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Thursday's Eco Wrap

Jobless Claims

 The Labor Department reported that initial jobless claims slid 37,000 to 404,000 last week (much better than the expectation of 420K).  This comes off of that 30,000 boost that followed the back-to-back holiday weeks, always tough to adjust for. 

 The four-week average fell 4,000 to 411,750.


 Continuing claims were mixed again as the standard issue of claims (covering the first 26 weeks), fell 26,000 to 3.861 million, while emergency level of claims (that extend benefits out to as long as 99 weeks) rose 29,125 to 8.538 million.  This follows negative revisions to the prior week’s reading as standard claims fell 240K (not the 250K initially reported) and emergency claims rose 141K (not the 128K reported last week).  Nevertheless, while total continuing claims remain sky high, the trend has been improving – particularly for the standard measure.


 On initial claims we find that the trend has not moved to the sub-400 level that the Christmas holiday week appeared to suggest, but the pop back to that 450K level didn’t hold either. It remains unclear whether the four-week average is going to move even closer to the 400K mark or back to that 425K level that was present prior to the Christmas/New Years weeks.  My feel is that the latter will occur, but neither level is all that different.  Both suggest that there is job growth, as we’ve seen, but not sufficient to bring the jobless rates lower in a reasonable timeframe. 

 Existing Home Sales

 The National Association of Realtors reported that existing home sales jumped in December just as the October and November pending home sales figures had predicted – pending sales are contract signings and the transaction is officially counted when the contract closes. 

 Sales of previously-owned homes rose 12.3% to 5.28 million seasonally-adjusted at an annual rate (SAAR) -- much better than the 4.87 million expected.  This is the best result in seven months as sales dipped to a 15-year low in July and failed to get back to the high-end of the four-million mark until November.   This move above five-million SAAR corresponds with the increase in mortgage rates, so the figure was likely boosted by buyers’ fear that the 30-year fixed rate would move back above 5%.

 Single-family sales rose 11.8% to 4.64 million SAAR, which is close to the 15-year average of 4.76 million. 


 The official number of homes available for sales fell a large 180,000 to 3.02 million, but add in even the low-end of the shadow inventory range of 4-7 million units and quite the glut exists.


 The months worth of supply has improved substantially over the past two reporting months too, down to 7.8 – the 25-year average is 6.9 months worth.   So long as sales remain at the level seen in December, then the improvement will continue.  But again, this doesn’t include the homes that still must hit the market as the foreclosure process has been delayed.


 The median price of an existing home (single-family) was essentially unchanged from November, up $10K to $165,000.


Bottom line, this is a good report but over the next couple of reports we’ll see if this latest upshot in sales is the beginning of a new trend or another one off. 

I heard someone make the comments that these sales resulted from the fear that the last hoorah of ultra-silly rates has run its course.  But that doesn’t make sense as the run up in rates didn’t occur until December, and these December sales were contracts signed in October and early November.  Where were rates then?  Well the 30-year fixed mortgage hit its all-time low in October and averaged 4.30% for the time period in which these contracts were signed.  The sales were a function of those ultra-low rates.  Over the next couple of home sales reports now we’ll have to deal with the reality that applications to purchase a home have slid 10% over the past six weeks.

 Philly Fed

 The Federal Reserve Bank of Philadelphia’s gauge of factory activity within the 3rd Fed district eased in January but remained at a strong level.   The measure dipped 1.6 points to 19.3 after November’s 20.8, which was revised meaningfully lower from the 24.3 initial print. 


 The breadth of the report was impressive as new orders, number of employees and the average workweek all either rose to hot levels or remained well in expansion mode.  Even unfilled orders improved substantially – most other regional manufacturing reports have shown order backlogs in contraction mode, which leaves little room for error if new orders falter. 

 The prices paid figure remains the trouble spot as it jumped to the highest reading since the commodity-price spike in the summer of 2008.  Prices received jumped too, following what we saw in the Empire report.  Firms, where they can, are certainly passing costs down stream.