Discussing the big jobs report and several other reports on employment, the FOMC minutes, where housing is headed and much more!
Construction Unemployment Rates Improve in 36 States
The not seasonally adjusted (NSA) national construction unemployment rate was 5 percent in November, down 0.7 percent from a year ago and the lowest November rate on record, according to an analysis of U.S. Bureau of Labor Statistics (BLS) data released today by Associated Builders and Contractors (ABC). The construction industry employed 191,000 more workers than in November 2016.
Construction unemployment rates were down in 36 states on a year-over-year basis, unchanged in 13 and up in one state (Missouri).
But wait… there’s more!
Private Sector Employment Increased by 250,000 Jobs in December
This is the biggest monthly increase since March and above this is well above the forecast by economists surveyed by Reuters.
But wait… there’s more!
Weekly Unemployment Claims Increase
In the week ending December 30, the advance figure for seasonally adjusted initial claims was 250,000, an increase of 3,000 from the previous week’s revised level. The 4-week moving average was 241,750, an increase of 3,500 from the previous week’s revised average.
Not good BUT wait… there is more!
December 2017 Employment Report
Total nonfarm payroll employment increased by 148,000 in December, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in health care, construction, and manufacturing.
In December, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents to $26.63. Over the year, average hourly earnings have risen by 65 cents, or 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.30 in December.
The is the 3rd month that the unemployment rate was 4.1%. The number of jobs added is below the estimate of economists surveyed by Bloomberg.
Check out the charts:
The strength of these employment reports should keep the Fed on track to raise rates in the coming year…
The Fed Speaks
The Fed just released the FOMC Minutes for December 12-13, 2017. Some of the highlights:
The information reviewed for the December 12-13 meeting indicated that labor market conditions continued to strengthen through November and suggested that real gross domestic product (GDP) was rising at a solid pace in the second half of 2017. Total consumer price inflation, as measured by the 12-month percentage change in the price index for personal consumption expenditures (PCE), remained below 2 percent in October and was lower than early in the year.
The U.S. economic projection prepared by the staff for the December FOMC meeting was generally comparable with the staff’s previous forecast. Real GDP was forecast to have increased at a solid pace in the second half of 2017. Beyond 2017, the forecast for real GDP growth was revised up modestly, reflecting the staff’s updated assumption that the reduction in federal income taxes expected to begin next year would be larger than assumed in the previous projection. The staff projected that real GDP would increase at a modestly faster pace than potential output through 2019. The unemployment rate was projected to decline further over the next few years and to continue running below the staff’s slightly downward-revised estimate of the longer-run natural rate over this period.
Many participants judged that the proposed changes in business taxes, if enacted, would likely provide a modest boost to capital spending, although the magnitude of the effects was uncertain. The resulting increase in the capital stock could contribute to positive supply-side effects, including an expansion of potential output over the next few years. However, some business contacts and respondents to business surveys suggested that firms were cautious about expanding capital spending in response to the proposed tax changes or noted that the increase in cash flow that would result from corporate tax cuts was more likely to be used for mergers and acquisitions or for debt reduction and stock buybacks.
After assessing current conditions and the outlook for economic activity, the labor market, and inflation, nearly all members agreed to raise the target range for the federal funds rate to 1-1/4 to 1-1/2 percent. These members noted that the stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation. Two members preferred to leave the target range at 1 to 1-1/4 percent, suggesting that the Committee should wait to raise the target range until inflation moves up closer to 2 percent on a sustained basis or inflation expectations increase.
So the Fed raised their benchmark rate again and only see a modest benefit from the tax reform. Interesting how they mention most of the business contacts say they will use the savings for mergers, stock buybacks and debt reduction instead of increasing wages or expanding the business…
South Carolina is 2017 State Of The Year
South Carolina has been named Business Facilities’ 2017 State of the Year:
Massive new commitments from auto giants BMW and Volvo were the drivers in a bounty of new projects in South Carolina in 2017, the top five netting 6,400 new jobs for SC. “The Volvo and BMW expansions catapult South Carolina into the top tier of U.S. automotive manufacturing hubs, but the Palmetto State also has been busy laying the foundation for sustainable growth across a diversified portfolio of growth sectors,” said BF Editor in Chief Jack Rogers.
South Carolina put down a marker that it intends to be a major player in the highly competitive medical devices market when it convinced Arthrex to launch new manufacturing operations in Sandy Springs, SC, a $69-million investment that will create more than 1,000 new jobs in Anderson County. Arthrex, based in Naples, FL, will use the new 200,000-square-foot facility to manufacture its innovative orthopedic devices and implants.
Awesome news! Getting good publicity like this helps to attract more economic growth AND helps to eliminate any negative stereotypes about South Carolina that some people or businesses may have.
Where Is the Housing Sector Headed?
From Atlanta Fed:
One element that has distinguished the expansion following the Great Recession from expansions following prior recessions is the slow recovery of the housing sector. Recent data releases relating to home sales activity and new construction point to a housing market that continues to grow at a slow but steady pace. Single-family starts are increasing but remain low by historical norms. According to the U.S. Census Bureau, the 12-month moving average of multifamily starts has peaked after increasing steadily over the last several years. The data releases since the initial fourth-quarter GDPNow nowcast on October 30 have, on net, brightened the outlook for residential investment.
