by Calculated Risk on 11/05/2010 10:04:00 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 payroll employment excluding temporary Census workers.

Employment-Population Ratio

The Employment-Population ratio declined to 58.3% in October from 58.5% in September. This is disappointing news.

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 also declined to 64.5% in October from 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. Right now workers are leaving the labor force, and even though that is keeping the reported unemployment rate from rising, it is really unwelcome news.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (some-
times referred to as involuntary part-time workers) fell by 318,000
over the month to 9.2 million, partially offsetting large increases in
the prior 2 months. 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) declined to 9.154 million in October, from the record 9.472 million in September. This is still very high.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 17.0% in October from 17.1% in September. The high for U-6 was 17.4% in October 2009. Still grim.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 6.206 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 6.123 million in September. 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 mixed. The positive included the 151,000 payroll jobs added, the upward revisions to August and September, a slight uptick in hours worked and average hourly earnings, and a slight decline in part time workers (and slight decline in U-6 unemployment).

The negatives include the declines in the employment-population ratio and the participation rate, the increase in workers unemployed for over 26 weeks, and the unemployment rate still flat at a very high level.

This report was a clear improvement from the previous four months, but this was still a fairly soft report.

Earlier Employment post: October Employment Report: 151,000 Jobs, 9.6% Unemployment Rate

by Calculated Risk on 11/05/2010 08:30:00 AM

From the BLS:

Nonfarm payroll employment increased by 151,000 in October, and the unemployment rate was unchanged at 9.6 percent, the U.S. Bureau of Labor Statistics reported today.

Both August and September payroll employment were revised up.

Click on graph for larger image.

This graph shows the unemployment rate vs. recessions. The unemployment rate has been stuck at 9.6% for three straight months.

Nonfarm payrolls increased by 151 thousand in October. The economy has gained 829 thousand jobs over the last year, and still lost 7.5 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 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 the early '80s recession with a peak of 10.8 percent was worse).

This is an improved employment report compared to recent months. I'll have much more soon ...

by Calculated Risk on 11/05/2010 12:01:00 AM

A late night update ... from the Financial Times: Clearing house warning to Irish bond traders

Fears over the health of the eurozone bond market intensified after one of Europe’s biggest clearing houses warned investors they could be compelled to stump up substantially more money to trade in Ireland’s debt.
...
Such a curb would be a blow to the Irish debt market and comes amid growing concerns over the fragility of the euro­zone’s peripheral economies.
excerpt with permission

And from the Irish Times: Government to postpone publication of four-year plan

A detailed four-year budget had been scheduled for publication in the next week or so but it emerged yesterday that the plan will not be disclosed until closer to the December budget.

by Calculated Risk on 11/04/2010 06:14:00 PM

The BLS will release the October Employment Report at 8:30 AM tomorrow. The consensus is for an increase of 60,000 payroll jobs in October, and for the unemployment rate to stay steady at 9.6%.

Most of the reports this week have been slightly above expectations:

The ADP employment report showed an increase of 43,000 private sector jobs in October. This was above expectations of 20,000 private sector jobs.

The ISM manufacturing employment index increased to 57.7 from 56.5 in September. This suggests some minor manufacturing job growth in October, although the ADP report showed a decline in manufacturing jobs.

The ISM non-manufacturing employment index increased to 50.9 from 50.2 in September. Although the relationship between this index and payroll jobs is noisy, this suggests close to 100,000 service jobs added in October.

Weekly initial unemployment claims were at about the same level in October as in September.

The decennial Census hiring and layoffs can finally be ignored this month. However it is worth remembering that the payroll reports showed job losses for each of the last four months, but excluding the decennial Census, the reports showed average gains of about 40,000 per month. So reports tomorrow that "this is the first gain since May" will be a little misleading.

I don't expect a strong report, but perhaps slightly better than expectations (I have no strong view this month).

by Calculated Risk on 11/04/2010 02:29:00 PM

As followup to the previous post, here is a look at European bond spreads from the Atlanta Fed weekly Financial Highlights released today (graph as of Nov 2nd):

Click on graph for larger image in new window.

From the Atlanta Fed:

Some peripheral European bond spreads (over German bonds) continue to be elevated, particularly those of Greece, Ireland, and Portugal.

Since the September FOMC meeting, the 10-year Greece-to-German bond spread has narrowed by 45 basis points (bps), from 8.62% to 8.17%, through November 2, though the spread has risen by 110 bps in the past two weeks.

Similarly, with other European peripherals’ spreads, Portugal’s is essentially unchanged over the intermeeting period but is 56 bps higher than two weeks prior, and Ireland’s spread is actually 70 bps higher since the last FOMC meeting and 100 bps higher since October 19.

The Atlanta Fed data is a couple days old. Nemo has links to the current data on the sidebar of his site.

As of today, the Ireland-to-German spread has increased to a record 525 bps, and the Portugal-to-German spread has increased to 417 bps - just below the record set in late September. The Greece-to-German spread is at 892 bps.

by Calculated Risk on 11/04/2010 12:24:00 PM

The yield on the Ireland 10-year bond surged again today to 7.68%. The Portugal 10-year yield is near a record at 6.57%.

