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CCL Market Update

Gallup US ECI

Gallup’s U.S. economic confidence index remained unchanged in the month of June at an average of minus 14, the same reading as in April and May. Early on in the month confidence was slightly higher averaging minus 12 in each of the first two weeks. Near the end of the month, however, confidence dwindled with weekly readings of minus 15 and minus 17 for the last two weeks of the month, offsetting the confidence boost earlier in the month.

Mortgage Applications

A sharp drop in mortgage rates to new three year lows reignited mortgage activity in the week of July 1st. Refinancing went up 21 percent from the previous week to the highest level since January 2015. Purchase applications rose 4 percent from the prior week to partially offset the three week long decline trend. From a year ago purchase applications are up an impressive 23 percent. Mortgage rates are only 10 points higher than their record lows.

Gallup US Job Creation Index         

US workers’ reports of hiring activity in their place of employment in June held at its record high first achieved in May. The plus 33 job creation index score in June represents 44 percent of employees saying their employer is hiring workers and expanding the size of its workforce minus the 11 percent saying their employer is letting workers go.

ADP Employment Report

June payrolls may pop back to follow previous trends after the disappointing May report, based off ADP’s private payroll estimate of 172,000, well above economists’ predictions of 150,000. This report like other indications on the labor market including jobless claims is a signal of health labor conditions.

Gallup Good Jobs Rate

June’s good jobs rate in the US was at a level of 46.0 percent, up slightly from May which was at 45.5 percent. This reading of 46.0 percent is the highest monthly rate Gallup has recorded since measurement began in 2010. The current rate is also half a percentage point higher than in June 2015. The percentage of US adults in June who participated in the work force was 67.5 percent, up from May’s 67.3 percent and above the 66.9 percent average workforce participation rate since June 2013. Gallup’s unadjusted US unemployment rate was 5.3 percent in June down from May’s 5.5 percent. June’s unemployment estimate is the second lowest for any month since Gallup began tracking it in 2010, after reaching its low of 5.2 percent in April of this year. Gallup’s US unemployment rate represents the percentage of adults in the workforce who did not have any paid work in the past seven day, either from an employer or for themselves and who are actively looking for and available for work. Gallup’s measure of underemployment in June was at 13.6 percent, down only .1 percentage points from May’s reading of 13.7 percent, another low since Gallup began recording in 2010. June’s rate also marks the fourth straight month of declining for underemployment since February’s rate of 14.7 percent. Gallup’s US underemployment rate combines the percentage of adults in the workforce who are unemployed and those who are working part time but desire full time work; 5.3 percent and 8.3 percent respectively.

Jobless Claims

Layoffs are on the decline as confirmed by yet another very low set of readings for jobless claims. Initial claims fell a very steep 16,000 in the week of July 2nd to a level of 254,000, below Economists’ low estimates. The four week average is at 264,750, about 5,000 lower than a month ago, a good sign for growth in the labor market. Continuing claims are following similar patterns, down a sizable 44,000 in the lagging data for the week of June 25th to a level of 2.124 million with the four week average up slightly to 2.148 million. The unemployment rate for insured workers is at a low 1.6 percent. The lack of layoffs doesn’t necessarily result in a rise in employment, but is a very favorable signal.

Bloomberg Consumer Comfort Index

In the week of July 3rd the consumer comfort index was at 43.5, down a bit more than a ½ a point since the Brexit vote. This decrease is a minor change, in contrast to the level that is it at which is very solid. Strength in the consumer confidence is ultimately tied to confidence in the labor market.

Employment Situation

May’s disappointing employment situation report has proved to be an outlier in what is otherwise a still favorable trend for the labor market. June nonfarm payrolls surged a much stronger than expected 287,000 vs a downward revised and recovery low increase of only 11,000 in May. Strength in June is led by a 38,000 gain for professional and business services. Telecommunications, fell 32,000 in May during the Verizon strike, rose 28,000 in June. Manufacturing showed a rare gain in a sizable 14,000 increase. The unemployment rate rose 2 tenths to 4.9 percent, this increase reflects strength and not weakness in the labor market as new people re-entered the labor force in June after being discouraged in May. Other readings are mixed with the average hourly earnings up only 0.1 percent for a 2.6 percent yearly increase and workweek remained unchanged at 34.4 hours. The second quarter payroll growth averaged a monthly 147,300 vs. a more substantial 195,700 in the first quarter. This report shows the labor market is solid but perhaps slowing and does not point to any urgency for a new Federal Reserve rate hike.

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