RSS Feed by Calculated Risk on 10/08/2010 07:26:00 PM
Friday, October 08, 2010
Daily Show on Foreclosure-Gate
While we wait for the FDIC ...
From the Daily Show (link if embed doesn't work) Foreclosure Crisis
| The Daily Show With Jon Stewart | Mon - Thurs 11p / 10c | |||
| Foreclosure Crisis | ||||
| ||||
Impact of estimated Benchmark Revision on Job Losses
by Calculated Risk on 10/08/2010 03:05:00 PM
This morning I mentioned the annual benchmark revision for the employment report - here are some more details, and a graph showing the impact on job losses.
As part of the employment report, the BLS released the preliminary annual benchmark revision of minus 366,000 payroll jobs. This will be finalized next February when the January 2011 employment report is released. Usually the preliminary estimate is pretty close to the final benchmark estimate.
Click on graph for larger image.
This graph shows the impact of the preliminary benchmark revision on job losses in percentage terms from the start of the employment recession.
The red line on the graph is the current estimate, and the dotted line shows the impact of estimated coming benchmark revision. This puts the current payroll employment about 8.1 million jobs below the pre-recession peak in December 2007.
Using the preliminary benchmark estimate, this means that payroll employment in March 2010 was 366,000 lower than originally estimated. This is slightly larger than a normal adjustment (see table below). So in February 2011, the payroll numbers will be revised down to reflect this estimate. The number is then "wedged back" to the previous revision (March 2009).
For details on the benchmark revision process, see from the BLS: Methodology
"The benchmark adjustment, a standard part of the payroll survey estimation process, is a once-a-year re-anchoring of the sample-based employment estimates to full population counts available principally through unemployment insurance (UI) tax records filed by employers with State Employment Security Agencies."The following table shows the benchmark revisions since 1979.
| Year | Percent difference | Difference in thousands |
|---|---|---|
| 1979 | 0.5 | 447 |
| 1980 | -0.1 | -63 |
| 1981 | -0.4 | -349 |
| 1982 | -0.1 | -113 |
| 1983 | * | 36 |
| 1984 | 0.4 | 353 |
| 1985 | * | -3 |
| 1986 | -0.5 | -467 |
| 1987 | * | -35 |
| 1988 | -0.3 | -326 |
| 1989 | * | 47 |
| 1990 | -0.2 | -229 |
| 1991 | -0.6 | -640 |
| 1992 | -0.1 | -59 |
| 1993 | 0.2 | 263 |
| 1994 | 0.7 | 747 |
| 1995 | 0.5 | 542 |
| 1996 | * | 57 |
| 1997 | 0.4 | 431 |
| 1998 | * | 44 |
| 1999 | 0.2 | 258 |
| 2000 | 0.4 | 468 |
| 2001 | -0.1 | -123 |
| 2002 | -0.2 | -313 |
| 2003 | -0.2 | -122 |
| 2004 | 0.2 | 203 |
| 2005 | -0.1 | -158 |
| 2006 | 0.6 | 752 |
| 2007 | -0.2 | -293 |
| 2008 | -0.1 | -89 |
| 2009 | -0.7 | -902 |
| 2010 | -0.3 | -366 estimate |
Earlier employment posts today (with many graphs):
Unemployment by Level of Education and Employment Diffusion Indexes
by Calculated Risk on 10/08/2010 12:34:00 PM
By request ...
Click on graph for larger image in new window.
This graph shows the unemployment rate by four levels of education (all groups are 25 years and older).
Note that the unemployment rate increased sharply for all four categories in 2008 and into 2009.
Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - but education didn't seem to matter as far as the recovery rate in unemployment following the 2001 recession. All four groups recovered slowly.
Earlier this year, the group with "less than a high school diploma" recovered a little better than the more educated groups - possibly because of the tax credit related increase in construction - but that changed in September as the unemployment rate increased sharply.
For the group with some college or an associate degree, the unemployment rate is at a new high for this employment recession.
Diffusion Indexes
This is a little more technical ...
The BLS diffusion index for total private employment declined to 49.8 from 54.1 in August. For manufacturing, the diffusion index declined to 46.3 from 48.2 in August.
Both indexes are down sharply from earlier this year.
Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS. From the BLS:
Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.The increases in the diffusion indexes in 2009 and earlier this year, was a clear positive in the monthly employment reports. However the decrease in the diffusion indexes over the last few months (falling below 50% for both in September), is disappointing.
Earlier employment posts today (with many graphs):
Employment-Population Ratio, Part Time Workers, Unemployed over 26 Weeks
by Calculated Risk on 10/08/2010 09:50:00 AM
Here are a few more graphs based on the employment report ...
Percent Job Losses During Recessions, aligned at Bottom
Click on graph for larger image.
This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at the bottom of the recession (Both the 1991 and 2001 recessions were flat at the bottom, so the choice was a little arbitrary).
The dotted line shows the impact of Census hiring. As of the end of September, there were only 6,000 temporary 2010 Census workers still on the payroll. So the gap between the solid and dashed red lines is almost completely gone.
