Sunday, June 9, 2013

May’s unemployment, PMI, and NMI, April’s LPS Mortgage Monitor and trade deficit

FRED Graphthe report on the Employment Situation for May from the Bureau of Labor Statistics was pretty much on par with expectations and not much different than the average of what we've been seeing over the past yearseasonally adjusted payroll jobs increased by 175,000, and the unemployment rate ticked up from 7.5% to 7.6%, mostly because more people were looking for work in May than in April....the establishment survey, which is collected from about 145,000 businesses and government agencies representing one-third of payroll jobs, also showed that payroll employment gains for April were revised down from 165,000 to 149,000, while March job gains were revised up from 138,000 to 142,000; revised jobs figures since the recession started are plotted on our adjacent FRED graph...remember, the margin of error on this survey is +/- 90,000, and as we've seen, all figures are eventually subject to revision, which in some cases can be rather large...unadjusted data shows 885,000 jobs were added in May, which is normally one of the better months for employment, but at the seasonally adjusted May rate of 175,000 new jobs per month we won’t get back to pre-recession employment levels until 2020...that seasonally adjusted data showed that professional and business services added 57,000 jobs in May, boosted by another 25,600 job jump in temporary help services...new jobs in food service and bars accounted for another 38,100 of May's payrolls, as did an addition of 27,700 jobs in retail...another 10,700 found employment in health care, with gains of 6,900 in home health care and 15,300 in ambulatory care offsetting a loss of 5,900 jobs in hospitals...meanwhile, 14,000 federal government jobs were cut, likely reflecting the sequester, the full impact of which wont really be felt until July, when the Pentagon begins to furlough 680,000 civilian workers for up to 11 days each...jobs in other major industries, including mining and logging, construction, manufacturing, wholesale trade, transportation and warehousing, and financial services were little changed in May; for more detailed payroll job counts by industry, see Table B-1. Employees on nonfarm payrolls by industry sector and selected industry detail, which includes roughly 200 specific job categories...this survey also showed that the average workweek for all private payroll employees was unchanged in May at 34.5 hours, while manufacturing payrolls saw a tenth of an hour increase in their workweek to 40.8 hours, and factory overtime was unchanged at 3.3 hours...average hourly earnings for all private  payroll employees came in at $23.89 for May, up a penny from April, with the average for non-supervisory employees at $20.08, also up just a penny...this report has shown consistent and small hourly earning gains monthly and is now up 2.0% since a year ago; however, a separate report fromthe  BLS on Productivity and Labor Costs for the First Quarter showed that unit labor costs fell at an annual rate of 4.3%, reflecting  a 3.8% decrease in hourly compensation and a 0.5% increase in productivity, which they note as the largest hourly compensation decline in the series, which began in 1947; furthermore, this report has unit labor costs in manufacturing down 10.0%, reflecting a 3.5% increase in productivity and a 6.9 percent decrease in hourly compensation...real, inflation adjusted hourly compensation in manufacturing was down 8.3% at an annualized rate in the first quarter; it was even worse in durable manufacturing, for which real hourly compensation is shown down 9.4%...

