustrated visually in the bar graph below, from Bill McBride at Calculated Risk, which stacks the percentage of foreclosures in red on the top of each quarterly bar, which each also shows the number of more than 30 but less than 90 days delinquent each quarter in the blue portion of each bar, and the number of mortgages more than 90 days behind on payments in yellow...we can see on that graph that the percentage of mortgages in trouble peaked at 14.7% in the first quarter of 2010 and has been trending downward since, and although the total is still well above the levels of the pre-crisis year of 2005, the shorter term new delinquencies in blue are now at near normal levels...

2nd quarter MBA delinquencies & foreclosures

Mortgage Monitor Finds Average Time in Foreclosure Approaching 1000 Days

in contrast with the MBA delinquency report, the Mortgage Monitor for June (pdf) from from Black Knight Financial Services (BKFS) shows that delinquencies have increased since their last report, with 5.70% of all mortgaged homeowners at least one payment overdue on their mortgage but not in foreclosure In June, up from 5.62% in May and up from 5.52% in March, the monthly report that would correspond with the MBA's 1st quarter delinquency survey...the difference is likely in the seasonal adjustments applied by the MBA, as it's well known that mortgage delinquencies peak around Christmas and fall into the spring, and that June usually sees an uptick...June delinquencies are still down nearly a full percent compared to June a year earlier, when the BKFS predecessor LPS gave the delinquency rate at 6.68%...of those delinquent but not in foreclosure in June, 1,155,114 mortgages were more than 90 days delinquent, aka "seriously delinquent" and 1,727,541 homeowners were more than 30 days but less than 90 days past due...

in addition to those homeowners who were simply delinquent, BKFS also showed that 951,348 home loans, or 1.88% of all mortgages outstanding, remained in the foreclosure process at the end of June, which was down from 966,062, or 1.91% of all active loans in May and down from 2.93% of all mortgages in June of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and May's so-called "foreclosure inventory" was the lowest percentage of homes in foreclosure since 2008...however, new foreclosure starts rose in June for the 2nd month in a row, as the 88,314 new foreclosures started in June was 2.38% higher than the 86,258 homes foreclosed on in May and 12.1% higher than the 78,796 foreclosures started in April...nonetheless, new foreclosures are still well off the pace of last year, as year-to-date foreclosure starts were at their lowest since 2007 and down 19% from a year ago...

the graph below, from page 7 of the Mortgage Monitor pdf, shows the percentage of mortgages that were in the foreclosure process monthly since 1995 in green, the percentage of active home loans that were delinquent but not in foreclosure over the same period in red, and the total of both, representing total percentage of mortgages that were in some kind of mortgage trouble monthly in blue over the same period…we can see that the percentage of homes in foreclosure in green has been falling fairly steadily over the last two years and at 1.88% in June is now well below the October 2011 peak of 4.29% of mortgages in the foreclosure process…but notice they're still more than 4 times the pre-crisis foreclosure inventory of 0.44% from December 2005 that’s highlighted on the graph, so the percentage of homes in foreclosure is still a long way from normal …similarly, with delinquent mortgages shown in red at 5.70% of all mortgage outstanding in June, that count is nearly down to half of the 10.57% of mortgages that were delinquent but not in foreclosure at the peak of the mortgage crisis in January of 2010, but still somewhat above the December 2005 delinquency percentage of 4.27% noted on the graph...comparing this graph to the one from the MBA above, we can see that the overall trends are quite similar, but that the Mortgage Monitor totals have generally been slightly less in each category…also note the seasonality of mortgage delinquencies apparent in the track of the red graph below, wherein they usually begin to increase at the beginning of the school year and peak during the holidays, and then decline at the beginning of the year as homeowners catch up on all their bills after holiday shopping...

