January jobs report; December’s income and outlays, trade, factory orders, construction spending, consumer credit and Mortgage Monitor…

as is usual for the first week of the month, Friday saw the release of the Employment Situation for January; there were also two other important reports; the December release on Personal Income and Spending from the Bureau of Economic Analysis and the December Report on our International Trade from the Census Bureau…in addition, the Census released the Full Report on Manufacturers’ Shipments, Inventories and Orders for December and the December report on Construction Spending, both of which could also impact 4th quarter GDP revisions…then on Friday, the Fed released its G19 on Consumer Credit for December, which indicated that revolving credit increased at a 7.9% annual rate in December, the largest increase since March, while non-revolving credit grew at a 4.5% rate, the slowest growth since February 2012

the week also saw the privately issued December Mortgage Monitor from Black Knight Financial Services and the Ward’s Automotive report on Light vehicle sales for January, as well as the two widely watched diffusion indexes from the Institute for Supply Management (ISM), the January Manufacturing Report On Business, and the January Non-Manufacturing Report On Business…although the simplistic index values from the latter two reports could be called into question, both reports are readable and include anecdotal comments from purchasing managers from the 34 business types who participate in these surveys nationally…

Employers Add Over a Million Jobs in 3 Months; January Labor Force Grows by Over a Million 

for the most part, the Employment Situation Summary for January from the BLS was another positive report, although some econobloggers complained that average wages have not been rising fast enoughthe seasonally adjusted establishment survey indicated employers added 257,000 jobs in January, and revisions of the two previous reports added 147,000 more jobs than previous estimated, with December now showing an addition of 329,00 jobs and November adding 423,000, which means the economy added more than a million jobs over three months for the fist time since 1997…meanwhile, the unemployment rate, which is sourced from the household survey, rose from 5.6% to 5.7% for the right reason; those counted in the labor force rose by more than a million, to 157,180,000, as self reported employment rose by 759,000 and unemployment rose by 291,000, as 354,000 more of those who weren’t counted in December started to look for work in January, and the labor force participation rate rose from 62.7% to 62.9%…

as we pointed out last month, the BLS press release itself is very readable, so you can get additional details on the employment reports directly from there…remember that there are links to roughly 30 detailed tables at the end of that release, with the A tables detailing household survey data and the B tables on the establishment survey…otherwise, the employment report is the most thoroughly covered of the monthly reports, with Dean Baker providing excellent coverage of the establishment survey here: Economy Adds 257,000 Jobs in January and Mish providing the relevant numbers from the household survey here: Diving Into the Payroll Report: Wages Rebound, Revisions, Huge Jump in Labor Force…for graphics, you can check out January’s Jobs Report in 10 Charts from the Wall Street Journal, and Bill McBride’s two posts: January Employment Report: 257,000 Jobs, 5.7% Unemployment Rate and Employment Report Comments and Graphs….

since it’s January, when prior employment data is rebenchmarked to March of the previous year, altering the rest of the year’s data, we’re going to add one graph here from another WSJ post that shows the effect of these revisions on 2014 payroll data…in the graphic below, the blue bars indicate jobs added in each month of last year as originally reported, and the red bars indicate the benchmark revisions as of this report…the net effect of the revisions back to January 2010 was to add an additional 91,000 jobs to March’s originally reported & revised jobs total…

January 2015 benchmark revsisions

Personal Income Rises 0.3% in December; Spending Falls 0.3%

other than the employment reports and the GDP report itself, the monthly report on Personal Income and Outlays from the Bureau of Economic Analysis is probably the most important release of the month, as it gives us important personal income data, the monthly data on our personal consumption expenditures (PCE), the major component of GDP, and the PCE price index, the inflation gauge the Fed targets…it is also probably the least understood and most misreported of the monthly economic reports, which is largely due to the nearly inscrutable manner in which the press release from the BEA reports on it…to start with, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the nominal monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts… however, the percentage changes are expressed as a month over month change and are confusingly used within the report as if they refer to the annualized amounts, making for a difficult report to unpack and report on correctly…

