by Calculated Risk on 9/21/2010 10:00:00 AM

Click on graph for larger image in new window.

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).

Thirteen states now have double digit unemployment rates (up from eleven last month). A number of other states are close.

Nevada set a new series high at 14.4% and now has the highest state unemployment rate. Michigan held the top spot for over 4 years until May.

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were little changed in August. Twenty-seven states recorded unemployment rate increases, 13 states registered rate decreases, and 10 states and the District of Columbia had no rate change, the U.S. Bureau of Labor Statistics reported today.
...
Nevada again reported the highest unemployment rate among the states, 14.4 percent in August, which was a new series high for the state. (All region, division, and state series begin in 1976.) The states with the next highest rates were Michigan, 13.1 percent, and California, 12.4 percent. North Dakota continued to register the lowest jobless rate, 3.7 percent, followed by South Dakota and Nebraska, at 4.5 and 4.6 percent, respectively.
emphasis added

by Calculated Risk on 9/21/2010 08:30:00 AM

Click on graph for larger image in new window.

Total housing starts were at 598 thousand (SAAR) in August, up 10.5% from the revised July rate of 541 thousand (revised down from 546 thousand), and up 25% from the all time record low in April 2009 of 477 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959).

Single-family starts increased 4.3% to 438 thousand in August. This is 22% above the record low in January 2009 (360 thousand).

The second graph shows total and single unit starts since 1968. This shows the huge collapse following the housing bubble, and that housing starts have mostly been moving sideways for over a year - with a slight up and down over the last several months due to the home buyer tax credit.

Here is the Census Bureau report on housing Permits, Starts and Completions.

Housing Starts:
Privately-owned housing starts in August were at a seasonally adjusted annual rate of 598,000. This is 10.5 percent (±11.9%)* above the revised July estimate of 541,000 and is 2.2 percent (±9.7%)* above the August 2009 rate of 585,000.

Single-family housing starts in August were at a rate of 438,000; this is 4.3 percent (±12.4%)* above the revised July figure of 420,000.

Building Permits:
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 569,000. This is 1.8 percent (±2.0%)* above the revised July rate of 559,000, but is 6.7 percent (±1.4%) below the August 2009 estimate of 610,000.

Single-family authorizations in August were at a rate of 401,000; this is 1.2 percent (±1.0%) below the revised July figure of 406,000.

This was above expectations of 550 thousand, mostly because of the volatile multi-family starts. As I've mentioned many times - this low level of starts is good news for the housing market longer term (there are too many housing units already), but bad news for the economy and employment short term.

by Calculated Risk on 9/20/2010 09:40:00 PM

From Graham Bowley at the NY Times: Ex-Physicist Leads Inquiry into Flash Crash

[The] long-awaited report on the so-called flash crash, in partnership with the Commodity Futures Trading Commission, is due to be published in the next two weeks.
...
[The SEC's Gregg Berman says] the report will zero in on a specific sequence of events that preceded the crash. He says it will tell a clear story about what happened in the markets on that stomach-churning day, beyond simply pointing a finger at the perils of the kind of high-speed computer trading that dominates today’s markets.

“The report will clearly demonstrate how market conditions and events prior to the flash crash led to the extreme price moves,” he said.
...
“Many market participants told us, ‘We’re not quite sure what happened over all, but this is what my firm saw and the actions we took,’ ” Mr. Berman said. “It was like ‘C.S.I.’ We wanted to interview everyone around.”

Hopefully the explanation will be clear and understandable.

by Calculated Risk on 9/20/2010 04:17:00 PM

The European bailout fund, called the European Financial Stability Facility (EFSF), received the expected AAA rating today.

From the NY Times: European Bailout Fund Gets Top Rating From Credit Agencies

The European Financial Stability Facility, as the fund is known, was rated AAA by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings. Standard & Poor’s said its understanding was that “guarantees from member governments supporting the repayment of E.F.S.F. obligations will be unconditional, irrevocable and timely, and thereby consistent with our criteria for sovereign guarantees.”

The ratings are preliminary because no member state has yet called on the facility for help, and it has thus issued no debt.

The facility will not be "pre-funded", but will only raise funds when a member state asks for help.

