PUBLISHED: Mar 10, 2023
The month of March means peak home buying season will be here before we know it. Before hitting the pavement and putting down offers, here’s what you need to know about the market.
As always, a lot of the analysis in this section is helped by the hard work of our friends at Econoday.1
According to the Bureau of Labor Statistics, there were 517,000 jobs added to nonfarm payrolls in January. The market seems incredibly hot because the consensus was for 185,000 jobs added.
The unemployment rate fell slightly, down 0.1% to 3.4%. Meanwhile, there were 443,000 jobs added to private payrolls. The other 74,000 were added in government.
Looking at other key data, the labor force participation rate was up slightly at 62.4%. The length of the average workweek increased 18 minutes to 34 hours, 42 minutes.
Taking a look at individual industries, 19,000 jobs were added in the closely watched manufacturing sector. Meanwhile, there were 128,000 jobs added in leisure and hospitality, 82,800 in professional and business services and 79,200 in health care and social assistance. Meanwhile, 30,100 jobs were added in retail.
It wasn’t all rosy. For example, telecommunications was down 1,400 jobs and a host of technology industries lost 1,000 jobs. In better news, hourly earnings were up 0.3% and have gone up 4.4% this year. This is enough that people are earning more while wage pressures are cooling. The market may still be too hot for the Federal Reserve’s liking.
The overall U.S. trade deficit in goods and services increased by $6.3 billion to $67.4 billion in December, the Census Bureau reported. Exports were down 2.2 billion at $250.2 billion, falling 0.9%. Meanwhile, imports were up 1.3% at $317.6 billion.
Digging a little deeper, exports of goods were down 1.7% as there was a $3.1 billion decrease in imports of industrial supplies. Consumer goods exports were down $1 billion as well. Services exports were up 0.9% as there was a $700 million increase in travel, transport and other business services.
On the imports side, goods imports were up 1.8%. There was a $4.1 billion increase in imports of consumer goods to go along with a $2.9 billion increase in imports for the automotive sector. Meanwhile, there was a $2.7 billion decrease in imports of industrial supplies and materials. Services imports were down 0.5% as there was a $600 million decline in travel and transport.
In January, prices were up 0.5% on a monthly basis and they’ve risen 6.4% on the year, said the Bureau of Labor Statistics. The projection had been for prices to drop in the month of January and that didn’t happen, so the Fed is probably concerned with this. When food and energy were taken out, prices were up 0.4% and they’ve gone up 5.6% for the year.
Looking at individual categories, shelter prices were up 0.7% for the month. Food cost rose 0.5%. Energy prices were up 2%. Auto insurance, recreation, clothing and household furnishings were all up for the month. There were declines in prices for used cars and trucks, medical care and airline tickets.
Sales in the retail sector were up 3% overall in January and 2.3% when vehicles were taken out. Further excluding gas, they were up 2.6% to begin the year in data collected by the Census Bureau.
Gas prices were flat for the month. Meanwhile, building material sales were up 0.3%. There was a 5.9% uptick in sales of motor vehicles and their parts. Miscellaneous store retailers head sales up 2.8% in another fairly high increase. There was a 4.4% upturn in sales of furniture and home furnishings. Finally, sales at nonstore retailers were up 1.3% in January.
Other huge contributors included a 17.5% sales increase at department stores. People must have been taking advantage of sales while they were returning their holiday gifts. There was a 7.2% rise in restaurant and bar sales. Finally, sales of electronics were up 3.5% in January.
Industrial production was flat in January, according to numbers tracked by the Federal Reserve. The manufacturing output was up 1%, while factories utilized 0.5% less space in January at 78.3%.
The big reason for the flat reading is that utility production was down 9.9% due to warmer January weather. Meanwhile, manufacturing of durable goods was up 0.8%, including a 0.5% increase from motor vehicles and parts. Mining was up 2%. There was also a 1.7% uptick in production of food, drink and tobacco to go along with a 2.2% rise in textile production and 3.7% increase in apparel.
Builder confidence in the housing market was up 7 points in February to come in at 42, said the National Association of Home Builders. Current single-family sales were up 6 points at 46 in February. Meanwhile, expected sales over the next 6 months were up 11 points at 48. Traffic of buyers going through homes was also up 6 points at 29.
There was a seasonally adjusted annual rate of 1.406 million housing completions in January, according to a report jointly released by the Census Bureau and Department of Housing and Urban Development (HUD). This was up 1% over December. Single-family completions were up 4.4% at 1.04 million. There were 349,000 multifamily completions.
Turning to starts, ground was broken on 1.309 million units on a seasonally adjusted annual basis, down 4.5% from December and falling 3.4% since the same time a year ago. Single-family starts fell 4.3% to 841,000. There were 457,000 multifamily units started.
Finally, permits for new construction were up 0.1% overall, but have fallen 27.3% since last January. These currently sit at an annual rate of 1.339 million. Authorizations of single-family homes were down 1.8% at 718,000. Meanwhile, there were 563,000 building authorizations in buildings with 5 units or more.
Released by the Bureau of Labor Statistics, this is the production counterpart of the CPI. It’s important to track this because the costs to producers are usually eventually passed down to the consumer. Producer prices were up 0.7% overall in January and have gone up 6% since the same time a year ago.
When food and energy were excluded, prices were up 0.5% and 5.4% over the last 12 months. When trade services (retail and wholesale) were taken out, prices were up 0.6% and up 4.5% on an annual basis.
