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Calculated Risk

Finance and Economics

Updated: 2017-10-17T18:27:10.947-04:00


Wednesday: Housing Starts, Beige Book


Back in 2014, I wrote this ...
For amusement: Years ago, whenever there was a market sell-off, my friend Tak Hallus (Stephen Robinett) would shout at his TV tuned to CNBC "Bring out the bears!".

This was because CNBC would usually bring on the bears whenever there was a sell-off, and bulls whenever the market rallied.

Today was no exception with Marc Faber on CNBC:
"This year, for sure—maybe from a higher diving board—the S&P will drop 20 percent," Faber said, adding: "I think, rather, 30 percent"
And Faber from August 8, 2013:
Faber expect to see stocks end the year "maybe 20 percent [lower], maybe more!"
And from October 24, 2012:
"I believe globally we are faced with slowing economies and disappointing corporate profits, and I will not be surprised to see the Dow Jones, the S&P, the major indices, down from the recent highs by say, 20 percent," Faber said...
Since the market is up 30% since his 2012 prediction, shouldn't he be expecting a 50% decline now?
Now the market is up about 80% since his 2012 prediction. I mention Faber - not because of his forecasting record - but because of his racist comments today (he will no longer be on CNBC).

I guess CNBC has an opening for a permabear!

• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, Housing Starts for September. The consensus is for 1.170 million SAAR, down from the August rate of 1.180 million.

• During the day: The AIA's Architecture Billings Index for September (a leading indicator for commercial real estate).

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.(image)

Lawler: Early Read on Existing Home Sales in September


From housing economist Tom Lawler:

Based on publicly-available state and local realtor/MLS reports from across the country released through today, I predict that US existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.38 million in September, up 0.6% from August’s estimated pace but down 1.6% from last September’s seasonally adjusted pace. Unadjusted sales should show a larger YOY decline, reflecting the lower business day count this September compared to last September. Hurricane Irma has a sizable impact on home sales in Florida, where I estimate sales were down by over 20% YOY. Surprisingly, however, residential sales in Houston were up 3.4% YOY, apparently reflecting the partial “spillover” in hurricane-related delayed closings in August (Harvey hit Houston in the latter part of August). For the combined August/September period home sales in Houston were down 12.5% from the comparable period of last year.

On the inventory front, local realtor/MLS data suggest that the NAR’s estimate of the number of existing homes for sale at the end of September will be about 1.88 million, unchanged from August’s preliminary estimate and down 7.4% from a year earlier.

Finally, realtor/MLS data suggest that the NAR’s estimate of the median existing SF home sales price last month was up 6.0% from last September.

CR Note: Existing home sales for September are scheduled to be released this Friday. The consensus is for sales of 5.30 million SAAR. (image)

NAHB: Builder Confidence increased to 68 in October


The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 68 in October, up from 64 in September. Any number above 50 indicates that more builders view sales conditions as good than poor.

From NAHB: Builder Confidence Rises Four Points in October
Builder confidence in the market for newly-built single-family homes rose four points to a level of 68 in October on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This was the highest reading since May.

“This month’s report shows that home builders are rebounding from the initial shock of the hurricanes,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “However, builders need to be mindful of long-term repercussions from the storms, such as intensified material price increases and labor shortages.”

“It is encouraging to see builder confidence return to the high 60s levels we saw in the spring and summer,” said NAHB Chief Economist Robert Dietz. “With a tight inventory of existing homes and promising growth in household formation, we can expect the new home market continue to strengthen at a modest rate in the months ahead.”
All three HMI components posted gains in October. The component gauging current sales conditions rose five points to 75 and the index charting sales expectations in the next six months increased five points to 78. Meanwhile, the component measuring buyer traffic ticked up a single point to 48.