FRED Graphthe May household survey, from which the unemployment rate is computed, is extrapolated from a sample of just 60,000 households and has a margin of error of  +/- 300,000 for the count of the unemployed, and about +/- 0.2% in the headline unemployment rate...with that caveat, May's survey showed those employed increased by 319,000 to 143,898,000 and those unemployed increased by 101,000 to 11,760,000, as those counted in the labor force increased by 420,000 to 155,658,000, reflecting a 188,000 increase in the non institutionalized population and a reduction of 231,000 of those "not in the labor force"...as a result, the labor force participation rate, shown in red on our FRED graph, rose 0.1% from the 34 year lows April to 63.4% in May, while the other metric from this survey we're watching, the employment to population ratio, shown in blue, remained unchanged at 58.6%...a similar measure from Gallup, who polls 30,000 families during the same week as the BLS household survey, showed a major decline in the "Payroll to Population employment rate", from 44.5% in April to 43.9% in May...while the BLS summary stated the unemployment rates for major demographics showed little or no change in May, we note that the unemployment rate for blacks rose 0.3% to 13.5% and the unemployment rate for teenagers rose 0.4% to 24.5%, which likely reflects more in each of those groups looking for work in May and hence being counted rather than an increase in job losses for either, as a total of 3,333,000 were reported as reentering the workforce, an increase of 182,000 from April labor force reentrants...it appears a substantial number of the new jobs went to high school dropouts, who saw their unemployment rate improve from 11.5% to 11.1%, while the unemployment rate for high school graduates, those with some college, and those with degree remained essentially unchanged...in addition, the number of older workers hit a new high, with an increase of 203,000 in the over 55 contingent, bringing their number to 31,488,000...the number of us considered long-term unemployed, or those jobless for 27 weeks or more, ticked up a bit to 4,357,000, and continue to account for 37.3% of the unemployed, while those working just part time for economic reasons who still want a full time job fell 12,000 to 7,904,000, as a result, the alternate rate of unemployment (U-6) fell back from 13.9% in April to 13.8% in May...among those who arent in the labor force and hence not counted as unemployed, there are still another 7,193,000 who say they want a job; 2,164,000 are considered "marginally attached to the labor force" because they've looked for work sometime in the last 12 months; of those, 780,000 are considered discouraged workers, because they report that they're not currently looking for work because they believe there are no jobs are available for them..

  FRED Graph one major worse than expected report this week came from the Institute for Supply Management (ISM), whose May Manufacturing Report On Business showed that the manufacturing sector was contracting at a rate not seen since June 2009 ...the manufacturing composite Purchasing Manager's index (PMI) for May was at 49.0%, down from 50.7% in April, but the internals were even worse; the new orders index, which fell 3.5% to 48.8% down from 52.3% in April, and the production index, which fell 4.9% to 48.6% from 53.5%, were the major sub-indexes which changed to indicate contraction, while the employment index remained barely positive, slipping 0.1% from 50.2% to 50.1%, in this survey sourced diffusion index where percentages below 50 indicate a majority of purchasing managers reported worse conditions than last month in the area covered...indexes for inventories, up 2.5% to 49.0%, and customer inventories, up 1.5% to 46.0%, were the only positive changes for the month; indexes for supplier deliveries, which fell 2.2% from 50.9% to 48.7%, and backlog of orders, which fell 5.0% from 53.0% to 48.0%, both turned from growth in April to contraction in May...expansion of both exports and imports continued, albeit weaker than last month; the export index fell from 54.0 to 51.0 and the import index fell from 55.0 to 54.5...if there's a bright spot in this surprising weak report, it's that the contraction in manufacturing seems to be quite concentrated; of the 18 manufacturing industries covered, 10 still report ongoing growth, and only 6 industries report contraction: miscellaneous manufacturing; transportation equipment; chemical products; plastic and rubber products, computer and electronic, and primary metals....ominously, this reading came shortly after HSBC reported that their Chinese manufacturing index came in at 49.2 for May, worse than the preliminary 49.6 reading announced in late May, and down from the 50.4 reading in April...indexes for Russia, India, and Korea had already been weaker than expected, and although the final Eurozone manufacturing PMI improved over April's 4 month low of 46.7, it was still deeply contractionary at 48.3...

