by Calculated Risk on 9/02/2010 08:30:00 PM

1) The consensus is for a headline payroll number of minus 90,000 and for the unemployment rate to increase to 9.6% in August from 9.5% in July.

Goldman Sachs is forecasting a minus 125,000 headline payroll number, with no change in private employment and minus 115,000 decline in decennial Census employment. That gives a negative 10,000 ex-Census.

2) My estimate is the decennial Census workforce was reduced by 116,000 in August. This suggests a consensus headline payroll number of +26,000 ex-Census (see point 4). I'll take the under on payroll employment ex-Census.

3) The unemployment rate is dependent on both job creation and the participation rate (both numbers from the household survey - payroll employment is from the establishment survey).

Usually the participation rate - the percent of the civilian population in the labor force - falls when the job market is weak. And a decline in the participation rate puts downward pressure on the unemployment rate (and the opposite is true when the participation rate increases). For technical reasons, there is a possibility that the participation rate increased in August - even with weak job creation - putting upward pressure on the unemployment rate.

4) And here is an easy prediction: there will be some confusion about which payroll number to report!

Here is an excerpt from a employment report preview story from CNBC:

Investors are likely to focus on the private payrolls number, analysts said, given that overall payrolls data is expected to have been influenced by the loss of government census hiring, among other factors.

What "other factors"? The reason everyone has switched to the private payroll number is because of the hiring and layoffs associated with the decennial Census. But this misses any local and state government layoffs (kind of a big story right now).

Reporting that is consistent with non-decennial Census employment reports is to lead with the headline payroll number ex-Census. What has confused some people (I think) is that the Census hiring and layoffs is Not Seasonally Adjusted (NSA), and the headline number is SA. Usually it is not appropriate to mix NSA and SA numbers, but this is a rare exception.

I checked with the BLS, and I even submitted it as a question when the BLS had their first live chat back in March:

9:34 Michele Walker (BLS-CES) -
Submitted via email from Bill: Hi. The headline payroll number is seasonally adjusted, and the hiring for the 2010 Census is NSA. How would you suggest adjusting for the 2010 Census hiring to determine the underlying trend (not counting the snow storms!)?

Thanks for your question Bill.

There is an adjustment made for the 2010 Census. Before seasonally adjusting the estimates, BLS makes a special modification so that the Census workers do not influence the calculation of the seasonal factors. Specifically, BLS subtracts the Census workers from the not-seasonally adjusted estimates before running seasonal adjustment using X-12. After the estimates have been seasonally adjusted, BLS adds the Census workers to the seasonally adjusted totals. Therefore, to determine the underlying trend of the total nonfarm (TNF) employment estimates (minus the Census workers), simply subtract the Census employment from the seasonally adjusted TNF estimate.

Oh well ... this will be the last big change in decennial Census employment.

by Calculated Risk on 9/02/2010 05:09:00 PM

A couple of quotes from Kathleen Pender at the San Francisco Chronicle: Little support for new home-buyer tax credit

"We are not advocating another one. We think it's important for the market to have time to recover on its own," says Walter Molony, spokesman for the National Association of Realtors.
...
"From a political standpoint, with Congress not wanting to increase the debt, it would be too expensive," [Bernard Markstein, senior economist with the National Association of Home Builders] says. "In terms of advisable, we are bordering on where tax credits become ineffective."

And HUD Secretary Shaun Donovan said yesterday, via Reuters: No talk of new homebuyer tax credit

"It is not high on anyone's list that we have heard. We have not heard Congress talking about renewing it," Housing and Urban Development Secretary Shaun Donovan said in response to a reporter's question about a possible tax credit renewal.

by Calculated Risk on 9/02/2010 02:30:00 PM

Hotel occupancy is one of several industry specific indicators I follow ...

From HotelNewsNow.com: STR: Chain scales report weekly increases

Overall, the industry’s occupancy increased 10.6% to 60.1%, ADR rose 2.4% to US$96.50, and revenue per available room increased 13.2% to US$57.98.

The following graph shows the four week moving average for the occupancy rate by week for 2008, 2009 and 2010 (and a median for 2000 through 2007).

Click on graph for larger image in new window.

Notes: the scale doesn't start at zero to better show the change. The graph shows the 4-week average, not the weekly occupancy rate.

On a 4-week basis, occupancy is up 7.9% compared to last year (the worst year since the Great Depression) and 3.9% below the median for 2000 through 2007.

The occupancy rate is just below the levels of 2008 - but 2008 was a tough year for the hotel industry!

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 9/02/2010 12:18:00 PM

Here is a graph from the Council of Foreign Relations blog: Greek Debt Crisis – Apocalypse Later

Click on graph for larger image in new window.

This graph from Paul Swartz at the CFR shows the default probabilities on three different dates:

On April 30th, no European plan was yet in place to address the ballooning Greek debt, and default was considered a real possibility in the short term. On May 11th, just after the European Stabilization Mechanism (ESM) was announced, markets sharply cut their view on the odds of default across all time horizons. ... On September 1st, the market’s view of the probability of default within two years was lower than before the ESM was announced, but higher over longer time frames.