June 2014 LPS delinquencies and foreclosures

as you'll recall, the monthly mortgage monitor is a largely graphic presentation of mortgage conditions with only 3 pages of summary data in table form (pages 21 through 23 in this month's pdf); the areas covered graphically in the June mortgage monitor include originations and prepayments, ie, new mortgages, and homeowners who are paying off their mortgage ahead of its term; delinquencies and foreclosure inventory, with a focus on judicial states, where foreclosures must proceed through the court; mortgage modifications, contrasting government HAMP modifications with proprietary modifications; and home sales volume, with a focus on short sales and discounters properties...since our concern in following this report has been homeowners who are in trouble, we'll include a few graphics below to expand on homeowners who remain in foreclosure....

as the far left margin tells us, this first graph below, from page 10 of the Mortgage Monitor, shows the percentage of those homeowners who have been in foreclosure for more than two years from the beginning of 2008 to the present, with the percentage for judicial states shown in blue, the percentage for non-judicial states shown in red, and the overall total percentage of homeowners who have been in foreclosure for more than two years shown in black....you can see that prior to 2009, almost no non-judicial  foreclosures were taking more than two years, and only a few foreclosures in judicial states were thus tied up...as of June, more than 57% of all homes in foreclosure had been there more than 2 years, with over 61% of homes in judicial states so encumbered...as we've pointed out, the mortgage banking industry blames the delay in foreclosures on the courts, but note that even in non-judicial states, where the court proceedings are unnecessary, roughly 42% of foreclosures are now taking more than 2 years…

June 2014 LPS foreclosures over 24 mo overdue

the next graphic, from page 11 of the mortgage monitor pdf, is a map of the lower 48 states showing the average number of days those homes in foreclosure have been delinquent on their mortgage, which in this graphic BKFS says has grown to 995 days nationally...the states are color-coded such that those states where the foreclosure pipeline is the longest are in the darker shades of red, and the states where the foreclosure proceeding are the shortest are in the darkest green...so the average length of time of mortgage delinquency for homes in the foreclosure process runs from 475 days in Wyoming, 520 days in Nebraska, and 525 days in Michigan 525 at the low end to 1246 days in Florida, 1276 days in New Jersey, 1285 days in the District of Columbia to 1350 days in New York at the high end...an inset below the map also notes that the average length of time of delinquency for foreclosed homes in judicial states has grown to 1084 days, in contrast to 775 days in non-judicial states...understand that these are averages, and thus some newly foreclosed homes may well have been delinquent as few a 90 days; thus, it's likely that a fair percentage of homes that were foreclosed on as early as 2008 and 2009 are still in foreclosure today...

June 2014 LPS duration of delinquency by state

finally, for an overview of how this foreclosure crisis has played out from the beginning, we’ll also include, from page 23 of the pdf, a portion of the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status...the columns here show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages in the foreclosure process, the total non-current mortgages, including those that just missed one or two payments, and the number of foreclosure starts going back to January 2008, with monthly data since January 2013….then, in the last two columns, we see the average length of time those who’ve been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…here we can see that the total of non-current mortgages ballooned to 7,680,916 in January 2010 and has now dropped to levels lower than those of 2008....we can also see that although the count of monthly foreclosure starts peaked in 2010, the count of those in foreclosure continued to rise until 2012 as the average time of mortgage delinquency for homes in the foreclosure process lengthened...and although the total counts of both mortgages that are seriously delinquent and those that are in foreclosure has fallen considerably, the average length of time for those who have been delinquent without foreclosure remains at 502 days, while the average time for those who’ve been in foreclosure without a resolution has lengthened to a record average 997 days...

June 2014 LPS non current state table 2

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts,contact me…)