the ISM also released the Non-Manufacturing Report On Business for May two days after the Manufacturing report; results for this relatively new survey of purchasing managers were somewhat better; the overall NMI (non manufacturing index) rose 0.6% to 53.7%, up from 53.1% in April, indicating slightly faster expansion; of the major component indexes, the non-manufacturing business activity index registered 56.5%, up 1.5% from April's reading of 55%, the new orders index was also up 1.5%, from 54.5% to 56%, and the employment index tanked 1.9%  to 50.1%, down from 52.0% in April, indicating a slowdown of hiring in the service sector, the largest employer in our economy...other indexes showed inventories growing slower, reading 51.5%, down from 56% in April, prices increasing slower, down 0.1% to 51.1%, the order backlog unchanged at 51.5%, new export orders stagnating, down 3.5% from 53.5% to an even 50%, and imports collapsing 9.0% and moving into contraction at 49.5%...our FRED graph to the right above shows the history of the NMI since it's inception in January of 2008 in blue, and the track of the older manufacturing PMI since 2000 in red, with recessions marked by grey vertical bars; we’ve also included in grey the track of the older ISM Business Activity Index, which is now incorporated into the NMI, as a proxy for the historical track of the NMI before it’s inception…

April LPS foreclosure percentageanother important report released this past week was the Mortgage Monitor for April (pdf) from Lender Processing Services (LPS), which we've been following as a proxy for the ongoing mortgage crisis...LPS reported that 3,111,000, or 6.21% of home mortgages, were more than 30 days delinquent but not foreclosure in April, down from a delinquency rate of 6.59% in March; of those, 1,717,000 homes were more than 30 and less than 90 days past due, and 1,394,000 mortgages were more than 90 days delinquent, in addition, LPS counts 1,588,000 homes, or 3.17% of all mortgages, in the foreclosure process; which gives us a total of ​​4,699,000, or 9.76% of home loans delinquent or in foreclosure as of April 30th, which marks the first time since 2008 that the total percentage of mortgages in arrears has fallen below 10%; part of this reduction in delinquencies is seasonal; as we've seen, significant numbers of homeowners forego mortgage payments before Christmas, and typically catch up by March or April...LPS also noted the highest rate of completed foreclosures in judicial states since 2010, which reduced the foreclosure inventory by 5.83%; nonetheless, homes in foreclosure are remaining delinquent in those states that require judicial review an average of nearly three years before the "foreclosure sale" is completed (you'll recall foreclosure sales is a mortgage industry euphemism for home seizures, after which the home usually becomes part of the banks REO, or real estate owned - the glossary of terms used is on page 23 of the pdf) ...foreclosure sales as a percentage of the then current foreclosure inventory, which is the number of home mortgages stranded in the foreclosure process, is shown in the chart to the right; each line tracks the percentage of homes in foreclosure that are seized in any given month; the blue line tracks that metric for judicial states, or those where a court review is necessary for a home to be seized, which was at 3.01% of all judicial mortgages in April, 16.87% above the home seizure rate for judicial states in March; the red line tracks the percentage of foreclosed homes seized in non-judicial states, where foreclosures need not be handled through the courts; in April, that rate was 6.88%, a 10.95% month over month increase...data from the table below, taken from page 20 of the LPS pdf, best illustrates where we've been and how far we have yet to go; each line first shows the month and the total active count, or the total number of active mortgages nationwide in that month; subsequent columns show the actual number of delinquent mortgages that are 30, 60, more than 90 days delinquent, or in foreclosure (FC), with a sum of the non current in the next column (the big jump in short term delinquencies in September last year was due to the release of the iphone5)...then there's also a separate column for foreclosure starts in each month...but it's the last two columns that tell the story, as they give the accumulating days that an average home mortgage has remained either delinquent or in foreclosure without proceeding to the next step; you can see that as of April, the average seriously delinquent homeowner has not paid on their mortgage for 503 days, and that the typical home in foreclosure has been delinquent for 843 days; in general, those who are seriously delinquent (more than 90 days past due) are not being foreclosed on, and those who are in the foreclosure process are not having their homes seized...since this metric seems to be increasing an average of ten days a month, and new foreclosure starts are being added each month which should be bringing the average days down, we can only conclude that the foreclosure process is damn near frozen...and as we'll see in the next graphic, this isnt just because the courts are clogged...