Part Time for Economic Reasons
From the BLS report:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose by 612,000 over the month to 9.5 million. Over the past 2 months, the number of such workers has increased by 943,000. 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) was at 9.472 million in September, up sharply from August.
This is a new record high, and is obviously bad news.
These workers are included in the alternate measure of labor underutilization (U-6) that increased to 17.1% in September from 16.7% in August. The high for U-6 was 17.4% in October 2009. Grim.
Employment-Population Ratio
The Employment-Population ratio was steady at 58.5% in September (the same as in August).
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 Labor Force Participation Rate was also steady at 64.7% in September. This is the percentage of the working age population in the labor force. The participation rate is well below the 66% to 67% rate that was normal over the last 20 years.
When the employment picture eventually improves, people will return to the labor force and the participation rate will increase from these very low levels. And that will put upward pressure on the unemployment rate.
Unemployed over 26 Weeks
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 6.123 million workers who have been unemployed for more than 26 weeks and still want a job. This is 4.0% of the civilian workforce. It appears the number of long term unemployed has peaked ... Although this may be because people are giving up.
The number of long term unemployed is staggering - still over 6 million people who are looking for a job.
Summary
The underlying details of the employment report were grim. The number of private sector jobs increased modestly by 64,000, otherwise ...
The negatives include the loss of 18,000 jobs ex-Census, the sharp increase in part time workers for economic reasons (and jump in U-6 unemployment rate), hours worked were flat (down for manufacturing workers), the employment-population ratio and labor force participation were flat at very low levels, and the unemployment rate was flat at a very high level.
Overall this was a weak report.
September Employment Report: 18K Jobs Lost ex-Census, 9.6% Unemployment Rate
by Calculated Risk on 10/08/2010 08:30:00 AM
Note: This will be the last "ex-Census" report this decade.
From the BLS:
Nonfarm payroll employment edged down (-95,000) in September, and the unemployment rate was unchanged at 9.6 percent, the U.S. Bureau of Labor Statistics reported today. Government employment declined (-159,000), reflecting both a drop in the number of temporary jobs for Census 2010 and job losses in local government. Private-sector payroll employment continued to trend up modestly (+64,000).Census 2010 hiring decreased 77,000 in September. Non-farm payroll employment decreased 18,000 in September ex-Census.
Both July and August payroll employment were revised down. The change in total nonfarm payroll employment for July was revised from -54,000 to -66,000, and the change for August was revised from -54,000 to -57,000.
Click on graph for larger image.This graph shows the unemployment rate vs. recessions.
Nonfarm payrolls decreased by 95 thousand in August. The economy has gained 334 thousand jobs over the last year, and lost 7.75 million jobs since the recession started in December 2007.
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).The dotted line is ex-Census hiring. The two lines have joined since the decennial Census is almost over.
For the current employment recession, employment peaked in December 2007, and this recession is by far 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).
Note: The preliminary benchmark payroll revision is minus 366,000 jobs. This is a little larger than the normal adjustment (last year was especially large). The actual adjustment will be made in February 2011. This is the preliminary estimate of the annual revision, from the BLS: "The benchmark adjustment, a standard part of the payroll survey estimation process, is a once-a-year re-anchoring of the sample-based employment estimates to full population counts available principally through unemployment insurance (UI) tax records filed by employers with State Employment Security Agencies."
This is another weak employment report. I'll have much more soon ...
For more, see next post: Employment-Population Ratio, Part Time Workers, Unemployed over 26 Weeks
Thursday, October 07, 2010
NY Times: Foreclosure-Gate starting to impact home sales
by Calculated Risk on 10/07/2010 10:23:00 PM
From Andrew Martin and David Streitfeld at the NY Times: Flawed Foreclosure Documents Thwart Home Sales
[A]s a scandal unfolds over mortgage lenders’ shoddy preparation of foreclosure documents, the fallout is beginning to hammer the housing market, especially in states like Florida where distressed properties are abundant. ... the agents are being told the freeze will last 30 to 90 days ...This will probably just be a delay. And the delays will mostly be in the judicial foreclosure states, although the story has one example of a house withdrawn from the market in California.
[One Florida] agency had 35 deals that were supposed to close this month. As of Thursday, Fannie had postponed 11 of them.
Video of Krugman, Feldstein and Hatzius from Oct 5th
by Calculated Risk on 10/07/2010 08:00:00 PM
Here is the video of Professors Paul Krugman and Martin Feldstein (former Reagan advisor and NBER president), and Jan Hatzius, chief economist of Goldman Sachs:
The Economic Policy Institute conference on October 5, 2010
I'm not sure who is the most pessimistic.
Lawler: “Foreclosure-Gate”: Who Will, and Who Should “Pay”?
by Calculated Risk on 10/07/2010 05:09:00 PM
CR Note: This is from economist Tom Lawler, who joked today: Maybe large servicers should be forced to put up billions in "claims fund," like BP? (the latter "caused" slime, while the former are just "slimy"!)
