it’s been a very busy news week, with several important economic releases…in addition to the employment reports for February released on Friday, both the International Trade Report for January (51pp pdf) and the Fed’s G-19 on Consumer Credit for January were released on the same day, and hence received very little blog or media coverage…our January trade report showed little change in the overall trade deficit after the jump in December, as our exports rose $1.2 billion on an increase of $1.855 billion in non-monetary gold exports, while our imports rose $1.3 billion on a $3.7 billion increase in imports of industrial supplies and materials, $2.7 billion of which was an increase in imported crude oil, while our imports of automotive vehicles, parts, and engines fell by $1.4 billion and our consumer goods imports were $1.0 billion lower, resulting in a trade deficit of $39.1 billion for the month…the consumer credit report showed that non-revolving credit (auto loans, student loans) increased at a 7.5% seasonally adjusted annual rate in January, while revolving credit (credit cards) shrunk at a 0.3% rate; unadjusted data showed outstanding credit card debt fell by $21.4 billion to $835.1 billion in January, while student loans owed to the federal government rose $28.0 billion to $757.8 billion…

the week started with the release of the January report on Personal Income and Outlays from the BEA, which showed that personal income increased 0.3% for the month while personal spending rose 0.4%; we’ll look at the details, which include several special factors, later…Monday also saw the release of the January report on construction spending (pdf) from the Census Bureau, which indicated that construction spending rose by 0.1 percent (±1.5%) over January to a seasonally adjusted annual rate of $943.1 billion; residential construction rose by 1.1% to an annualized $359.9 billion in January, private nonresidential construction fell 0.2% to a $310.9 billion rate, and the estimated seasonally adjusted annual rate of public construction spending was at $272.3 billion, 0.8% below December’s estimate….Monday also saw the release of the February Report on Manufacturing from the Institute for Supply Management , which saw the composite PMI (purchasing managers index) rise to 53.2% from January’s 51.3%; a similar index from Markit rose to 57.1 in February from a 53.7 reading in January, and one from New York area purchasing managers fell to 57.0 in February from 64.4 in January….and based on an AutoData estimate, light vehicles sold at a 15.34 million seasonally adjusted annual rate in February, a 1.8% increase from January’s seasonally adjusted sales…

other reports released during the week included the February Non-Manufacturing Report from the ISM, which reported that their composite non-manufacturing index was at 51.6%, down from 54.0% in January, indicating a slower expansion by service industries for the month, the Full report on Manufacturers’ Shipments, Inventories, & Orders for January from the Census Bureau, which indicated that new orders for manufactured goods decreased $3.3 billion or 0.7% to $483.0 billion in January, shipments of the same decreased $1.7 billion or 0.3 percent to $490.7 billion, while inventories of manufactured goods increased $1.1 billion or 0.3 percent to to a new record high at $389.1 billion…in addition, the 4th quarter report on labor productivity from the BLS, a measure of output per man hour, reported that non-farm labor productivity increased at a 1.8% annual rate in the 4th quarter, but with revisions to earlier reports indicated a the full year productivity growth for all of 2013 was just 0.5%, matching a 20 year low, and the 4th Quarter Flow of Funds from the Fed, which showed that household net worth increased by $2.95 trillion to a record high $80.7 trillion in the quarter, largely because of the increasing prices for financial assets and real estate…after debt of those who have it is subtracted, that works out to an average of just over $700,000 in net assets per US household

BLS Reports Employers Added 175,000 Jobs in February

from the employment situation reports released on Friday by the Bureau of Labor Statistics, the establishment survey conducted for February indicated that nonfarm payroll employment increased by 175,000 jobs to a seasonally adjusted 137,699,000 jobs, better than expected but not particularly good; job creation in January was revised to 129,000 from the previously reported 113,000 job gain, and the increase in payroll employment for December was revised from 75,000 to 84,000…the unadjusted establishment data indicates that 750,000 were added to non-farm payrolls, to bring the estimated total actually employed by business and government in February 136,183,000; recall that the margin of error on this survey is +/- 90,000 jobs….the FRED bar graph below incorporates revisions to December and January and shows the seasonally adjusted payroll job change monthly since the beginning of 2008…the 388,000 jobs added over the past three months is the weakest 3 months of job creation since the 304,000 jobs added from April through June of last year…