Looking at the three-month moving averages for regional HMI scores, the South rose two points to 68 and the Northeast rose one point to 50. Both the West and Midwest remained unchanged at 77 and 63, respectively.
emphasis added
(image) Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was above the consensus forecast, and a strong reading.(image)

Industrial Production Increased 0.3% in September


From the Fed: Industrial production and Capacity Utilization
Industrial production rose 0.3 percent in September. The rates of change for July and August were notably revised; the current estimate for July, a decrease of 0.1 percent, was 0.5 percentage point lower than previously reported, while the estimate for August, a decrease of 0.7 percent, was 0.2 percentage point higher than before. The estimates for manufacturing, mining, and utilities were each revised lower in July. The continued effects of Hurricane Harvey and, to a lesser degree, the effects of Hurricane Irma combined to hold down the growth in total production in September by 1/4 percentage point.[1] For the third quarter as a whole, industrial production fell 1.5 percent at an annual rate; excluding the effects of the hurricanes, the index would have risen at least 1/2 percent. Manufacturing output edged up 0.1 percent in September but fell 2.2 percent at an annual rate in the third quarter. The indexes for mining and utilities in September rose 0.4 percent and 1.5 percent, respectively. At 104.6 percent of its 2012 average, total industrial production in September was 1.6 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.2 percentage point in September to 76.0 percent, a rate that is 3.9 percentage points below its long-run (1972–2016) average.
emphasis added
(image) Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 9.4 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 76.0% is 3.9% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

(image) The second graph shows industrial production since 1967.

Industrial production increased in September to 104.6. This is 20.1% above the recession low, and close to the pre-recession peak.

The hurricanes are still impacting this data.(image)

Tuesday: Industrial Production, Homebuilder Confidence


From Matthew Graham at Mortgage News Daily: Mortgage Rates Sideways to Slightly Higher
Mortgage rates were sideways to slightly higher today, depending on the lender.  Underlying bond markets suggested a bit more movement, and that will likely be reflected in tomorrow morning's rate sheets unless bonds improve overnight. [30YR FIXED - 3.875-4.0%]
• At 9:15 AM ET, The Fed will release Industrial Production and Capacity Utilization for September. The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to increase to 76.2%.

• At 10:00 AM, The October NAHB homebuilder survey. The consensus is for a reading of 64, unchanged from 64 in September. Any number above 50 indicates that more builders view sales conditions as good than poor.(image)

Housing Starts and the Unemployment Rate


By request, here is an update to a graph I haven't posted in several years ...

The graph below shows single family housing starts (red) and the unemployment rate (blue, inverted) through September 2017. Note: Of course there are many other factors impacting the unemployment rate, but housing is a key sector.

Usually when single family housing starts are increasing, then the unemployment rate is falling (with a lag).

You can see both the correlation and the lag.  Housing starts fall (or increase) first, followed by the unemployment rate.  The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn't hold.

(image) Click on graph for larger image.

Here is what I wrote when I first posted this graph in 2009. I wrote:
[T]here is still far too much existing home inventory, a sharp bounce back in housing starts is unlikely, so I think ... a rapid decline in unemployment is also unlikely.
That is exactly what happened.

Usually near the end of a recession, residential investment1 (RI) picks up as the Fed lowers interest rates. This leads to job creation and also household formation - and that leads to even more demand for housing units - and more jobs, and more households - a virtuous cycle that usually helps the economy recover.

However, following the 2007 recession, with the huge overhang of existing housing units, this key sector didn't participate for a few years.

Currently I expect single family housing starts to continue to increase (still historically low), and for the unemployment rate to fall further.

1 RI is mostly new home sales and home improvement.(image)

Phoenix Real Estate in September: Sales up slightly, Inventory down 10% YoY


This is a key housing market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in September were up 0.9% year-over-year (including homes, condos and manufactured homes).

2) Active inventory is now down 10.4% year-over-year. 

More inventory (a theme in most of 2014) - and less investor buying - suggested price increases would slow sharply in 2014.  And prices increases did slow in 2014, only increasing 2.4% according to Case-Shiller.

