Jobless Claims / Philly Mfr’g / Existing Home Sales

Initial Jobless Claims totaled 361k, about in line with expectations and up from 344k last week. Unlike data seen post hurricane and seasonal issues with holiday shutdowns, the Labor Dept is saying today’s data point is clean. In order to smooth out the number from the issues stated, the 4 week average was 368k which is basically where it was in mid to late October before the storm. Continuing Claims were higher by 12k but Extended Benefits fell by 95k. Extended Benefits fully expire at yr end and to extend or not extend is part of the fiscal discussion going on. Bottom line, the 4 week average of initial claims is back near the lowest since the Spring of ’08 and points to a labor market that continues to improve but at a still lackluster pace. Certainly the fiscal negotiations in DC and the cloudy visibility that comes with it has impacted business decision making. Historically, initial claims hover closer to 300k during more robust economic expansions.

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After the weaker than expected NY mfr’g survey that was negative for a 5th straight month, the Philly region in Dec saw its mfr’g index unexpectedly go from -10.7 to +8.1 and vs +5.7 in Oct. New Orders jumped to +10.6 from -4.6 and Backlogs were up at +2.3 from -4.6. Shipments, which follow orders, rose 25 pts. Inventories were little changed at -11.5. Employment went positive for the 1st time since June at +3.6 from -6.8 and the Avg Workweek rose to +4.2 from -6.2. Prices Paid were little changed but Prices Received jumped to +15.4 from +6.3, the highest since April ’11. The 6 month outlook rose to 30.9 from 20. Bottom line, following the Nov declines post hurricane, and in contrast to the NY region, things bounced back in Dec. Because the survey though is a diffusion index, the improvement in the numbers show only the direction of the bounce rather than the degree. Because of the discrepancy between the two data points where both regions dealt with the storm, we’ll wait to see the other areas of the country in mfr’g culminating with the national ISM on Jan 2nd before we can draw any good conclusions on the state of mfr’g.

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Existing Home Sales in Nov, where contracts were likely signed in Aug/Sept, rose to 5.04mm annualized vs 4.76mm in Oct and expectations of 4.90mm. It’s at the best level since Nov ’09 when at that time sales jumped above 5mm as the first home buying tax credit was set to expire on Nov 30th before it was eventually renewed. Sales were up for both single family and condos/co-ops. Also of note, because the amount of homes for sale declined to the lowest level since Jan ’02, the inventory to sales ratio fell to 4.8 months from 5.3, the lowest since Oct ’05. The median home price at $180,600 was up 10.1% y/o/y and 2.1% sequentially helped out by a drop in the amount of distressed sales to 22% of the total from 24% in Oct. Even with historically low interest rates, all cash buyers rose to 30% from 29% in Oct and vs 28% in Nov ’11. Investors, making up most of the cash sales, were 19% of total purchases vs 20% in Oct. On the impact of the hurricane affecting the actual closings, the NAR said the Northeast did “show storm related disruptions but overall activity in the Northeast is up, offset by gains in unaffected areas.” Bottom line, with the homebuyer affordability index near multi decade highs combined with decent job creation at the same time renting has gotten more expensive all lead to a continued improvement in sales. This said, sales are still 30% below the bubble highs and are still where they were in 1998, both pointing to the degree of possible improvement ahead but also evidence of the damage that was done where historically the pace of recovery takes time.