FRED Graph

79,000 of the seasonally adjusted jobs added in February were in the broad professional and business services category; of those, 15,700 were added in accounting and bookkeeping services, 29,700 were in other professional and technical services, 24,400 were with temporary help agencies, and 11,400 were in services to buildings and dwellings…of the 25,000 jobs added by leisure and hospitality industries, 21,200 were added by bars and restaurants, an area that has added nearly 305,000 jobs over the preceding 12 months…an additional 33,000 jobs were added in the education and health care services sector, with 18,200 of those in private educational services (not including public schools or state universities)…9,500 jobs were added in health care, of which 8,200 were in doctor’s offices, while there were 5,200 more working in social assistance….there was some concern that weather would affect the February jobs count, but like January, another seasonally adjusted 15,000 jobs were added in construction, the one sector usually most impacted by the weather; 12,300 of those were in heavy and civil engineering construction….14,800 more jobs were added in wholesale trade, with 11,500 of those in durable goods trade, while there were 4,100 less jobs in retail, as the 12,000 jobs added by food and beverage stores were more than offset by the cuts of a similar number of employees at electronic and appliance stores and an 8,600 reduction of employees of sporting goods, hobby, book, and music stores….financial activities accounted for another 9,000 new jobs in February, as 9,900 payroll jobs were added by insurance carriers and in related activities…but there were 16,000 less jobs in information, as 14,100 were cut from motion picture and sound recording industries, apparently what passes for information in the US these days….government payrolls increased by 13,000, as increases of 11,000 jobs at the state level, mostly in education, and 8,000 jobs at the local level more than offset the 6,000 payroll jobs lost working for Uncle Sam…meanwhile, employment in manfacturing was mostly flat, with 6,000 jobs added in durable goods industries, while transportation and warehousing saw 3,600 fewer jobs and the resource extraction sector – mining, logging, and oil and gas extraction – netted out just an addition 1,000 jobs…

our FRED bar graph below shows the seasonally adjusted monthly change in payroll employment in selected sectors since the beginning of 2013, with the scale on the left indicating the increase of payroll jobs in thousands when the colored bar for that sector extends upwards, and the decrease in jobs in thousands in that sector when its bar points downwards…in each monthly grouping of 8 bars, the monthly change in manufacturing employment for that month is indicated in blue, the change in monthly construction employment is in red, the monthly change in retail employment is in dark green, the monthly change in government jobs is in yellow, and the change in employment in the large professional and business services sector, which could be anything from an accountant to a trash hauler, is in grey; also included are the CES employment subcategories of jobs in bars and restaurants in light green, and new health care jobs in orange, with private education jobs shown in violet…(download xls jobs data shown in graphclick to show two year graph)…February’s jobs changes are represented by the bar cluster on the far right; with the large jump in professional and business service jobs fairly evident, with retail trade as the only sector on our graph showing a job loss for the month, its second larger than normal post holiday employment decrease in a row…

FRED Graph

one employment area where the weather may have been a factor was in the average workweek for all payroll employees, which slipped a tenth of an hour to 34.2 hours and is now 0.3 hours less than last February’s workweek…construction workers saw 1.2 less hours than a year ago at 38.0 hours for the reference week of the 12th, while the retail workweek slipped 0.1 hour to 31.0 hours, 0.6 hours less than a year earlier…average hours were even lower for production and nonsupervisory employees, who saw their workweek shrink 0.2% below the January level to 33.5 hours…resource extraction was the only sector seeing a much longer workweek in February, as production workers in mining, logging, gas and oil saw their weeks lengthen 0.9 hours to 47.1 hours…meanwhile, average hourly pay for all workers rose 9 cents to $24.31, with utilities workers seeing a 28 cent an hour increase  to $35.81 an hour, the highest average pay for any sector, while the lowest paid workers in leisure and hospitality gained 7 cents an hour to average $13.76 an hour… average pay for nonsupervisory workers was also up 9 cents and hour to $20.50, with those working in the information sector seeing the largest increase of 29 cents to $28.77 an hour..

Household Survey Indicates February Unemployment Rose by 223,000

FRED Graphin contrast to the results from the survey of employers, the extrapolated results from the survey of 60,000 representative households indicated that there were 145,266,000 employed in February, a seasonally adjusted increase of just 42,000 more employed individuals than in January, while the number who were classified as unemployed increased by 223,000 to 10,459,000…since the civilian population rose by 170,000 for the month, the combination of the newly employed and unemployed meant 94,000 who were out of the labor force in January returned in February; however, that was not enough to raise the labor force participation rate by a significant digit as it remained unchanged at 63.0%…similarly, the small increase in the employed vis-a-vis the population was not enough to lower the employed to population ratio by a significant factor as it also remained unchanged at 58.8%…our adjacent FRED graph shows the historical track of these two metrics over the past ten years, with the labor force participation rate shown in red and the employment to population ratio in blue…some at the Fed think that big downturn in both since the recession is normal, as it’s just the boomers retiring en masse..

