by Calculated Risk on 12/07/2010 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings in October was 3.4 million, which was up
from 3.0 million in September. Since the most recent series trough in
July 2009, the number of job openings has risen by 1.0 million or 44
percent.

The following graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Unfortunately this is a new series and only started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for October, the most recent employment report was for November.

Click on graph for larger image in graphics gallery.

Notice that hires (purple) and total separations (red and blue columns stacked) are pretty close each month. When the purple line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Note: The temporary decennial Census hiring and layoffs distorted this series over the summer months.

In October, about 4.047 million people lost (or left) their jobs, and 4.196 million were hired (this is the labor turnover in the economy) adding 149 thousand total jobs.

The good news is job openings is increasing, however overall labor turnover is still low.

by Calculated Risk on 12/07/2010 09:00:00 AM

This is the new UCLA Anderson Forecast and Ceridian Corporation index using real-time diesel fuel consumption data: Pulse of Commerce Index^TM

Click on graph for larger image in new window.

This graph shows the index since January 1999.

This is a new index, and doesn't have much of a track record in real time, although the data suggests the recovery has "stalled" since May.

Press Release: Inventory Movement Up Slightly in November in Still Fragile Market, Reports Latest Ceridian-UCLA Pulse of Commerce Index™

The Ceridian-UCLA Pulse of Commerce Index™ (PCI), a real-time measure of the flow of goods to U.S. factories, retailers, and consumers, grew 0.4 percent in November following three consecutive months of decline. The growth, while positive, is not enough to offset the 0.6 percent decline that the PCI saw the previous month, nor the 2.1 percent decline experienced in the PCI since July. Though on a year-over-year basis the PCI is up, the three month moving average has been declining for four months, suggesting relative weakness within the goods producing segments of the economy.

“While the PCI’s most recent data shows growth, it is not substantial enough to offset the loss from the third quarter,” explained Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast. “In short, November’s “up” is relative to a low-bar so the growth is only mildly encouraging. The flatness we’re seeing with the latest PCI data reflects inventories in motion which seem to be signaling a weak fourth quarter.”
...
The Ceridian-UCLA Pulse of Commerce Index™ is based on real-time diesel fuel consumption data for over the road trucking ...

Note:
I'm not confident in using this index to forecast GDP growth, although it does appear to track Industrial Production over time (with plenty of noise).

by Calculated Risk on 12/06/2010 08:29:00 PM

The NY Times has the details: Pact on Bush Tax Cuts Trims Payroll Levy

A few points:
• Extend Bush income tax cuts for two years, including for high income earners.

• 13-month extension of jobless aid for the long-term unemployed. This isn't additional weeks of benefits for the '99ers - this is an extension of the qualification dates for existing tiers of extended unemployment benefits.

• Reducing the Social Security payroll tax by two percentage points for a year:

For a family earning $50,000, the two percentage point cut would mean a savings of $1,000.

For workers paying the maximum, the two percentage point cut would mean a savings of $2,136.

• Estate tax exemption of $5 million per person and a maximum rate of 35 percent.

This is expected to increase the budget deficit by $900 billion over two years.

by Calculated Risk on 12/06/2010 05:15:00 PM

From the Association of American Railroads: AAR Reports November 2010 Rail Traffic Continues Mixed Progress. The AAR reports carload traffic in November 2010 was up 4.5% compared to November 2009, however carload traffic was still lower than in November 2008. Intermodal traffic (using intermodal or shipping containers) is up 11.3% over November 2009 and up slightly over November 2008.

"Even though U.S. rail volumes were down in November from October levels — due largely to Thanksgiving — November marks the 11th straight month in which rail volumes were higher than year-earlier levels. That hasn’t happened since January 2006," said AAR Senior Vice President John Gray. "Granted, 2009 was a bad year for rail traffic, but like the economy in general, rail traffic has been slowly improving. We’re hopeful that recent gains in consumer confidence and some recent encouraging signs regarding consumer spending will mean a continuation of economic growth and further growth in rail traffic."

