FED: Gov Waller: Layoffs A Bigger Concern Than Inflation In Tariff Uncertainty

Sales of new single-family homes were a lower-than-expected 676k in February (680k survey, all figures are seasonally-adjusted and annualized), but this was more than compensated for by an upward revision to January (664k, +7k from prelim). 

• This kept new home sales in roughly the same range they've been in since early 2023, which are roughly the same level as pre-pandemic - far outperforming existing home sales which remain around 20% below pre-pandemic levels.
• The current level of inventory however hit a post-2007 high of 500k, which at the current rate of sales equates to 8.9 months of supply - just below recent highs of just above 9.
• As such it suggests a relatively loose new home sales market vs early pandemic levels, and indeed the preceding decade. Though prices remain relatively elevated, at $414.5k median in February (-1.5% Y/Y)vs closer to $300k in late 2019, they're off the top ($460k in Oct 2022) and have basically moved sideways since early 2023.
• As today's final building permits (a leading indicator) showed, overall permits activity has softened a little since late 2024, but remains at a fairly normal level vs pre-pandemic. That's largely owing to continued single-family activity hovering near the 1m mark (of 1.459m overall), with multi-unit permits continuing to pull back.
• These are both mortgage rate related: high rates mean existing home sales are depressed and multi-unit (apartment) construction carries a higher cost of capital, whereas new home construction and sales have different dynamics (eg builder incentives). In short there is no change in the recent trend of unusually elevated new home sales vs existing, and there is unlikely to be until there is a major shift in the market, in particular higher unemployment and/or decisively lower mortgage rates.

• Conference Board consumer confidence came in lower than expected in March at 92.9 (cons 94.0) with its decline from February boosted by an upward revision to 100.1 (initial 98.3).
• Having set a recent peak of 112.8 in November when Trump won the presidential election (highest since Jul 2023 and before that late 2021), confidence has since declined in each month with 92.9 marking its lowest since early 2021.
• The present situation fell from 138.1 to 134.5 whilst expectations drove the overall decline, falling from 74.8 to 65.2.
• Against that backdrop, it was impressive that the labor differential actually inched higher in March. The net share of those reporting jobs plentiful vs hard to get increased to 17.9 after an upward revised 17.6 (initial 17.1) in Feb.
• The latest change came as jobs plentiful was unchanged at 33.6% whilst jobs hard to get dipped to 15.7%.
• It doesn't materially alter the readthrough to the unemployment rate when allowing for a wide error range, suggesting some very mild upside bias remains.

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