In 2015, with falling inventory, prices increased a little faster.  Prices were up 6.3% in 2015 according to Case-Shiller.

With flat inventory in 2016, prices were up 4.8%.

This is the eleventh consecutive month with a YoY decrease in inventory, and prices are rising a little faster this year (3.1% through July or 5.4% annual rate).

September Residential Sales and Inventory, Greater Phoenix Area, ARMLS
1 September 2008 probably includes pending listings

NY Fed: Manufacturing Activity "grew at a robust pace" in October


From the NY Fed: Empire State Manufacturing Survey
Business activity grew at a robust pace in New York State, according to firms responding to the October 2017 Empire State Manufacturing Survey. The headline general business conditions index climbed six points to 30.2, its highest level in three years. The new orders index came in at 18.0 and the shipments index rose eleven points to 27.5—readings that pointed to ongoing solid gains in orders and shipments. ...
The index for number of employees rose five points to 15.6, suggesting that employment expanded more strongly this month, while the average workweek index registered zero, indicating that the average workweek held steady. ...

Indexes assessing the six-month outlook suggested that firms continued to be optimistic about future conditions. The index for future business conditions climbed six points to 44.8, and the index for future new orders also came in at 44.8. Employment was expected to increase modestly.
emphasis added
This was well above the consensus forecast of a reading of 20.0.(image)

Sunday Night Futures


Schedule for Week of Oct 15, 2017

• At 8:30 AM ET, The New York Fed Empire State manufacturing survey for October. The consensus is for a reading of 20.0, down from 24.4.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 future are up 4 and DOW futures are up 30 (fair value).

Oil prices were up over the last week with WTI futures at $51.80 per barrel and Brent at $57.72 per barrel.  A year ago, WTI was at $50, and Brent was at $49 - so oil prices are up year-over-year.

Here is a graph from for nationwide gasoline prices. Nationally prices are at $2.45 per gallon. A year ago prices were at $2.25 per gallon - so gasoline prices are up 20 cents per gallon year-over-year.(image)

Fed Chair Janet Yellen "The Economy and Monetary Policy"


From Fed Chair Janet Yellen: The Economy and Monetary Policy. A few excerpts on inflation:
Inflation readings over the past several months have been surprisingly soft, however, and the 12-month change in core PCE prices has fallen to 1.3 percent. The recent softness seems to have been exaggerated by what look like one-off reductions in some categories of prices, especially a large decline in quality-adjusted prices for wireless telephone services. More generally, it is common to see movements in inflation of a few tenths of a percentage point that are hard to explain, and such "surprises" should not really be surprising. My best guess is that these soft readings will not persist, and with the ongoing strengthening of labor markets, I expect inflation to move higher next year. Most of my colleagues on the FOMC agree. In the latest Summary of Economic Projections, my colleagues and I project inflation to move higher next year and to reach 2 percent by 2019.

To be sure, our understanding of the forces that drive inflation is imperfect, and we recognize that this year's low inflation could reflect something more persistent than is reflected in our baseline projections. The fact that a number of other advanced economies are also experiencing persistently low inflation understandably adds to the sense among many analysts that something more structural may be going on. Let me mention a few possibilities of more fundamental influences.

First, given that estimates of the natural rate of unemployment are so uncertain, it is possible that there is more slack in U.S. labor markets than is commonly recognized, which may be true for some other advanced economies as well. If so, some further tightening in the labor market might be needed to lift inflation back to 2 percent.

Second, some measures of longer-term inflation expectations have edged lower over the past few years in several major economies, and it remains an open question whether these measures might be reflecting a true decline in expectations that is broad enough to be affecting actual inflation outcomes.