While railroads continue to bring employees back to work and cars out of storage, data show the pace slowed slightly in recent months. During the month of October, the most recent period for industry employment data, railroads added 191 people to the employee rolls. Railroads brought 465 rail cars out of storage in November, with 317,810 cars, or roughly 20.8 percent of the North American railcar fleet, still in storage.

Click on graph for larger image in new window.

This graph shows U.S. average weekly rail carloads (NSA). Traffic increased in 14 of 19 major commodity categories year-over-year.

From AAR:

• U.S. freight railroads originated an average of 284,407 carloads per week in November 2010 (see chart below left), for a total of 1,137,626 carloads for the month. That’s up 4.5% over November 2009. November was the ninth straight month with higher year-over-year average weekly rail carloads, something that hasn’t happened since 2004.

• On a seasonally adjusted basis, U.S. rail carloads were down 1.1% in November 2010 from October 2010. Seasonally-adjusted carloads on U.S. carriers have fallen (though by relatively small amounts) three of the past four months.

As the first graph shows, rail carload traffic collapsed in November 2008, and now, over a year into the recovery, carload traffic has only recovered part way.

The second graph is for intermodal traffic (using intermodal or shipping containers):

• On a non-seasonally adjusted basis, there is always a big decline in intermodal traffic in November from October, partly because many of the goods retailers stock for holiday sales are shipped in September and October and partly because of Thanksgiving. The week including Thanksgiving this year was the lowest-volume intermodal week of the year for U.S. railroads.

• Seasonally adjusted U.S. rail intermodal traffic was down 0.4% in November 2010 from October 2010, its third straight monthly decline. As with carloads, recent declines have been small.
excerpts with permission

The small seasonally adjusted declines suggest the recovery is very sluggish, or has even stalled, over the last few months.

Note: The Ceridian-UCLA diesel fuel index for November will be released tomorrow.

by Calculated Risk on 12/06/2010 01:10:00 PM

One of the key reasons for the sluggish recovery has been the ongoing problems in housing. Usually residential investment (RI) is a major contributor to GDP growth in the early stages of a recovery, but not this time because of the huge overhang of existing vacant homes.

Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

Click on graph for larger image in graphics gallery.

This graph shows RI and investment in single family structures as a percent of GDP. Usually RI rebounds strongly at the beginning of a recovery, but this time RI has continued to decline.

RI as a percent of GDP is at a post WWII low of 2.22%, and investment in single family structures is near the all time low.

Some people have asked how a sector that only accounts for 2.2% of GDP be so important? The answer is that usually RI accounts for a large percentage of the employment and GDP growth in the first year or so of a recovery. We can see this by looking at housing starts and the unemployment rate.

This graph shows single family housing starts (through October) and the unemployment rate (inverted) through November. Note: Of course there are many other factors too, but housing is a key sector.

You can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn't hold.

Housing starts (blue) rebounded a little last year,and then moved sideways for some time, before declining again in May.

This is what I expected when I first posted the above graph in August 2009. I wrote:

[T]here is still far too much existing home inventory, a sharp bounce back in housing starts is unlikely, so I think ... a rapid decline in unemployment is also unlikely.

I'm now looking at a 2011 forecast for housing, and the good news is RI should increase modestly next year. It will not be a vigorous recovery, but I do expect RI to make a positive contribution to GDP - and that is an improvement, and is one of the reasons I think real GDP growth in 2011 will be 3%+. Not great, but an improvement over 2010.

by Calculated Risk on 12/06/2010 09:17:00 AM

The European finance ministers are meeting today in Brussels. As we discussed over the weekend, some ministers are pushing to increase the bailout fund and others are arguing for "E-bonds" - joint European government bonds. As expected, Germany reject both suggestions ...

From the Irish Times: Germany rejects calls over debt fund

German Chancellor Angela Merkel said she saw no need to increase the size of the bailout mechanism.

Mrs Merkel also said the European Union treaty did not allow for issuing common bonds, which would anyway reduce the element of competition and the interest rate incentive for fiscal good behaviour.

