While some observers were looking at the Friday after Thanksgiving -- historically “Black Friday” -- as an economic indicator, the meatier gauge will come next Friday with the November employment report -- and it’s not likely to be pretty!
Black Friday is important because it officially kicks off the holiday shopping season when retailers do the biggest chunk of full-year sales. It took on added importance this year because the shopping season was a week shorter than in 2007 when Thanksgiving was a week earlier.
The hoped-for Friday retail surge followed a week of digestive challenge, the easiest of which was Thursday’s Thanksgiving meal.
The tough, short week began disappointing housing news with a decline in existing home sales -- and more significantly, a decline in the median price of an existing single-family home. The price plunges were confirmed with the Case Shiller Home Price Index report, which showed record year-year price declines in the national index, the 10-city index and the 20 city index in September. After a couple of months in which details were stronger than the headlines in the Case Shiller index, the data this month turned decidedly negative with no cities registering a price gain in September. The declines partly reflect the generalized weakness in the housing market but also the effects of distressed sales -- foreclosures and short sales -- on home prices. While falling prices should encourage buyers by making homes more affordable, they will also discourage transactions because lenders will be reluctant to trust appraisals, and fear loans might quickly be “under water,” with borrowers owing more than homes are worth.
The home sales data -- existing sales Monday and new home sales Wednesday -- were consistent in taking price out of the home sales equation. In both reports, even as prices fell, sales did not increase from month earlier levels. Indeed, the median price of an existing single family home plunged to the lowest level since March 2004. The median price has dropped $31,800 -- almost 15% --since June and has fallen year-year for 14 straight months, down $23,400 -- 11.3% -- in the last year, the largest drop ever in both percentage and dollar terms.
One factor contributing to the decline in prices is the surge in foreclosure sales which, according to the National Association of Realtors, made up 45% of the October home sales. Excluding the sale of foreclosed homes would have made the bad report only worse. The nationwide price decline was driven by a plunge in the median price of an existing home in the West census region: down $23,700. Of the 13 states in the West census region, four are among the top 10 states in foreclosure rates; nine are among the top 20.
Home sales will continue to be a balancing act between buyer and seller. Compounding the sales stall are mortgage lenders who, according to the most recent Federal Reserve Senior Loan Officers Survey continue to tighten lending standards.
New home sales fell for the ninth time in the last year, as the sales pace dipped to the lowest level since January 1991 in the midst of the 1990-91 recession. In October, as sales were below 500,000 for the fourth time in the last five months, builders completed 774,000 new single family homes, the Census Bureau reported earlier this month.
As bad as the housing news was, consumer news was worse with a report that personal consumption spending fell 1% in October, the largest month-month percentage decline since September 2001. With consumption about 70% of GDP, the report was a weak start for the fourth quarter. The details were more discouraging than the headline as they showed weakness in spending on high-ticket durable goods. Durable spending -- typically a signal of consumer confidence -- fell as a share of total spending to the lowest level since this data series began in 1959. Consumers essentially remained on strike in October.
The income side of the report, though showing an increase, was also weak showing slow wage growth which makes the 10-month decline in payroll jobs more severe: fewer people are working to receive slowly increasing wages, adding pressure on household budgets.
There was some forward looking data too with Wednesday’s report on first-time and continuing unemployment insurance claims. Though initial claims for unemployment dipped slightly, first-time unemployment insurance claims exceeded 500,000 for the third straight week -- the longest such string since 1982. From mid-October to mid-November (the measurement points used in the monthly employment situation report) initial claims increased 64,000. When initial claims grew 63,000 from mid-July to mid-August, the unemployment rate jumped from 5.7% to 6.1%.
Continuing claims for unemployment insurance -- a surrogate for jobs -- also improved [that is, declined] slightly ,though the four-week moving average climbed. From mid-October to mid-November continuing claims jumped 241,000. Last month continuing claims increased 178,000 and payrolls contracted by 240,000.
The employment report next Friday will reflect the claims data and could show a drop in payroll jobs of as much as 300,000 which would be the largest decline since October 2001 following the terrorist attacks one month earlier. That report will cap what is expected to be another flurry of bad news.