Third, our framework for understanding inflation dynamics could be misspecified in some way. For example, global developments--perhaps technological in nature, such as the tremendous growth of online shopping--could be helping to hold down inflation in a persistent way in many countries. Or there could be sector-specific developments--such as the subdued rise in medical prices in the United States in recent years--that are not typically included in aggregate inflation equations but which have contributed to lower inflation. Such global and sectoral developments could continue to be important restraining influences on inflation. Of course, there are also risks that could unexpectedly boost inflation more rapidly than expected, such as resource utilization having a stronger influence when the economy is running closer to full capacity.

In this economic environment, with ongoing improvements in labor market conditions and softness in inflation that is expected to be temporary, the FOMC has continued its policy of gradual policy normalization.

Schedule for Week of Oct 15, 2017


The key economic reports this week are September housing starts and existing home sales.For manufacturing, September industrial production, and the October New York Fed and Philly Fed manufacturing surveys, will be released this week.This week is bookended by two speeches by Fed Chair Janet Yellen (on Sunday, and then on Friday night).----- Sunday, Oct 15th -----At 9:00 AM ET, Speech by Fed Chair Janet Yellen, The Economy and Monetary Policy, At the 32nd Annual G30 International Banking Seminar, Washington, D.C.----- Monday, Oct 16th -----8:30 AM: The New York Fed Empire State manufacturing survey for October. The consensus is for a reading of 20.0, down from 24.4.----- Tuesday, Oct 17th -----9:15 AM: The Fed will release Industrial Production and Capacity Utilization for September.This graph shows industrial production since 1967.The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to increase to 76.2%.10:00 AM: The October NAHB homebuilder survey. The consensus is for a reading of 64, unchanged from 64 in September. Any number above 50 indicates that more builders view sales conditions as good than poor.----- Wednesday, Oct 18th -----7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.8:30 AM: Housing Starts for September. The consensus is for 1.170 million SAAR, down from the August rate of 1.180 million.This graph shows total and single unit starts since 1968. The graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering.During the day: The AIA's Architecture Billings Index for September (a leading indicator for commercial real estate).2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.----- Thursday, Oct 19th -----8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 240 thousand initial claims, down from 243 thousand the previous week.8:30 AM: the Philly Fed manufacturing survey for October. The consensus is for a reading of 20.2, down from 23.8.----- Friday, Oct 20th -----10:00 AM: Existing Home Sales for September from the National Association of Realtors (NAR). The consensus is for 5.30 million SAAR, down from 5.35 million in August.The graph shows existing home sales from 1994 through the report last month.10:00 AM: Regional and State Employment and Unemployment (Monthly) for September 2017At 7:30 PM, Speech by Fed Chair Janet Yellen, Monetary Policy Since the Financial Crisis, At the National Economists Club Herbert Stein Memorial Lecture and Annual Dinner, Washington, D.C [...]

Oil Rigs "The US oil rig count eased back again"


A few comments from Steven Kopits of Princeton Energy Advisors LLC on Oct 13, 2017:
• The US oil rig count eased back again

• Total US oil rigs were down 5 to 743

• Horizontal oil rigs were down 3 to 638
• In May, $50 WTI would have brought forth a gain of nearly 10 rigs per week.  Today, $50 oil at best will hold rig counts steady.

• To regain upward momentum, our model suggests WTI would have to reach about $56 / barrel.  WTI was trading at $51.40 today.
(image) Click on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.(image)

Sacramento Housing in September: Sales down 5% YoY, Active Inventory down 5% YoY


During the recession, I started following the Sacramento market to look for changes in the mix of houses sold (equity, REOs, and short sales). For several years, not much changed. But in 2012 and 2013, we saw some significant changes with a dramatic shift from distressed sales to more normal equity sales.

Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In September, total sales were down 5.3% from September 2016, and conventional equity sales were down 1.0% compared to the same month last year.

In September, 2.2% of all resales were distressed sales. This was down from 2.5% last month, and down from 4.5% in September 2016.

The percentage of REOs was at 1.0%, and the percentage of short sales was 1.2%.

