New Residential Construction Report: May 2013

Today’s New Residential Construction Report showed mixed results in May with an 6.8% increase to total housing starts and a 3.1% decline to total housing permits while single family housing permits improved on the month.

Single family housing permits, the most leading of indicators, increased 1.3% from April to 622K single family units (SAAR), and  increased 24.6% above the level seen in May 2012 but still remained well below levels seen at the peak in September 2005.

Single family housing starts increased 0.3% from April to 599K units (SAAR), and rose 16.3% above the level seen in May 2012 but still remained well below the peak set in early 2006.

Homebuilder Blues: NAHB/Wells Fargo Home Builder Ratings June 2013

Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that assessments of housing activity improved notably in June with the composite HMI index climbing to 52, the highest level seen since early 2006, while the "buyer traffic" index also improved, rising to a level of 40.

It's important to note that June firmly reversed the weakening trend seen earlier in the year, suggesting that activity in the new home market has picked up notably and is remaining strong even beyond the traditionally strong first quarter period.

Looking at the data, it is fairly clear that the last year of results indicate a major change in builder sentiment likely coming as a result of improvements in confidence given the notable rise in buyer traffic, reduced inventory and a more balanced monthly supply.

Reading Rates: MBA Application Survey – June 12 2013

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) jumped again climbing 7 basis points to 3.98% since last week while the purchase application volume increased 5% and the refinance application volume increased 5% over the same period.

Rates have risen steadily for the past few weeks seemingly correlated with the Feds recent suggestion that they may start to wind down GSE purchases later this year.  Only time will tell if this is a trend or simply an aberration.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

SNAP Food Stamp Participation: March 2013

As a logical consequence of the prolonged economic downturn, participation in the federal food stamp program is continuing to rise.

In fact, household participation has been climbing so steadily that it has dwarfed the last peak (which looks like a minor blip by comparison) set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture indicated that in March, a notable 168,888 individual recipients were added to the food stamps program with the current total increasing 2.85% on a year-over-year basis.

Individuals receiving food stamp benefits increased to 47.72 million which, as a ratio of the overall civilian non-institutional population now stands at a whopping 19.48% of the population.

Households receiving food stamps benefits increased by 109,731 to 23.11 million households with the current total rising 3.86% above the level seen a year earlier

As participation continues to swell, so too has the total nominal benefit cost climbing 2.58% on a year-over-year basis to $6.34 billion for the month.

Envisioning Employment: Employment Situation May 2013

Today’s Employment Situation Report indicated that in May, net non-farm payrolls increased by 175,000 jobs overall with the private non-farm payrolls sub-component adding 178,000 jobs while the civilian unemployment rate increased slightly to 7.6% over the same period.

Net private sector jobs increased 0.16% since last month climbing 1.95% above the level seen a year ago but remained 1.62% below the peak level of employment seen in December 2007.

Recovery-less Recovery: Unemployment Duration May 2013

Today's employment situation report showed that conditions for the long term unemployed were mixed in May while still remaining distressed by historic standards.

Workers unemployed 27 weeks or more increased to 4.357 million or 37.3% of all unemployed workers while the median term of unemployment declined to 17.3 weeks and the average stay on unemployment increased to 36.9 weeks.

Looking at the charts below (click for super interactive versions) you can see that today’s sorry situation far exceeds even the conditions seen during the double-dip recessionary period of the early 1980s, long considered by economists to be the worst period of unemployment since the Great Depression.

On The Margin: Total Unemployment May 2013

Today’s Employment Situation report showed that in May “total unemployment” including all marginally attached workers declined slightly to 13.8% while the traditionally reported unemployment rate increased to 7.6%.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit definition of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

ISM Non-Manufacturing Report on Business: May 2013

Today, the Institute for Supply Management released their latest Non-Manufacturing Report on Business indicating that service related business activity continued to expand in May with the overall non-manufacturing index climbing to 53.7 from last months reading of 53.1.

At 56.5 the business activity index improved since last month climbing 2.73% above the level seen a year earlier.

This month, service industry respondents are sounding mixed to flat with some respondents citing improving activity but also uncertainty and lingering weakness:


"Sales remain slightly higher than the same period last year, but still below pre-recession sales figures." (Public Administration)

"The job order market slowed in April/May. We saw a slight increase in employment due to working down the order/inquiry backlog." (Professional, Scientific & Technical Services)

"Business seems to be improving through the second half of the year." (Information)

"Fairly stable the last month; overall optimistic going forward." (Accommodation & Food Services)

"The flat sequential sales — which began in January 2012 — are still continuing. At this point, we do not predict any lift in the foreseeable future. We do not see any negatives; it appears that business has reached its 'cruising altitude' and is staying there." (Wholesale Trade)

"Healthcare reform and sequestration are having a strong negative impact on business." (Health Care & Social Assistance)

"North America continues to improve at a modest rate. Europe is still a problem for global recovery." (Mining)

ADP National Employment Report: May 2013

Today, private staffing and business services firm ADP released the latest installment of their National Employment Report indicating that the situation for private employment in the U.S. improved in May as private employers added 135,000 jobs in the month bringing the total employment level 1.62% above the level seen in May 2012.

Perusing the rest of the data in the ADP dataset you can see the the economy is currently showing the most growth for small to mid-sized service providing jobs with goods-producing jobs remaining near trough levels.

Look for Friday’s BLS Employment Situation Report to likely show somewhat similar trends.

Reading Rates: MBA Application Survey – June 05 2013

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) jumped a notable 16 basis points to 3.91% since last week while the purchase application volume declined 2% and the refinance application volume declined 15% over the same period.

Rates have risen steadily for the past few weeks seemingly correlated with the Feds recent suggestion that they may start to wind down GSE purchases later this year.  Only time will tell if this is a trend or simply an aberration.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

ISM Manufacturing Report on Business: May 2013

Today, the Institute for Supply Management released their latest Report on Business for the manufacturing sector indicating that manufacturing activity slumped into contraction territory in May for only the second time since August of 2008.

At 49.0 the purchasing manager’s composite index (PMI) declined 3.35% since April and dropped 6.67% below the level seen a year earlier giving an indication of slowing manufacturing activity for the third consecutive month.

Respondent assessments appear mixed with some sounding a cautious tone while others remain more upbeat:


"Customers are anticipating resin price decreases and holding back orders." (Plastics & Rubber Products)
"Slight uptick in overall business but not substantial." (Textile Mills)

"Government spending has tightened, which has moved out program awards and caused some reduction in force." (Computer & Electronic Products)

"Market outlook is relatively flat, with some promise of raw materials inflation relaxing." (Electrical Equipment, Appliances & Components)

"General economy seems sluggish and pensive. Buyers are not buying much beyond lead times." (Fabricated Metal Products)

"Downturn in European and Chinese markets is having a negative effect on our business." (Machinery)

"We are having a difficult time hiring skilled employees." (Transportation Equipment)

"Business continues to increase, but over the past 20 days we have seen the trend flatten." (Furniture & Related Products)

"Market was holding strong until mid-month — then softened." (Wood Products)

"Decline in sales for FYQ2 over same period a year ago due to softer demand [in] both domestic and exports." (Chemical Products)

Construction Spending: April 2013

Today, the U.S. Census Bureau released their latest read of construction spending showing mixed results in April with total private construction spending declining while single family private residential construction spending and non-residential construction spending improved on the month.

On a month-to-month basis, total residential spending declined 0.11% from March climbing 18.78% above the level seen in April 2012 while still remaining a whopping 55.37% below the peak level seen in 2006.

Single family construction spending rose 1.42% since February rising 38.63% since April 2012 but remained a whopping 64.76% below it's peak in 2006.

Non-residential construction spending rose 2.19% since March and rising a slight 0.65% above the level seen in April 2012 and remained a whopping 29.60% below the peak level reached in October 2008.

The following charts (click for larger dynamic versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year, month-to-month and peak percent change to each since 1994 and 2000 – 2005.

Pending Home Sales: April 2013

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for April showing that pending home sales improved with the seasonally adjusted national index climbing 0.3% from March and increasing 10.3% above the level seen in April 2012.

Meanwhile, the NARs chief economist Lawrence Yun is suggests that gaining sales and tight inventory should work to continue to push up home prices:

"The housing market continues to squeak out gains from already very positive conditions.  Pending contracts so far this year easily correspond to higher closed home sales in 2013, ... Because of inventory shortages, higher home sales will push up home values to the highest level in five years,"

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Extended Unemployment: Initial, Continued and Extended Unemployment Claims May 30 2013

Today’s jobless claims report showed an increase to both initial and continued unemployment claims as initial claims trended well below the closely watched 400K level.

Seasonally adjusted “initial” unemployment claims increased by 10,000 to 354,000 claims from 344,000 claims for the prior week while seasonally adjusted “continued” claims increased by 63,000 claims to 2.986 million resulting in an “insured” unemployment rate of 2.3%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 1.72 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 2.77 million people that are currently counted as receiving traditional continued unemployment benefits, there are 4.50 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – May 29 2013

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) jumped 11 basis points to 3.76% since last week while the purchase application volume increased 3% and the refinance application volume declined 12% over the same period.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).