Initial Jobless Claims Near 44 Year Low! (Too Bad Wage Growth Is Roughly 1/3rd Of 1973 Wage Growth YoY)

US initial jobless claims rose slightly to 239k for the week ending November 4th. But initial jobless claims remain near the 44 year low.

joblessclaims

If we look at the 4 week moving average of initial claims, it too is at a 44 year low.

monthlyavg

Now that is an impressive feat! Now if only earnings growth would return to 1973 levels. Current YoY wage growth is roughly 1/3rd of 1973 wage growth.

 

 

Advertisements

Hey Bartender! U-6 Underemloyment Rate Drops To GWBush Lows of 7.9%, U-3 Lowest Since 2001 (But Wage Growth Declines)

Another jobs Friday and this one has some good news: The U-6 Underemployment Rate* fell to 7.9% in October. The last time the US hit this low level was under President George W Bush in December 2006 before all hell broke look in the housing market.u6back

The U-3 unemployment rate is now at the lowest level since early GW Bush (2001).

u3cool

Unfortunately, average hourly earnings YoY tumbled to 2.4% YoY.

avgheyoy

What were the jobs added?  Bartenders and waitstaff! This helps explain the decline in hourly wage earnings.

Oct Jobs by type

Hey Bartender! 

bartender-juniorryan-thumb-625xauto-332900

*U-6 underemployment rate equals the total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.

Simply Unaffordable: These Cities Make USA Housing Look Dirt Cheap

As the late Robert Palmer crooned, housing is simply unaffordable in many cities. And most of those cities are outside the USA.

(Bloomberg) — As people around the world move into cities and look for housing, one thing is clear: Most will have a hard time paying for it.

Average monthly take-home pay won’t cover the cost of buying a 1,000-square-foot residence or renting a three-bedroom home in any of the 105 metropolitan areas ranked by the Bloomberg Global City Housing Affordability Index – based on a general rule of thumb among U.S. lenders that people should spend no more than 28 percent of net income on housing costs. Only 12 cities would be considered affordable if they spend 50 percent.

 

Residents face many obstacles, including urban land-use regulations, underdeveloped rental markets and difficulty getting financing, according to Enrique Martínez-García, a senior research economist at the Federal Reserve Bank of Dallas who studies housing prices. Policy solutions to these problems aren’t clear, he adds.

 “Not having access to credit is a challenge to develop a healthy housing market,” he said. “But opening it up too fast might be a problem as well; it might actually lead to a boom-bust episode.”
 

The Bloomberg index calculates the affordability of renting or buying in city centers and suburbs. Rankings are based on self-reported data, including net salary and mortgage interest rates, compiled by Numbeo.com, an online database of city and country statistics.

Since 2012, 48 cities in the Bloomberg index have become less affordable, while affordability improved in 51. (Historical data aren’t available for all 105.) In nine of the bottom 10, average net income fell, while income in eight of the top 10 cities rose as rental and mortgage costs declined.

Emerging economies currently have the least-affordable housing, led by Caracas and Kiev in Ukraine. The remaining cities among the bottom 20 include seven in Asia and six in Latin America. London is the least-affordable major city in Western Europe, with average monthly rent and mortgage payments equaling 135 percent of monthly net income.

In Rio de Janeiro, Brazil’s second-largest city, average monthly take-home pay of $640 won’t unlock a rental even on the outskirts of town, let alone provide the means to buy a house or apartment in the city center, where monthly mortgage payments approach $2,000. This contributes to multiple-income households and also may explain why more than one in five Rio residents lived in informal shantytowns called favelas in 2010, the most recent data available. Six of the 10 cities with the greatest deterioration in the past five years are in Latin America.

Seven of the top 10 most-affordable cities are in North America: four in the U.S. and three in Canada.  The least-affordable metro area in the two countries is Vancouver, where an influx of foreign cash has caused a surge in home prices. New York ranked near the middle of the index.

Two of the cities with the greatest improvement are in China: Shenzhen and Guangzhou. Even so, housing demand across the country continues to outweigh supply, “despite rapid construction and the large-scale delivery of new homes” in cities including Shenzhen, according to Kate Everett-Allen, head of international residential research at real-estate consultant Knight Frank in London. That’s because of “mass urbanization” and relatively low wages, she said, adding that home prices in several cities grew at an annual rate of as much as 40 percent last year.

Four Chinese metro areas, including Hong Kong, were among the 20 least-affordable in the index. 

Yes, the USA, while more affordable that the rest of the world, is suffering from low wage growth while home price growth is more rapid. In fact, the FHFA home price index is growing YoY at over 2X average hourly wage growth YoY. 6.63% versus 2.54%.

wagegrhop

Note that home price growth started to exceed hourly wage growth in 1998, the beginning of the dreaded housing bubble that blew sky high.