The mortgage-foreclosure debacle, which started with a story about a GMAC “technicality” (and included a “GMAC denies foreclosure moratorium” story) but which quickly “ballooned” as more mortgage servicers were “implicated,” has now exploded into a full-blown “issue” of unknown proportions. One thing is pretty clear – many larger mortgage servicers simply “screwed up” by trying to deal with the surge in foreclosures by taking shortcuts to keep costs down, and this mistake has blown up in their faces.
But … is it just “their” faces?
It seems pretty clear that one of the outcomes of the recent “revelations” is that many foreclosures will be postponed; there will be more “refilings” of foreclosure petitions that will cost money; more borrowers facing foreclosures will hire lawyers, and servicers will have to reimburse more borrowers for legal fees; and some foreclosures could be delayed for quite a while. It is unclear at this point whether there will be any significant number of completed foreclosures that might be reversed, but if so that’s gonna cost! Net, there are going to be significant costs that someone is going to have to bear.
But who will bear those costs? Will it be mortgage servicers? Well, if they also own the mortgage, sure. But what about for loans they service for others (including private-label securities, Fannie, Freddie, FHA, VA, …)? Who’s a’ gonna’ pay?
From a “who should” perspective, any increase in losses associated with mistakes made by mortgage servicers, especially if those mistakes involved not following state foreclosure laws, which is a “violation” of most servicing contracts, the answer is crystal clear – the mortgage servicers. But how easy is it going to be to determine losses associated with mistakes by mortgage servicers? What are the “rules” on what a servicer can “recoup” in terms of costs associated with foreclosure when a servicer makes a mistake in private-label deals? With loans serviced for Fannie and Freddie, or FHA? What about delays in foreclosures clearly associated with servicer mistakes, which generally result in increased loss severities? Mortgage investors shouldn’t bear those costs, but how can they be sure they won’t?
What if there is a national “foreclosure moratorium” triggered by mortgage servicer mistakes that ultimately increase the severity of losses? Who “pays the price” in reality, as opposed to who “should?” Will there be lawsuits from mortgage investors whose loans and/or loans backing securities they own find that their incidence and/or severity of loss was adversely impacted by servicers mistakes, and will they be able to ensure that servicers who “screwed up” bear those losses instead of them?
I don’t know the “technically right” answers to any of the above questions, but it is crystal clear that the “right” answer should be that mortgage servicers who messed up should bear all of the costs associated with their mess up.
CR Note: This is from economist Tom Lawler
Consumer Credit declines in August
by Calculated Risk on 10/07/2010 03:19:00 PM
The Federal Reserve reports:
In August, total consumer credit decreased at an annual rate of 1-3/4 percent. Revolving credit decreased at an annual rate of 7-1/4 percent, and [Non] revolving credit increased at an annual rate of 1-1/4 percent.
Click on graph for larger image in new window.This graph shows the increase in consumer credit since 1978. The amounts are nominal (not inflation adjusted).
Revolving credit (credit card debt) is off 15.2% from the peak. Non-revolving debt (auto, furniture, and other loans) is off 1.1% from the peak. Note: Consumer credit does not include real estate debt. This has been very different from previous recessions with the decline in non-revolving debt.
Fed's Fisher: QE2 "debate still to take place"
by Calculated Risk on 10/07/2010 01:33:00 PM
From Dallas Fed President Richard Fisher: To Ease or Not to Ease? What Next for the Fed?
I am afraid that despite recent speculation in the press and among market pundits, we did little at that meeting to settle the debate as to whether the Committee might actually engage in further monetary accommodation, or what has become known in the parlance of Wall Street as “QE2,” a second round of quantitative easing. It would be marked by an expansion of our balance sheet beyond its current footings of $2.3 trillion through the purchase of additional Treasuries or other securities. To be sure, some in the marketplace―including those with the most to gain financially―read the tea leaves of the statement as indicating a bias toward further asset purchases, executed either in small increments or in a “shock-and-awe” format entailing large buy-ins, leaving open only the question of when.Fisher suggests the debate on QE2 isn't over (he opposes QE2). However he is not a voting member of the FOMC this year (an alternate). He is always fun to read - but barring some upside surprise, I think QE2 will be announced on November 3rd.
Since the FOMC meeting, a handful of my colleagues have fanned further speculation about QE2 by signaling their personal positions on the matter quite openly in recent speeches and interviews in the major newspapers. Hence the headline in yesterday’s Wall Street Journal, “Central Banks Open Spigot,” a declaration that surely gave the ghosts of central bankers past the shivers and sent a tingle down the spine of gold bugs from Bemidji to Beijing.
...
There is a great deal of legitimate debate still to take place within the FOMC on the subject of quantitative easing and the pros and cons and costs and benefits of further monetary accommodation. Whatever we might do, if anything, must be consistent with long-term price stability and not add to the nightmare of confusing signals already being sent to job creators.
What will we likely decide at the next FOMC meeting? ... “You’ll find out soon enough.”
