Calculated Risk

Wednesday: ADP Employment, ISM non-Mfg

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:15 AM, The ADP Employment Report for May. This report is for private payrolls only (no government). The consensus is for 9,000,000 payroll jobs lost in May, up from 20,236,000 lost in April.

• At 10:00 AM, the ISM non-Manufacturing Index for May.   The consensus is for a reading of 44.0, up from 41.8.

June 2 COVID-19 Test Results

The US is now conducting around 400,000 tests per day, and that might be enough to allow test-and-trace in some areas. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US might need to double the number of tests per day again.

According to Dr. Jha of Harvard's Global Health Institute, the US might need more than 900,000 tests per day .

There were 400,963 test results reported over the last 24 hours.

COVID-19 Tests per Day Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 5.4% (red line).

For the status of contact tracing by state, check out testandtrace.com.

Energy expenditures as a percentage of PCE at All Time Low

Note: Back in early 2016, I noted that energy expenditures as a percentage of PCE had hit an all time low. Here is an update through the recently released April PCE report.

Below is a graph of expenditures on energy goods and services as a percent of total personal consumption expenditures through April 2020.

This is one of the measures that Professor Hamilton at Econbrowser looks at to evaluate any drag on GDP from energy prices.

Energy Expenditures as Percent of GDP
Click on graph for larger image.

Data source: BEA.

The huge spikes in energy prices during the oil crisis of 1973 and 1979 are obvious. As is the increase in energy prices during the 2001 through 2008 period.

In April 2020, energy expenditures as a percentage of PCE was at a record low of 3.54% of PCE.  This was below the previous low of 3.66% in February 2016.

This new record happened even with a 13.6% annual rate decrease in overall PCE in April (energy expenditures declined more in April than overall PCE).


Update: Real Estate Agent Boom and Bust

Way back in 2005, I posted a graph of the Real Estate Agent Boom. Here is another update to the graph.

The graph shows the number of real estate licensees in California.

The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).

The number of salesperson's licenses is off 26% from the peak, and is increasing again (up 11% from low). The number of salesperson's licenses has increased to December 2004 levels.

Brokers' licenses are off 14.7% from the peak and have fallen to November 2005 levels, and are still slowly declining.

California Real Estate Licensees Click on graph for larger image.

We are seeing a pickup in Real Estate licensees in California, although the number of Brokers is still slowly declining.

COVID-19 could lead to more people studying to get their license - and also more people quitting.  It is unclear.

Update: Framing Lumber Future Prices Up Year-over-year

Here is another monthly update on framing lumber prices.   Lumber prices declined sharply from the record highs in early 2018, and then increased until the COVID-19 crisis.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through May 22, 2020 (via NAHB), and 2) CME framing futures.

Lumcber PricesClick on graph for larger image in graph gallery.

Right now Random Lengths prices are up 27% from a year ago, and CME futures are up 14% year-over-year.

There is a seasonal pattern for lumber prices, and usually prices will increase in the Spring, and peak around May, and then bottom around October or November - although there is quite a bit of seasonal variability.

Prices fell sharply due to COVID-19, however prices have bounced back (Note: Construction is considered an essential activity is ongoing in many areas)

CoreLogic: House Prices up 5.4% Year-over-year in April

Notes: This CoreLogic House Price Index report is for April. The recent Case-Shiller index release was for March. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports April Home Prices Increased by 5.4% Year Over Year
Home prices nationwide, including distressed sales, increased year over year by 5.4% in April 2020 compared with April 2019 and increased month over month by 1.4% in April 2020 compared with March 2020 (revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results).

The CoreLogic HPI Forecast indicates that home prices will increase on a month-over-month basis by 0.3% from April 2020 to May 2020, and decline 1.3% on a year-over-year basic from April 2020 to April 2021. 2021 will mark the first year home prices are expected to decline in more than nine years.

