the first jobs report for the new year picked up where the last one left off...with expectations averaging around 190,000 new jobs, the establishment survey for January was extrapolated to indicate seasonally adjusted job creation at 113,000 for the month, not even enough to keep up with the increase in the working age population...furthermore, amidst expectations that the disastrous payroll jobs number reported in December would see a sizable positive revision, the job increase for December was virtually unchanged at 75,000 vis-a-vis the originally reported 74,000......net job creation for November, however, was revised upward by 33,000 from 241,000 to 274,000, and job creation for the entire year was also revised upward by 369,000 as a result of the annual rebenchmarking of jobs for the period between April 2012 and March 2013 to state unemployment insurance records, and the updating of the seasonal adjustment program, and which also included a reclassification of 466,000 jobs from private households previously not counted as payroll jobs to the services for the elderly and disabled payroll jobs category...before seasonal adjustments, non-farm payrolls fell by 2,870,000 to 135,396,000, which is a fairly typical post holiday job loss, so the seasonal adjustment alone added nearly 3 million jobs to the reported figure...the magnitude of both the revisions and the seasonal adjustments suggest that the margin of error in this report is like larger than the normal +/- 90,000….the FRED graph below now incorporates all these January revisions and shows the seasonally adjusted payroll job change monthly since the beginning of 2008...it's fairly clear that job creation over the last two months was the weakest it has been since the same two months three years ago....
like December, there were suggestions in the media that January’s poor payroll job performance was weather related; however, the sectors showing the strongest job creation last month were those where we’d expect bad weather to have the most negative impact…construction contractors added a seasonally adjusted 48,000 jobs, with 13,200 of those in residential construction, 12,900 in non-residential specialty trades, and 10,100 in heavy and civil engineering...another 7,000 jobs were added in mining & logging, with 2,900 of those in support activities...in addition, 9,900 more jobs were added in transportation and warehousing, boosted by 10,100 additional couriers and messengers...the leisure and hospitality sector added 24,000 jobs, with 14,800 of those working in restaurants and bars...manufacturing industries added 21,000 jobs, with 7,000 in machinery manufacturing and 5,900 in transportation equipment factories, while 13,900 more were employed in wholesale trade, with 9,800 of those handling non-durable goods...the large professional and business services sector employed 36,000 more than a normal January, with 11,900 of those in employment services and nearly 5,000 each in accounting and bookkeeping, architectural and engineering, and computer systems design.....offsetting those job gains, sectors that saw seasonally adjusted job losses in January included government, where there were 29,000 less employed, with 12,000 less federal government workers as the post office cut 8,500, and 8,700 less employed by local school districts...and private educational services saw 7,700 less jobs as well, as the education and health services sector lost 6,000 jobs...meanwhile there were 12,900 less working in retail trade due to a cut of 22,300 workers at sporting goods, hobby, book, and music stores, while general merchandise stores added a seasonally adjusted 7,000...the actual reported job count in retail fell by 660,100, from 15,828,900 to 15,168,800, so what that's telling us is that the seasonal adjustment algorithm has determined that December to January job loss in retail was 12,900 more than normal for this time of year....
we're going to shorten the period shown on our regular FRED monthly payroll job changes bar graph below so as to better view the job changes that occurred over the past year...this graph below now 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 professional and business services, which could be anything from a programmer to a janitor, 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...(click to expand to two years)...January's jobs changes are represented by the bar cluster on the far right; with the large jump in construction jobs (red) fairly obvious as is the large drop in government employment (yellow)...also note the drop in retail jobs (dark green) follows a larger than normal increase in that sector in December, so January's seasonally adjusted drop may just reflect greater than normal seasonal employment in that sector...
in unadjusted data over the past year for the jobs shown in the graph above, employers have added 85,000 jobs in manufacturing, 180,000 jobs in construction, 316,700 in retail, 700,000 in professional and business services, 347,900 in food and drink service, 277,900 in health care, and 25,500 in private education, while 48,000 government jobs were eliminated...in sectors not shown on the graph above, 98,500 jobs were added in wholesale trade, 96,100 were added in transportation and warehousing, 37,000 jobs were added by mining, oil & gas & logging industries, 67,000 jobs were added in the financial sector and while jobs in information services and utilities were virtually unchanged...
