10-Year Treasury Yield
U.S. Treasury yields retreated slightly Tuesday after the 2-year rate hit its highest level since November 2007 in the previous session. The yield on the short-term 2-year Treasury note was little changed, last trading at 3.44% — close to its highest level in nearly 15 years. The yield on the benchmark 10-year Treasury note dropped 2 basis points to 3.082%. The yield on the 30-year Treasury bond was more than 1 basis point lower at 3.23%. Yields move inversely to prices, and a basis point is equal to 0.01%.
S&P Case-Shiller HPI
Home prices weakened in June 2022, but were still much higher than a year ago, says S&P Case Shiller. Home prices in June 2022 were 18% higher than during the same month last year, according to the S&P CoreLogic Case-Shiller Indices. That’s a weaker pace than in May 2022 of this year, which showed an 19.9% annual gain. Home prices in June were 18% higher than during the same month last year, according to the S&P CoreLogic Case-Shiller Indices. That’s a weaker pace than in May of this year, which showed an 19.9% annual gain. The 10-city composite rose 17.4%, down from 19.1% in the previous month. The 20-city composite was higher 18.6% year-over-year, down from 20.5% in May 2022. It’s important to bear in mind that deceleration and decline are two entirely different things, and that prices are still rising at a robust clip, While the drop may seem small, it is the largest single-month decline in prices since January 2011. It is also the second-worst July performance dating back to 1991, behind the 0.9% decline in July 2010, during the Great Recession. We’ve noted previously that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that continued as our June data were gathered. As the macroeconomic environment continues to be challenging, home prices may well continue to decelerate.
FHFA House Price Index
U.S. house prices rose 17.7 percent from the second quarter of 2021 to the second quarter of 2022 according to the Federal Housing Finance Agency House Price Index (FHFA HPI®). House prices were up 4.0 percent compared to the first quarter of 2022. FHFA’s seasonally adjusted monthly index for June was up 0.1 percent from May.Housing prices grew quickly through most of the second quarter of 2022, but a deceleration has appeared in the June monthly data. The pace of growth has subsided recently, which is consistent with other recent housing data.
Consumer Confidence
Lower gas prices push consumer confidence to highest level since May 2022. Lower gas prices helped consumer confidence bounce back in August, breaking a three-month stretch of worsening sentiment. However this improvement, while welcome, is tempered by ongoing worries that the US economy may be heading toward a recession. The Conference Board's monthly snapshot of consumer attitudes improved, rising to 103.2 from July's downwardly revised 95.3. The August number matches the level it reached in May and marks the first time since then that the headline index broke 100, the historical baseline metric. In the first half of the year, there were shocks to consumers from gas prices, the stock market and mortgage rates. The survey found that Americans are less pessimistic in both their current and future economic outlooks. The present situation index, which measures how people perceive current business and labor market conditions, jumped to 145.4 from 139.7 last month. The survey found that Americans are less pessimistic in both their current and future economic outlooks. The present situation index, which measures how people perceive current business and labor market conditions, jumped to 145.4 from 139.7 last month.
JOLTS
Job openings top 11.2 million in July, well above estimate and nearly double the available workers. Available job positions in July totaled 11.24 million for the month, well in excess of the 10.3 million FactSet estimate. That total also was nearly double the total pool of available workers, which stood at 5.67 million for the month. There were nearly 1 million more job openings than expected in July, an inflationary sign that the U.S. labor market is still extremely tight, the Bureau of Labor Statistics reported Tuesday. Available positions totaled 11.24 million for the month, well in excess of the 10.3 million FactSet estimate, according to the Job Openings and Labor Turnover Survey. The total was about 200,000 higher than the 11.04 million in June, a number revised up from the initially reported 10.7 million. Federal Reserve officials watch the JOLTS numbers closely for signs of slack in hiring. The July numbers reinforced that there is still a considerable shortage of workers for available positions, with openings outnumbering available workers by just shy of a 2-to-1 margin. That, in turn, is inflationary as employers are forced to offer higher compensation to lure workers at a time when prices are rising near their fastest pace in more than 40 years. Hiring declined during the month, falling to 6.38 million. Quits, a closely watched metric for worker confidence, also declined, down to 4.18 million as those leaving their jobs as a percentage of the workforce declined one-tenth of a percentage point to 2.7%, still relatively high by historical standards. Changing jobs has proven lucrative during the Covid era, with job switchers seeing an average 6.7% annual wage growth rate, well ahead of the 4.9% rate of those who have stayed in their positions, according to the Atlanta Fed. Total separations declined slightly in July to 5.93 million, as the rate edged lower to 3.9%. Layoffs and discharges were little changed at just under 1.4 million.
MBA Purchase Applications
Mortgage applications decreased 3.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 26, 2022. The Market Composite Index, a measure of mortgage loan application volume, decreased 3.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5 percent compared with the previous week. The Refinance Index decreased 8 percent from the previous week and was 83 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 23 percent lower than the same week one year ago.
