Pending Home Sales
Existing home sales have recently been near cycle highs but have been unable to move above those highs, although new gains may perhaps be underway. The pending home sales index rose a strong 1.6 percent in December which is just above economists’ top predictions. Pending sales track contract signing for resales and the gain points at strength in January and February for final sales, tracked through the existing home sales report.
S&P Case-Shiller HPI
Case-Shiller’s home price index had been lifeless in the prior months leading up to the month of November when it rose sharply up 0.9 percent for the best monthly gain since March of 2015. They year to year rate rose 2 tenths to 5.3 percent, an improvement yet still down from the 5.5 percent area it was in early last year. This report shows less strength than the FHFA house price index but both are moving in the same direction, upward, and that is the factor that matters the most.
In the month of January consumer confidence held strong and steady at a level of 111.8, it is down only slightly from December’s 15-year revised high of 113.3. Details in the report are positive including a noticeable decline in those saying jobs are hard to get right now; it is at a percentage of 21.5 percent compared to December’s 22.7 percent. This combined with a solid rise in those saying jobs are plentiful rising from 26.0 percent to 27.4 percent points to more positive news in the consumer confidence sector. In the negatives of the report, the outlook for the future is less upbeat with more saying there will be fewer jobs 6 months from now and fewer saying there will be more. Confidence in income prospects is also down. When looking further into the details of the report there are some red flags, including a nearly 2 percentage point drop in buying plans for auto. This suggests that auto demand, after having several months of very strong sales, may flatten and level off. Home sales have been even less strong than auto sales and here too, buying plans are down sharply. The inflation expectations rate, in some good news in the report, bounced back up 4 tenths to 4.9 percent after sinking in December to 4.5 percent, a very low reading for report. This reading of 4.9 percent for inflation expectations is the best showing since September.
Purchase applications for home mortgages fell a seasonally adjusted 6.0 percent in the past week of January 27th. Application for refinancing fell 1.0 percent. On an unadjusted basis the purchase index increased 12 percent from the previous weeks to a level that stands a whole 2 percentage points higher than a year ago. Purchase applications have been surprisingly strong given the recent rise in mortgage rates. Purchase application activity is at its highest level since June this past week of January 27th. In contrast to purchase applications, refinancing has been on a dramatic decline, reaching lows we haven’t seen since July of 2015 in last week’s data and continuing to fall even further this week. The refinance share of all mortgage activity is down yet again this time by 0.36 percentage points to a level of 49.4 percent. Mortgage rates rose this week and were at the highest level since December.
Construction spending fell 0.2 percent in December, but does show gains for housing. Spending on n ewe single-family homes rose 0.5 percent in the month with multi-family spending up 2.8 percent. On the negative side, however, is a 0.6 percent dip in home improvements. More negatives include, pull coming from the public construction spending component which fell a sharp 1.7 percent in the month. Educational spending fell 2.2 percent with highways and streets down 0.6 percent. Private nonresidential categories are mixed with total spending for this component remaining unchanged. Spending on new home construction will have to improve further to ease the tight supply seen in the new home markets.
The Fed kept policy unchanged at the latest January FOMC meeting, surprising nobody. The statement gives upgrades to inflation and should confirm expectations for several rate hikes this year. Inflation “will” rise is the new jargon used during this announcement vs “expected to rise” the language used back in the December statement; referring the Fed’s two percent inflation target mark. In the statement made, the language now excludes references to factors that were holding down inflation, including energy prices and non-energy imports. Other than a few language modifications the statement remains little changed from the statement of the last meeting. Economic activity is still described as moderate, household spending is up only moderate while business investment remains soft this is all in line with the prior FOMC statement for the December meeting. Jobs are described as solid with further gains expected. There was no reference to timing of the next rate hike during the meeting announcement.
Initial claims continue to reach new lows this year, down 14,000 in the week of January 28th to a level of 246,000. The four week average was at 248,000 and has been below the 250,000 mark for three straight weeks; a first for this reading. Continuing claims, though not moving lower are still favorable, down 39,000 in the lagging data for the week of January 21st to a level of 2.064 million. This four week average is down 13,000 to 2.080 million with the unemployment rate for insured workers holding strong at a very low 1.5 percent.
Gallup Good Jobs Rate
The January Gallup Good Jobs rate was 44.8 percent that is up one tenth of a point from 44.7 in December’s reading. Though not a significant increase, the current rate is the highest for any January since tracking the measure began back in 2010. The percentage of US adults who participated in the workforce in January was 67.4 percent this includes people working full-time, working part time, or not working but actively seeking and being available for work. This data is up almost a full percentage point from 66.5 percent in December and is about even with the November results last year of 67.5 percent. Gallup’s unadjusted US unemployment rate in January was 5.8 percent, up from 5.2 percent in December and 4.9 percent in November 2016, the lowest rate Gallup has ever recorded. This unemployment rate represents the percentage of US adults in the workforce who did not have any paid work in the past seven days, but were actively looking for and available for work. Gallup’s measure of underemployment in January was 14.1 percent up from December’s rate of 13.7 percent, and 1.4 points higher to than the report’s low measured in October 2016 (12.7 percent). Gallup’s US underemployment rate is calculated by combining the percentage of adults in the workforce who are unemployed (5.38percent) and those who are working part time but desire full time work (8.3 percent)
Payroll growth in January exceeded expectations rising 227,000 for the best showing since September and well above the 2016 average of 187,000. Construction spending has been improving and is reflected in payrolls where the sector added a strong 36,000 jobs in the month. The unemployment rate rose 1 tenth to a still very low rate of 4.8 percent. This indicates new employees entering the labor market as the labor force participation rate, which has been down, bounced back 2 tenths higher to a level of 62.9 percent. The pool of workers available rose 183,000 in the month to 13.4 million. A surprise in the report is the surprisingly light wage pressure as average hourly earnings ticked only 0.1 percent higher, with December revised down from an initially impressive 0.4 percent gain to a gain of only 0.2 percent. The yearly rate which remained near the three percent line in December’s initial data is now revised way back down to 2.5 percent.