the establishment survey also showed that the average workweek for all payroll employees was unchanged at 34.4 hours while the average workweek for production and nonsupervisory employees was also unchanged at 33.5 hours as December's as workweek was revised down by a tenth of an hour from the reported 33.7 hours....the manufacturing workweek fell 0.2 hours to to 40.7 hours, and factory overtime was cut by 0.1 hour to 3.4 hours, while the workweek in wholesale trade and for utility workers rose 0.1 hour....the average hourly pay for all workers was up 5 cents to $24.21, with seasonally adjusted average pay for retail workers up 12 cents to $16.77 an hour while utility workers saw their average hourly pay cut 6 cents to $35.40...excluding management, average pay for nonsupervisory workers was up 6 cents to $20.39, with pay for nonsupervisory leisure and hospitality workers, the lowest paid group to begin with, falling even further by 4 cents to $11.87 an hour...
According to the Household Survey, December’s Labor Force Dropouts Found Jobs in January
meanwhile, the employment metrics that we follow that are extrapolated from the monthly Census survey of 60,000 households improved somewhat from the 36 year lows some of them hit in December...the seasonally adjusted count of those ‘not in the labor force’ fell by 355,000 in January as apparently some of those who quit looking for work and hence weren't counted in December went out and tried again and found work in January...as a result, the labor force participation rate, which is shown in red on the adjacent FRED graph, rose by 0.2% to 63.0%, but still remained near historical lows...the number of employed rose by a seasonally adjusted 638,000 in January while the civilian non-institutional population rose by 170,000, so in like manner the employed to population ratio also rose by 0.2% to 58.8%, as shown in blue on that same graph...the seasonally adjusted count of the unemployed fell by 115,000 and as a result of that and the larger labor force, the unemployment rate fell from 6.7% in December to 6.6% in January...the actual extrapolated count of the employed, before seasonal adjustments, fell by 897,000 to 143,526,000 in January, in contrast to the unadjusted loss of 2,870,000 payroll jobs...hence, these figures go a long way to resolving the 2,966,000 job difference between the two surveys that had accumulated since July…
of the seasonally adjusted total of 145,224,000 of us who reported being employed in January, 27,540,000 reported they were working part time, or less than 34 hours in the reference week, an increase of 168,000 part time workers from December...however, the count of the involuntarily part time, or those who'd rather work full time, fell by 514,000 and thus the alternate measure of unemployment known as U-6 fell 0.4% to 12.7% in January, from 13.1% in December, which was the lowest reading for that metric since November of 2008…
the number of us unemployed for more than 27 weeks fell by 232,000 to 3,646,000, but that official number only counts those who looked for work during the month...since unemployment rations were cut off at the end of December, it's likely many of the long term jobless lost the incentive to look for work during the coldest month in recent history...among those thus not officially in the labor force and hence not counted, some 6,508,000 reported that they still want a job, up from 5,932,000 in December; of those, 2,592,000 were categorized as "marginally attached to the labor force" because they've looked for work sometime during the last year, but not during the 30 day period covered by the January survey...837,000 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, which is up from the 804,000 workers considered discouraged last January...
CBO Says We’ll Quit our Jobs to Collect Obamacare Subsidies
there was one other widely misinterpreted report out this week that we ought to explain before we leave the topic of employment...on Tuesday, the Congressional Budget Office (CBO) published their annual ten year tome, ‘The Budget and Economic Outlook: 2014 to 2024’, a dense, 182 page pdf that attempts to forecast our economy over the next ten years, and which includes a section titled 'Labor Market Effects of the Affordable Care Act - Updated Estimates"...the CBO is billed as "non-partisan", but the director, Doug Elmendorf, has long had a bone to pick with welfare programs, and CBO had earlier forecast that giving poorer workers means-tested subsidies for health care would cause some workers to work less hours....in this update they were more specific, as summarized by the following "CBO estimates that the ACA [Affordable Care Act] will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive.", although the entire section was much more nuanced...almost immediately, this small appendix to the budget forecast was widely covered with headlines such as Obamacare will push 2 million workers out of labor market; Obamacare Will Cost 2 Million Full-Time Equivalent Jobs by 2017, Obamacare To Crush Workforce By 2.5 Million Workers In Next Decade, spinning the ACA as a job killer....but that's not what the section alleges; they're saying workers will voluntarily quit their extra jobs or work less hours to keep their ACA subsidies...even if this were true, just because a percentage of workers decide to work less hours does not mean that total jobs or hours worked in the aggregate will fall; if someone quits their extra job, whoever they had been working for will just hire someone else…the only way ACA could cause a reduction in jobs would be if there were a labor shortage and companies couldnt find anyone willing to work, which would ultimately result in higher wages until such time as their labor requirements were met...but the entire premise of this section is suspect; we dont have evidence that the poorest among us choose to remain poor and refuse to take a job so they could remain eligible for Medicaid; why should we believe that this would happen with the ACA?...that the equivalent of 2.3 million workers will walk off their jobs in order to remain poor enough to have their health insurance subsided strikes us as pure poppycock...