Sunday, August 3, 2014

July’s jobs report, 2nd quarter GDP, June’s personal income and spending, May’s home prices, et al

  we got hit with a bunch of reports this week...in addition to the two employment reports covered by the Employment Situation Summary, this week also saw the release of the 1st estimate of 2nd quarter GDP by the BEA on Wednesday, the corresponding BEA report on personal Incomes and spending for June on Friday, and the Case Shiller home price index on Tuesday...manufacturing diffusion indexes released this week included the Texas Manufacturing Outlook Survey for July from the Dallas Fed, which saw it's broadest index edge up from 11.4 to 12.7, the highest level in 10 months, indicating robust factory activity in the District; the Chicago Business Barometer from the Chicago Institute for Supply Management, which saw it's index drop 10.0 points to 52.6 in July, indicating that manufacturing in that region was barely expanding, the July Purchasing Managers Index (PMI) from the National Institute for Supply Management, which rose to 57.1% in July, up from 55.3% in June, indicating a pickup in manufacturing nationally, and the Markit final July U.S. manufacturing PMI, which came in at 55.8 in July, down from 57.3 in June, indicating somewhat slower U.S. manufacturing growth in July...in another report from WardsAuto, light vehicle sales were estimated to be running at a 16.4 million annual rate in July, down 3.0% from the 16.9 million annual sales rate last month, but 4.9% higher than the annual pace of auto sales a year ago...in addition, we also saw the Census report on Construction Spending for June (pdf). which estimated that our seasonally adjusted construction spending for the month would work out to an annual rate of $950.2  billion in spending overall, 1.8 percent (±1.8%)* below the revised May estimate of $967.8 billion annualized and 5.5 percent (±2.3%) above last June's level of construction spending....private construction spending was at a seasonally adjusted annual rate of $685.5 billion, 1.0 percent (±1.0%)* lower than the revised May estimate, with residential spending falling 0.3 percent (±1.3%)* and non-residential construction falling 1.6 percent (±1.0%), while public construction spending was estimated at $264.7 billion, 4.0 percent (±3.0%) below the revised May estimate...if this estimate holds, it would be the largest drop in construction spending in more than 3 years

Employers Add 209,000 Jobs in July

the establishment survey conducted for July by the BLS indicated that nonfarm payroll employment increased by a seasonally adjusted 209,000 jobs to 139,004,000 jobs, slightly less than expected, while May's payroll jobs count addition was revised up from 224,000 to 229,000, as was June's, up from 288,000 to 298,000...although July's total job creation was the lowest since March, it caps the strongest 6 months of job growth since 2006, and the best start to any year since 2005....the unadjusted establishment data indicates that there were actually 1,110,000 less non-farm payroll jobs in June, as 1,232,800 jobs were lost in local government education before the seasonal adjustment, lowering the estimated total actually employed by business and government in July to 138,666,000...the FRED bar graph below incorporates the seasonal adjustments and the revisions to the May & June reports and shows the reported payroll job change monthly since the beginning of 2008, with job gains above the zero line and job losses below it...  

July 2014 payroll jobs

seasonally adjusted payroll jobs increased in most major sectors in July, led by an increase of 47,000 additional jobs in the  broad professional and business services category, with 13,700 of those in employment services and another 8,800 in architectural and engineering services....an additional 28,000 slots were added in manufacturing, with 14,600 of those in the manufacture of motor vehicles and parts, while food manufacturing companies shed 3,600 jobs in the weaker non-durable goods manfacturing sector....26,700 jobs were added in retail, with 7,600 added by food and beverage stores, 6,900 in clothing stores, and 6,500 more working in general merchandise outlets...another 25,400 jobs were added in health care and social assistance, with the addition of 21,300 in ambulatory health care services and 18,400 in social assistance offset by the loss of 7,200 jobs in nursing and residential care facilities and 7,100 in hospitals...employment also increased with the addition of 22,000 jobs in construction, 13,900 of which were working for specialty trade contractors, with those roughly evenly split between residential and non-residential contractors...there were also 21,000 more jobs in leisure and hospitality, with 18,600 of those working in bars and restaurants... governments added 11,000 jobs, with a gain of 12,000 jobs at the local level and a loss of 1,000 in state government....another 8,000 jobs were added in resource extraction, with 6,200 of those in support activities for mining, which includes gas and oil exploitation...in addition, 7,900 jobs were added in transportation and warehousing, 2,700 in wholesale trade, 7,000 in financial activities, 2,000 in information services, and 1,200 more were employed by utilities...