The German view is the higher spreads are the penalty for bad behaviour.

The key 10-year bond yields fell sharply last week (Ireland, Portugal, Spain), but are up slightly today.

by Calculated Risk on 12/05/2010 09:06:00 PM

From the CBS 60 Minutes interview: Fed Chairman Bernanke On The Economy

CBS: In the panic of 2008, the Fed put up $3.3 trillion. And just this past week, the Fed revealed who got emergency help. ... it was a historic transfusion of cash in a global system that was bleeding to death. We asked Bernanke what would have happened if the Fed hadn't acted.

Scott Pelley: What would unemployment be today?

Fed Chairman Bernanke: Unemployment would be much, much higher. It might be something like it was in the Depression. Twenty-five percent. We saw what happened when one or two large financial firms came close to failure or to failure. Imagine if ten or 12 or 15 firms had failed, which is where we almost were in the fall of 2008. It would have brought down the entire global financial system and it would have had enormous implications, very long-lasting implications for the global economy, not just the U.S. economy.

Although we don't how bad it would have been, I've repeatedly praised the Fed's creative and aggressive liquidity efforts - once they finally understood what was happening. This was the Federal Reserve at its best (and they are constantly criticized for this effort).

And on the Fed at its worst:

Pelley: Is there anything that you wish you'd done differently over these last two and a half years or so?

Bernanke: Well, I wish I'd been omniscient and seen the crisis coming, the way you asked me about, I didn't.

Bernanke was flat out blind. Missing the housing bubble and inevitable financial impact was inexcusable. I criticized Bernanke repeatedly in 2005, 2006 and 2007 for not recognizing the serious problems with the economy. I ridiculed Bernanke's 2005 piece in the WSJ: The Goldilocks Economy and wrote then that Bernanke was "channeling Coolidge's [Dec 1928] monument to economic shortsightedness".

There is much more in the interview including comments on income inequality ... "Well, it’s a very bad development. It’s creating two societies." ... and on unemployment ... "At the rate we're going, it could be four, five years before we are back to a more normal unemployment rate."

As always, I suggest ignoring Bernanke's comments on the deficit.

Earlier:
• Summary for Week ending December 4th
• Schedule for Week of December 5th

by Calculated Risk on 12/05/2010 07:02:00 PM

The European finance ministers meet this week in Brussels. Some ministers are pushing to increase the bailout fund and others are arguing for "E-bonds" - joint European government bonds. Although the key 10-year bond yields fell sharply last week (Ireland, Portugal, Spain), the crisis is far from over. A couple of articles:

From Stephen Castle at the NY Times: Pressure Rises to Bolster European Bailout Fund

European finance ministers are under mounting pressure to significantly increase the €750 billion rescue fund for the currency union when they meet Monday. ... Didier Reynders, the Belgian finance minister, suggested over the weekend that the fund ... will have to be increased when it is made permanent after 2013, and that it may make little sense to wait until then to do it.

From the Financial Times: Europe’s leaders at odds over bond plan

Jean-Claude Juncker, Luxembourg’s prime minister who also chairs meetings of eurozone finance ministers, and Giulio Tremonti, Italy’s finance minister, argue in Monday’s Financial Times that the launch of “E-bonds” would send a clear message to financial markets and European citizens about the “the irreversibility of the euro”.
excerpt with permission

Good luck getting Germany on board.

by Calculated Risk on 12/05/2010 02:29:00 PM

I haven't updated this graph for some time ...

There have been 314 bank failures in this cycle (starting in 2007):

FDIC Bank Failures by Year
2007	3
2008	25
2009	140
2010	149
Total	314

No larger image.This graph shows bank failures by week in 2008, 2009 and 2010.

The FDIC has slowed down recently, and there are probably only two weeks left for bank closures this year. The 149 bank failures this year is the highest total since 1992 (181 bank failures).

Unfortunately banks are still being added to the unofficial problem bank list much faster than they are being removed ... so there are probably many more banks failures to come.