Key European analysts had expected that countries would wait until the rating was secured before asking for help. Now there is a focus on Ireland and Portugal - the two countries most likely to ask for help in the near term.

The yields for Ireland and Portugal 10 year bonds are now above the crisis levels back in May.

And from Bloomberg: Honohan Says Irish Government Must Cut Deficit at Faster Pace

The extra yield that investors demand to hold 10-year Irish bonds over German bunds today exceeded 400 basis points for the first time as the government struggles to convince investors it can cap the cost of bailing out its banking system. Portugal is also being punished by investors, with the spread on its bonds also touching a record today. That’s fueling concerns that both countries may have to follow Greece and ask the European Union and the International Monetary Fund for a rescue.

“We think there is a measurable risk that Ireland and Portugal will access the EFSF and IMF, but probably only early next year,” Goldman Sachs Group Inc. Chief European Economist Erik Nielsen said in a note yesterday.

And something else to watch from the WSJ: ECB Steps Up Its Bond Buys Amid Worries

The European Central Bank has increased its purchases of government bonds amid rising concerns in financial markets about the ability of Greece, Ireland and Portugal to repay their debts.
...
Bond buys by the ECB, though higher in recent weeks than during much of the summer, are still a fraction of what they were when the program started.

by Calculated Risk on 9/20/2010 01:08:00 PM

Moody's reported today that the Moody’s/REAL All Property Type Aggregate Index declined 3.1% in July. This is a repeat sales measure of commercial real estate prices.

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

Notes: Beware of the "Real" in the title - this index is not inflation adjusted. Moody's CRE price index is a repeat sales index like Case-Shiller - but there are far fewer commercial sales - and that can impact prices.

Click on graph for larger image in new window.

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).

It is important to remember that the number of transactions is very low and there are a large percentage of distressed sales.

Commercial real estate prices (as measured by this index) fell 7% combined in June and July.

The index is now down 43.2% from the peak in October 2007.

The index is only 0.9% above the October 2009 low.

by Calculated Risk on 9/20/2010 11:31:00 AM

From NBER: NBER Business Cycle Dating Committee Announces Trough Date

The Business Cycle Dating Committee of the National Bureau of Economic Research ... determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II.

In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.

The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.

This is somewhat subjective - and I thought they'd wait longer because the committee usually waits until some of the key indicators have returned to pre-recession levels. This time no indicator has reached the pre-recession level, and some are still very low (like personal income less transfer payments).

by Calculated Risk on 9/20/2010 10:00:00 AM

The National Association of Home Builders (NAHB) reports the housing market index (HMI) was at 13 in September. This is the same low level as in August and below expectations. The record low was 8 set in January 2009, and 13 is very low ...

Note: any number under 50 indicates that more builders view sales conditions as poor than good.

Click on graph for larger image in new window.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the September release for the HMI and the July data for starts (August starts will be released tomorrow).

This shows that the HMI and single family starts mostly move in the same direction - although there is plenty of noise month-to-month.

Press release from the NAHB: Builder Confidence Unchanged in September

Builder confidence in the market for newly built, single-family homes held unchanged in September from the previous month's low level of 13, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

"In general, builders haven't seen any reason for improved optimism in market conditions over the past month," noted NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential home buyers feel more secure about the job market and economy."

"The stall in the nation's housing market continues," agreed NAHB Chief Economist David Crowe. "Builders report that the two leading obstacles to new-home sales right now are consumer reluctance in the face of the poor job market and the large number of foreclosed properties for sale."

by Calculated Risk on 9/20/2010 08:33:00 AM

From Mokoto Rich at the NY Times: For the Unemployed Over 50, Fears of Never Working Again (ht Ann)

Of the 14.9 million unemployed, more than 2.2 million are 55 or older. Nearly half of them have been unemployed six months or longer, according to the Labor Department. The unemployment rate in the group — 7.3 percent — is at a record, more than double what it was at the beginning of the latest recession.

After other recent downturns, older people who lost jobs fretted about how long it would take to return to the work force and worried that they might never recover their former incomes. But today, because it will take years to absorb the giant pool of unemployed at the economy’s recent pace, many of these older people may simply age out of the labor force before their luck changes.