“The very low inventory of homes for sale, coupled with homebuyers’ spur of record-low mortgage rates, will likely continue to support home price growth during the spring. If unemployment remains elevated in early 2021, then we can expect home prices to soften. Our forecast has home prices down in 12 months across 41 states.” - Dr. Frank Nothaft, Chief Economist for CoreLogic

“Tight supply and pent-up demand, particularly among millennials, provides optimism for a bounce-back in the housing market purchase activity and home prices over the medium term. The next 12 to 18 months are going to be very tough times for the broader economy. As employment and economic activity begin to pick up, as it will surely do, we expect housing to be a driver in a national recovery.” -Frank Martell, President and CEO of CoreLogic
emphasis added
CR Note: The overall impact on house prices will depend on the duration of the crisis.

Tuesday: Vehicle Sales, CoreLogic House Prices

From Matthew Graham at Mortgage News Daily: Mortgage Rates Start Higher But Finish Lower
Mortgage rates pulled off a repeat performance of last Friday's intraday drama. The average lender began the day in higher territory as bond markets were weaker in the morning. Bonds recovered nicely and mortgage lenders were more than willing to adjust rate sheets accordingly. After being in slightly weaker shape compared to Friday's latest levels, the average lender was noticeably better than Friday by the end of the day. [30YR FIXED - 3.04%]
emphasis added
Tuesday:
• All day, Light vehicle sales for May. The consensus is for light vehicle sales to be 10.8 million SAAR in May, up from 8.6 million in April (Seasonally Adjusted Annual Rate).

• 10:00 AM, Corelogic House Price index for April.

June 1 COVID-19 Test Results: Progress on Percent Positive

The US is now conducting around 400,000 tests per day, and that might be enough to allow test-and-trace in some areas. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US might need to double the number of tests per day again.

According to Dr. Jha of Harvard's Global Health Institute, the US might need more than 900,000 tests per day .

There were 403,791 test results reported over the last 24 hours.

COVID-19 Tests per Day Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 4.0% (red line).

For the status of contact tracing by state, check out testandtrace.com.

MBA Survey: "Share of Mortgage Loans in Forbearance Increases to 8.46%" of Portfolio Volume

Note: To put these numbers in perspective, the MBA notes "For the week of March 2, only 0.25% of all loans were in forbearance."

From the MBA: Share of Mortgage Loans in Forbearance Increases to 8.46%
The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance increased from 8.36% of servicers’ portfolio volume in the prior week to 8.46% as of May 24, 2020. According to MBA’s estimate, just over 4.2 million homeowners are now in forbearance plans.
...
“MBA’s survey continues to indicate that fewer homeowners are seeking forbearance as more states across the country reopen their economies and prospects begin to improve. The share of loans in forbearance increased by only 10 basis points over the week of May 24th,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Policy support for households, including expanded unemployment insurance benefits and other transfers, have helped many stay on their feet during this crisis. With 11.82 percent of Ginnie Mae loans currently in forbearance, FHA and VA borrowers are struggling the most.”

Added Fratantoni, “Forbearance requests and call volume declined relative to the prior week and led to further declines in wait times and abandonment rates.”
emphasis added
MBA Forbearance Survey Click on graph for larger image.

This graph shows the percent of portfolio in forbearance by investor type over time.  Most of the increase was in late March and early April.

The MBA notes: "Forbearance requests as a percent of servicing portfolio volume (#) dropped across all investor types for the sixth consecutive week relative to the prior week: from 0.28% to 0.20%."

Zillow Case-Shiller April Forecast: Still Showing Increasing YoY Price Gains

The Case-Shiller house price indexes for March were released last week. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Matthew Speakman at Zillow: March Case-Shiller Results and April Forecast: Housing Maintains its Strength
The strong buyer demand heading into this crisis has held fairly steady in the months since the outbreak, as record-low mortgage rates and inventory levels have maintained competition in the markets and placed upward pressure on home prices. So much remains uncertain – including the longer-term path for home prices – but for now, competition for homes is holding strong and keeping prices afloat.

