by Calculated Risk on 5/14/2010 08:30:00 AM

On a monthly basis, retail sales increased 0.4% from March to April (seasonally adjusted, after revisions), and sales were up 8.8% from April 2009 (easy comparison).

Click on graph for larger image in new window.

This graph shows retail sales since 1992. This is monthly retail sales, seasonally adjusted (total and ex-gasoline).

The red line shows retail sales ex-gasoline and shows the increase in final demand ex-gasoline has been sluggish.

Retail sales are up 9.2% from the bottom, but still off 3.6% from the pre-recession peak.

The second graph shows the year-over-year change in retail sales (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 6.9% on a YoY basis (8.8% for all retail sales). The year-over-year comparisons are easy now since retail sales collapsed in late 2008. Retail sales bottomed in December 2008.

Here is the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for April, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $366.4 billion, an increase of 0.4 percent (±0.5%)* from the previous month and 8.8 percent (±0.5%) above April 2009. Total sales for the February through April 2010 period were up 7.3 percent (±0.3%) from the same period a year ago. The February to March 2010 percent change was revised from +1.9 percent (±0.5%) to +2.1 percent (±0.4%).

The strongest sector was building material and garden equipment sales - and that might have been positively impacted by the homebuyer tax credit. Still this is a reasonably strong report.

by Calculated Risk on 5/13/2010 08:45:00 PM

Last night I linked to an article from Catherine Rampell at the NY Times that highlighted the skills mismatch problem related to long term unemployment.

And from Haya El Nasser at the USA Today: More move, but not long distance

More Americans moved last year than in the previous year, but most didn't go far, a sign that foreclosures and housing costs are still keeping people close to home.
...
"The main reason migration has ticked up (in 2009) is local movement," [William Frey, demographer at the Brookings Institution said]. "Foreclosures have a lot to do with that. A lot of people have moved to renter status."
...
"This is the absolute worst time to lose our residential mobility," says Richard Florida, a professor of U.S. urban theory at the University of Toronto. "It's important for people to move to where the new opportunities are, because that is the cornerstone of our idea-driven economy."

The loss of mobility is a huge concern. Usually people can move freely in the U.S. to pursue employment - but it is more difficult now, especially for borrowers who are underwater on their homes.

In March, Atlanta Fed President Dennis Lockhart discussed both of these mismatches: Prospects for Sustained Recovery and Employment Gains. These mismatches are part of the reason I expect the unemployment rate to stay elevated for some time.

by Calculated Risk on 5/13/2010 05:12:00 PM

"Ob Griechenland über die Zeit wirklich in der Lage ist, diese Leistungskraft aufzubringen, das wage ich zu bezweifeln"
Deutsche Bank CEO Josef Ackermann, May 13, 2010

Translation: "Whether Greece - over time – is really in a position to raise its [economic] performance [to repay its debt], I doubt it" (ht U)

by Calculated Risk on 5/13/2010 02:44:00 PM

Here is a graph from the Atlanta Fed weekly Financial Highlights released today (graph as of May 12th):

Click on graph for larger image in new window.

From the Atlanta Fed:

European bond spreads (over German bonds) narrowed considerably this week following the unveiling of the European Union’s €750 billion policy response on May 9, jointly with the International Monetary Fund.

In addition to the €750 billion package, the European Central Bank announced its Securities Market Program, aimed at purchasing public and private European debt.

During the past few weeks, the 10-year Greece-to-German bond spread had risen to nearly 10% (or 1000 bps), but following the €750 billion EU/IMF package, the spread fell sharply to around 450 bps, as of May 11. Other European peripherals’ spreads also narrowed, with Portugal currently at 152 bps, Ireland at 165 bps, and Spain at 100 bps.

This is the series to follow to see the short term impact of the policy response. The spread for Greece has fallen sharply, but is still very high. The spreads for Portugal, Ireland and Spain have all fallen back to earlier levels.

by Calculated Risk on 5/13/2010 12:07:00 PM

Notes: this data is not seasonally adjusted. There is a very distinct seasonal pattern for imports, but not for exports. LA area ports handle about 40% of the nation's container port traffic.

Sometimes port traffic gives us an early hint of changes in the trade deficit. The following graph shows the loaded inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported.

Click on graph for larger image in new window.

Loaded inbound traffic was up 13.6% compared to April 2009. (up 15% compared to last year using three month average). Inbound traffic was still down 11% vs. two years ago (Apr 08).

Loaded outbound traffic was up 13.7% from April 2009. (+19% using three months average) Just as with imports, exports are still off from 2 years ago (off 7%).

Exports were off slightly in April after the increase in March.

For imports there is usually a significant dip in either February or March, depending on the timing of the Chinese New Year, and that didn't happen this year. Then usually imports increase until late summer or early fall as retailers build inventory for the holiday season. So this increase in April imports is part of the normal seasonal pattern.

Still, based on this data, it appears the trade deficit with Asia increased in April. The old global imbalances continue ...

by Calculated Risk on 5/13/2010 09:51:00 AM

The phrase "foreclosure activity" can be confusing.

There are three key stages in the process: 1) Notice of Default (or Lis Pendens depending on state), 2) Notice of Trustee Sale or Notice of Foreclosure Sale, and 3) actual foreclosure (Real Estate Owned). Usually we abbreviate these stages as NOD, NTS and REO.

