by Calculated Risk on 11/06/2009 07:13:00 PM

Whats a "Prosperan"?
A breakfast food, car or band?
Answer: money pit

Looming Gateway Arch
Symbol of pioneer spirit
Their bank now a ghost.
by Soylent Green is People
From the FDIC: Alerus Financial, National Association, Grand Forks, North Dakota, Assumes All of the Deposits of Prosperan Bank, Oakdale, Minnesota

Prosperan Bank, Oakdale, Minnesota, was closed today by the Minnesota Department of Commerce, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of August 31, 2009, Prosperan Bank had total assets of $199.5 million and total deposits of approximately $175.6 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $60.1 million. ... Prosperan Bank is the 118th FDIC-insured institution to fail in the nation this year, and the sixth in Minnesota. The last FDIC-insured institution closed in the state was Riverview Community Bank, Ostego, on October 23, 2009

From the FDIC: Central Bank of Kansas City, Kansas City, Missouri, Assumes All of the Deposits of Gateway Bank of St. Louis, St. Louis, Missouri

Gateway Bank of St. Louis, St. Louis, Missouri, was closed today by the Missouri Division of Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 25, 2009, Gateway Bank of St. Louis had total assets of $27.7 million and total deposits of approximately $27.9 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $9.2 million. ... Gateway Bank of St. Louis is the 119th FDIC-insured institution to fail in the nation this year, and the third in Missouri. The last FDIC-insured institution closed in the state was First Bank of Kansas City, Kansas City, on September 4, 2009.

That makes four today ...

by Calculated Risk on 11/06/2009 06:17:00 PM

Motor City crash.
Home Federal has spun out.
Bagholders totaled
by Soylent Green is People
From the FDIC: Liberty Bank and Trust Company, New Orleans, Louisiana, Assumes All of the Deposits of Home Federal Savings Bank, Detroit, Michigan

Home Federal Savings Bank, Detroit, Michigan, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 24, 2009, Home Federal Savings Bank had total assets of $14.9 million and total deposits of approximately $12.8 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $5.4 million. ... Home Federal Savings Bank is the 117th FDIC-insured institution to fail in the nation this year, and the third in Michigan. The last FDIC-insured institution closed in the state was Warren Bank, Warren, on October 2, 2009.

A small one ... but it counts.

by Calculated Risk on 11/06/2009 05:05:00 PM

"Feds!... Come and Take Them"
United Security
Sparta Bank is dead.
by Soylent Green is People
From the FDIC: Ameris Bank, Moultrie, Georgia, Assumes All of the Deposits of United Security Bank, Sparta, Georgia

United Security Bank, Sparta, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 14, 2009, United Security Bank had total assets of $157 million and total deposits of approximately $150 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $58 million. ... United Security Bank is the 116th FDIC-insured institution to fail in the nation this year, and the twenty-first in Georgia. The last FDIC-insured institution closed in the state was American United Bank, Lawrenceville, on October 23, 2009.

Off to a quick start ...

by Calculated Risk on 11/06/2009 03:00:00 PM

From MarketWatch: Consumer debt drops for record 8th straight month

Outstanding consumer debt fell at a 7.2% annual rate in September, the eighth consecutive decline, the Federal Reserve reported Friday.

Click on graph for larger image in new window.

This graph shows the year-over-year (YoY) change in consumer credit. Consumer credit is off 4.7% over the last 12 months - and falling fast. The previous record YoY decline was 1.9% in 1991.

Here is the Fed report: Consumer Credit

Consumer credit decreased at an annual rate of 6 percent in the third quarter of 2009. Revolving credit decreased at an annual rate of 10 percent, and nonrevolving credit decreased at an annual rate of 3-3/4 percent. In September, consumer credit decreased at an annual rate of 7-1/4 percent.

Note: The Fed reports a simple annual rate (multiplies change in month by 12) as opposed to a compounded annual rate. Consumer credit does not include real estate debt.

by Calculated Risk on 11/06/2009 01:47:00 PM

Update: A couple points: CRE is a lagging sector (see Business Cycle: Temporal Order), and I make some pretty optimistic comments in the middle of this post. I'll try to put some number togther on household formation and excess inventory.

From Carolyn Said at the San Francisco Chronicle: Gloomy times for commercial real estate

Values will plunge, vacancies will rise and rents will decrease across all types of commercial property before the market hits bottom in 2010, according to the "Emerging Trends in Real Estate" forecast from the Urban Land Institute and PricewaterhouseCoopers LLP.
...
No quick recovery is in store, the report said. "2010 looks like an unavoidable bloodbath for a multitude of 'zombie' borrowers, investors and lenders," it said. "The shake-out period may extend several years as even some conservative owners with well-underwritten loans from the early 2000s see their equity destroyed."

The report suggests the first sector to recover will be apartments as "people who were forced to move back in with their parents seek their own places as soon as they find jobs".

This household creation is really the key to entire housing market. During a recession people double up with friends or move into their parent's basements - and this is pent-up demand for housing units (mostly apartments) once these people find jobs and regain confidence about their future earnings.

All will not be grim forever. The number of housing units currently being completed (single family and apartments) is significantly below the level normally required for population growth. This level of completions would usually be reducing the excess inventory, however the improvement is being masked by the loss of households due to the recession. Once the job market starts to improve, I'd expect a surge in household creation (mostly renters).

Unfortunately there is a catch-22. Usually residential investment contributes significantly to job creation at the beginning of a recovery - and the excess housing inventory is holding down residential construction employment this time.