Sacramento Realtor Press Release: Sales volume drops for September, sales price stalls
Septemberendedwitha10%decrease in sales,downfrom1,734to 1,5260.Compared withSeptember2016, current number is a 5.3 %decrease from the 1,647sales for that month. Equity sales for the month reached a high point, accounting for 97.8% (1,526)of the sales this month. REO/bank-owned and Short Sales made up the difference with 16 sales(1%) and 18 sales (1.2%) for the month, respectively.
Active Listing Inventory increased slightly, rising 1.2% from 2,593 to 2,625. The Months of Inventory increased from 1.5 to1.7 Months. A year ago the Months of inventory was also 1.7 and Active Listing Inventory stood at 2,774 listings.
emphasis added
Here are the statistics.

(image) Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional (equity) sales that started in 2012 (blue) as the percentage of distressed sales declined sharply.

Active Listing Inventory for single family homes decreased 5.4% year-over-year (YoY) in September.  This was the 29th consecutive monthly YoY decrease in inventory in Sacramento.

Cash buyers accounted for 12.9% of all sales - this has been generally declining (frequently investors).

Summary: This data suggests a normal market with few distressed sales, and less investor buying - but with limited inventory.(image)

Key Measures Show Inflation mostly below 2% in September


The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.5% annualized rate) in September. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.8% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.5% (6.8% annualized rate) in September. The CPI less food and energy rose 0.1% (1.5% annualized rate) on a seasonally adjusted basis.
Note: The Cleveland Fed released the median CPI details for September here. Motor fuel increased 335% in September, annualized.

(image) Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.2%, the trimmed-mean CPI rose 1.8%, and the CPI less food and energy rose 1.7%. Core PCE is for August and increased 1.3% year-over-year.

On a monthly basis, median CPI was at 2.5% annualized, trimmed-mean CPI was at 1.8% annualized, and core CPI was at 1.5% annualized.

Using these measures, inflation was soft year-over-year again in September (although inflation picked up month-to-month, with gasoline prices up sharply due to Hurricane Harvey).  Overall these measures are mostly below the Fed's 2% target  (Median CPI is slightly above).(image)

Cost of Living Adjustment increases 2.0% in 2018, Contribution Base increased to $128,700


With the release of the CPI report this morning, we now know the Cost of Living Adjustment (COLA), and the contribution base for 2018.

From Social Security: Social Security Announces 2.0 Percent Benefit Increase for 2018
Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 66 million Americans will increase 2.0 percent in 2018, the Social Security Administration announced today.

The 2.0 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 61 million Social Security beneficiaries in January 2018. Increased payments to more than 8 million SSI beneficiaries will begin on December 29, 2017. (Note: some people receive both Social Security and SSI benefits) The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.

Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $128,700 from $127,200. Of the estimated 175 million workers who will pay Social Security taxes in 2018, about 12 million will pay more because of the increase in the taxable maximum.
Currently CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). Here is a discussion from Social Security on the current calculation (2.0% increase) and a list of previous Cost-of-Living Adjustments.

The contribution and benefit base will be $128,700 in 2018.

The National Average Wage Index increased to $48,664.73 in 2016, up 1.2% from $48,098.63 in 2015 (used to calculate contribution base).(image)

Retail Sales increased 1.6% in September


On a monthly basis, retail sales increased 1.6 percent from August to September(seasonally adjusted), and sales were up 4.4 percent from September 2016.

From the Census Bureau report:
Advance estimates of U.S. retail and food services sales for September 2017, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $483.9 billion, an increase of 1.6 percent from the previous month, and 4.4 percent above September 2016. ... The July 2017 to August 2017 percent change was revised from down 0.2 percent to down 0.1 percent.
(image) Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were up 1.2% in September.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

(image) Retail and Food service sales, ex-gasoline, increased by 3.8% on a YoY basis.