Annual growth in April as reported by Case-Shiller is expected to accelerate in the 10- and 20-city indices, and stay steady in the national index. S&P Dow Jones Indices is expected to release data for the April S&P CoreLogic Case-Shiller Indices on Tuesday, June 30.
emphasis added
Zillow forecast for Case-ShillerThe Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 4.4% in April, the same as 4.4% in March.

The Zillow forecast is for the 20-City index to be up 4.2% YoY in April from 3.9% in March, and for the 10-City index to increase to 3.7% YoY compared to 3.4% YoY in March.

Construction Spending Decreased in April

From the Census Bureau reported that overall construction spending decreased in April:
Construction spending during April 2020 was estimated at a seasonally adjusted annual rate of $1,346.2 billion, 2.9 percent below the revised March estimate of $1,386.6 billion. The April figure is 3.0 percent above the April 2019 estimate of $1,307.1 billion.
emphasis added
Both private and public spending decreased:
Spending on private construction was at a seasonally adjusted annual rate of $1,004.1 billion, 3.0 percent below the revised March estimate of $1,035.6 billion. ...

n April, the estimated seasonally adjusted annual rate of public construction spending was $342.1 billion, 2.5 percent below the revised March estimate of $351.0 billion.
Construction Spending Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Residential spending is 21% below the previous peak.

Non-residential spending is 13% above the previous peak in January 2008 (nominal dollars).

Public construction spending is 5% above the previous peak in March 2009, and 30% above the austerity low in February 2014.

Year-over-year Construction SpendingThe second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 6.2%. Non-residential spending is up 1.1% year-over-year. Public spending is up  0.8% year-over-year.

This was above consensus expectations of a 6% decrease in spending, and construction spending for February and March were revised up.

Construction was considered an essential service in most areas and hasn't declined sharply like many other sectors.

ISM Manufacturing index Increased to 43.1 in May

The ISM manufacturing index indicated contraction in May. The PMI was at 43.1% in May, up from 41.5% in April. The employment index was at 32.1%, up from 27.5% last month, and the new orders index was at 31.8%, up from 27.1%.

From the Institute for Supply Management: May 2020 Manufacturing ISM® Report On Business®
Economic activity in the manufacturing sector contracted in May, and the overall economy returned to expansion after one month of contraction, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: “The May PMI® registered 43.1 percent, up 1.6 percentage points from the April reading of 41.5 percent. This figure indicates expansion in the overall economy after April’s contraction, which ended a period of 131 consecutive months of growth. The New Orders Index registered 31.8 percent, an increase of 4.7 percentage points from the April reading of 27.1 percent. The Production Index registered 33.2 percent, up 5.7 percentage points compared to the April reading of 27.5 percent. The Backlog of Orders Index registered 38.2 percent, an increase of 0.4 percentage point compared to the April reading of 37.8 percent. The Employment Index registered 32.1 percent, an increase of 4.6 percentage points from the April reading of 27.5 percent. The Supplier Deliveries Index registered 68 percent; though down 8 percentage points from the April figure of 76 percent, this high reading elevated the composite PMI®.
emphasis added
ISM PMIClick on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was close to expectations of 43.0%, but the readings for new orders and employment were even worse than the headline.

This suggests manufacturing contracted further in May.

Six High Frequency Indicators for the Eventual Recovery

These indicators are mostly for travel and entertainment - some of the sectors that will probably recover very slowly.

The TSA is providing daily travel numbers.

TSA Traveler Data Click on graph for larger image.

This data shows the daily total traveler throughput from the TSA for 2019 (Blue) and 2020 (Red).

On May 30th there were 268,867 travelers compared to 2,117,180 a year ago.

That is a decline of 87.3%. There has been some increase off the bottom, but it is pretty small compared to the normal level of travel.

The second graph shows the year-over-year change in diners as tabulated by OpenTable for the US and several selected cities.