the average workweek for all payroll employees was unchanged at 34.5 hours for the 5th month in a row, with shorter workweeks in resource extraction and the information services sector offsetting slightly longer workweeks elsewhere, with the manufacturing workweek also falling 0.2 hours to 40.9 hours and factory overtime slipping 0.1 hour to 3.4 hours....the average workweek for production and nonsupervisory employees was also unchanged at 33.7 hours, with the average nonsupervisory manufacturing employees seeing their workweek fall 0.2 hour to 40.2 hours...the average hourly pay for all workers rose by a penny an hour to $24.45 an hour with their year over year increase at 47 cents, or less than 2%, while the average pay for nonsupervisory workers increased by 4 cents to $20.61, with their year over average hourly pay rising 46 cents, a 2.3% average annual pay increase…

Unemployment Rate Rises to 6.2% as More Look for Work

the employment numbers extrapolated from the July survey of 60,000 households improved slightly over June, when those left outside the labor force hit a record high...June saw the seasonally adjusted count of the employed rise by 131,000 to 146,352,000 while the count of the unemployed rose by 197,000 to 9,671,000, which increased the unemployment rate, or the percentage of the total of both, to 6.2% in July, up from 6.1% in June but down from 7.3% in July of 2013...with the labor force, or the total of those employed and those counted as unemployed, rising by 328,000 while the civilian noninstitutional population rose by 209,000, the count of those not in the labor force thus fell 119,000 to 92,001,000, or enough to nudge the labor force participation rate up from 62.8% in June to 62.9% in July....however, the increase in the employed vis-a-vis the population was not enough to raise the employed to population ratio for the month and it remained unchanged at 59.0%...our FRED graph below shows the employment to population ratio, which we could think of as the employment rate, in blue, and the labor force participation rate in red, back to the turn of the century...
July 2014 household survey metrics

of those who were counted as employed in July, 118,489,000 reported they were working full time, 285,000 more than in June, while 28,070,000 reported they were working part time, or less than 34 hours in the reference week, an increase of 52,000 part time workers over June's count...of those, the count of those stuck working just part time for economic reasons who would rather work full time fell by 33,000 to 7,544,000, while the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", ticked up by 0.1% to 12.1%...meanwhile, the number of us unemployed for more than 27 weeks who were still looking for work rose by 74,000 in July to 3,155,000, while the median duration of unemployment rose from 13.1 weeks to 13.3 weeks...among the 92,001,000 of us not officially in the labor force and hence not counted as unemployed, 6,624,000 reported that they still want a job, down from 6,694,000 in June; of those, 2,178,000 were categorized as "marginally attached to the labor force" because they had looked for work sometime during the last year, but not during the 30 day period covered by the July survey...741,000 of those were further characterized as "discouraged workers", because they reported that they haven't looked for work because they believe there are no jobs available to them…such discouraged workers rose 65,000 in July...

2nd Quarter GDP Up at 4.0% Rate on Investment Surge

the Advance Estimate of 2nd Quarter GDP from the Bureau of Economic Analysis indicated that the output of goods and services produced in the US grew at a 4.0% annual rate this spring over the output of the 1st quarter of this year, while the previously reported first quarter contraction at a 2.9% rate was revised to a 2.1% slowdown, still resulting in the largest quarter to quarter improvement in GDP growth in 14 years....combined, that leaves our year to date growth for the first half of 2014 at a still very weak .88% annual rate...in addition to the estimates for the 2nd quarter, this report also included the results of an annual revision of the national income and product accounts over the last three years, with GDP and select components of it revised back to the first quarter of 1999...although the revisions resulted in stronger second half growth now reported for 2013, real GDP still increased at an average annual rate of 1.8% over the period from the fourth quarter of 2010 to the first quarter of 2014, the same rate for the overall period as in previously published estimates....