ADP Employment Rpt
U.S. economy added 132,000 private-sector jobs in August 2022: ADP. Private payrolls grew by just 132,000 for the month, a deceleration from the 270,000 gain in July 2022, ADP said in its monthly payroll report. August’s numbers add to the inflation worries, as the firm reported annual pay up 7.6% for the month. Companies sharply slowed the pace of hiring in August amid growing fears of an economic slowdown, according to payroll processing company ADP. Private payrolls grew by just 132,000 for the month, a deceleration from the 270,000 gain in July, the firm said in its monthly payroll report. The Dow Jones estimate for the ADP count was 300,000. August payroll numbers are notoriously volatile. ADP’s release also comes at an uncertain time for a U.S. economy which saw negative growth for the first half of 2022 amid the highest inflation the nation has seen since the early 1980s. The more closely watched nonfarm payrolls report from the Bureau of Labor Statistics comes out Friday and is expected to show an increase of 318,000. The report had been on public hiatus through the latter part of the summer as the firm adjusted methodology and entered into a partnership with the Stanford Digital Economy Lab.
Jobless Claims
Initial filings for unemployment insurance fell to their lowest level since late June last week, a sign that the labor market is resilient amid a slowing economy. Claims totaled a seasonally adjusted 232,000 for the week ended Aug. 27, a decline of 5,000 from the previous period and the lowest since June 25, the Labor Department reported Thursday. Economists surveyed by Dow Jones had been looking for 245,000. Continuing claims increased to 1.44 million, up 26,000 from the previous level in data that runs a week behind the headline number. The numbers come a day ahead of the closely watched nonfarm payrolls report for August, though it is outside the survey week the Bureau of Labor Statistics uses to compile that count. Wall Street is expecting that report to show that job gains in August, a notoriously volatile month statistically, will total 318,000. Earlier this week, the BLS reported that job openings rose past 11.2 million and outnumber the available worker pool by just shy of 2 to 1. Data on Wednesday from payroll processing firm ADP indicated that private companies added just 132,000 jobs in August, but most economists thus far have held with their forecast for solid growth for the month.
Productivity and Costs
Unit labor costs increased 9.3% over the past four quarters, the highest level since the first quarter of 1982. Separate data the BLS released Thursday showed that the productivity decline in the second quarter wasn’t as sharp as initially reported. The revised productivity level showed a drop of 4.1%, an upward revision of half a percentage point from the initial reading. Economists had been expecting a reading of minus-4.3%. Unit labor costs, or the amount of compensation compared to output, rose 10.2% for the quarter, 0.4 percentage point less than the estimate. However, the four-quarter increase of 9.3% is the highest level since the first quarter of 1982.
PMI Mfg Final
July 2020. Barring the initial pandemic lockdowns months, this is the steepest downturn in US manufacturing seen since the global financial crisis in 2009. Although still elevated by historical standards, the survey’s inflation gauges are now at their lowest for one and a half years. Currency and Exchange Stock Chart for Finance and Economy Display. The August S&P Global US Manufacturing PMI came in at 51.5, down 0.7 from the final July figure and its lowest since July 2020. S&P Global US Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. US factory production was down for a second month running in August, with demand for goods having now fallen for three straight months amid the ongoing impact of soaring inflation, supply constraints, rising interest rates and growing economic uncertainty about the economic outlook.
ISM Mfg Index
U.S. manufacturing grew steadily in August as employment and new orders rebounded, while a further easing in price pressures strengthened expectations that inflation has likely peaked. The Institute for Supply Management (ISM) said on Thursday that its manufacturing PMI was at 52.8 last month, unchanged from July. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index falling to 52.0. Manufacturing is showing resilience despite a shift in spending back to services as well as an ebb in business confidence amid rapidly rising interest rates, which have increased the risk of a recession. The Federal Reserve has hiked its policy rate by 225 basis points since March to tame inflation. The ISM survey's forward-looking new orders sub-index rebounded to 51.3 last month from a reading of 48.0 in July. That ended two straight monthly decreases. Order backlogs rose, suggesting factories will continue humming for a while.
Construction Spending
The Commerce Department said on Thursday that construction spending fell 0.4% in July 2022 after decreasing 0.5% in June. July's decline was in line with economists' expectations. Construction spending increased 8.5% on a year-on-year basis in July. Construction spending dipped in July, as residential construction fell amid rising mortgage rates and declining home affordability. The U.S. Census Bureau said Thursday that total construction spending during July 2022 was estimated at a seasonally adjusted annual rate of $1.777 trillion, down 0.4% from the revised June estimate of $1.784 trillion. The July figure, however, was still 8.5% above the July 2021 estimate of $1.64 trillion. Through the first seven months of 2022, total construction spending was $1.01 triillion, 10.8% above the $915.2 billion for the same period in 2021, the report said. Spending on private construction was at a seasonally adjusted annual rate of $1.42 trillion, 0.8% below the revised June estimate of $1.44 trillion. Decline in single- and multifamily home construction helped offset increase in public construction.