The increase in September was slightly below expectations, however sales in July and August were revised up.(image)

Friday: Retail Sales, CPI and 2018 COLA


• At 8:30 AM ET, The Consumer Price Index for September from the BLS. The consensus is for a 0.6% increase in CPI, and a 0.2% increase in core CPI. Note: The 2018 Cost-Of-Living Adjustments and Maximum Contribution Base will be announced tomorrow. COLA will probably be around 2%.

• Also at 8:30 AM, Retail sales for September will be released.  The consensus is for a 1.9% increase in retail sales.

• At 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for August.  The consensus is for a 0.6% increase in inventories.

• Also at 10:00 AM, University of Michigan's Consumer sentiment index (preliminary for October). The consensus is for a reading of 95.5, up from 95.1 in September.(image)

LA area Port Traffic: Imports increased, Exports decreased in September


Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

(image) Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was up 1.0% compared to the rolling 12 months ending in August.   Outbound traffic was down 0.3% compared to the rolling 12 months ending in August.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

(image) Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March depending on the timing of the Chinese New Year.  

This was the highest level of imports ever for the month of September - following record imports in July and August - suggesting the retailers are optimistic about the Christmas Holiday shopping season.

In general imports have been increasing, and exports are mostly moving sideways to down recently.(image)

Hotel Occupancy Rate increases YoY, Just behind Record Year


From STR: US hotel results for week ending 7 October
The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 1-7 October 2017, according to data from STR.

In comparison with the week of 2-8 October 2016, the industry recorded the following:

Occupancy: +0.9% to 71.4%
• Average daily rate (ADR): +2.0% to US$130.92
• Revenue per available room (RevPAR): +3.0% to US$93.51

Among the Top 25 Markets, Houston, Texas, once again reported the largest year-over-year increases in occupancy (+45.0% to 85.9%) and RevPAR (+66.0% to US$99.25). With a spike in post-Hurricane Harvey demand, Houston also posted the second-largest ADR increase (+14.5% to US$115.51).
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

(image) The red line is for 2017, dash light blue is 2016, dashed orange is 2015 (best year on record), blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels).

Currently the occupancy rate, to date, is ahead of last year, and just behind the record year in 2015.  The hurricanes might push the annual occupancy rate to a new record.

Seasonally, the occupancy rate will remain close to this level during the Fall business travel season.

Data Source: STR, Courtesy of

Update: Real Estate Agent Boom and Bust


Way back in 2005, I posted a graph of the Real Estate Agent Boom. Here is another update to the graph.

The graph shows the number of real estate licensees in California.

The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).

The number of salesperson's licenses is off 29% from the peak, and is increasing again (up 6.6% from low). The number of salesperson's licenses has increased to July 2004 levels.

Brokers' licenses are off 12.9% from the peak and have only fallen to February 2006 levels, but are still slowly declining (down almost 1% year-over-year).

(image) Click on graph for larger image.

We are seeing a pickup in Real Estate licensees in California, although the number of Brokers is still declining.(image)

Weekly Initial Unemployment Claims decrease to 243,000


The DOL reported:
In the week ending October 7, the advance figure for seasonally adjusted initial claims was 243,000, a decrease of 15,000 from the previous week's revised level. The previous week's level was revised down by 2,000 from 260,000 to 258,000. The 4-week moving average was 257,500, a decrease of 9,500 from the previous week's revised average. The previous week's average was revised down by 1,250 from 268,250 to 267,000.

Hurricanes Harvey, Irma, and Maria impacted this week's claims.
emphasis added
The previous week was revised down.

The following graph shows the 4-week moving average of weekly claims since 1971.

(image) Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 257,500.

This was below the consensus forecast.  The recent increase in claims is due to the hurricanes.(image)

Port of Long Beach: Record Month, "Looks like retailers are optimistic about the holiday season"


From the Port of Long Beach: Port of Long Beach Sets Record for September
Cargo volume continues to break records at the Port of Long Beach, which moved more containers last month than any September in its history.