So initially the policy response lowered the default probabilities across all time frames (from red to light blue), but now - after further analysis - the default probabilities have increased for longer time frames (green).

by Calculated Risk on 9/02/2010 10:00:00 AM

From the NAR: Pending Home Sales Rise

The Pending Home Sales Index ... rose 5.2 percent to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June, but remains 19.1 percent below July 2009 when it was 98.1. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, cautioned that there would be a long recovery process. “Home sales will remain soft in the months ahead ..."

This suggests a small increase in existing home sales in September (reported when transactions close), but this also suggests double digit months of supply for some time.

by Calculated Risk on 9/02/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Aug. 28, the advance figure for seasonally adjusted initial claims was 472,000, a decrease of 6,000 from the previous week's revised figure of 478,000. The 4-week moving average was 485,500, a decrease of 2,500 from the previous week's revised average of 488,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since January 2000.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 2,500 to 485,500.

Claims for last week were revised up from 473,000 to 478,000. So the level this week is about the same as initially reported last week.

The current level of the 4-week average suggests a weak job market.

by Calculated Risk on 9/01/2010 06:54:00 PM

Note: The number of filings is volatile month to month - and August is frequently a bit lower than July.

From the American Bankruptcy Institute: August Consumer Bankruptcy Filings fall 8 Percent this Month

The 127,028 consumer bankruptcies filed in August represented a 8 percent decrease nationwide over the 137,698 filings recorded in July 2010, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). Though a decrease from the previous month, NBKRC’s data also showed that the August 2010 consumer filings represented a 6 percent increase from the 119,874 consumer filings recorded in August 2009. ...

“While monthly filings are volatile, consumer bankruptcies are still the highest they have been since Congress overhauled the bankruptcy law in 2005,” said ABI Executive Director Samuel J. Gerdano. “Consumer filings remain on track to top 1.6 million filings in 2010.”

Click on graph for larger image in new window.

This graph shows the non-business bankruptcy filings by quarter using monthly data from the ABI and previous quarterly data from USCourts.gov.

In 2005 the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" was enacted. Since then the number of bankruptcy filings has increased steadily.

by Calculated Risk on 9/01/2010 04:00:00 PM

Based on an estimate from Autodata Corp, light vehicle sales were at a 11.47 million SAAR in August. That is down 18.9% from August 2009 (cash-for-clunkers), and down 0.5% from the July sales rate.

Click on graph for larger image in new window.

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for August (red, light vehicle sales of 11.47 million SAAR from Autodata Corp).

The high for the year was in March, and sales have moved mostly sideways since then.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current month sales rate. The current sales rate is still below the bottom of the '90/'91 recession - when there were fewer registered drivers and a smaller population.

This was below most forecasts of around 11.6 million SAAR.

by Calculated Risk on 9/01/2010 12:15:00 PM

The Institute for Supply Management reported this morning that the PMI increased to 56.3 from 55.5 in July. Expectations were for a decrease to 53.0.

Click on graph for larger image in new window.

Here is an update to the graph showing the regional Fed manufacturing surveys and the ISM index through August.

The Fed surveys suggested that the ISM index would probably decline, but the relationship is noisy. Based on this graph I'd expect either the Fed surveys to bounce back in September - or the ISM to decline.

Here is a long term graph that hopefully puts the uptick in August in perspective.

In addition to the increase in the PMI, the production index increased to 59.9 from 57.0, and the employment index increased from 58.6 in July to 60.4. That suggests increased manufacturing employment in August.

However the new orders index declined in August to 53.1 from 53.5 in July (still expanding, but at a slower pace). And the inventory index was up for the 2nd month in a row to 51.4.

This report was somewhat better than expected, but I still expect the index to decline over the next couple of months.

by Calculated Risk on 9/01/2010 11:18:00 AM

Note: Sales in August 2009 were boosted by "Cash-for-clunkers".

From MarketWatch: GM August U.S. sales down 24.9% to 185,176 units

General Motors Co. said Wednesday that U.S. sales in August slumped 24.9% to 185,176 vehicles from 246,479 in August 2009.

Note: in August 2009 U.S. light vehicle sales were 14.1 million (SAAR). This was related to "Cash-for-clunkers" - also General Motors emerged from bankruptcy on July 10, 2009.

I'll add reports from the other major auto companies as updates to this post.

Update1: From MarketWatch: Ford U.S. August sales slide 10.7% to 157,503

From MarketWatch: Chrysler U.S. August sales rise 7% to 99,611 units

NOTE: Once all the reports are released, I'll post a graph of the estimated total August light vehicle sales (SAAR: seasonally adjusted annual rate) - usually around 4 PM ET. Most estimates are for an increase to 11.6 million SAAR in August from the 11.5 million SAAR in July.