I guess Americans have been addicted to gov since the 1987 stock market crash.

September Jobs Report: Hurricanes And Largest Gain in Full-time Employment Since 1999 (Hourly Earnings YoY Highest Since 2009)

The hurricane-impacted jobs report is out for September.

The good news? Full-time employment rose by 935,000! The largest increase since 1999.

fulltimr

And then there is average hourly earnings YoY which just hit the highest growth rate since 2009.

aheyoy.png

Of course, the labor market was thrown a curveball with the hurricanes Harvey and Irma. The usual cry of labor shortages have begun appearing.

Here are the rest of the jobs numbers.

jobssept17

Most jobs lost? Leisure and hospitality.

jobs by category sept 2017

 

 

What will The Fed do now?

yellenleather

ISM Survey: Manufacturing Is Highest Since April 2004 (Prices Highest Since May 2011) — 2% Inflation?

The Institute for Supply Management (ISM) released their monthly survey for manufacturing this morning. The findings? The ISM Manufacturing Index is at its highest level since May 2004.

ism1999

How about business prices? They are now the highest since May 2011.

napmprices

The last time ISM prices were this high were followed shortly by the only time that “inflation” (Core PCE prices YoY) were above 2% since The Great Recession.

corepcenapmdprc

Here is the report summary.

20171002_ism

“Was I wrong about inflation … AGAIN???????”

yelleninflation

Broken Velocity: Yellen’s Low Inflation Quandary (Hint: FHFA Home Price Index Growing At 6.62% YoY)

Here is a brief summary of Fed Chair Janet Yellen’s thoughts from yesterday courtesy of Deutsche Bank’s Peter Hooper: The Fed is on track to raise rates once more this year and three times in 2018. Yellen recognized that inflation has been running low recently, and that while there was some uncertainty around this performance, one-off factors that are not expected to persist, and which have not been associated with the performance of the broader economy, have been important. At the same time, Yellen noted that monetary policy operates with a lag and that labor market tightness will eventually push inflation up.

Inflation has been running low “recently”? Actually, “inflation” (defined as core personal consumption expenditure price growth YoY) has been below 2% since April 2012 and below 3% since July 1992. Notice that hourly wage growth for production and nonsupervisory employees has remained low as well, particularly since 2007.

Of course, home price increases have been far greater than the “inflation” rate used by The Fed. The recent FHFA Purchase-only home price index YoY (released this morning for June) has US home prices growing at 6.62% YoY while “inflation” is growing at a palty 1.40% YoY.

But nothing really seems to be working as expected by some. Expanding the M2 Money Supply was supposed to increase Real GDP, but that really hasn’t worked since the Reagan/Clinton recovery when M2 Money Supply growth dropped from over 12.5% YoY in 1983 to 0.1% YoY in April 1995 under President Clinton and Federal Reserve Chair Alan “Maestro” Greenspan. Robert Rubin was the Treasury Secretary.

Notice that M2 Money growth has almost always been higher than real GDP growth since 1995. Hence, M2 Money Velocity has mostly been declining since 1997.

What about the old model where additional Federal debt is okay as long as real GDP growth is greater than Federal debt growth? We are nearly at that point again after decades of rapid Federal debt growth with modest real GDP growth.

I am guessing that rather than raise rates next year, The Fed may be forced to expand their balance sheet … again. Giving more oxygen to the asset bubbles.

frankoxy

As many Americans are forced to switch from exotic beers like Heineken to less expensive beers like Pabst Blue Ribbon. 

 

Atlanta Fed Increases Q3 Real GDP Forecast To 3.0% As Catastrophe Bonds Plunge (Fed Not Likely To Raise Rates Again Until September 2017 Meeting)

The Atlanta Fed’s GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 3.0 percent on September 8, up from 2.9 percent on September 6. The forecast of the contribution of inventory investment to third-quarter real GDP growth increased from 0.87 percentage points to 0.94 percentage points after this morning’s wholesale trade report from the U.S. Census Bureau.

atlfedgdp090817

Of course, these GDP numbers do not yet include the horrific damages caused by Harvey or Irma (while Jose is pushing out into the Atlantic Ocean). The damage to housing, commercial real estate and automobiles from Harvey and Irma will be quite extensive.

hurrmap

Catastrophe (Cat) bonds took a big plunge on Irma.

catbonds

The extensive hurricane damage is likely to reduce the chance of a Fed rate hike. As of today, the implied probability of a Fed rate hike does not exceed 50% until the September 26, 2018 meeting. And then it is only 55.3%.

wirp090817

The most likely path of Fed rate hikes is beginning to look like the train from the movie “Snowpiercer.”

mostlikely

Be safe Texans and Floridians.