Employment Situation: Total Unemployment January 2016

Today's Employment Situation report showed that in January “total unemployment” including all marginally attached workers went flat at again 9.9% while the traditionally reported unemployment rate declined slightly to 4.9%.

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.

Weekly Unemployment Claims: Initial and Continued February 04 2016

Today’s jobless claims report showed an increase to initial unemployment claims and a decrease to continued unemployment claims as seasonally adjusted initial claims remained just below the 300K level.

Seasonally adjusted “initial” unemployment claims increased by 8,000 to 285,000 claims while seasonally adjusted “insured” claims declined by 18,000 to 2.255 million resulting in an “insured” unemployment rate of 1.7%.

ISM Non-Manufacturing Report on Business: January 2016

Today, the Institute for Supply Management released their latest Non-Manufacturing Report on Business indicating that service related business activity slowed notably in January with the overall non-manufacturing index falling to 53.5 from last months reading of 55.8.

At 53.9 the business activity index significantly worsened since last month falling 12.36% below the level seen a year earlier, the largest annual decline seen throughout the entirety of the current expansion.

It would appear from today's report that service providing activities may be following manufacturing into a period of notable, likely recessionary, weakness.

Reading Rates: MBA Application Survey – February 03 2016

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) increased 13 basis points to 4.04% since last week while the purchase application volume increased 4% and the refinance application volume increased 11% 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).

ADP Manufacturing Meltdown

Looking a bit deeper at today's ADP Employment Report, one finds yet another clear signal that the current expansion has topped-out making recession as a distinct possibility in 2016.

The ADP Total Manufacturing Payrolls series has continued to trend negative dropping 0.14% on an annual basis, the second year-over-year decline since the waning days of the Great Recession in 2010.

Keep in mind that while manufacturing is clearly also showing strong secular weakness, this is a very sensitive series that should not be ignored.

Also, a revitalization of the nation's manufacturing sector was a important goal of the current administration's economic policy and a particularly key focus of 2009's American Recovery and Reinvestment Act.

ADP National Employment Report: January 2016

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 January as private employers added 205,000 jobs in the month bringing the total employment level 2.00% above the level seen in January 2015.

Look for Friday’s BLS Employment Situation Report to likely show, more or less, similar trends.

ISM Manufacturing Report on Business: January 2016

Today, the Institute for Supply Management released their latest Report on Business for the manufacturing sector indicating that manufacturing activity remained weak in January with many components continuing to indicate contraction.

At 48.2 the purchasing manager’s composite index (PMI) rose a slight 0.42% from December but slumped 9.91% below the level seen a year earlier giving a solid indication of contraction for manufacturing.

Construction Spending: December 2015

Today, the U.S. Census Bureau released their latest read of construction spending showing improved residential spending but weakening non-residential spending for December with total private construction spending and single family construction spending rising on the month while non-residential construction spending declined.

On a month-to-month basis, total residential construction spending increased 0.9% on the month rising 8.1% above the level seen a year earlier but still remained well below the peak level seen in 2006.

Single family construction spending increased 1.0% on the month rising 8.7% above the level seen a year earlier but still remained well below it's peak level reached in 2006.

Non-residential construction spending declined a notable 2.1% on the month but rose 11.8% above the level seen a year earlier but still remains a well 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.

GDP: Q4 2015 (First Estimate)

Today, the Bureau of Economic Analysis (BEA) released their first "estimate" of the Q4 2015 GDP report showing that the economy grew weakly in the fourth quarter with real GDP improving at an annualized rate of 0.7% from Q3 2015.

On a year-over-year basis, real GDP increased 1.8% while the quarter-to-quarter non-annualized percent change was an increase of 0.17%.

Notable categories of weakness include, Nonresidential investment in fixed structures and equipment which declined at 1.8%, Exports of goods which declined at 5.4%, while notable categories of strength include Personal Consumption Expenditures which increased at 2.2% and residential fixed investment which increased 8.1%.

Kansas City Fed Manufacturing Survey: January 2016

The Federal Reserve Bank of Kansas City, like other district FRBs (New York, Philadelphia, Richmond and Dallas), tracks its region’s manufacturing activity by surveying a number of important indicators such as general activity, production, shipments, orders, employment and prices for raw materials and finished products.

The latest results are indicating that the assessments of manufacturing activity remained at a contraction level of -9 in January with more component measure declining than increasing while prices paid for raw materials declined to -14.

It's important to note that the current level of the Composite index is roughly equivalent to the level seen during the middle of the Great Recession seemingly indicating, yet again, that our current expansion has drawn to a close.

Pending Home Sales: December 2015

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for December showing that pending home sales increased only slightly with the seasonally adjusted national index rising 0.1% from November to stand 4.2% above the level seen in December 2014.

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).

Advance Report on Durable Goods Shipments, Inventories and Orders: December 2015

Today, the U.S. Census Department released its advanced monthly Durable Goods Manufacturers’ Shipments, Inventories and Orders Report for December showing new orders for durable goods declining a notable 5.1% from November and falling -0.58% below the level seen in December 2014.

Much of the weakness came from the sub-components of new orders of non-defense aircraft parts (down 29.4%), communications equipment (down 20.5%), capital goods (down 18%), transportation equipment (down 12.4%), machinery (down 5.6%),

Weekly Unemployment Claims: Initial and Continued January 28 2016

Today’s jobless claims report showed a decrease to initial unemployment claims and an increase to continued unemployment claims as seasonally adjusted initial claims remained just below the 300K level.

Seasonally adjusted “initial” unemployment claims declined by 16,000 to 278,000 claims while seasonally adjusted “insured” claims increased by 49,000 to 2.268 million resulting in an “insured” unemployment rate of 1.7%.

New Home Sales: December 2015

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for December showing sales jumped a notable 10.8% from November rising 9.9% above the level seen in December 2014 but still remaining near an historically low level with 544K SAAR units.

The monthly supply declined to 7.1 months while the median selling price declined 2.73% and the average selling price declined 4.89% from the year ago level.

The following chart show the extent of sales decline to date (click for full-larger version).

Reading Rates: MBA Application Survey – January 27 2016

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) declined 13 basis points to 3.91% since last week while the purchase application volume increased 5% and the refinance application volume increased 11% 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).