with the relatively large increase in the unemployed compared to the 264,000 increase in the labor force, the unemployment rate, which is the percentage of the labor force unemployed, rose a tenth of a percent to 6.7%…statistically, the BLS considers that “little changed”, since the margin of error in  in the unemployment rate is +/- 0.2%, while the margin of error in the number unemployed is +/- 300,000….thus they report the unemployment rates for the major demographic groups — adult men at 6.4%, adult women at 5.9%, teenagers at 21.4% whites at 5.8%, blacks at 12.0%, and Hispanics at 8.1% — as “little changed” in February; however, the data shows that the unemployment rate for black men rose from 12.0% in January to 12.9% in February, while the unemployment rate for black women fell from 10.4% to 9.9%…remember, only those who looked for work during the month are counted as unemployed in this report…meanwhile, the number who reported that they were working part time who indicated they wanted full time work fell by 71,000 to 7,186,000; so the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, fell from 12.7% in January to 12.6% in February, another post recession low…

there was, however, a big  jump of 203,000 in those unemployed 27 weeks or longer, as their numbers rose from 3,646,000 in January to 3,849,000 in February; they now account for 37.0% of all the unemployed compared to 35.9% just last month…over 2 million of these workers have had their unemployment rations cut off already, and more stand to be cut off soon…the average length of time that the unemployed have been out of work rose to 37.1 weeks, up from 35.4 weeks in January; never before have emergency rations been withdrawn at this level of long term unemployment; as you can see on theFRED graph below, the mean duration of unemployment has remained above 35 weeks since January 2011, a level not previously seen in recent US history…(click to enlarge)

FRED Graph

and remember, these counts of the long term unemployed doesn’t even count those who did not happen to search for work during February, or in the reference month in the case of the months charted…among those of us thus not officially in the labor force and hence not counted, some 6,091,000 reported that they still want a job…of those, 2,303,000 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 February survey…775,000 of those were further characterized as “discouraged workers’, because they say that they haven’t looked for work because they believe there are no jobs available to them…  

January Incomes Rise 0.3% on Government Payments while Spending Rises 0.4%

another important release of this past week was on Personal Income and Outlays for January from the BEA (Bureau of Economic Analysis), which, in addition to giving us the details on our personal income and disposable personal income (after taxes), also reveals the details on our personal consumption expenditures (PCE), the major component of GDP,  personal savings and the national savings rate, as well as the price index for PCE, which is the inflation gauge the Fed targets and which is used in this report to adjust both personal income and consumption expenditures for inflation…like all data from the BEA, the dollar totals and the month over month dollar amount changes for each of these metrics are given at a seasonally adjusted annual rate, but the percentage change is expressed as a month over month change…with this report, income figures for July through September have been revised with new data from the Quarterly Census of Employment and Wages, another government program that will be curtailed due to budget cuts

In January, total personal income increased by a seasonally adjusted and annualized $43.9 billion to $14,356.1 billion, which was 0.3% higher than in greater than December, when personal income decreased at a $5.5 billion annual rate from November, which would be considered statistically unchanged…disposable personal income (DPI), which is income after taxes, increased at an annualized rate of $45.2 billion to $12,667.3 billion, which was a 0.4% increase over December, when DPI fell by an annualized $9.7 billion, a 0.1% drop…most of the January increase in income and DPI was not from what most would consider traditional sources;  $29.8 billion of the $43.9 billion increase in income was from increases in current transfer receipts from the government to individuals; $14.2 billion of those income increases came from the 1.5% cost of living increases seen in social security stipends and several other federal pension programs, another $19.2 billion was attributed to the increase in Medicaid benefits due to expanded coverage under Obamacare, and  $14.7 billion reflected increases in several refundable tax credits, including health insurance premium subsidies in the form of tax credits to those who enrolled in Obamacare exchanges…offsetting those increases in government transfer program incomes was the $16.7 billion hit to incomes of the long term unemployed due to the expiration of emergency unemployment rations, and a reversal of lump-sum social security benefit payments that had boosted December personal incomes at a $8.2 billion annual rate…

meanwhile, wages and salaries increased at an annual rate of $14.8 billion in January, after falling at a $9.1 billion clip in December… an increase in government wages and salaries added $0.6 billion to that, compared to the $1.3 billion government payrolls added in December…other income increases to employees in January were in the form of a $1.9 billion annualized increase in employer contributions for employee pension and insurance funds, and a $2.7 billion increase in employer’s contributions for government social insurance, largely due to the once a year increase in the social security taxable wage base…in addition, proprietors’ income increased $4.4 billion for the month, in contrast to a decrease of $6.1 billion in December, mostly because the $12.6 billion seasonally adjusted decline in farm owners income that was seen in both November and December stabilized, as they saw their incomes rise at a $0.6 billion annual rate in January…rental income to individuals also increased at a $5.6 billion rate, after an increase at a $2.4 billion rate in December, while personal interest and dividends decreased at a $6.7 billion rate in January…