Move Box OfficeThanks to OpenTable for providing this restaurant data:

This data is updated through May 30, 2020.

The US was off 100% YoY as of March 21st.

New York is still off 100%.

Some states - like Texas and Georgia - are only down 55% YoY.

Move Box OfficeThis data shows domestic box office for each week (red) and the maximum and minimum for the previous four years.  Data is from BoxOfficeMojo through May 28th.

Note that the data is noisy and depends on when blockbusters are released.

Movie ticket sales have picked up slightly, but have been essentially at zero for ten weeks.

Most  movie theaters are closed all across the country, and will probably reopen slowly (probably with limited seating at first).

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotel Occupancy RateThe red line is for 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

2020 was off to a solid start, however, COVID-19 has crushed hotel occupancy.

Notes: Y-axis doesn't start at zero to better show the seasonal change.

STR reported hotel occupancy was off 50.2% year-over-year last week.  Occupancy has increased slightly over the last few of weeks.

gasoline ConsumptionThis graph, based on weekly data from the U.S. Energy Information Administration (EIA), shows the year-over-year change in gasoline consumption.

At one point, gasoline consumption was off almost 50% YoY.

As of May 22nd, gasoline consumption was off about 23% YoY (about 77% of normal).

The final graph is from Apple mobility.

Apple Mobility DataThis data is through May 30th for the United States.

IMPORTANT: All data is relative to January 13, 2020. This data is NOT Seasonally Adjusted. People walk and drive more when the weather is nice, so this means walking in driving is back to winter levels!

According to the Apple data, walking and driving are above January levels, but public transit is still off 62% from the January level.

Monday: ISM Mfg, Construction Spending

Weekend:
Schedule for Week of May 31, 2020

Las Vegas Visitor Authority: "No Convention Attendance, Hotel Occupancy 1.7%" in April

May 2020: Unofficial Problem Bank list Increased to 65 Institutions

Monday:
• At 10:00 AM ET, ISM Manufacturing Index for May. The consensus is for the ISM to be at 43.0, up from 41.5 in April.

• Also at 10:00 AM, Construction Spending for April. The consensus is for a 6.0% decrease in construction spending.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are down 30 and DOW futures are down 228 (fair value).

Oil prices were up over the last week with WTI futures at $35.20 per barrel and Brent at $37.60 barrel.  A year ago, WTI was at $53, and Brent was at $67 - so WTI oil prices are about 33% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $1.98 per gallon. A year ago prices were at $2.82 per gallon, so gasoline prices are down $0.84 per gallon year-over-year.

May 31 COVID-19 Test Results

The US is now conducting around 400,000 tests per day, and that might be enough to allow test-and-trace in some areas. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US might need to double the number of tests per day again.

According to Dr. Jha of Harvard's Global Health Institute, the US might need more than 900,000 tests per day .

There were 441,448 test results reported over the last 24 hours.

COVID-19 Tests per Day Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 5.4% (red line).

For the status of contact tracing by state, check out testandtrace.com.

May 2020: Unofficial Problem Bank list Increased to 65 Institutions

The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public (just the number of banks and assets every quarter). Note: Bank CAMELS ratings are also not made public.

CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

DISCLAIMER: This is an unofficial list, the information is from public sources and while deemed to be reliable is not guaranteed. No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein and same is subject to errors and omissions. This is not intended as investment advice. Please contact CR with any errors.

Here is the unofficial problem bank list for May 2020.

Here are the monthly changes and a few comments from surferdude808:
Update on the Unofficial Problem Bank List for May 2020. During the month, the list increased by one to 65 banks after two removals and three additions. Aggregate assets were little changed at $48.5 billion from last month. A year ago, the list held 73 institutions with assets of $54.6 billion.