December Trade Deficit Jumps 12% on Lower Exports
the other important economic release of this past week was the report on our International Trade in Goods and Services for December from the Commerce Department, which showed our seasonally adjusted trade deficit jumped $4.1 billion to $38.7 billion, up nearly 12% from the four year low of $34.6 billion posted in November...exports decreased while imports increased; our seasonally adjusted exports of goods decreased $4.3 billion to $132.8 billion while our exports of services increased $0.8 billion to $58.5 billion, as our imports of goods increased $0.3 billion to $191.6 billion, while our imports of services increased $0.3 billion to $38.4 billion....our FRED bar graph below shows the monthly change in exports in blue and the monthly change in imports in red over the past two years, with the net of them resulting in the change in the balance of trade, which is shown in brown...each group of three bars represents one month’s of trade data, with positive changes above the ‘0’ line and negative changes below it; note that when exports (blue) increase in a given month, they add to the trade balance change in brown; and when exports decrease, they subtract from the brown trade balance bar...however, the action of imports on the balance is just the reverse; when imports increase in a given month, they subtract from the brown trade balance for the month, but when imports decrease, the balance of trade rises as a result…since December's trade balance was worse than expected (recall the BEA assumed imports would decrease in December) we would expect a downward revision to 4th quarter GDP as a result...Barclay's has already estimated a 0.4% hit to 4th quarter GDP, down to 2.8%, from the originally reported annual rate of 3.2%...
all of the end use categories of our exports saw decreases on a seasonally adjusted basis in December except for food, feed and beverages, exports of which were up $364 million on a $386 million increase in soybean exports...we exported $1,127 less in industrial supplies and materials as we exported $250 million less finished metal shapes, $250 million less chemicals not classified separately, and $196 million less plastic materials, while our exports of petroleum products other than fuel oil rose $337 million; we exported $1,067 less capital goods as our civilian aircraft exports fell $609 million, and we also exported $769 million less automotive vehicles, parts, and engines...in addition, our December exports of consumer products fell $708 million on $234 million less exports of gem diamonds and $149 million less exports of pharmaceuticals, and our exports of goods not otherwise classified fell $894 million as well...
meanwhile, the seasonal adjusted increase in imports of goods in December included a $653 million increase in imports of consumers goods, the lions share of which was a $491 million increase in imports of artwork and antiques; we also saw our imports of industrial supplies and materials increase by $527 million as a $217 million increase in imports of crude oil and a $285 million increase in imports of other petroleum products offset a decrease of $229 million in imports of nuclear fuel materials, while our imports of "other goods" increased by $316 million...meanwhile, our imports of automotive vehicles, parts, and engines decreased by $914 million to $26,253 million and our imports of capital goods decreased by $343 million to $47,445 million on $399 less computers, $177 million less industrial machines and $168 million less computer accessories while our imports of civilian aircraft increased by $573 million...in addition, our net imports of foods, feeds, and beverages decreased by $61 million as $80 million more imports of cocoa beans and $66 million greater imports of fish and shellfish were offset by broad declines in most other food imports, including a $74 million decrease in imports of food oils and oil seeds…
2013 Trade Deficit Shrinks Nearly 12% on Lower Oil Imports
for the entire year, our goods and services deficit fell by $63.1 billion from the 2012 deficit of $534.7 billion, as exports of $2,272.3 billion and imports of $2,743.9 billion resulted in a goods and services deficit of $471.5 billion for 2013; the trade deficit subtracted 2.8% from GDP in 2013, down from the 3.3% hit to GDP in 2012...exports that saw the largest annual increases in 2013 included civilian aircraft, which increased by $9,023 million to $54,398 million, automotive vehicles, parts, and engines, of which our exports increased by $5,969 million to $152,095 million; fuel oil, in which exports increased by $4,463 million to $64,350 million, other petroleum products, where our exports increased by $4,158 million to $60,949 million; gem diamonds, exports of which increased by $2,796 million to $20,909 million, industrial machines, exports of which increased by $2,635 million to $48,803 million, and wheat exports, which increased $2,351 million to $10,687 million...major exports which decreased in 2013 included non-monetary gold, which fell by $3,254 million to $33,345 million, soybeans, where our exports fell $3,060 million to $22,933 million, metallurgical grade coal, exports of which fell $2,954 million to $7,701 million, excavating machinery, exports of which fell $2,874 million to $14,714 million, and non-monetary gold, of which our exports fell $3,254 million to $33,345 million...