on the spending side, seasonally adjusted personal consumption expenditures (PCE) rose at an annual rate of $48.1 billion to $11,712.1 billion, a 0.4% increase…that increase was driven by a $71.6 billion increase to $7,799.0 billion annualized in spending for services, mostly due to greater than normal utility outlays and increased health care spending…spending for goods, on the other hand, fell at $23.4 billion rate, not surprising considering the 0.4% drop in January retail sales….durable goods spending was off at a $4.4 billion clip to an annualized $1,253.5 billion, while outlays for non-durable goods fell at a $19.0 billion annual rate to $2,659.7 billion…

while personal consumption expenditures are more than two-thirds of GDP, before they’re included in that computation they must be adjusted for inflation using the PCE price indices, which are based on prices in 2009 equal to 100.0…in January, the PCE index for durable goods fell another 0.1% after falling every month last year, while the PCE price index for non-durable goods was unchanged, and the PCE price index for services rose 0.2%; as a result, real personal consumption expenditures rose by 0.3% in January, after falling 0.1% in December, and increased by 2.2% on a year over year basis…adjusting disposable personal income with the same PCE price index, we find that real inflation adjusted DPI rose by 0.3% in January and 2.7% from a year earlier, but was still down 2.5% from December 2012, when when accelerated bonuses and special dividends related to fiscal cliff tax avoidance schemes caused a one time spike in DPI

to compute how much of our national DPI was saved, we find that total personal outlays, which includes interest payments, and personal transfer payments in addition to PCE, increased by an annualized $49.7 billion to $12,127.3 billion in January, and we subtract that from our disposable personal income of $12,667.3 billion and find that total savings was $540.1 billion for the month….thus the personal saving rate, which is personal saving as a percentage of disposable personal income, was 4.3% in January, unchanged from December….our FRED graph below shows the monthly personal savings rate in green since January 2007, with the savings rate indicated as a percentage on the right margin of the graph…also shown is real disposable personal income in blue and real personal consumption expenditures in red over the same time frame, with the scale in billions of chained 2009 dollars for both on the left…note that although both appear to be rising at a decent clip, neither is adjusted for increases in the population…

FRED Graph

Foreclosure Starts at a Crisis Low as January Mortgage Delinquencies Fall a Seasonal 2.96%

new mortgage loan originations declined to their lowest since November of 2008and that the number of homeowners who remained eligible for either traditional and HARP-eligible borrower refinancing continued to decline, and while there are several charts in the Mortgage Monitor illustrating these trends, we’ll continue to to focus on mortgage delinquencies and foreclosure data from this report as we have in the past…as of January, BKFS reports that 1,175,500 home mortgages, or 2.35% of all mortgages outstanding, remained in the foreclosure process, which was down from 1,244,000, or 2.48% of all active loans in December and down from 3.41% in January of last year….these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and January’s was the lowest percentage of homes in foreclosure since 2008…in addition to homes in foreclosure, end of January data showed that 3,140,000 mortgage loans, or 6.27% of all mortgages, were at least one mortgage payment overdue but not in foreclosure, down from 3,244,000 homeowners, or 6.47% of those with a mortgage, who were more than 30 days behind in December…of those who were delinquent in January, 1,289,000 home owners were 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, with 8.82% of homeowners with a mortgage who were either late in paying or in foreclosure, 4.92% of them remained in serious trouble at the end January…

the first graph below, from page 25 of the Mortgage Monitor pdf, shows the percentage of active home loans that were delinquent monthly since 1995 in red and the percentage of mortgages that had been in the foreclosure process in green monthly over the same period…it’s pretty clear that the percentage of homes in foreclosure in green has been falling fairly steadily over the last year and a half and at 2.35% is now down 45% from the October 2011 peak of 4.29% of mortgages in the foreclosure process…but we’re still around 5 times the pre-crisis foreclosure inventory of 0.44% from December 2005 that’s highlighted on the graph, so we’re still a long way from normal …similarly, with delinquent mortgages shown in red at 6.27% of all mortgage outstanding in December, we’re down nearly 40% from the 10.57% of mortgages that were delinquent but not in foreclosure in January of 2010, but still nearly 50% above the December 2005 delinquency percentage of 4.27% noted on the graph…the seasonality of mortgage delinquencies is also apparent in the track of the red graph, wherein they usually begin to increase at the end of the summer and peak during the holidays, and then decline at the beginning of the year as homeowners catch up after holiday shopping…we wouldn’t be surprised if that decline in delinquencies is delayed this year as homeowners are confronted with larger than normal heating bills…