Mark Lieberman is the senior economist for the Fox Business Network. Prior to joining FOX, he served as first vice president and manager of economic analysis and research at Washington Mutual in New York. Before that, he served as senior vice president at Dime Savings Bank of New York (which was later acquired by Washington Mutual), where he specialized in credit and risk management. He is a member of the Executive Committee of the New York Association for Business Economics. He has a degree in Economics from the Wharton School of the University of Pennsylvania.
Monday, December 1Construction Spending (Oct)September actual: DOWN 0.3%October consensus: DOWN 0.8%ISM Manufacturing Index (Nov)October actual: 38.9 DOWN 4.6November consensus: 37.6Federal Reserve Chairman Ben S. Bernankespeaks on Federal Reserve Policies in the Financial Crisis
at a meeting of the Greater Austin Chamber of Commerce in Austin TX.Tuesday, December 2Light Vehicle Sales (Nov)October actual: 10.5 million DOWN 2.0 millionNovember consensus: 9.9 millionPhiladelphia Fed President Charles Plosser speaks
on the economic outlookWednesday, December 3MBA Application Index (Week ended: November 28)Week Ended November 21: 404.4 UP 1.5%Four-week moving average: 416.3 DOWN 1.3%No November 28 consensusChallenger Layoffs (Nov)October actual: 112,884 UP 17,790No November consensusADP Employment Report (November / BLS Private sector)October actual: DOWN 157,000 / DOWN 263,000No November consensusISM Non-Manufacturing Survey (Nov)October actual: 44.4 DOWN 5.8November consensus: 43.0Productivity and Costs (3Q) RevisedOutput per hour2Q Final: UP 3.6%3Q Preliminary: UP 1.1%3Q Final consensus:Unit Labor Costs2Q Final: DOWN 0.1%3Q Preliminary: UP 3.6%No 3Q Final consensusBeige Book (for Dec 15-16 FOMC Meeting)Federal Reserve Governor Randall S. Kroszner speaks
on The Community Reinvestment Act
and the Recent Mortgage Crisis at the Policy Forum on Concentrated Poverty in Washington DCRichmond Fed President Jeffrey Lacker speaks on the economic outlookThursday, December 4Monster Employment Advertising Index (Nov)October Actual: 150 UP 10No November consensusUnemployment Insurance Claims (Week Ended November 29)November 22 Actual: 529,000 DOWN 14,000November 29 Consensus: 540,000Four-week moving average: 518,000 UP 11,000No November 29 consensusMBA Mortgage Delinquency Survey (3Q) [Tentative]All Residential Mortgages2Q actual: 6.4% (Unchanged from 1Q)No 3Q consensusPrime Mortgages2Q actual: 3.9% (UP 0.2)No 3Q consensusSubprime Mortgages2Q actual: 18.7% (DOWN 0.1)No 3Q consensus:Factory Orders (Oct)Total orders:September actual: DOWN 2.5%October consensus: DOWN 2.0%Ex-Transportation:September actual: DOWN 3.7%No October consensusFlow of Funds (3Q)Household Net Worth2Q actual: $55.99 trillion DOWN 0.8% Q-Q, DOWN 3.5% Y-YNo 3Q consensusFederal Reserve Chairman Ben S. Bernanke speaks
on Housing and Housing Finance at Presidents’ Conference
on Homeownership and Mortgage Initiative in Washington DCFederal Reserve Governor Randall S. Kroszner participates
in a panel discussion on Mortgage-Backed Securities
at the Presidents’ Conference on Homeownership and Mortgage Initiative
in Washington DCFriday, December 5Employment Situation (Nov)Change in payroll employmentOctober actual: DOWN 240,000November consensus: DOWN 268,000Unemployment RateOctober actual: 6.5% UP from 6.1% in SeptemberNovember consensus: 6.7%Average workweekOctober actual: 33.6 hours UNCHANGED from SeptemberNovember consensus: 33.6 hoursAverage hourly earningsOctober actual: $18.21 UP 4¢, 0.2% from SeptemberNovember consensus: $18.25 UP 4¢, 0.2%Consumer Credit (Oct)September actual: UP $6.9 billionOctober consensus: UP $5.5 billion
Home sales continue to slide
Lower gas prices don’t alleviate auto industry’s pain
Producer, Consumer Prices Ahead In Upcoming Week