For the other CRE sectors the outlook is very grim. From the Urban Land Institute:

Among property sectors, the survey finds declines or near low record lows in investment sentiment for almost every property type. Only rental apartments register fair prospects and all other categories sink into the fair to poor range. Hotel and retail record the most precipitous falls. Development prospects are “largely dead” and drop to new depths and practically to “abysmal” levels for office, retail and hotels. Warehouse and apartments score only marginally better at “modestly poor.”

by Calculated Risk on 11/06/2009 10:29:00 AM

A few more graphs ...

Stress Test Scenarios

The economy is performing better that the stress test baseline scenario for GDP and house prices, but worse than the "more adverse" stress test scenario for unemployment.

Click on graph for larger image in new window.

This graph shows the unemployment rate compared to the stress test economic scenarios on a quarterly basis as provided by the regulators to the banks (no link).

This is a quarterly forecast: the Unemployment Rate for Q4 is just October at 10.2%. The unemployment rate is higher than the "more adverse" scenario, and much higher than the peak of the baseline scenario.

Unemployed over 26 Weeks

The DOL report yesterday showed seasonally adjusted insured unemployment at 5.75 million, down from a peak of about 6.9 million. This raises the question of how many unemployed workers have exhausted their regular unemployment benefits (Note: most are still receiving extended benefits, and President Obama signed a further extension of benefits this morning).

The monthly BLS report provides data on workers unemployed for 27 or more weeks, and here is a graph ...

The blue line is the number of workers unemployed for 27 weeks or more. The red line is the same data as a percent of the civilian workforce.

According to the BLS, there are a record 5.6 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 3.6% of the civilian workforce. (note: records started in 1948)

Diffusion Index

The third graph shows the BLS diffusion indexes for total private employment and manufacturing employment.

Think of this as a measure of how widespread the job losses are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS.

Both the "all industries" and "manufacturing" employment diffusion indices had been trending up - meaning job losses were becoming less widespread. However both turned down in October. This series is noisy month-to-month, but it still appears job losses are widespread across industries.

Earlier employment posts today:

Employment Report: 190K Jobs Lost, 10.2% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

Employment-Population Ratio, Record Part Time Workers, Weak Holiday Hiring

by Calculated Risk on 11/06/2009 09:24:00 AM

The [un]employment report headline numbers were ugly, but the internals are even less encouraging ...

Employment-Population Ratio

Click on graph for larger image in new window.

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

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

The general upward trend from the early '60s was mostly due to women entering the workforce.

This measure fell in October to 58.5%, the lowest level since the early '80s.

The Labor Force Participation Rate fell to 65.1% (the percentage of the working age population in the labor force). This is also the lowest since the mid-80s.

When the job market starts to recover, many of these people will reenter the workforce and look for employment - and that will keep the unemployment rate elevated for some time.

Part Time for Economic Reasons

From the BLS report:

The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in October at 9.3 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) is at a record 9.284 million.

Note: the U.S. population is significantly larger today (about 308 million) than in the early '80s (about 228 million) when the number of part time workers almost reached 7 million. Still - even adjusted for population - part time workers is at record levels.

Seasonal Retail Hiring

The old saying is "Watch what they do, not what they say". Yesterday there were some reports that retail sales were up slightly year-over-year. But retailers are hiring seasonal workers at the same pace as last year ...

Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year.

This really shows the collapse in retail hiring in 2008.

Retailers only hired 63.5 thousand workers (NSA) net in October. This is essentially the same as in 2008 (59.1 thousand NSA), and suggests retailers are being very cautious with their seasonal hiring.

Earlier employment post today:

Employment Report: 190K Jobs Lost, 10.2% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

by Calculated Risk on 11/06/2009 08:30:00 AM

From the BLS:

The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade.

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 190,000 in October. The economy has lost almost 5.5 million jobs over the last year, and 7.3 million jobs¹ during the 22 consecutive months of job losses.

The unemployment rate increased to 10.2 percent. This is the highest unemployment rate in 26 years.

Year over year employment is strongly negative.

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 recession, employment peaked in December 2007, and this recession was a slow starter (in terms of job losses and declines in GDP).

However job losses have really picked up earlier this year, and the current recession is the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early '80s recession with a peak of 10.8 percent was worse).

The economy is still losing jobs at about a 2.2 million annual rate, and the unemployment rate is finally above 10%. This is a very weak employment report - just not as bad as earlier this year. Much more to come ...

¹Note: The total jobs lost does not include the preliminary benchmark payroll revision of minus 824,000 jobs. (This is the preliminary estimate of the annual revision that will be announced early in 2010).

by Calculated Risk on 11/06/2009 12:31:00 AM

See the poll in the right sidebar ...

Catherine Rampell at the NY Times Economix offers a Jobs Report Preview

Ms. Rampell suggests three things to look for:

1) The unemployment rate may hit 10 percent.
...
2) Job losses continue to mount, but more slowly.
...
3) Hours worked stagnate.

There will be many more interesting details such as the employment-population ratio, part time workers, how many people are unemployed more than 26 weeks (for unemployment benefits), and how many part time workers were hired for seasonal retail jobs - just to mention a few.

by Calculated Risk on 11/05/2009 09:24:00 PM

From CNBC: Boomers in Denial About Retirement Savings

Wells Fargo just released the results of its Retirement Fitness survey and looked hard at the investment habits of pre-retirees ages 50 to 59. What did they find?

“There is a sense of denial among the pre-retirees,” said Lynne Ford, head of Wells Fargo Retail Retirement.

Even after suffering significant losses last year, many remain overly optimistic about their investment returns and the ability of their savings to fund their expenses after they stop working.
...
On average, these pre-retirees expected they would need $800,000 to fund their retirement. However, most had only saved about $300,000.

I expect many of these pre-retirees will start saving more soon, and this is part of the reason I expect the saving rate to increase to 8% or so over the next couple of years. And for a more humorous take: