Extended Unemployment: Initial, Continued and Extended Unemployment Claims July 11 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 16,000 to 360,000 claims from 344,000 claims for the prior week while seasonally adjusted “continued” claims increased by 24,000 claims to 2.977 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 1.64 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 2.78 million people that are currently counted as receiving traditional continued unemployment benefits, there are 4.43 million people on state and federal unemployment rolls.

Recession Watch 2013: Term Spread Probability Series

With the weak economic recovery lagging through its fourth continuous year, its sensible to start looking for clues, however so slight, of the possibility of oncoming recession.

First, let’s remember that while the NBER makes the official call of both the “peak” of a business cycle expansion and the “trough” of the subsequent recession, their officiating is delayed to say the least.

For a more “real time” assessment of the prospects of recession, various methods of number crunching have been formulated to distill out a basic probability assessment from several underlying macro series data sets.

One popular statistical method is the yield-curve based “Term Spread” probability method.


Spearheaded by economist Professor Arturo Estrella of the Rensselaer Polytechnic Institute, this method derives a probability of recession from the spread between long and short yields (10-year and 3-month) and is by all accounts the standard for recession probability forecasting.

The latest data indicates that the probability for recession is remains elevated with a January 2014 probability (the probability that there will be a recession by that date) of 4.4%.

Keep in mind that a positive indication using this method would require this probability to reach 30% so while the probability is clearly rising, the current probability is still quite low.

Recession Watch 2013: Piger Probability Series

Last year I reported on a relatively new recession probability indicator (… the “markov switching” series recently introduced to the Fed FRED/Blytic) that was giving a pretty clear, though preliminary, indication of probable recession.

While I noted that the series was highly revised, I pointed out that even taking into account the revisions, the series was giving a recession signal since using just the "maximum" reported values (values that had been all been revised lower) the reporting 20% probability was very unusual and typically associated to oncoming trouble.

In the latest release, the April data (... there is a reporting lag) indicates that the probability of recession has increased to 3.08% while the standout August 2012 value (that initially peaked interest in this series) has now been revised to 1.22%.

It's important to note though that the point of my prior post was to highlight just the "maximum" reported values and while the latest release revises down August's 19.6% and reports an additional low probability for the latest month, it makes no difference... the fact remains that this series has NOT given such a significant over estimate of recession without there being a probable recession ahead.

Now clearly, there could always be a first time... this is just estimated data... but the prior 19.6% reported figure clearly argues for following this series very closely in the coming months.  

Reading Rates: MBA Application Survey – July 10 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) rose again climbing 10 basis points to 4.52% since last week while the purchase application volume decreased 3% and the refinance application volume decreased 4% over the same period.

Rates have literally exploded rising a whopping 106 basis points over the past nine weeks seemingly directly correlated with the Feds recent suggestion that they may start to wind down GSE purchases later this year.

Clearly, steadily increasing rates is working to tamp down mortgage application activity but thus far, the spillover to home sales and price indicators appears minimal.

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).

Envisioning Employment: Employment Situation June 2013

Last week’s Employment Situation Report indicated that in June, net non-farm payrolls increased by 195,000 jobs overall with the private non-farm payrolls sub-component adding 202,000 jobs while the civilian unemployment rate went flat at 7.6% over the same period.

Net private sector jobs increased 0.18% since last month climbing 2.11% above the level seen a year ago but remained 1.40% below the peak level of employment seen in December 2007.

Recovery-less Recovery: Unemployment Duration June 2013

Last week's employment situation report showed that conditions for the long term unemployed improved in June while still remaining distressed by historic standards.

Workers unemployed 27 weeks or more declined to 4.328 million or 36.7% of all unemployed workers while the median term of unemployment declined to 16.3 weeks and the average stay on unemployment declined to 35.6 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 June 2013

Last week's Employment Situation report showed that in June “total unemployment” including all marginally attached workers increased to 14.3% while the traditionally reported unemployment rate went flat at 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.

Pending Home Sales: May 2013

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for May showing that pending home sales improved notably with the seasonally adjusted national index climbing 6.7% from April and increasing 12.1% above the level seen in May 2012.

Meanwhile, the NARs chief economist Lawrence Yun is suggests the spike in contract activity is likely the result of sidelined buyers now jumping to buy before interest rates, increasing for several weeks now, rise further:

"Even with limited choices, it appears some of the rise in contract signings could be from buyers wanting to take advantage of current affordability conditions before mortgage interest rates move higher, ... This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand."

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 June 27 2013

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

Seasonally adjusted “initial” unemployment claims declined by 9,000 to 346,000 claims from 355,000 claims for the prior week while seasonally adjusted “continued” claims declined by 1,000 claims to 2.965 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 1.70 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 4.48 million people on state and federal unemployment rolls.

S&P/Case-Shiller: April 2013

Today's release of the S&P/Case-Shiller (CSI) home price indices for April reported that the non-seasonally adjusted Composite-10 price index rose a notable 2.63% since March while the Composite-20 index also increased 2.52% over the same period.

The latest CSI data is continuing to demonstrate significant resiliency compared to past years, as prices remained stable through the typically slow winter and early spring period and now appear to be rising notably into the more active late spring.

The 10-city composite index increased 11.58% as compared to April 2012 while the 20-city composite increased 12.05% over the same period.

Both of the broad composite indices show significant peak declines slumping -26.81% for the 10-city national index and -26.22% for the 20-city national index on a peak comparison basis.

To better visualize today’s results use Blytic.com to view the full release.

The Chicago Fed National Activity Index: May 2013

The latest release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated that the national economy remained near contraction in May with the index improving to -0.30 from a level of -0.52 in April while the three month moving average declined to a level of -0.43.

The CFNAI is a weighted average of 85 indicators of national economic activity collected into four overall categories of “production and income”, “employment, unemployment and income”, “personal consumption and housing” and “sales, orders and inventories”.

The Chicago Fed regards a value of zero for the total index as indicating that the national economy is expanding at its historical trend rate while a negative value indicates below average growth.

A value at or below -0.70 for the three month moving average of the national activity index (CFNAI-MA3) indicates that the national economy has either just entered or continues in recession.

Existing Home Sales Report: May 2013

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for May showing an increase in sales with total home sales rising a notable 4.2% since April and climbing 12.9% above the level seen in May 2012.

Single family home sales also improved climbing a whopping 5.0% from April and rising 12.7% above the level seen in May 2012 while the median selling price increased a notable 15.8% above the level seen a year earlier.

Inventory of single family homes increased from April to 1.98 million units but still remained 9.2% below the level seen in May 2012 which, along with the sales pace, resulted in a monthly supply of 5.2 months.

The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home prices, inventory and months of supply since 2005.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims June 20 2013

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

Seasonally adjusted “initial” unemployment claims increased by 18,000 to 354,000 claims from 336,000 claims for the prior week while seasonally adjusted “continued” claims declined by 40,000 claims to 2.951 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 1.68 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 4.46 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – June 19 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) rose again climbing 3 basis points to 4.01% since last week while the purchase application volume decreased 3% and the refinance application volume decreased 3% 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).

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.