At what point does it make sense for Ireland to use the European Financial Stability Facility (EFSF)?

Wolfgang Münchau at the Financial Times worked through the details in September and estimated the EFSF borrowing costs would be around 8%: Could any country risk a eurozone bail-out?

It is not all that hard to conceive of a situation in which the borrower would end up paying a total interest rate of 8 per cent ... Three issues arise from this set-up. The first is that no country would ever want to borrow from the EFSF, unless it was absolutely unavoidable. The typical situation where an EFSF loan would be useful would be a case of egregious market failure. If the borrower is insolvent, the EFSF cannot help.
excerpt with permission

So probably at around 8%. Ireland apparently will not need to borrow until sometime in 2011 - and they will do everything possible to avoid the EFSF, still the yields are getting close for the EFSF to make sense ...

And it appears Russia has stopped investing in bonds of Ireland and Portugal - via Tracy Alloway at the Financial Times Alphaville: The world backs away from Ireland, Spain, Portugal

There’s something missing from the Russian Finance Ministry’s website.

No mention of Ireland, Portugal or even Spain.

by Calculated Risk on 11/04/2010 11:38:00 AM

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

Important: Even though the occupancy rate is close to 2008 levels, 2010 is a more difficult year for the hotel industry than 2008. RevPAR (revenue per available room) is up 12.5% compared to the same week in 2009, but still down 3% compared to the same week in 2008 - and 2008 was a very difficult year for the hotel industry.

From HotelNewsNow.com: STR: Upper-upscale reports softer week

Overall the industry’s occupancy increased 11.7% to 57.9%, ADR was up 0.7% to US$99.84, and RevPAR ended the week up 12.5% to US$57.76.

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 8.5% compared to last year (the worst year since the Great Depression) and 5.8% below the median for 2000 through 2007.

The occupancy rate is slightly above the levels of 2008, but RevPAR is still down 3% compared to the same week in 2008.

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

by Calculated Risk on 11/04/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Oct. 30, the advance figure for seasonally adjusted initial claims was 457,000, an increase of 20,000 from the previous week's revised figure of 437,000. The 4-week moving average was 456,000, an increase of 2,000 from the previous week's revised average of 454,000.

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 increased this week by 2,000 to 456,000.

The 4-week moving average has been moving sideways at an elevated level for almost a year - a sign of a weak job market.

by Calculated Risk on 11/03/2010 11:59:00 PM

Fed Chairman Ben Bernanke explains what the Fed is trying to accomplish in the WaPo: What the Fed did and why: supporting the recovery and sustaining price stability

[W]hen the Fed's monetary policymaking committee - the Federal Open Market Committee (FOMC) - met this week to review the economic situation, we could hardly be satisfied. The Federal Reserve's objectives - its dual mandate, set by Congress - are to promote a high level of employment and low, stable inflation. Unfortunately, the job market remains quite weak; the national unemployment rate is nearly 10 percent ...

Today, most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run. ... [L]ow and falling inflation indicate that the economy has considerable spare capacity, implying that there is scope for monetary policy to support further gains in employment without risking economic overheating. The FOMC decided this week that ... further support to the economy is needed. With short-term interest rates already about as low as they can go, the FOMC agreed to deliver that support by purchasing additional longer-term securities, as it did in 2008 and 2009. ...

This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

by Calculated Risk on 11/03/2010 09:46:00 PM

From the American Bankruptcy Institute: October Consumer Bankruptcy Filings increase slightly from Previous Month. There will be close to 1.6 million consumer bankruptcy filings this year.

Yields on Ireland 10-year bonds soared to 7.44% today. The yield on the Greece 10-year hit 10.85%, and the Portugal 10-year was up to 6.3%.

Freddie Mac reported a $2.5 billion net loss. Freddie Mac's REO inventory increased 20% from 62,178 at the end of Q2 to 74,897 at the end of Q3. And that is expected to increase sharply in Q4:

Foreclosure activity for non-performing loans also continued to increase during the third quarter as many of those loans transitioned to REO. The timing and volume of the company's future REO activities could be adversely affected by deficiencies in the foreclosure practices of the company's mortgage servicers, as well as related delays in the foreclosure process.

And the costs for the REOs are increasing too:

included in non-interest expense for the third quarter of 2010 was REO operations expense of $337 million, compared to REO operations income of $40 million in the second quarter of 2010, reflecting higher property write-downs due to lower estimated REO fair values as well as higher expenses driven by increased REO inventory.

Earlier stories today:

FOMC Statement: QE2 Arrives, $600 Billion by end of Q2 2011

U.S. Light Vehicle Sales 12.26 million SAAR in October

From the Institute for Supply Management: October 2010 Non-Manufacturing ISM Report On Business®. The October ISM Non-manufacturing index was at 54.3%, up from 53.2% in September - and above expectations of 54.0%. The employment index showed expansion in October at 50.9%, up from 50.2% in September.

ADP reported "Private-sector employment increased by 43,000 from September to October". This was above expectations for 20,000 private sector jobs in October.