Sunday, February 07, 2010

Weekly Summary and a Look Ahead

by Bill McBride on 2/07/2010 11:59:00 AM

People will be watching the so called PIGS (Portugal, Ireland, Greece and Spain) this week for any updates on a possible sovereign debt crisis. And don't forget Eastern Europe and the Baltic states too, especially Latvia.

The Economist has a preview on Greece:

TAX-COLLECTORS and customs officers in Greece have already walked out in protest against planned austerity measures by the government. On Wednesday February 10th it will be the turn of civil servants, doctors and other state workers. A much bigger strike is expected later in the month and past experience suggests that protests could turn nasty. Yet unless Greece gets a grip on its public finances, the government will struggle to finance its loans. Similar anxieties are emerging elsewhere in Europe.
On Tuesday, the NFIB Small Business Optimism for January will be released, the Job Openings and Labor Turnover Survey (JOLTS) survey for December, and Wholesale Inventories report for December.

On Wednesday, the Census Bureau will release the December Trade Balance report (consensus is for a trade deficit of about $36 billion, the same as last month) and the MBA will release the weekly Mortgage Applications report. Also Wednesday will be a busy day for Fed Speak.

On Thursday, the Retail Sales report for January will be released. Consensus is for a 0.4% increase (Bloomberg consensus 0.3%), and 0.6% ex-autos. The weekly initial unemployment claims report will be closely watched, and the consensus is for a decline to under 460,000. Business inventories will also be released on Thursday.

Consumer sentiment will be released on Friday, and the West Coast port traffic will probably also be released this week - and of course more bank failures.

And a summary of last week ...

  • Employment Report: 20K Jobs Lost, 9.7% Unemployment Rate

    Employment Measures and Recessions Click on graph for larger image.

    This graph shows the unemployment rate and the year over year change in employment vs. recessions.

    Nonfarm payrolls decreased by 20,000 in January and the unemployment rate decreased to 9.7%. The economy has lost almost 4.0 million jobs over the last year, and 8.42 million jobs since the beginning of the current employment recession.

    Percent Job Losses During Recessions The second graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).

    For the current employment recession, employment peaked in December 2007, and this is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only the early '80s recession with a peak of 10.8 percent was worse).

    Employment Population RatioThis graph shows the employment-population ratio; this is the ratio of employed Americans to the adult population.

    The Employment-Population ratio ticked up slightly to 58.4% in January, after plunging since the start of the recession. This is about the same level as in 1983.

    Note: the above graph doesn't start at zero to better show the change.

    Unemployed Over 26 Weeks The fourth graph shows the number of workers unemployed for 27 weeks or more (blue). The red line is the same data as a percent of the civilian workforce.

    According to the BLS, there are a record 6.31 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 4.1% of the civilian workforce. (note: records started in 1948)

    The number of long term unemployed, and the dramatic plunge in Employment-Population ratio, are two of the key stories of this recession.

  • U.S. Light Vehicle Sales 10.8 Million SAAR in January

    Vehicle Sales This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for January (red, light vehicle sales of 10.78 million SAAR from AutoData Corp).

    This is the lowest level since October and below the levels of last July. Obviously sales were boosted significantly by the "Cash-for-clunkers" program in August and some in July.

    The current level of sales are still very low, and are still below the lowest point for the '90/'91 recession (even with a larger population).

  • Homeownership Rate Declines to Early 2000 Level

    Homeownership Rate The homeownership rate declined to 67.2% in Q4 and is now at the levels of early 2000.

    Note: graph starts at 60% to better show the change.

    The Census report also showed the homeowner vacancy rate increase to 2.7%, and the rental vacancy rate was at 10.7% (see graphs here).

    This data suggests there are about 1.8 million excess vacant housing units in the U.S. (above the normal levels). For analysis, see: Housing Stock and Flow

  • Construction Spending Declines in December

    Construction Spending Residential construction spending decreased in December, and nonresidential spending increased slightly.

    Private residential construction spending is now 61.5% below the peak of early 2006.

    Private non-residential construction spending is 22.0% below the peak of October 2008.

  • Other Economic Stories ...

  • From David Streitfeld at the NY Times: No Aid or Rebound in Sight, More Homeowners Just Walk Away

  • From the Fed: Banks Cease Tightening Standards, Loan Demand Weakens Further

  • From Dina ElBoghdady and Dan Keating at the WaPo: Rising FHA default rate foreshadows a crush of foreclosures

  • Q4: Office, Mall and Lodging Investment

  • From the Institute for Supply Management: ISM Manufacturing Index Shows Expansion in January

  • From the Institute for Supply Management: ISM Non-Manufacturing Shows Slight Expansion in January

  • From the National Multi Housing Council (NMHC): Apartment Market Conditions Steady; Sales Volume and Equity Financing Improve, According to NMHC Quarterly Survey

  • December PCE and Saving Rate

  • From the American Bankruptcy Institute: January Consumer Bankruptcy Filings Decrease 10 Percent from December

  • Unofficial Problem Bank Lists Increases to 605

    Best wishes to all.