To calculate "foreclosure activity", RealtyTrac adds the notices together. If a property goes all the way to REO, it will be counted at least 3 times (sometimes more if multiple NODs or NTS are filed).

What this report shows is that REO is at record levels (actual foreclosures), but the initial stage (NODs) has declined substantially. The decline in NODs is good news, but the servicers are still working through a huge backlog of previously filed NODs - and REO activity (or short sales) will be high for a long time.

From RealtyTrac: Foreclosure Activity Decreases 9 Percent in April

RealtyTrac® ... today released its U.S. Foreclosure Market Report™ for April 2010, which shows that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 333,837 properties in April, a 9 percent decrease from the previous month and a 2 percent decrease from April 2009. One in every 387 U.S. housing units received a foreclosure filing during the month.

“There were two important milestones in the April numbers that show foreclosure activity has begun to plateau — but at a very high level that will not drop off in the near future,” said James J. Saccacio, chief executive officer of RealtyTrac. “April was the first month in the history of our report with an annual decrease in U.S. foreclosure activity. Secondly, bank repossessions, or REOs, hit a record monthly high for the report even while default notices dropped substantially on a monthly and annual basis. We expect a similar pattern to continue for most of this year, with the overall numbers staying at a high level and ripples of activity hitting the various stages of the foreclosure process as lenders systematically work through the backlog of distressed properties.”

by Calculated Risk on 5/13/2010 08:33:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending May 8, the advance figure for seasonally adjusted initial claims was 444,000, a decrease of 4,000 from the previous week's revised figure of 448,000 [revised up from 444,000]. The 4-week moving average was 450,500, a decrease of 9,000 from the previous week's revised average of 459,500.

The advance number for seasonally adjusted insured unemployment during the week ending May 1 was 4,627,000, an increase of 12,000 from the preceding week's revised level of 4,615,000..

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims decreased this week by 9,000 to 450,500.

The dashed line on the graph is the current 4-week average. The current level of 444,000 (and 4-week average of 450,500) is still high, and suggests ongoing weakness in the labor market.

Although declining over the last few weeks, the 4-week average first declined to this level at the end of December 2009, and has been at this level for almost five months.

by Calculated Risk on 5/12/2010 11:52:00 PM

Catherine Rampell at the NY Times has a story about the long term unemployed, and the skills mismatch: In a Job Market Realignment, Some Workers Left Behind

Millions of workers who have already been unemployed for months, if not years, will most likely remain that way even as the overall job market continues to improve, economists say. The occupations they worked in, and the skills they currently possess, are never coming back in style. And the demand for new types of skills moves a lot more quickly than workers — especially older and less mobile workers — are able to retrain and gain those skills.

There is no easy policy solution for helping the people left behind. The usual unemployment measures — like jobless benefits and food stamps — can serve as temporary palliatives, but they cannot make workers’ skills relevant again.

A sad story ...

by Calculated Risk on 5/12/2010 07:52:00 PM

From Stephen Castle at the NY Times: E.U. Plans Peer Review for Member States' Budgets

[T]he European Commission on Wednesday outlined ambitious proposals to give countries that use the euro a say over each other’s budget plans.
...
“Member states should have the courage to say whether they want an economic union because, if they don’t want that, it is better to forget monetary union altogether,” [European Commission president, José Manuel Barroso] said at a press conference in Brussels.

Among the ideas announced Wednesday was a plan to make the huge safety net for the euro that was decided on over the weekend a permanent crisis-resolution mechanism.

From the EU: Mastering economic interdependence: Commission proposes reinforced economic governance in the EU

I'm not sure how this will go over.

Meanwhile in Spain from the Financial Times: Tough new Spanish austerity measures

José Luis Rodríguez Zapatero, Spain’s prime minister ... announced a surprise 5 per cent cut in civil service pay to accelerate cuts to the budget deficit.
...
The measures should help bring the deficit down from 11.2 per cent of GDP in 2009 to just over 6 per cent in 2011.
excerpt with permission

The EU €750 billion announced on Sunday just buys time. As part of that agreement, both Portugal and Spain agreed to reduce their deficits.

by Calculated Risk on 5/12/2010 03:55:00 PM

A couple housing stories ... the first provides analysis from Barclays analysts that suggests distressed sales will stay elevated for some time. The second is from Diana Olick about house prices and the tax credit.

From Jon Prior at HousingWire: Shadow Inventory To Peak in Summer of 2010: Barclays

Barclays defines the shadow inventory of foreclosures as loans in 90-plus day delinquency or already in the foreclosure process. ...

The shadow inventory should reach its height in the summer in 2010 before falling gradually as the market absorbs 130,000 distressed properties per month, according to the report. Over the next three years, analysts forecast 4.7m distressed sales with 1.6m in 2010, another 1.6m in 2011 and 1.5m in 2012.

From Diana Olick at CNBC: Home Buyer Tax Credit Takes its Toll

From one of our own CNBC producers, Andrea Mantia:

"I've been househunting for a few months now...we totally got caught up in the "tax credit frenzy"....thank God we took a deep breath and relaxed...EVERY SINGLE HOME we had our eye on dropped in price this week...and this is in Bergen Co (NJ) where prices weren't budging!"

Anybody surprised that asking prices have adjusted down?

And on the stock market:

Click on graph for larger image in new window.

This graph is from Doug Short: "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.