January LPS delinquent and foreclosure monthly

the next graph, from page 22 of the pdf, shows the number of new foreclosure starts monthly since January 2008 in blue, as indicated by the numbers on the left margin, and those new foreclosure starts as a percentage of seriously delinquent mortgages in red, with the percentage scale for those on the right….foreclosure starts, which have been trending lower, fell to 94,075 during January, which is the first time they’ve been below 100K since 2006…and since serious delinquencies remain elevated, foreclosure starts as a percentage of those homeowners who are more than 90 days late on their mortgage payments is now at an all time low…

January LPS foreclosure starts as a percentage of serious delinquent

the next combination bar graph, from page 20 of the Mortgage Monitor, gives us another perspective on these foreclosure starts…each bar represents the number of foreclosure starts that took place in each month since January 2008; the blue portions of each bar represents those home mortgages that were entering foreclosure for the first time, and the red portion of each bar represents those who are again being served with foreclosure notice after a previous cure, typically through a modification…the green line shows the percentage of foreclosure starts monthly that were repeat foreclosures, which we can see has been over 40% for the past year and a half…it’s fairly apparent that a significant number who have once escaped foreclosure, either through a modification or by catching up on payments, are still falling behind enough to have the process restarted on their homes…

January LPS new and repeat foreclosures

the next graph below, from page 21 of the pdf, gives us even more perspective on these foreclosure starts…each line shows the number of months that the homeowner was delinquent when the foreclosure was first initiated since 2005, with the number foreclosed in the given delinquency bracket on the left margin…in dark blue, we have the number of homes that were 6 months overdue when foreclosure was started, in orange we have the number 5 months delinquent when foreclosure was initiated, in teal blue, foreclosure starts in the 4 month bracket, while the 3 month delinquency bracket is in violet and the 2 month delinquents are in red…note that the drop in foreclosure starts primary is in the 2 and 3 month delinquent brackets…BKFS, in association with the servicers, blames this drop in foreclosures on new rules from the Consumer Financial Protection Bureau…

January LPS New foreclosurers by delinquency status

this next graph, from page 23 of the Mortgage Monitor, has two bars for each month since the beginning of 2008…the number of foreclosure starts monthly is shown by the blue bar, while the number of delinquent mortgages that deteriorated to serious, ie, first became more than 90 days late, is shown in red for each month…while the blue line on the graph is showing that the ratio of serious deterioration to foreclosure starts is at the highest level since 2010, BKFS is pulling a bit of a misdirection here, because the graph by no means implies an increase in more mortgages becoming delinquent…the number of seriously delinquent mortgages fell over most of the period and has remained in the same narrow range over the past  5 months, while the number of foreclosure starts has dropped monthly since October, raising the ratio…

January LPS serious deterioration ratio

in this next graph, from page 24 of the Mortgage Monitor, we see that completed sales as a percentage of those homes in foreclosure jumped in January, which according to BKFS, was simply a matter of return to a normal pace after a holiday moratorium…foreclosure sales is a industry euphemism for those mortgages that have proceeded through the last legal step in that month, which is typically an auction that transfers the home into the bank REO (real estate owned) portfolio (a glossary is on page 31)…the blue graph shows that the percentage of foreclosure sales completed on homes in judicial states, where the banks must establish their right to foreclose in court, rose 28.73% in January to 3.51% of those homes in foreclosure, while the red graph shows that the percentage of homes in non-judicial states, where foreclosures tend to proceed more rapidly, rose 12.65% to 7.7% of all homes in the foreclosure inventory of those states..

January LPS foreclosure sales vs inventroy

one more interesting graph below comes from page 7 of the Mortgage Monitor…the track of interest rates for a 30 year fixed rate mortgage, according to Freddie Mac is shown in black on the right scale, while the still climbing percentage of all cash home buyers, who obviously aren’t mortgagees, is shown in red…all cash buyers are in many cases rich foreign nationals or investors buying homes which they’ll subsequently rent…now approaching 50% of the homes sold, BKFS makes the point that these increasing cash purchases have been supporting overall property sales, which were up 8.4% for 2013, but just 3.7% over last January…

January LPS cash sales and interest rates

(the above is the commentary that accompanied my regular sunday morning links emailing, synopses which in turn were 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 taken from the aforementioned GGO posts, contact me…)