August’s employment report, July’s trade deficit and Mortgage Monitor, et al

the key reports of this past week were the employment situation summary from the BLS and our international trade report for July from the Commerce Dept; we’ll also take a look at the Mortgage Monitor for July (pdf) from Black Knight Financial Services (BKFS, formerly LPS), which was also released this week…other reports of note released this past week included:

  • the manufacturing Purchasing Managers Index (PMI) for August from the Institute for Supply Management (ISM), which rose to 59.0%, up from 57.1% in July, the highest reading since March 2011, and indicating a larger plurality of manufacturing purchasing managers reported expansion in various facets of their business; 
  • the August Non-Manufacturing Report, also from the ISM, which showed their non-manufacturing index rose from 58.7% in July to 59.6% in August, the highest reading ever for this index, and similarly indicating that a larger percentage of service industry purchasing managers saw expansion in their business than did a month ago..
  • the Full Report on Manufacturers’ Shipments, Inventories, & Orders for July from the Census Bureau (pdf), which showed new orders for manufactured goods rose by $53.1 billion or 10.5% to a record high of $558.3 billion, factory shipments rose by $6.0 billion or 1.2% to a record $507.4 billion, factory inventories rose by $0.9 billion or 0.1% to a record high at $653.8 billion, and unfilled factory orders rose by $58.9 billion or 5.4% to $1,158.2 billion, which was also the highest level value of unfilled orders on record….  
  • the Census report on Construction Spending for July (pdf). which estimated that our seasonally adjusted construction spending for the month would work out to an annual rate of $981.3  billion in spending overall, 1.8 percent (±1.6%) above the revised June estimate of spending at a $963.7 billion annual rate and 8.2 percent (±2.3%) above last July’s adjusted and annualized level of construction spending….private construction spending was at a seasonally adjusted annual rate of $701.7 billion, 1.4 percent (±0.8%) higher than the revised June estimate, with residential spending rising  0.7 percent (±1.3%)* and non-residential construction rising 2.1 percent (±0.8%), while public construction spending was estimated at $279.6 billion, 3.0 percent (±3.0%)* above the revised June estimate…

in addition, Ward’s Automotive estimated that light vehicle sales were running at a 17.45 million seasonally adjusted annual rate in August, which was 6.4% higher than in July’s rate and the highest annualized monthly sales rate since January 2006…this adjusted number was based on sales of 1.51 million light vehicles sold over 27 selling days in August, as compared to the sales of 1.43 million vehicles sold over 26 selling days in July and adjusted using seasonal factors supplied by the BEA…included below is Bill McBride’s graph of monthly auto sales (at a seasonally adjusted annual rate) since the beginning of 2006, wherein you can see how new car sales are now near pre-recession record levels…

August 2014 auto sales

142,000 New Jobs Added in August, the Least This Year

the August survey of business establishments and government agencies conducted by the BLS found that nonfarm payroll employment increased by a seasonally adjusted 142,000 jobs to 139,118,000 jobs in August, well below the consensus forecasts of between 220,000 and 230,000 new jobs…in addition, July’s count of new payroll jobs was revised from 209,000 to 212,000, and the increase in June’s non farm payroll employment was revised down, from 298,000 to 267,000, meaning that this report added just 114,000 payroll slots to the total seasonally adjusted employment figures, the worst report this year…..the unadjusted establishment data indicates that 327,000 were actually added to non-farm payrolls in August, after the seasonal loss of 1,110,000 jobs in July, bringing the estimated total actually employed by business and government in August to 138,989,000…the FRED bar graph below incorporates the seasonally adjusted revisions to the June and July reports and shows the seasonally adjusted payroll job change monthly since the beginning of 2008, with job gains above the zero line and job losses below it…

  August 2014 payroll jobs

seasonally adjusted payroll jobs increased in most major sectors in August, while manufacturing employment remaining unchanged and small job losses were recorded in the retail and information sectors…as usual, the broad professional and business services category showed the largest gains at 47,000 new payroll jobs, with 13,000 of those added by temporary help agencies while 7,800 jobs were added in business management…another 34,000 jobs were added in health care and social assistance, with the addition of 22,800 in ambulatory health care services, including 7,800 in doctors offices, and 8,700 in social assistance…20,000 jobs were added in construction, with 11,500 of those in the specialty trades and 7,200 working on construction of buildings….employment in leisure and hospitality increased by 15,000 in August, as the addition of 21,500 jobs in restaurants and bars offset the loss of 3,900 jobs in performing arts and spectator sports…job gains in other sectors were less impressive; a net 8,000 jobs were added by federal, state, & local governments, 7,000 were added in financial activities, 6,500 were added in wholesale trade, 2,000 were added in the extractive industries, and 1,200 were added in transportation and warehousing…although there were 8,400 jobs less jobs in retail, the BLS points out that was largely the function of a loss of 17,100 jobs in food and beverage stores due to employment disruptions at a grocery store chain in New England…