in current dollars, our 2nd quarter GDP would extrapolate to $17,294.7 billion of economic output annually, up from the $17,044.0 billion annualized figure extraolated by the BEA for the 1st quarter...however, since the change in GDP being reported here is not a measure of the change in the dollar value of our GDP but a measure of the change in our output, the current dollar value of output is adjusted for inflation based on prices chained from 2009 , from which all percentage calculations in this report are based...the inflation adjustment used in the first quarter, aka the "GDP deflator" would suggest annual inflation at a 2.0% rate, up from 1.3% in the 1st quarter...remember all quarter over quarter percentage changes reported here are given at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period...as is always the case with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions which average +/-0.7% in either direction for nominal GDP, and +/- 0.6% for real (inflation adjusted) GDP before the third estimate is released, which will be two months from now...note that June trade and inventory data have yet to be reported, and BEA assumed an decrease in both exports and imports, and that wholesale and retail inventories and nondurable manufacturing inventories had increased in June...also note that June construction spending, which was released two days after this report, was down 1.8% against expectations of a 0.5% increase, so figures reported here for investment in structures and by governments are likely to be revised lower in the second estimate...

real personal consumption expenditures, the largest component of GDP,  grew at a 2.5% seasonally adjusted annual rate in the 2nd quarter, compared with growth at a 1.2% rate in first quarter...real consumption of goods was up at a 6.2% rate, with inflation adjusted consumer purchases of durable goods units growing at a 14.0% rate and adding 0.99% to GDP on the strength of a 17.4% real growth rate in motor vehicle and parts consumption, while real consumption of furnishings and durable household equipment and recreational goods and vehicles also both grew at double digit rates....real consumption of non-durable goods, depressed by a 3.6% deflator in the second quarter, was up at a 2.5% rate and added 0.39% to the GDP growth rate, as reduced real outlays for food and beverages and gasoline partially offset real growth in consumption of clothing and footwear and other non-durable goods...meanwhile, real growth in consumption of services slowed to a 0.7% annual rate and added 0.31% to GDP as real outlays for housing and utilities contracted at a 3.3% rate and partially offset modest growth in real outlays for health care, financial services, transportation services, food services, recreation and other services..

seasonally adjusted gross private domestic investment, which had fallen at a 6.9% annual rate in the 1st quarter, completely turned around and grew at a 17.0% annual rate in the second quarter and added 2.57% to the the quarter's GDP growth rate...real gross private fixed investment grew at a 5.9% rate as real nonresidential fixed investment grew at a 5.5% rate on a 7.0% increase in real outlays for equipment, with outlays for computers and industrial equipment leading the increase, while investment in non-residential structures grew at a 5.3% annual rate and investment in intellectual property products grew at a 3.5% rate on modest growth in software and R&D....for the quarter, non-residential fixed investment added to GDP at a 0.68% annual rate, with investment in equipment adding 0.40%, investment in structures adding 0.15%, and investment in intellectual property adding 0.14%, while real residential investment grew at a 7.5% annual rate and added .23% to the quarter's growth rate...meanwhile, inflation adjusted private inventories grew by an inflation adjusted $93.4 billion and added 1.66% to the quarter's growth rate, in contrast to the contraction in inventory growth that subtracted 1.16% in the 1st quarter...since higher inventories indicate more produced goods have not been shipped or sold, their increase by $93.4 billion means real final sales of GDP were reduced by that amount and hence rose at a 2.27% rate in the 2nd quarter…

exports, which had been down at a 9.2% rate in the first quarter, grew by nearly the same amount in the 2nd quarter, but imports grew even more, so our net exports subtracted from growth for the quarter...remember that exports add to gross domestic product because they represent that part of our production that was not consumed or added to investment in our country, while imports subtract from GDP because they represent either consumption or investment that was not produced here, and that it's the quarter over quarter change in each that affects the quarterly change in GDP.... in the 2nd quarter, our real exports of goods and services rose at a 9.5% rate, resulting in addition of 1.23% to the second quarter's growth rate...but our real imports of goods and services, which were larger than our exports to begin with, increased at a 11.7% rate, and because imports are a subtraction from GDP, the increase of imports from the 1st quarter to the 2nd subtracted 1.85% from the quarter over quarter growth rate...