These numbers tell us where we are but not what lies ahead.
So where do they think we are headed?
Well they are optimistic and expect slow and steady growth. But once again the broken record of tight inventory is the main concern.
So nothing groundbreaking but it is a good outlook despite the persistent problem of limited inventory. Since real estate is a highly localized subject, you really need to talk to a local Realtor to find out what is happening in your market.
National statistics and news stories do not tell you what you need to know to make an informed decision when buying or selling a home!
Rail Traffic in 2017
AAR just reported that total U.S. carload traffic for 2017 was up 2.9% compared to 2016; and intermodal units were up 3.9% from the level in 2016. Total combined U.S. traffic for the full year of 2017 was up 3.4% compared to 2016.
Sounds great and the really good news is that 2017 ended strongly according to AAR Senior Vice President John T. Gray:
Rail traffic finished 2017 on a positive note,. In December, total carloads were up for the first time in six months, and 14 of the 20 carload categories we track saw year-over-year gains – the most for any month in almost three years. Meanwhile, intermodal volume was up for the 11th straight month and set a new annual record, breaking the previous mark set in 2015.
Could we see a very strong economy in 2018?
CMBS Delinquency Rate Plunges to Lowest Level in 15 Months
Just like the thermometer over the last two weeks, the Trepp CMBS Delinquency Rate fell sharply in December. The final reading of 2017 was the lowest reading since September 2016, and also marked the sixth straight month in which the reading has dropped. The delinquency rate for US commercial real estate loans in CMBS is now 4.89%, a decrease of 29 basis points from the November level.
While my focus is residential and not commercial real estate, I try to share any information about the direction of the economy. If the economy is weak, it is unlikely that the housing market will be strong.
PHH Settles Mortgage Servicing Complaint for $45 Million
PHH just said that they will pay $45 million to settle a complaint related to legacy mortgage servicing activities that happened between January 1, 2009 and December 31, 2012 that were subject to a multi-state mortgage loan servicing examination.
PHH was accused of threatening foreclosure and gave conflicting messages to borrowers. The sad thing is that while $45 million sounds like a bunch of money, the actual amount that will paid to people that lost their homes to foreclosure be PHH will receive only $840.
Of course, PHH did not admit any wrong doing but they did settle…
The CEO of Wells Fargo Might Be in Big, Big Trouble
From The Nation:
Late last year, Congress scrapped Obama-era rules from the Consumer Financial Protection Bureau that would have banned forced-arbitration clauses in financial contracts. This bill, which President Trump quickly signed, was self-evidently bad for consumers at the time—and if anyone needs further proof of how ridiculous and harmful these clauses are, just look at what Wells Fargo has been up to over the past several months. The mega-bank famously issued at least 3.5 million fake accounts without consumer consent, triggering a $185 million fine to state and federal regulators. The bank aimed to demonstrate sales growth to investors and boost the stock price with bogus numbers, but millions of customers got caught up in the exchange, paying unnecessary fees and taking hits to their credit scores. Scores of defrauded customers sued Wells Fargo in a series of class-action lawsuits.
Wells Fargo then tried to defy metaphysical reality: It moved to block one class-action case in Utah by claiming that the arbitration clause in customer contracts on the real accounts they held at the bank also applied to the fake accounts. By this theory, Wells Fargo customers signed away their legal rights when it came to accounts they didn’t even sign.
A must read and demonstrates why the CFPB being transformed from a consumer protection agency into a front for big business is so bad…
Bloomberg Consumer Comfort Index Hits 16-Year High
American consumers last year were more upbeat on average than at any time since 2001, reflecting more favorable views of the economy, personal finances and the buying climate, according to the Bloomberg Consumer Comfort Index released Thursday.
Sentiment in 2017 got a boost from the combination of a solid labor market that’s pushed unemployment to an almost 17-year low, limited inflation and record stock prices. Such optimism should help keep consumers spending after a bright holiday-shopping season. Retail sales during the year-end holidays may have been the strongest in more than a decade, according to calculations from research firm Customer Growth Partners.
Good news but there is a serious difference between how people with different political leanings feel. I would suggest not letting your politics over rule logic and facts…
CEO Confidence Rebounds
From The Conference Board:
The Conference Board Measure of CEO Confidence™, which declined in the third quarter, bounced back in the fourth quarter of 2017. The Measure now reads 63, up from 59 in the third quarter (a reading of more than 50 points reflects more positive than negative responses).
Lynn Franco, Director of Economic Indicators at The Conference Board said:
CEO confidence rebounded in the final quarter of 2017, following back-to-back quarterly declines. CEOs’ short-term expectations for growth in both mature and emerging markets also improved, and they expressed the greatest optimism about short-term prospects in the U.S. In 2018, CEOs anticipate hiking prices by 2.1 percent, up from 1.3 percent last year.
You have to imagine that the tax reform passing has a big impact on how CEOs are feeling. We will have to wait and see if this translates into something good for the average American…
Well that is it for today! I ran out of time so check back tomorrow as I will be discussing mortgage rates! And if you enjoyed this post, please hit those share buttons!