Initial jobless claims continue neutral trend, while continuing claims make a 3 year high

 

 - by New Deal democrat

This Christmas week initial claims declined -1,000 to 219,000. The four week average rose 1,000 to 226,500. With the typical one week delay, continuing claims 46,000 to 1.910 million, the highest number in over 3 years:

On the YoY% basis more important for forecasting purposes, initial claims were up 2.8%, and the four week average was up 7.7%  Continuing claims were up 5.1%:

Because of seasonality issues at this time of year, the four week average is much more important. The numbers over the past few months tell us that while there is no recession in the immediate future, there is some definite weakness creeping into the economy, and in particular the jobs aspect.

Finally, since the trend in initial claims in particular leads the unemployment rate by a number of months, here is what the YoY% change in each looks like:

Over the past few months, the trend in claims has been between 5%-10% higher. Since one year ago the unemployment rate was 3.7%, this suggests the unemployment rate should trend towards 3.9%-4.1% in the next several months (note we are calculating % changes in a % number). Since in thee past few months the unemployment rate has been 4.1%-4.3%, this suggests a rate that is unchanged or slightly lower month over month. Recall also that very high immigration may have distorted the unemployment rate higher this year compared with its normal trend.

This further suggests that the Sahm rule, which was triggered for several months earlier this autumn, will remain back down below its threshold, currently at th 4.2% unemployment rate level averaged over 3 months.

Merry Christmas and Happy Hanukkah to all who celebrate!

 

 - by New Deal democrat

Last night we celebrated with the traditional Christmas Eve pastime of viewing “Die Hard.”

Regular economic blogging will resume tomorrow with the release of weekly jobless claims.

Sales of new and existing homes increased in November; declining price trend continues for the former, but pressures increase in the latter

 

 - by New Deal democrat

Ive been looking at new and existing home sales more in tandem recently, as we are looking for a rebalancing of the market, with prices abating in existing home sales and inventory increasing, vs. new houses where prices have been slightly declining.

Additionally, as usual let me start with the important caveat that new home sales data are very noisy and heavily revised. And heavily revised they were, as October’s preliminary report of 610,000 annualized, which was the lowest rate since November of 2022, was revised higher by 17,000 to 627,000; and November rose another 37,000 from there to 664,000 annualized, still on the low side for the past two years:

The above graph shows single family permits as well, which tend to lag new home sales by a few months, but are much less noisy. New home sales are suggesting that permits will likely stagnate near current levels in the next few months.

The relatively low number of new home sales probably has much to do with the increase in mortgage rates close to 7%:

Inventory of new houses continued to increase to a 15+ year high. This is actually “good” news for the moment because as the below long term historical graph shows, recessions have in the past happened after not just sales decline, but the inventory of new homes for sale also decline:

Meanwhile the trend in prices continues to be slightly downward:

On a YoY basis, the median price of a new home is now -6.3% lower than it was one year ago.

Turning to xxisting home sales, they have been flat in the range of 3.85 -4.10 million annualized for almost two years. After breaking to the downside two months ago at a 10+ year record low of 3.83 million, November’s report increased to an eight month high at 4.15 million units annualized:

But the moderation in the YoY% change in prices from the past few months reversed somewhat as the median price for an existing home increased 4.7% YoY (below graph shows non-seasonally adjusted data):

On a YoY basis, in response to the longer term decline in inventory, existing home prices have risen consistently since 2014, and accelerated during the COVID shutdowns. After briefly turning negative YoY in early 2023, troughing at -3.0% in May, comparisons accelerated almost relentlessly to a YoY peak of 5.8% in May of this year. 

Here are the YoY% comparisons since then:

June. 4.1% 

July.  4.2% 

August. 3.1%

September  2.9% 

October 4.0%

November 4.7%

Finally, while inventory declined seasonally in November, it is the highest inventory for that month since 2019:

Putting the picture of new and existing home sales together, mortgage rates are putting a lid on sales of either (graph shows YoY new home sales and change in mortgage rates, the latter inverted so that lower rates show to the upside):

Prices of new homes have continued to follow sales:

And as shown above inventory in both new and existing homes have continued to increase. The big inventory of new house is presumably helping keep a lid on prices, while  the inventory of existing houses, which also continues to increase, is still doing so too slowly to reverse price pressures. New houses continue to be the relative bargains. And both continue to be pressured by near 7% mortgage rates.