finally, real consumption and investment by governments increased at a 1.6% annual rate, as federal government consumption and investment shrunk at a 0.8% rate over the 1st quarter, while state and local consumption and investment grew at a 3.1% rate....federal spending for defense grew at a 1.1% rate and added 0.05% to GDP, while non-defense federal consumption and investment fell at a 2.7% rate and subtracted 0.10% from GDP...note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in output...meanwhile, state and local government investment and consumption expenditures, which grew at a 3.1% annual rate, added 0.35% to the quarter's growth rate, as state and local consumption spending rose at a 1.3% rate while state and local investment grew at a 11.1% rate...

in our FRED bar graph below, each color coded bar shows the change, in billions of chained 2009 dollars in one of the major components of GDP over each quarter since the beginning of 2012...in each quarterly grouping of seven bars on this graph, the quarterly changes in real (ie, inflation adjusted) personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and  investment is shown in pink, while the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line...you can clearly see the complete turnaround in almost all GDP components from the first quarter, the second group of bars from the right, to the second quarter of 2014 on the far right....the exception was the large increase in imports shown in green, which as we've previously mentioned subtracted 1.85% from the quarterly growth rate....

2nd quarter 2014 advance GDP

Personal Income and Spending Both Rise 0.4% in June

in conjunction with the 2nd quarter GDP report, the BEA also released the June report on Personal Income and Outlays, from which they derived June's data on our personal consumption expenditures (PCE), which as we just saw is the major component of GDP.....like the GDP reports, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the nominal monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts... however, the percentage changes are expressed as a month over month change and are used within the report as if they refer to the annualized amounts...also, like GDP, this data underwent an annual revision that changed current-dollar estimates beginning with the first quarter of 1999, so the data in this report is not directly comparable to amounts we've cited previously..

in June, total personal income increased at a seasonally adjusted and annualized $56.7 billion rate, an amount with would work out to $14,753.2 billion annually, and which was 0.4% higher than in May, when personal income also increased by 0.4%....disposable personal income (DPI), which is income after taxes, increased at an annualized rate of $51.5 billion to $12,877.2 billion annually, which was also a 0.4% increase over May....increases in private wages and salaries of $28.9 billion accounted for roughly half of the personal income increase in June, with an $21.3 billion increase in service industry payrolls accounting for most of that...increases in supplements to wages and salaries, such as employer contributions to pension plans, accounted for another $5.0 billion of June's annualized income increase, while employee contributions for government social insurance, which are subtracted from the personal income figure, increased at a $4.5 billion annual rate...other sources of the May income increase included personal interest and dividend income, which increased at a $11.9 billion rate, proprietors' income, which increased at a $5.8 billion rate, with $0.2 billion of that increase going to farm owners and $5.4 billion to individual proprietors of other types of business, rental income of individuals, which increased at a $3.5 billion rate, and increases in personal transfer payments from government programs, which increased at a $4.4 billion rate in June...

meanwhile, seasonally adjusted personal consumption expenditures (PCE), which are the basis for the change in real PCE in the GDP data we reviewed earlier, rose at a $57.4 billion annual rate in June to a level of $11,915.6 billion annually, 0.4% higher than  May, which was itself was revised to an increase of 0.3%...the current dollar increase in June spending included a $6.1 billion annualized increase to $1,310.1 billion in outlays for durable goods, a $27.4 billion increase to $2,688.4 billion in annualized spending for non-durable goods, and an annualized $18.4 billion increase to an annual rate of $7,917.2 billion in spending for services...total personal outlays for March, which includes interest payments, and personal transfer payments in addition to PCE, increased by an annualized $51.6 billion to $12,333.3 billion, which left personal savings, which is disposable personal income less total outlays, at $687.9 billion for the month, virtually unchanged from $688.0 billion in personal savings in May... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, was unchanged at 5.3%..