It is hard for people in their 50s to change careers, or rebuild their savings after a long period of unemployment. And, as in the story, they may end up taking Social Security early - just to get by - and that means they will receive a significantly lower monthly payout than if they waited until 66. A very tough situation.

by Calculated Risk on 9/19/2010 08:47:00 PM

From the Financial Times: Junk bond prices hit pre-crisis levels

Strong investor demand for junk bonds has pushed the average price on such corporate debt to its highest level since June 2007, when companies could borrow with ease at the height of the credit boom.
except with permission

And from the WSJ: Bond Markets Get Riskier

Bond markets are growing riskier as investors seeking steady returns bid up prices and ignore some early warning signs similar to those that flashed during the credit bubble.

Last week, prices on high-yield, or junk, bonds, hit their highest level since 2007, nearly double their lows of the credit crisis. Nine months into the year, companies have sold $172 billion in junk bonds, already an annual record, according to data provider Dealogic.

This seems like investors chasing yield - and that is making it easy to sell junk bonds. Oh well ...

by Calculated Risk on 9/19/2010 02:45:00 PM

Note: The previous post is a summary of last week with graphs.

Four key housing reports will be released this week: the September homebuilder confidence survey (Monday), August housing starts (Tuesday), August existing home sales (Thursday), and August new home sales (Friday). Also the FOMC meets on Tuesday.

----- Unscheduled, but likely -----
Making Home Affordable Program (HAMP) for August and the “Housing Scorecard”

Moody's/REAL Commercial Property Price Index (CPPI) for July.

----- Monday, Sept 20th -----
10 AM: The September NAHB homebuilder survey. This index collapsed following the expiration of the home buyer tax credit. The consensus is for a slight increase to 14 from 13 in August (still very depressed).

----- Tuesday, Sept 21st -----
8:30 AM: Housing Starts for August. Housing starts also collapsed following the expiration of the home buyer tax credit. The consensus is for a slight increase to 550K (SAAR) in August from 546K in July.

10:00 AM: the BLS will release the Regional and State Employment and Unemployment report for August.

2:15 PM: The FOMC statement will be released. I don't expect any significant changes to the statement compared to the statement following the August meeting.

----- Wednesday, Sept 22nd -----
Early: The AIA's Architecture Billings Index for August will be released (a leading indicator for commercial real estate). This has been showing ongoing contraction, and usually this leads investment in non-residential structures (hotels, malls, office) by 9 to 12 months.

7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index declined sharply following the expiration of the tax credit, and the index has only recovered slightly over the last couple months - suggesting reported home sales through at least October will be very weak.

10:00 AM: 10:00 FHFA House Price Index for July. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).

----- Thursday, Sept 23rd -----
8:30 AM: The initial weekly unemployment claims report will be released. Consensus is for about the same as last week (450 thousand).

10:00 AM: Existing Home Sales for August from the National Association of Realtors (NAR). The consensus is for an increase to 4.1 million (SAAR) in August from 3.83 million in July. Housing economist Tom Lawler is projecting 4.1 million SAAR. In addition to sales, the level of inventory and months-of-supply will be very important (since months-of-supply impacts prices).

10:00 AM: Conference Board's index of leading indicators for August. The consensus is for a 0.1% increase in this index.

1:00 PM ET: Former Fed Chairman Paul A. Volcker gives the Keynote address at the Chicago Fed and IMF Thirteenth Annual International Banking Conference

----- Friday, Sept 24th -----
8:30 AM: Durable Goods Orders for August from the Census Bureau. The consensus is for a 1.0% decline in durable good orders.

10:00 AM: New Home Sales for August from the Census Bureau. The consensus is for a slight increase in sales to 290K (SAAR) in August from 276K in July.

1:00 PM: Richmond Fed President Jeffrey Lacker speaks on the economic outlook at the 2010 Kentucky Economic Association Annual Conference

4:30 PM: Fed Chairman Ben Bernanke speaks at the Conference Co-sponsored by the Center for Economic Policy Studies and the Bendheim Center for Finance, Princeton University, Princeton, N.J: "Implications of the Financial Crisis for Economics"

After 4:00 PM: The FDIC will probably have another busy Friday afternoon ...