for example, this month’s report opens by telling us “Personal income increased $41.3 billion, or 0.3 percent, and disposable personal income (DPI) increased $35.8 billion, or 0.3 percent, in December” which most would read to indicate that incomes rose $41.3 billion for the month….however, that $41.3 billion is seasonally adjusted and at an annual rate, which means that if the increase in December personal incomes were extrapolated over an entire year, those 12 months would add up to $41.3 billion… what that statement actually means is that personal incomes rose from an annual rate of $14,930.9 billion in November to an annual rate of $14,972.2 billion in December, and no where in this report will we learn how much December incomes rose before being seasonally adjusted and turned into an annual number…the same is true of disposable personal income, which is income after taxes, and all the components of the income increase that are reported here…thus, when the press release tells us: Wages and salaries increased $6.9 billion in December, that’s not how much wages and salaries increased in December, that’s how much wages and salaries would increase over a year if the rate of increase in December wages were extrapolated over an entire year…also note that of the “personal income” reported here, wages and salaries works out to $7,558.2 billion annualized, barely over half the annualized $14,972.2 billion personal income reported…the other major sources of personal income are transfer payments (ie social security), income on assets (dividends and interest), proprietors’ income, and rental income paid to individuals….the detailed breakdown for all of that is in the pdf for this report, linked on the sidebar of the press releasehttp://www.bea.gov/newsreleases/national/pi/2015/pdf/pi1214.pdf

also, personal consumption expenditures (PCE) are reported in the same manner, such that they fell at an annual rate of $40.0 billion, or 0.3%, from the annual rate of November…this was the largest seasonally adjusted drop in consumer spending since 2009, but the caveat that must be applied to that is that prices, mostly of energy related goods, were falling in December as well, so a large part of the pullback in spending was just due to lower prices…like the GDP report, the monthly personal consumption expenditures are adjusted with the price index for PCE, which is a chained type price index based on 2009 prices equal to 100…in table 9 of the pdf for this report we see that that price index fell to 108.746 in December, from 109.000 in November, a drop of 0.023%, which the BEA rounds to 0.2% when reporting it…hence, real personal consumption expenditures only fell 0.10%, which the BEA rounds to a drop of 0.1%….using the same PCE price index, disposable personal income was adjusted to show that real disposable personal income, or the purchasing power of disposable income, rose by 0.5% in December after an increase of 0.4% November…

with disposable personal income up and personal consumption expenditures down, it only goes to reason that personal savings would have increased for the month…to arrive at the figures for that, the BEA takes total personal outlays, which is the sum of PCE, personal interest payments, and personal current transfer payments, and subtracts that from disposable personal income, to show personal savings at a $643.2 billion annual rate in December, up from the $568.2 billion that we would have saved in November had November’s savings been extrapolated for a year…this left the personal savings rate, or personal savings as a percentage of disposable personal income, at 4.9% in December, up from the savings rate of 4.3% in November..

Trade Deficit Jumps 17% in December Despite Lower Oil Prices

the December report on our International Trade in Goods and Services from the Commerce Department revealed a much larger trade deficit than most expected, as it increased by 17% to $46.6 billion in December from a revised $39.8 billion in November, against economists expectations that it would narrow to $37.9 billion from the $39.0 billion originally reported…and it’s actually worse than that, because the price of crude oil fell by 18.6% from November to December, so when the import deficit is adjusted for prices to arrive at real import quantities, it will show correspondingly higher imports to be subtracted from 4th GDP…

our exports fell $1.5 billion in December to $194.9 billion on a decrease of $2.5 billion to $134.3 billion in our exports of goods and a $1.0 billion increase to $60.6 billion in our exports of services, while our imports rose $5.3 billion to $241.4 billion on a $4.4 billion increase to $200.3 billion in our imports of goods, while our imports of services rose $0.9 billion to $41.2 billion… the September trade deficit was revised up to $39.8 billion from the previously reported $39.0 billion, implying a downward revision of similar magnitude to 4th quarter GDP for November…furthermore, considering that import prices were down 2.5% in December, the increased dollar value of our imports means we were buying even more goods on an inflation adjusted basis, and hence those imports will subtract even more than otherwise from 4th quarter GDP…

the BEA press release provides a good overview, but to get the details on trade we have to view the full release and tables (55pp pdf) which is linked to on the sidebar…there, in exhibit 7, we see that the major reasons for the December drop in our exports were a $1,244 million drop in our exports of non-monetary gold, and a $499 million decrease in our exports of soybeans…but while our exports of soybeans are up $2,535 million to $25,522 for the year, our exports of gold fell by $11,759 million to $22,454 million for the year and were the sole reason that our 2014 exports of industrial supplies and materials fell $2,479 million to $506,835 million…and although there were several categories of imports that contributed to the the $5.3 billion December increase, most notable were the dollar-based increases of oil and fuels, as oil imports rose by $1088 million to $18,278 million, fuel oil imports rose $296 million to $2,759 million, and imports of other petroleum products rose by $464 million to $3,699 million…meanwhile our crude oil imports increased from 6.296m barrels a day in November to 7.980m barrels a day in December, a sizable jump considering US oil production hit another record in the same month..the only other category of imports that saw an increase of a similar magnitude was our imports of motor vehicles, engines and parts which rose $938 million to $28,451 million..