Food prices were down 1% and they’ve risen 11.6% since last January. Energy prices were up 5% and are up 10.4% for the year. Inflation in the goods sector was up 1.2% in January and 7.5% over the course of the year. Services inflation was up 0.4% and has risen 5% annually. The good news is that it’s a decrease in the annual inflation rate for both.
Existing home sales were down 0.7% in January, settling at a rate of 4 million on a seasonally adjusted annual basis. This is 12 straight months of declines and slightly disappointing because pending home sales in December were higher. The National Association of REALTORS® reports sales have fallen 36.9% since last January.
Single-family existing homes were down 0.8% to 3.59 million units while condos and co-ops were unchanged at 410,000. The median price of an existing home was down 2% at 359,000, which is up just 1.3% compared to the same time a year ago.
Supply remains a huge issue and is unchanged at 2.9 months based on the current rate of sales in January.
In the second preliminary reading for the fourth quarter, the economy grew at a rate of 2.7%, according to the Bureau of Economic Analysis. This is a step back from the first estimate, which showed 2.9% growth. A big reason for the lower revision was a 1.4% consumer spending figure. Previously, it had been 2.1%.
Meanwhile, residential investment was down 25.9% last quarter, only made up for partially by a 3.3% increase in nonresidential investment. The good news is residential investment had a much bigger drop in the first estimate and nonresidential investment was quite a bit higher. There was also a 3.7% uptick in private domestic investment.
Government spending was up 3.6% for the quarter. On the downside, there was a larger than expected trade deficit of $854.1 billion. However, private inventory growth added 1.47 points to GDP.
Spending on durable goods was down 1.8% from the prior quarter. Meanwhile, nondurable spending was up 0.2%. Specifically, motor vehicle sales were down.
Overall personal incomes were up 0.6% in January, but spending was up 1.8%, so people aren’t saving that money. Prices were up 0.6% and they’ve been up 5.4% since last January. There was the same monthly increase in core categories, but prices in these areas are only up 4.7% for the year, as seen in data from the Bureau of Economic Analysis.
Looking at some major categories, spending on food was up 0.4% to go along with a 2% increase in energy spending. Since last year, consumers are paying 11.1% more for food and 9.6% more for energy. Overall goods spending was up 2.8%, while consumers spent 1.3% more on services. The good news is personal savings increased for the fourth consecutive month, settling at 4.7%.
Another joint effort of the Census Bureau and HUD, new home sales were up 7.2% to a seasonally adjusted annual rate of 670,000. This is 19.4% below the same time a year ago.
The median price of a new home was down 8.2% from December at $427,500. This is down 0.7% from last year at the same time.
There are reports that builders are focusing on smaller and less expensive properties, but this is still quite a bit higher than the price for an existing home. Perhaps that’s why supply is 7.9 months and things are so much tighter in the existing home sales market.
Overall durable goods orders were down 4.5% in January, according to the Census Bureau. When excluding transportation, these were up 0.7%. When looking at core capital goods specifically, orders rose 0.8%. The key to the downturn was a 13.3% drop in transportation orders. Aircraft numbers are always extremely volatile.
Looking at other categories, the report was pretty positive. Machinery orders were up 1.6%. Meanwhile, primary metals were up 0.5%, matching computer and electronic orders. There was a 0.6% increase in orders of electrical equipment, appliances and components.
For the second straight month, pending home sales rose. The number of existing homes under contract for sale was up 8.1%, at an index level of 82.5. This typically means good things for the next existing home sales report, last month notwithstanding.
We’ll see if the normal pattern continues when existing home sales for February are released.
The Case-Shiller index takes a look at home prices for all transactions across 20 major metropolitan cities on a rolling 3-month average. The data for December shows that prices were down 0.5% on a seasonally adjusted basis and 0.9% overall. They’ve gone up 4.6% on the year in this index, but that’s well off the prior pace.
Unlike the Case-Shiller index, this index from the Federal Housing Finance Agency only looks at home prices for transactions backed by conventional loans. It’s also just a standard month-to-month look.
Prices were down 0.1%, but they’ve still gone up 6.6% since last December.
Consumer confidence fell 3.1 points to 102.9 in February, according to the Conference Board. January numbers were also revised slightly lower. Current conditions are perceived to be better, as this index was up 1.7 points at 152.8. However, expectations for the next 6 months were down 6.3 points at 69.7.
There’s some uptick in expectations for personal income and the present labor market is considered good. But business conditions are considered somewhat less favorable and the overall report wasn’t very optimistic.
Manufacturing activity was slightly more positive in February up 0.3 points at 47.7. While a number under 50 means that the industry is shrinking, it’s less so than January. This is tracked by the Institute for Supply Management.
Although the report is extensive, one of the key pieces is that prices paid continue to be pressured. The Federal Reserve appears to have some work to do on inflation based on this. This is the third consecutive month of contraction in the manufacturing sector. However, new orders were up 4.5 percentage points at 47.
New export orders were up 0.5% at 49.4. Inventories were coming down at 47.4. Meanwhile, backlogs are up 1.7 points at 45.1. This probably means good things for future employment. However, in the short term, that section of the index fell back into contraction at 49.1 in February.
Mortgage rates have been up a bit for the last couple of weeks. The single most important thing you can remember is that no one can time the market. If you’re looking to purchase or refinance soon, lock your rate if you like what you see.
According to Freddie Mac, the average rate on a 30-year fixed mortgage was up 15 basis points last week to 6.65%. This is up from 3.76% last year.
Meanwhile, looking at a shorter-term 15-year fixed mortgage, the average rate was up 13 basis points to 5.89%. Last year at the same time, the rate was 3.01%.
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1Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2023 Econoday, Inc. All rights reserved.
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