once again, the average workweek for all payroll employees was unchanged at 34.5 hours for the 6th month in a row, with only mining and logging, where hours were up from 44.5 per week to 44.8 hours, seeing an increase greater than a tenth of an hour… the manufacturing workweek was up 0.1 hour to 41.0 hours after falling 0.2 hour in July, while factory overtime was unchanged at 3.4 hours …the average workweek for production and nonsupervisory employees was also unchanged at 33.7 hours, with the average health services nonsupervisory employees seeing their workweek increase a 0.2 hours to 32.1 hours…the average hourly pay for all workers rose by 6 cents an hour to $24.53 an hour, bringing the year over year increase to 50 cents, or about 2.1%, while the average pay for nonsupervisory workers also rose by 6 cents to $20.68, with their year over average hourly pay rising 51 cents, a 2.5% average annual pay increase.. 

Unemployment Rate Drops to 6.1% as Those Not Counted at a Record High

in contrast to the establishment survey, the employment data extrapolated from the August survey of 60,000 households showed that the seasonally adjusted count of the employed rose by just 16,000 to 146,368,000, a number not directly comparable to the establishment data as it includes farm workers and the self-employed… meanwhile, the count of the unemployed fell by 80,000 to 9,591,000, which thus means the number of us who were counted in the labor force fell by 64,000, leaving the unemployment rate, or the percentage of the total, at 6.1% in August, down from 6.2% in July…with an increase of 206,000 in the working age population and 64,000 less in the labor force, the count of those not in the labor force (and hence not counted when the percentages are calculated) rose 268,000 to a record high 92,269,000…as a result, the labor force participation rate fell back from 62.9 to 62.8, a 36 year low touched four times since last October…and although the employed to population ratio also fell slightly,  the decrease was statistically small enough to leave the official ratio unchanged at 59.0%……our FRED graph below shows the employment to population ratio, which we could think of as the employment rate, in blue, and the labor force participation rate in red, back to the turn of the century…

August 2014 household survey metrics

>of the seasonally adjusted total of 146,368,000 of us counted as being employed in June, 118,616,000 reported they were working full time, 127,000 more than in July, while 27,743,000 reported they were working part time, or less than 34 hours in the reference week, a decrease of 327,000 part time workers over July’s count…of those, the count of those working part time who would rather work full time fell by 234,000 to 7,277,000; as a result, the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, fell by 0.2% to 12.0%…meanwhile, the number of us unemployed for more than 27 weeks who were still looking for work fell by another 192,000 in August to 2,963,000, while the median duration of unemployment fell from 13.3 weeks to 13.2 weeks, numbers which have been falling since the end of extended unemployment rations disincentivized the long term unemployed to continue looking for work …among the 92,269,000 of us not officially in the labor force and hence not counted as unemployed, 6,382,000 reported that they still wanted a job, down from 6,624,000 in July but up from 6,291,000 a year ago; of those, 2,141,000 were categorized as “marginally attached to the labor force” because they had looked for work sometime during the last year, but not during the 30 day period covered by the August survey…775,000 of those were further characterized as “discouraged workers”, because they reported that they haven’t looked for work because they believe there are no jobs available to them…

July Trade Deficit Falls 0.7% to $40.5 Billion

the July report on our International Trade in Goods and Services from the Commerce Department indicated that our seasonally adjusted trade deficit in goods and services was at $40.5 billion for the month, down from the revised trade deficit of $40.8 billion in June, as our exports rose more than $1.8 billion to $198.0 billion on a $1.8 billion increase to $138.6 billion in our goods exports and a $0.1 billion increase to $59.4 billion in our services exports, while our imports rose $1.6 billion to $238.6 billion on a $1.5 billion increase to $198.8 billion in our imports of goods, while our imports of services were virtually unchanged at $39.8  billion…the June trade deficit was revised down from the previously reported $41.5 billion, which suggests there will be yet another upward revision to 2nd quarter GDP….since last July, our overall trade deficit has increased by $1.1 billion, on an $8.1 billion increase in exports and a $9.2 billion increase in imports…