Construction Spending increases by 0.4% December While Factory Orders Fall 3.4%

the Census report on Construction Spending for December (pdf) estimated that our seasonally adjusted construction spending for the month would work out to $982.1 billion annually if extrapolated over an entire year, which was 0.4 percent (±1.3%)* above the revised November annual rate and 2.2 percent (±1.6%) above above last December’s adjusted and annualized level of construction spending….this was a bit below expectations, and may result in a smallish downward revision to 4th quarter GDP if prices aren’t a factor…private construction rose 0.1%, with residential construction up 0.3 percent (±1.3%)* to $349.6 billion annually, while nonresidential construction fell 0.1%  (±1.0%)* to $349.0 billion, as it was impacted by a 1.0% drop in power related construction, which includes gas and oil investment…meanwhile, public consruction grewby 1.1 percent (±2.1%)* to $283.5 billion annually..

the Census Bureau’s Full Report on Manufacturers’ Shipments, Inventories, & Orders for October (pdf), commonly known as the factory orders report, indicated that the widely watched new orders for manufactured goods fell by $16.4 billion or 3.4% to $471.5 billion, following a revised 1.7% decrease in November, which was a larger drop than anyone expected…we had known last week that new orders for durables were reported down 3.4%; this report revised that to a 3.3% drop, while it also reported orders for non-durables were down by 3.4%…no one seemed to notice that new orders at refineries, which accounts for more than 20% of non-durable goods, was a major factor in that drop, as it was in the other sections of this report…shipments, for instance, decreased $5.3 billion or 1.1 percent to $488.2 billion, largely on a 15.7% drop in shipments from refineries, which was undoubtedly due to lower prices for refined goods…but since this report does not include prices, we can’t tell how much of a factor that was..same with inventories, which were down 0.2% for the first time in 19 months, and to a lesser extent, unfilled orders, which fell $9.4 billion or 0.8 percent to $1,166.9 billion, their first drop in 11 months…

Mortgage Delinquencies Fall 7.2% in December While New Foreclosures Rise 21.0%

the Mortgage Monitor for December (pdf) from Black Knight Financial Services (BKFS, formerly LPS Data & Analytics) reported that there were 820,177 home mortgages, or 1.61% of all mortgages outstanding, remaining in the foreclosure process at the end of December, which was down from 892,796, or 1.63% of all active loans that were in foreclosure at the end of November, and down from 2.48% of all mortgages that were in foreclosure in December of last year…these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and December’s “foreclosure inventory” was the lowest percentage of homes in foreclosure since early 2008… new foreclosure starts rose to 89,357 in December from 73,862 in November, the highest since September, but still below the 104,759 foreclosures that were started in December of last year…

in addition to homes in foreclosure, October data showed that 2,876,751 mortgage loans, or 5.54% of all mortgages, were at least one mortgage payment overdue but not in foreclosure, down from 6.04% of homeowners with a mortgage who were more than 30 days behind in November, and down from the delinquency rate of 6.47% a year earlier…of those who were delinquent in December, 1,132,301 home owners were considered seriously delinquent, which means they were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month…thus, a total of 7.15% of homeowners with a mortgage were either late in paying or in foreclosure at the end of December, and 3.83% of them were in serious trouble, ie, either “seriously delinquent” or already in foreclosure at month end…

included below is the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 12 of the pdf….the columns here show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by 30 days, number of mortgages that were delinquent by 60 days, the number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are 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 that those who have 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 the average length of delinquency for those who have been more than 90 days delinquent without foreclosure has begun to increase again and is now at 515 days, while the average time for those who’ve been in foreclosure without a resolution is off its record high but still nearly three years at 1010 days… 

December 2014 LPS FC & delinquent loan count 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, most from the aforementioned GGO posts, contact me…)

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