Unemployment Rate
The August jobs report showed the U.S. unemployment rate rise across the board. Meanwhile, Black workers marked the only demographic to see their labor force participation fall. The unemployment rate rose 0.2 percentage point to 3.7% in August, according to data released Friday by the U.S. Bureau of Labor Statistics. Nonfarm payrolls came in at 315,000 and fell in line with estimates of 318,000. While all demographic groups saw the unemployment rate tick up slightly, it rose at a sharper pace for both Hispanic and Black workers to 4.5% and 6.4%, respectively, from 3.9% and 6% in July. However, Black workers marked the only group that saw labor force participation decline, while their employment-population ratio, which measures what percentage of the population holds a job, also fell.
August’s jobs report showed the economy add 315,000 payrolls last month and well below the shock 528,000 added in July, while the unemployment rate rose slightly to 3.7%. Dow Jones estimates anticipated 318,000 jobs added last month and an unchanged unemployment rate of 3.5%. The report could play a key role in the Federal Open Market Committee’s deliberations over its next monetary policy move. Earlier in the summer, the Fed backed away from forward guidance for future rate adjustments, focusing instead on making data-dependent decisions — potentially making key data points like nonfarm payrolls even more important. On Wednesday, jobs data from payroll processing company ADP showed that private payrolls increased by just 132,000 in August, a fall from the 268,000 rise in July.The unemployment rate rose to 3.7%, two-tenths of a percentage point higher than expectations.
Non Farm Payroll
Nonfarm payrolls rose solidly in August amid an otherwise slowing economy, while the unemployment rate ticked higher as more workers rejoined the labor force, the Bureau of Labor Statistics reported Friday. The economy added 315,000 jobs for the month, just below the Dow Jones estimate for 318,000. The unemployment rate rose to 3.7%, two-tenths of a percentage point higher than expectations. A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons rose to 7% from 6.7%. Wages continued to rise, though slightly less than expectations. Average hourly earnings increased 0.3% for the month and 5.2% from a year ago, both 0.1 percentage point below estimates. Professional and business services led payroll gains with 68,000, followed by health care with 48,000 and retail with 44,000. Leisure and hospitality, which had been a leading sector in the pandemic-era jobs recovery, rose by just 31,000 for the month after averaging 90,000 in the previous seven months of 2022. This is a unique period of time, where we have still a relatively tight labor market, where there is still job growth, but companies have started to announce hiring freezes, some companies have announced layoffs. This could very likely be a recession were you don’t see the kind of carnage in the labor market that you see in most recessions.
Homes selling less than Listing Price
One in five home sellers is now dropping their asking price as the housing market cools. Homes in August sat on the market an average five days longer than they did a year ago. The median listing price in August was 14% lower than August of 2021 and nearly 42% lower than August of 2019. The average home sold for less than its list price for the first time in over 17 months during the four-week period ended Aug. 28, according to Redfin. Homes are simply not selling at the breakneck pace they were six months ago, when strong demand butted up against tight supply, bidding wars were the norm, and a seller could often get a signed contract in under a weekend. Homes in August sat on the market an average five days longer than they did a year ago — the first annual increase in time on the market in over two years. The supply of homes for sale is also rising fast, up nearly 27% from a year ago, even as fewer sellers decide to list.
Pending sales in July, which represent signed contracts on existing homes and which are the most recent sales data available, were nearly 20% lower than July 2021, according to the National Association of Realtors. Mortgage rates have been rising since January, hitting a recent high in June and then falling back slightly in July and much of August. They are, however, rising again and are now nearly matching that June high.
Factory Orders
New orders for U.S.-manufactured goods unexpectedly fell in July, weighed down by a plunge in defense aircraft bookings, but the overall manufacturing industry remains resilient. The Commerce Department said on Friday that factory orders dropped 1.0% in July after increasing 1.8% in June. Economists polled by Reuters had forecast factory orders would increase 0.2%. Orders increased 13.4% on a year-on-year basis in July. The Institute for Supply Management said on Thursday manufacturing grew steadily in August as employment and new orders rebounded. July's factory orders were mixed. Orders for computers and electronic products increased 0.8%. Orders for electrical equipment, appliances and components fell 1.2%. There was also 0.7% drop in orders for transportation equipment, which reflected a 49.7% plunge in orders for defense aircraft and parts. Orders for machinery rose as did those for fabricated metal products.
Fixed Mortgage Rates
Mortgage rates continued to climb this week following comments by Federal Reserve Chairman Jerome Powell that the central bank is taking "forceful and rapid" steps to reduce inflation and slow the economy. The 30-year fixed-rate mortgage averaged 5.66% in the week ending September 1, up from 5.55% the week before, according to Freddie Mac. That is significantly higher than this time last year when it was 2.87%. After starting the year at 3.22%, mortgage rates rose sharply during the first half of the year, hitting a high of 5.81% in mid-June. But since then, concerns about the economy and the Federal Reserve's mission to combat inflation have made them more volatile. |
