Sunday, March 28, 2010

Weekly Summary and a Look Ahead

by Calculated Risk on 3/28/2010 12:30:00 PM

The employment report for March will be the focus this week, but there are several other key releases too.

On Monday, the Personal Income and Outlays report for February will be released by the BEA at 8:30 AM. The consensus is for a 0.1% increase in income and 0.3% increase in spending. This will provide a reasonable estimate of Q1 Personal Consumption Expenditure (PCE) growth.

On Tuesday, the January Case-Shiller house Price Index will be released at 9:00 AM. The consensus is for a small decline in prices (not seasonally adjusted). Consumer confidence will be released at 10 AM and former Fed Chairman Paul Volcker will be speaking on financial reform at noon.

On Wednesday, the ADP March employment report will be released (consensus is for 40,000 net private sector payroll jobs in March). This report excludes all government jobs and is not distorted by the temporary Census hiring. At 9:45 AM the Chicago PMI index for March will be released (consensus is for expansion, but at a slower rate than in February). At 10 AM, the Census Bureau will release the February Factory Orders report.

Also on Wednesday, Atlanta Fed President Dennis Lockhart will speak about employment.

On Thursday, the closely watched initial weekly unemployment claims will be released. Also the ISM Manufacturing Index for March at 10 AM (Consensus is for slightly less expansion in March), and Census Bureau will release February Construction Spending at 10 AM (consensus is for a decline of about 1.1%).

Also on Thursday, personal bankrutpcy filings for March will be released. Update: Also on Thursday, the auto manufacturers will releases March sales. The expectation is for a sharp rise to over 12 million units (SAAR) because of incentives.

And on Friday, the BLS will release the March employment report. The consensus is for 190,000 net payroll jobs, however this is distorted by both the February snow storms and temporary Census hiring (see Employment: March Madness). The consensus is for no change in the unemployment rate (9.7%), but historically the Census hiring has pushed down the unemployment rate in the March to May period – so we might see a slight decline. Goldman Sachs is estimate net payrolls increased 275,000 in March.

Also on Friday the FDIC will probably close several more banks. Once again I’ll be watching Puerto Rico!

And a summary of last week ...

  • Treasury announces changes to HAMP
    A few stories:
  • HAMP Principal Write-downs

  • More on HAMP "Improvements"

  • From David Streitfeld at the NY Times: A Bold U.S. Plan to Help Struggling Homeowners

  • From Renae Merle at the WaPo: Second mortgages complicate efforts to help homeowners
  • New Home Sales at Record Low in February

    The Census Bureau reported New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 308 thousand. This is a new record low and a decrease from the revised rate of 315 thousand in January (revised from 309 thousand).

    New Home Sales Monthly Not Seasonally Adjusted Click on graph for larger image in new window.

    The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted).

    Note the Red columns for 2010. In February 2010, 24 thousand new homes were sold (NSA).

    This is below the previous record low of 29 thousand hit three times; in February 2009, 1982 and 1970.

    New Home Sales and Recessions The second graph shows New Home Sales vs. recessions for the last 45 years. New Home sales fell off a cliff, but after increasing slightly, are now 6% below the previous record low in January 2009.
    Sales of new single-family houses in February 2010 were at a seasonally adjusted annual rate of 308,000, according to estimates released jointly today ... This is 2.2 percent (±15.3%)* below the revised January rate of 315,000 and is 13.0 percent (±12.2%) below the February 2009 estimate of 354,000.
    Obviously this was another extremely weak report.

  • Existing Home Sales decline in February

    Existing Home Sales This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

    Sales in February 2010 (5.02 million SAAR) were 0.6% lower than last month, and were 7.0% higher than February 2009 (4.69 million SAAR).

    Note: existing home sales are counted at closing, so even though contracts must be signed in April to qualify for the tax credit, buyers have until June 30th to close.

    Existing Home InventoryThe second graph shows nationwide inventory for existing homes.

    According to the NAR, inventory increased to 3.59 million in February from 3.27 million in January. The all time record high was 4.57 million homes for sale in July 2008.

    Inventory is not seasonally adjusted and there is a clear seasonal pattern - inventory should increase further in the spring.

  • AIA: Architecture Billings Index Shows Contraction in February

    Note: This index is a leading indicator for Commercial Real Estate (CRE) investment.

    AIA Architecture Billing Index This graph shows the Architecture Billings Index since 1996. The index has remained below 50, indicating falling demand, since January 2008.

    Historically, according to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. This suggests further significant declines in CRE investment through all of 2010, and probably longer.

  • Moody's: CRE Prices increase 1% in January 2010

    CRE and Residential Price indexes Here is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index.

    CRE prices only go back to December 2000.

    The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

    CRE prices peaked in late 2007 and are now 40% below the peak in October 2007. Prices are at about the same level as early 2003.

  • DOT: Vehicle Miles Driven decline in January

    Last week the Department of Transportation (DOT) reported that vehicle miles driven in January were down from January 2009:
    Travel on all roads and streets changed by -1.6% (-3.7 billion vehicle miles) for January 2010 as compared with January 2009. Travel for the month is estimated to be 222.8 billion vehicle miles.
    Vehicle Miles YoYThis graph shows the percent change from the same month of the previous year as reported by the DOT.

    As the DOT noted, miles driven in January 2010 were down -1.6% compared to January 2009, and miles driven have declined 2.9% compared to January 2008, and are down 4.7% compared to January 2007. This is a multi-year decline, and miles driven appear to be falling again.

  • Unemployment Rate Increases in 27 States in February

    From the BLS: Regional and State Employment and Unemployment Summary

    State Unemployment This graph shows the high and low unemployment rates for each state (and D.C.) since 1976. The red bar is the current unemployment rate (sorted by the current unemployment rate).

    Fifteen states and D.C. now have double digit unemployment rates. New Jersey and Indiana are close.

    Four states and set new series record highs: Florida, Nevada, Georgia and North Carolina. Three other states tied series record highs: California, Rhode Island and South Carolina.

  • Other Economic Stories ...

  • Fed Governor Daniel Tarullo argues for more stress tests: Lessons from the Crisis Stress Tests

  • Fed Chairman Ben Bernanke is testified before the House Committee on Financial Services: Federal Reserve's exit strategy

  • From the Financial Times: China to lose ally against US trade hawks

  • From Kathleen Pender at the San Francisco Chronicle: Some [California] home buyers get new state tax credit

  • From Bloomberg: Greece to Sell Eurobonds Next Week in Rescue Test, FT Says

  • Q4 GDP revised down to 5.6%

  • Unofficial Problem Bank List increases to 684

    Best wishes to all.