The 701,619 twenty-foot equivalent units (TEUs) processed in Long Beach for September — up 28.3 percent — also resulted in the Port’s best quarter ever. In the third quarter (July, August and September), the Port of Long Beach handled 2,114,306 TEUs, as volumes swelled 15.9 percent over the same period last year.

“Simply put, we are having the best trade months in Port history,” said Harbor Commission President Lou Anne Bynum. “Back-to-school merchandise was strong for us, and it looks like retailers are optimistic about the holiday season.”
CR Note: I'll have more on port traffic soon.

• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 252 thousand initial claims, down from 260 thousand the previous week.

• Also at 8:30 AM, The Producer Price Index for September from the BLS. The consensus is a 0.4% increase in PPI, and a 0.2% increase in core PPI.(image)

FOMC Minutes: "Many participants thought" December Rate Hike "likely to be warranted"


From the Fed: Minutes of the Federal Open Market Committee, September 19-20, 2017. Excerpts:
In their discussion of monetary policy, all participants agreed that the economy had evolved broadly as they had anticipated at the time of the June meeting and that the incoming data had not materially altered the medium-term economic outlook. Consistent with those assessments, participants saw it as appropriate, at this meeting, to announce implementation of the plan for reducing the Federal Reserve's securities holdings that the Committee released in June. Many underscored that the reduction in securities holdings would be gradual and that financial market participants appeared to have a clear understanding of the Committee's planned approach for a gradual normalization of the size of the Federal Reserve's balance sheet. Consequently, participants generally expected that any reaction in financial markets to the start of balance sheet normalization would likely be limited.
Consistent with the expectation that a gradual rise in the federal funds rate would be appropriate, many participants thought that another increase in the target range later this year was likely to be warranted if the medium-term outlook remained broadly unchanged. Several others noted that, in light of the uncertainty around their outlook for inflation, their decision on whether to take such a policy action would depend importantly on whether the economic data in coming months increased their confidence that inflation was moving up toward the Committee's objective. A few participants thought that additional increases in the federal funds rate should be deferred until incoming information confirmed that the low readings on inflation this year were not likely to persist and that inflation was clearly on a path toward the Committee's symmetric 2 percent objective over the medium term. All agreed that they would closely monitor and assess incoming data before making any further adjustment to the federal funds rate.
emphasis added

BLS: Job Openings Decreased Slightly in August


From the BLS: Job Openings and Labor Turnover Summary
The number of job openings was little changed at 6.1 million on the last business day of August, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were also little changed at 5.4 million and 5.2 million, respectively. Within separations, the quits rate and the layoffs and discharges rate were little changed at 2.1 percent and 1.2 percent, respectively. ...

The number of quits was little changed at 3.1 million in August. The quits rate was 2.1 percent. The number of quits was little changed for total private and for government. Quits decreased in information (-14,000) and mining and logging (-6,000). In the regions, the number of quits increased in the West but decreased in the South.
emphasis added
The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for August, the most recent employment report was for September.

(image) Click on graph for larger image.

Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings decreased in August to 6.082 million from 6.140 in July.  Note: July had the highest number of job openings since this series started in December 2000.

The number of job openings (yellow) are up 11% year-over-year.

Quits are up 2% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Job openings are mostly moving sideways at a high level, and quits are increasing year-over-year.  This is another strong report.(image)

MBA: Mortgage Applications Decrease in Latest Weekly Survey


From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey
Mortgage applications decreased 2.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 6, 2017.

... The Refinance Index decreased 4 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier. The unadjusted Purchase Index increased 0.1 percent compared with the previous week and was 7 percent higher than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) increased to 4.16 percent from 4.12 percent, with points decreasing to 0.44 from 0.45 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
(image) Click on graph for larger image.

The first graph shows the refinance index since 1990.

Refinance activity will not pick up significantly unless mortgage rates fall well below 4%.

(image) The second graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 7% year-over-year.(image)