Actions were terminated against Sevier County Bank, Sevierville, TN ($332 million) and Nantahala Bank & Trust Company, Franklin, NC ($157 million). Florida Capital Bank, National Association, Jacksonville, FL ($496 million); Bank of Louisiana, New Orleans, LA ($78 million); and State Bank of Nauvoo, Nauvoo, IL ($33 million). The order against the Bank of Louisiana does have a certain entertainment value, should you have time on your hands you may want to give it a read. Normally by this time after a calendar quarter-end, banks would have filed updated financials and the FDIC would have provided an update on the Official Problem Bank list, but 30 days was added to the financial filing deadline because of the COVID-19 pandemic. Look for that update in next month’s comment.

May 30 COVID-19 Test Results

The US is now conducting around 400,000 tests per day, and that might be enough to allow test-and-trace in some areas. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US might need to double the number of tests per day again.

According to Dr. Jha of Harvard's Global Health Institute, the US might need more than 900,000 tests per day .

There were 395,928 test results reported over the last 24 hours.

COVID-19 Tests per Day Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 5.8% (red line).

Las Vegas Visitor Authority: "No Convention Attendance, Hotel Occupancy 1.7%" in April

From the Las Vegas Visitor Authority: April 2020 Las Vegas Visitor Statistics
With global travel restrictions and stay‐at‐home orders in place due to the COVID‐19 pandemic, Las Vegas visitation in April was a small fraction of normal levels (107k visitors), limited to est. stays with friends or relatives and/or those in non‐gaming properties that remained open for essential transient lodging.

No measurable convention attendance occurred during the month.

With the vast majority of the destination's hotel rooms temporarily unavailable to book, occupancy was 1.7% while the average day rates (ADR) among those properties that were open came in at approximately $60.
Here is the data from the Las Vegas Convention and Visitors Authority.

Las Vegas Click on graph for larger image.

The blue and red bars are monthly visitor traffic (left scale) for 2019 and 2020.   The dashed blue and orange lines are convention attendance (right scale). 

Convention traffic in April was down 100% compared to April 2019.

And visitor traffic was down 97% YoY.

The numbers for May will be very low too.

Schedule for Week of May 31, 2020

The key report scheduled for this week is the May employment report.

Other key reports include the May ISM Manufacturing and non-manufacturing surveys, May Vehicle Sales and the Trade Deficit for April.

----- Monday, June 1st -----
ISM PMI10:00 AM: ISM Manufacturing Index for May. The consensus is for the ISM to be at 43.0, up from 41.5 in April.

Here is a long term graph of the ISM manufacturing index.

The employment index was at 27.5% in April, and the new orders index was at 27.1%.

10:00 AM: Construction Spending for April. The consensus is for a 6.0% decrease in construction spending.

----- Tuesday, June 2nd -----
Vehicle SalesAll day: Light vehicle sales for May. The consensus is for light vehicle sales to be 10.8 million SAAR in May, up from 8.6 million in April (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the sales rate for last month (lowest in 50 years).

10:00 AM: Corelogic House Price index for April.

----- Wednesday, June 3rd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for May. This report is for private payrolls only (no government). The consensus is for 9,000,000 payroll jobs lost in May, up from 20,236,000 lost in April.

10:00 AM: the ISM non-Manufacturing Index for May.   The consensus is for a reading of 44.0, up from 41.8.

----- Thursday, June 4th -----
U.S. Trade Deficit 8:30 AM: Trade Balance report for April from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is the trade deficit to be $44.3 billion.  The U.S. trade deficit was at $44.4 Billion the previous month.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a 1.900 million initial claims, down from 2.123 million the previous week.

----- Friday, June 5th -----
Employment Recessions, Scariest Job Chart8:30 AM: Employment Report for May.   The consensus is for 8,250,000 jobs lost, and for the unemployment rate to increase to 19.7%.

There were 20,500,000 jobs lost in April, and the unemployment rate was at 14.7%.

This graph shows the job losses from the start of the employment recession, in percentage terms.

The current employment recession is by far the worst recession since WWII in percentage terms, and the worst in terms of the unemployment rate.

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