April LPS loan count and days delinquent

below to the left we have a set of bar graphs from page 13 of the LPS pdf; as the heading reads, they show the average months delinquent for various stages of foreclosure, and again, blue represents the times for judicial states, and red for non-judicial states; the top number over each bar represents the number of months a loan has been delinquent in that stage as of April; in the small print below that are the months delinquent for each stage and type as of January 2010, the peak of the crisis...so we can clearly see that at that time, foreclosures were being started after 8 months of delinquency in both judicial and non-judicial states, but now even starting the proceedings is delayed an average of 12.9 months for non-judicial states. and 16.6 months for judicial states, or nearly twice as long...also note the length of time homeowners spend in the foreclosure process (aka foreclosure inventory) in non judicial states, where court delays cant be blamed; early in the crisis it was 12.1 months, as of April, it’s stretched out to 21.1 months

April LPS timeline differences

April LPS del & foreclosure ratrs

lastly, the graph on the right above summarizes the delinquency and foreclosure history of US mortgages going back to 1995, showing both as a percentage of the active loan counts; there's a callout for December 2005. presumably because .44% in foreclosure and 4.27% delinquent would represent a normal level of mortgages in trouble...you see delinquencies, tracked in red, peaked at 10.57% in January 2010, and have now fallen to 6.27%; the seasonal pattern for delinquencies is also evident...and the foreclosure inventory in green is now down to 3.17%....most of the mortgage monitor is graphics like these above with little detail; the data summary for the past 12 months is on page 18 of the pdf: if you are so inclined, you can also watch LPS Applied Analytics Senior Vice President Herb Blecher explain some of the graphics in a video presentation… 

U.S. Trade Deficit one more important report from this week we should at least make note of is on our International Trade in Goods and Services for April from the Commerce Dept (pdf), which showed our seasonally adjusted trade deficit widened by 8.5% from the three year low recorded in March...April exports of $187.4 billion, $2.2 billion more than March exports of $185.2 billion, and April imports of $227.7 billion,  $5.4 billion more than March imports of $222.3 billion, resulted in a goods and services deficit of $40.3 billion, up from the revised March figure of $37.1 billion; (a revision of our entire trade data history resulted in a lowering of the March deficit from $38.8 billion to $37.1 billion)...our April trade deficit was nonetheless $6.3 billion lower than a year earlier, as April exports were $3.1 billion, or 1.7% higher than last April's, and imports were down  $3.2 billion, or 1.4% lower year over year...month over month increases in broad categories of exports included a 2.0 billion increase in exports of consumer goods, a 0.9 billion increase in exports of capital goods, and $0.6 billion more exports of cars, engines and parts, while we exported $0.9 billion less  industrial supplies and materials, $0.3 billion less foods, feeds and beverages, and $0.5 billion less of other goods...the March to April increase in imports of goods reflected increases a $3.0 billion increase in imports of consumer goods, a $1.3 billion increase in imports of cars, parts, and engines, a $1.0 billion increase in imports of capital goods, and $0.2 billion more of other goods..April also saw $0.3 billion less imports of industrial supplies and materials  and $0.1 billion less imports of foods, feeds, and beverages...as always, most of our trade deficit results from imported oil and trade with China; oil averaged $97.82 in April, up from $96.95 per barrel in March, but down from $109.69 a year earlier, and despite media stories that we're importing less, we also imported more: 233,215 thousand barrels in April vs 215,734 thousand in March, and the most since January..(see exhibit 17 in the trade pdf)...our major bilateral trade deficits in April were $24.1 billion with China, $12.4 billion with the European Union, $6.9 billion with Japan,  $6.6 billion with OPEC, $6.1 billion with Germany,  $4.4 billion with Mexico, $2.6 billion with Saudi Arabia, and  $2.4 billion with Canadathe adjacent chart from Bill McBride at Calculated Risk shows our overall trade deficit tracked in blue (negative from the top of the graph), our trade deficit in oil tracked in black, and our trade deficit in other goods and services in red..you can see the general improvement over the past year is mostly due to less oil imports...

(the above is my weekly commentary that accompanied my 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 getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

No comments:

Post a Comment