while personal consumption expenditures accounted for 68.3% of our second quarter GDP, before they were included in measurement of the change in our output they were first adjusted for inflation...that's done with the price index for personal consumption expenditures which is computed here, which is a chained price index based on 2009 prices = 100....that index rose to 109.029 in June from 108.793 in May, giving us a month over month inflation rate of 0.22% and a year over year PCE price index increase of 1.60%; as a result, inflation adjusted or real personal consumption expenditures rose by 0.2% in June after rising just 0.1% in May, when a greater deflator was applied to a fractionally lower increase...using the same PCE price index, disposable personal income is deflated to show that real disposable personal income, or the purchasing power of disposable income, rose by 0.2% in June, the same increase as in May...

our FRED graph below shows monthly real disposable personal income in blue and real personal consumption expenditures in red since January 2000, with the annualized scale in chained 2009 dollars for both shown in the current data box and on the left; also shown on this same graph in green is the monthly personal savings rate over the same period, with the scale of savings as a percentage of disposable income on the right...the spike in income and savings at the end of 2012 was a result of bonuses and income manipulation before the year end fiscal cliff; the earlier spikes were as a result of the tax rebates enacted as a fiscal stimulus under George Bush….although it may appear from the graph that real disposable income has been accelerating over the past 13 years, real DPI below is not adjusted for increases in the population; on a per capita basis, real DPI  per capita is up just 20.5% over the span of this graph… 

June 2014 income and outlays

Case-Shiller Home Prices Up 9.3% Year Over Year in May Report

the Case-Shiller Home Price Index for May, in comparing prices for repeat sales of homes sales closed over the three month period of March to May vis a vis the 3 month period from February to April, found the both the 10- and 20-city composite indexes to be up 1.1%. for the monthly comparison, while the 10 city index was up 9.4% year over year and the 20 city composite rose 9.3% from a year ago, both slipping somewhat from the 10.9% and 10.8% year over year increases reported last month...all 20 cities saw month over month prices increases with this report, led by home price increases of 1.8% in Tampa, 1.6% in San Francisco, 1.5% in Chicago and 1.4%.in Charlotte, while Phoenix and San Diego, with increases of 0.4% and 0.5% respectively, were the only cities to show increases of less than one percent in May....the largest year over year home price increases were seen in Las Vegas, where hom prices were up 16.9%, San Francisco, where they rose 15.4%, and Miami, where prices were up 13.2%, while Cleveland, where prices were up 2.4%, Charlotte, where they rose 4.7%, and New York, where they we up 4.8%, were the only cities showing annual home price increase of less than 5%..

included below are screenshots of the pair of interactive FRED graphs we created to show the historical track of home price indexes for each of the cities in the 20 city index, all based on 2000 home prices equal to 100.0... in our first FRED graph, we show the tracks of home price indexes for Atlanta in bright blue, Boston in bright red, Charlotte in dark green, Chicago in orange, Cleveland in purple, Dallas in grey, Detroit in mauve, Denver in mustard, Las Vegas in dull blue, and Los Angeles in beet red... for the larger interactive view of this graph at FRED, click here; there you can move your cursor across the graph and view the monthly price history of the changes in the price indices for all 10 cities shown below, just as we have included the index values for each of them for the April report in our screenshot… 

May 2014 Case Shiller A-L

our second FRED graph of the Case-Shiller city indices shows the the historical price track of the metro home price indexes for Miami in bright blue, Minneapolis in bright red, New York in dark green, Phoenix in orange, Portland in violet, San Diego in grey, San Francisco in mauve, Seattle in mustard, Tampa in dull blue and Washington DC in beet red; in addition, this second chart includes the track of the Case-Shiller Composite 20 shown as a heavier black line…the S&P Case-Shiller index is not seasonally adjusted, but we notice that the seasonal home price swings have become more pronounced since the housing bust…again, you can click here for the larger 1000 pixel interactive version of this graph at the St Louis Fed web site, where all the lines can be easily traced and  the index values for each  viewed over time with their interactive tool… 

May 2014 Case Shiller M-Z

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts,contact me…)