imports which saw large increases in 2013 included automotive vehicles, parts, and engines, which saw an $11,000 million import value increase to $308,813 million, cell phones and similar household goods, of which our imports increased $8,923 million to $90,207 million, civilian aircraft, imports of which increased by $3,464 million to $13,753 million, gem diamonds, imports of which rose $3,198 million to $23,394 million, electric apparatus, of which our imports rose $2,870 million to $45,718 million, and textiles and apparel not including those of wool or cotton, for which our imports increased by $2,505 million to $41.881 million... decreases of imports in 2013 were led by the $40,334 million decrease in imports of crude oil to $272,466 million but still our largest import item by far...we also imported $18,139 million in iron and steel mill products, $2,734 million less than in 2012, and $2,191 million less liquefied petroleum gases, imports of which fell to $4,160 million, while imports of televisions and video equipment fell $4,079 million to $28,764 million, imports of pharmaceuticals fell $2,901 million to $84,352 million, imports of oilfield and drilling equipment fell $2,692 million to $9,006 million. and imports of excavating machinery fell $2,326 million to $10,381 million...
we’ll again use the trade deficit graph from Bill McBride to illustrate the significance of our oil imports in the trade deficit equation; with the top line as zero and the rest of the graph negative, the black graph line tracks our deficit in petroleum trade only in billions of dollars since 1998; over the same time span, the red graph shows our trade deficit for everything else except oil; add those two together, we get our total trade deficit, which is graphed in blue...it’s clear that since the beginning of the recession until just recently, our deficit in oil products has been greater than our deficit in all other goods and services combined…despite the fact that oil prices averaged $91.34 in December, down from $94.69 in November, we imported somewhat more crude and other petroleum products than we exported, so our petroleum deficit increased in December, contributing to the overall increase…
Foreclosure Starts Fall to 5½ Year Low as Time in Foreclosure Lengthens to 920 Days
also released this week was the Mortgage Monitor for December (pdf) from Black Knight Financial Services (BKFS), which is the spinoff of the LPS Data & Analytics division...according to BKFS, 1,244,000 home loans, or 2.48% of all active loans, were in the foreclosure process in December, down from 1,256,000, or 2.50% of all homes with mortgages that were in foreclosure in November, and down from 3.44% in foreclosure in December of last year; new foreclosure starts at 104,759 were also down slightly from November's 104,939 and the least foreclosure starts in any month since April 2007...as is usually the case in December, there was a slight increase in those who were behind on their mortgage payments, as the mortgage delinquency rate, or the percentage of home loans 30 or more days past due but not in foreclosure, increased to 6.47% from 6.45% in November, but was still down from the year ago delinquency rate of 7.17%...of those delinquent in December, 1,964,000 home loans were 30 or more days but less than 90 days past due, and 1,280,000 mortgages were seriously delinquent, or more than 90 days past due, a slight decrease from the 1,283,000 seriously delinquent in May...most of the increase in delinquencies were in the 60 to 90 days late bracket, which at 551,473 was up from 534,167 in November and at an eleven month high...so it appears a number of the newly delinquent mortgages we saw in November extended their delinquency into December...
the first graph below, from page 5 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 that same time period…it’s evident from this view that the percentage of homes in foreclosure in green has been falling fairly steadily over the last year and a half and at 2.48% is now down 42% from the October 2011 peak of 4.29% of mortgages in the foreclosure process…however, that’s still 4.6 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 6.47% of all mortgage outstanding in December, we’re down significantly from the 10.57% of mortgages that were delinquent but not in foreclosure in January of 2010, but still more than 50% above the December 2005 delinquency percentage of 4.27% noted on the graph...