end use categories of exports that saw seasonally adjusted increases in July included exports of automotive vehicles, parts, and engines, which were up $1,695 million to $15,314 million, industrial supplies and materials, which were up $1,264 million to $43,470 million on a $628 million increase in exports of petroleum products other than fuels a $268 million increase in exports of fuel oil, and a $205 million increase in exports of non-ferrous metals, and and increase in exports of capital goods, where our exports increased by $427 million to $46,097 million on a $286 million increase of industrial machines not itemized separately and a $149 million increase in exports of telecommunications equipment…on the other hand, our exports of consumer goods decreased by $650 million to $16,508 million on a $343 million decrease in exports of gem diamonds, a $130 million decrease in exports of jewelry, and a $116 million decrease in our exports of artwork and antiques…also, our exports of food, feeds and beverages decreased by $632 million to $11,061 million on $166 million lower exports of nuts, $152 million less exports of corn, $143 million less exports of soybeans, $108 million less exports of animal feeds not otherwise classified, and $104 less exports of meat and addition, our exports of goods not categorized by end use fell by $15 million to $5,134 million…

the June to July increase in imports of goods included a $1370 million increase to $28,855 million in imports of automotive vehicles, engines and parts, and a $506 million increase to $55,942 million in industrial supplies and materials, as increases of $740 million in crude oil imports, $395 million more imports of non-monetary gold, and $298 million more in imports of fuel oil were partially offset by $217 million less imports of other precious metals, $202 million less imports of other petroleum products, $194 million less imports of natural gas, and $184 less imports of nuclear fuel materials…our imports of foods, feeds and beverages also increased by $56 million to $10,887 million as a $168 million increase in imports of fruits and frozen fruit juices was partially offset by a $151 million decrease in imports of oils and oilseeds…in addtion, our imports of of goods not categorized by end use rose by $533 million in July to $6,873 million… meanwhile, our imports of consumer goods fell by $497 million to $45,128 million on $307 million less imports of cell phones and similar products, $181 million less imports of textiles other than wool or cotton, and $164 million less imports of pharmaceuticals, which were partially offset by $161 million more imports of art and antiques….we also imported $49,110 in capital goods, $340 million less than in June, as an increase of $310 million in imports of industrial machines not itemized separately and $245 million more imports of civilian aircraft was partially offset by $133 million less imports of excavating machinery and $126 million less imports of civilian aircraft parts..

included below is Bill McBride’s graph of our trade deficit from his coverage of this report, which shows the relationship of our net petroleum trade deficit to our deficit overall….reading from the top $0 line down, the black graph line tracks our deficit in petroleum trade only as a negative in billions of dollars since 1998; over the same span, the red graph shows our trade deficit for everything else except oil, also as a negative from the $0 line; combined together, those two sum to our total trade deficit, which Bill has graphed in blue…it’s pretty clear that even though our oil deficit in black has generally been falling (ie, going up towards zero on this chart) over the past couple of years, our trade deficit in everything else in red has continued to grow…

July 2014 McBride trade deficit

Foreclosure Starts and 90 Day Defaults Rise Again, Average Time in Foreclosure at a Record 1001 Days

according to the Mortgage Monitor for July (pdf) from Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division), 935,460 home mortgages, or 1.85% of all mortgages outstanding, remained in the foreclosure process at the end of July, which was down from 951,384, or 1.91% of all active loans that were in foreclosure at the end of June, and down from 2.82% of all mortgages in July of last year…these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and July’s so-called “foreclosure inventory” was the lowest percentage of homes in foreclosure since March of 2008…however, new foreclosure starts rose in July for the third month in a row, as the 90,690 homes foreclosed on in July was 2.7% higher than the 88,314 foreclosures started in June and 15.1% over the 78,796 foreclosures started in April; nonetheless, new foreclosures are still well off the pace of last year, as year-to-date foreclosure starts were at their lowest since 2008 and down 13.43% from a year ago…

in addition to homes in foreclosure, July data showed that 2,849,000​ mortgage loans, or 5.64% of all mortgages, were at least one mortgage payment overdue but not in foreclosure, down 1.1% from 5.70% of homeowners with a mortgage who were more than 30 days behind in June, and down from the delinquency rate of 6.41% a year earlier…of those who were delinquent in July, 1,136,000 home owners were considered seriously delinquent, which means they were 90 or more days behind on mortgage payments, but not in foreclosure at the end of the month…thus, a total of 7.49% of homeowners with a mortgage were either late in paying or in foreclosure at the end of July, and 4.10% of them were in serious trouble, ie, either “seriously delinquent” or already in foreclosure…  

the graph below, from page 4 of the Mortgage Monitor pdf, shows the percentage of mortgages that were in the foreclosure process monthly since 1995 in green, the percentage of active home loans that were delinquent but not in foreclosure over the same period in red, and the total of both, representing total percentage of mortgages that were in some kind of mortgage trouble each month, in blue over the same period…we can see that the percentage of homes in foreclosure in green has been falling fairly steadily over the last two years and at 1.85% in July is now well below the October 2011 peak of 4.29% of mortgages in the foreclosure process…but notice that’s still more than 4 times the pre-crisis foreclosure inventory of 0.44% from December 2005 that’s highlighted on the graph, so the percentage of homes in foreclosure is still a long way from normal …similarly, with delinquent mortgages shown in red at 5.64% of all mortgage outstanding in July, that count is down to almost half of the 10.57% of all mortgages that were delinquent but not in foreclosure at the peak of the mortgage crisis in January of 2010, but still somewhat above the December 2005 mortgage delinquency percentage of 4.27% noted on the graph…note also the seasonality of mortgage delinquencies apparent in the track of the red graph below, wherein they usually begin to increase at the beginning of the school year and peak during the holidays, and then decline at the beginning of the year as homeowners catch up on all their bills after holiday shopping… 

July 2014 LPS delinquencies and foreclosures

the next graph below, from page 7 of the Mortgage Monitor pdf, shows the historical track of the number of foreclosure starts monthly since the beginning of 2008 in red, and the track of the number of mortgages that have transitioned into 90 day delinquencies each month over the same time frame…as we mentioned earlier and as is obvious on the chart, the number of foreclosure starts has gone up over the last 3 months; similarly, the number of new 90 day defaults has now increased for four months in a row…note the callout on the graph, where BKFS tells us 53% of new foreclosure starts are now repeats, where a homeowner had previously resolved a foreclosure, presumably by catching up on payments or through a mortgage modification, only to fall behind on payments and be foreclosed on again…also note that 79% of foreclosure starts in July were on mortgages originating in 2008 or earlier, as were 74% of the new 90 day defaults…

July 2014 LPS 90 day and foreclosure starts

the next graph, from page 8 of the mortgage monitor, is a color-coded representation of the year of origination for the 90 day delinquent mortgages in each of several larger states, as well as for the US as a whole…within each bar representing the entirety of the 90 day delinquent mortgages in a state, the top virtually invisible light blue band represents the percentage of 90 day delinquent mortgages that originated this year; followed by the orange band, which represents the percentage of 90 day delinquent mortgages that originated last year (2013), followed by teal blue for 2012, purple for 2011, green for 2010, red for 2009, and dark blue for the percentage of 90 day delinquent mortgages that originated prior to 2008, which obviously represents the majority of the seriously delinquent mortgages…

July 2014 LPS 90 day by state and vintage 

next we’ll include the updated table that shows the breakdown of non-current mortgages by state, taken from page 24 of the pdf…shown below for each state and the District of Columbia are the percentage of home loans that were delinquent (Del%) in July, the percentage of mortgages that are in the foreclosure process (FC%), the total mortgages that weren’t current with their payments (NonCurr%) and the year over year change in the number of non-current mortgages…note that states that have a judicial foreclosure process, where the bank must prove their right to foreclose on a homeowner in court, are marked by a red asterisk, and BKFS gives this as a reason that foreclosures have been taking so long….there are now only 4 states that still have more than 4% of their mortgaged homes in the foreclosure process, and all are judicial states: New Jersey at 6.1%,  Florida with 4.8%, New York with 4.6%, and Hawaii with 4.1% of their homes with mortgages in foreclosure..

July 2014 LPS state non current table

for an overview of how this foreclosure crisis has played out from the beginning, we’ll also include below, from page 25 of the pdf, a portion of the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status…the columns here show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month shown going back to January 2008….in the last two columns, we see the average length of time those who’ve been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…notice that although the total counts of both mortgages that are seriously delinquent and those that are in foreclosure has been falling over the past year & a half, the average length of time for those who have been more than 90 days delinquent without foreclosure remains at 501 days, while the average time for those who’ve been in foreclosure without a resolution has lengthened to a record average 1001 days…

July 2014 LPS non current state table

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

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