the next picture, from page 8 of the Mortgage Monitor, is a map with breakdown of the total percentage of non-current mortgages by state, including both all those that are behind on their mortgage payments as well as those that are in the foreclosure process…the darkest red indicates states where the total percentage of delinquent mortgages is above 12.4%, which includes Mississippi at 15.5%, New Jersey at 14.5%, and Florida at 14.3% of all their mortgages not current…lighter red indicates states where between 9.2% to 12.1% of mortgages are late on their payments…for the states shaded light green, the delinquency rates range from 6.0% for Nebraska to 8.7% for Washington, while the darkest green states all have total mortgage delinquency rates lower than 5.5%, with North Dakota with 2.9% of mortgages in arrears, being the lowest…low delinquencies don't necessarily indicate housing stability, however; as we’ve noted previously, some of those housing bust states with low current delinquency rates, such as Arizona and California, have just had rapid foreclosure processes, such that those homeowners who fell behind on their mortgages were quickly foreclosed on and already had their homes seized...
the next graph, below, from page 6 of the pdf, shows the number of foreclosure starts in blue and foreclosure sales in red monthly since the beginning of 2005; foreclosure starts are indicated for the month that the loan servicer refers a delinquent mortgage to its attorneys for foreclosure, and are usually initiated with an official notice of delinquency or foreclosure, depending on state regulations...a foreclosure sale is the legal auction wherein the bank buys the title after the foreclosure completes; after a foreclosure sale, the home moves into the bank's property inventory, also known as REO (Real Estate Owned - definitions are on page 28 of the pdf)...we can see that foreclosure starts peaked at 316,000 in March 2009 and remained elevated until recently, with starts in both November and December in the 105,000 range, while completed foreclosures peaked at 124,000 in September 2010 and dropped rapidly in the light of the foreclosure fraud scandals…what the two graphs together show is that for the duration of the mortgage crisis, foreclosure starts have been far in excess of foreclosures completed, which results in that large ongoing foreclosure inventory of homes and homeowners stuck in the foreclosure process, which as we noted earlier, is more than 4 times the normal level…
the bar graph below shows the “pipeline ratio” for selected states; as the subheading indicates, the pipeline ratio is computed by adding those homes that are seriously delinquent to those already in foreclosure and dividing that by the average number of completed foreclosures per month over the previous 6 months; that results in the average number of months a problem loan would be in the "foreclosure pipeline" at the current pace before the foreclosure process on all seriously delinquent homes is completed…the graph is further divided into those states shown in red where the foreclosure process is judicial, where a court proceeding is necessary to complete a foreclosure, and non-judicial states, shown in blue, where such a proceeding isn't necessary for the banks to have the the home seized…thus, the pipeline ratio at an average of 51 months is higher in those states where the bank must prove their right to take the home than the non-judicial average pipeline ratio of 41 months…New York State continues to have the longest pipeline ratio at 272 months, which means that at the current pace of foreclosures in New York, it would take nearly 23 years for all seriously delinquent homes in the state to be foreclosed on....and New Jersey, with a seriously delinquent backlog that would take over 16 years to clear, is also far behind on processing foreclosures…as we can see in the printed call out of the largest changes over the past 6 months, the pipeline ratio is being reduced in most states, save California where it has risen to 61 months…in mid 2011, in the midst of the robosigning scandal, the pipeline ratio had risen to an average of 118 months, or nearly ten years, for all states with a judicial process...
for a comprehensive review of how the mortgage crisis has played out from the beginning, we’ll include below a table showing total active home mortgage loans, the number of them delinquent and in the foreclosure process, the number of foreclosure starts, and the average days delinquent for those in the “foreclosure pipeline”, going back to January 2008 with monthly data since January 2012, which comes from page 25 of the Mortgage Monitor…after the columns for the date and the active loan count for that month, the the next three columns show the total loan counts of delinquent mortgages by number of days delinquent, the number of mortgages in foreclosure (FC) and the foreclosure starts for each January since 2008 and each month since January 2012...in the last two columns, we see the average length of time those who’ve been more than 90 days delinquent have remained in that status, and then the average number of days those in foreclosure have been stuck in that process because of the long pipelines…we can see that for those 90 days delinquent, the length of time remaining in that status without foreclosure has fallen to 490 days, while the length of time for those who’ve been in foreclosure without a foreclosure sales has lengthened to a record 920 days…this suggests that the reduced level of new foreclosure starts are being initiated only against those who’ve been delinquent the longest…
(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)