Earlier:
• Summary for Week ending December 4th
• Schedule for Week of December 5th

by Calculated Risk on 12/05/2010 09:28:00 AM

Below is a summary of the previous week, mostly in graphs. Note: here is the economic schedule for the coming week.

• November Employment Report: 39,000 Jobs, 9.8% Unemployment Rate

The following graph shows the employment population ratio, the participation rate, and the unemployment rate.

Click on graph for larger image in graph gallery.

The unemployment rate increased to 9.8% (red line) from 9.6% in October.

The Employment-Population ratio declined to 58.2% in November matching the cycle low set in 2009 (black line).

The Labor Force Participation Rate was steady at 64.5% in November (blue line). 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.

The second graph shows the job losses from the start of the employment recession, in percentage terms aligned at maximum job losses.

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).

The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) declined slightly to 8.972 million in November. This has been around 9 million since August 2009 - a very high level.

These workers are included in the alternate measure of labor underutilization (U-6) that was steady at 17.0% in November. The high for U-6 was 17.4% in October 2009. Still very grim.

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

According to the BLS, there are 6.313 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 6.206 million in October. It appears the number of long term unemployed has peaked, however the level is extremely high - and the increases over the last two months is very concerning.

Most of the underlying details of the employment report were weak. The positives included small upward revisions to the September and October payroll reports, a slight increase in average hourly earnings, and a slight decline in part time workers.

The negatives include the unemployment rate increasing to 9.8%, few payroll jobs added (only 39,000 jobs), the decline in the employment-population ratio, the steady participation rate at a very low level, and the increase in workers unemployed for over 26 weeks.

• Case-Shiller: Broad-based Declines in Home Prices in Q3

S&P/Case-Shiller released the monthly Home Price Indices for September (actually a 3 month average of July, August and September). This includes prices for 20 individual cities, and two composite indices (10 cities and 20 cities), and the quarterly national index.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 29.8% from the peak, and down 0.7% in September(SA).

The Composite 20 index is off 29.6% from the peak, and down 0.8% in September (SA).

The next graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Prices increased (SA) in only 1 of the 20 Case-Shiller cities in September seasonally adjusted. Only Wash, D.C. saw a price increase (SA) in September, and that was very small.

Prices in Las Vegas are off 57.6% from the peak, and prices in Dallas only off 8.1% from the peak.

Prices are now falling - and falling just about everywhere. And it appears there are more price declines coming (based on inventory levels and anecdotal reports).

• U.S. Light Vehicle Sales 12.26 million SAAR in November

Based on an estimate from Autodata Corp, light vehicle sales were at a 12.26 million SAAR in November. That is up 13.2% from November 2009, and up slightly from the October 2010 sales rate.

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for November (red, light vehicle sales of 12.26 million SAAR from Autodata Corp).

This is the highest sales rate since September 2008, excluding Cash-for-clunkers in August 2009.

This was above most forecasts of around 12.0 million SAAR.

• ISM Manufacturing Index decreases slightly to 56.6 in November

From the Institute for Supply Management: November 2010 Manufacturing ISM Report On Business® PMI was at 56.6% in November, down slightly from 56.9% in October. The consensus was for a decrease to 56.5%.

Here is a long term graph of the ISM manufacturing index.

In addition to the PMI, the ISM's new orders index was down to 56.6 from 58.9 in October.

The employment index decreased to 57.5 from 57.7 in October.

This was inline with the regional Fed manufacturing surveys.

• Other Economic Stories ...
• Restaurant Performance Index Rose to Three-Year High In October
• Hamilton: Europe and China: is this deja vu all over again?
• Michael Pettis: The rough politics of European adjustment.
• From Catherine Rampell at the NY Times: Persistence of Long-Term Unemployment Tests U.S.
• DOT: Vehicle miles driven increased in September
• From the Institute for Supply Management: October 2010 Non-Manufacturing ISM index showed expansion in November
• From the NAR:
Strong Rebound in Pending Home Sales
• ADP: Private Employment increased by 93,000 in November
• Unofficial Problem Bank list increases to 920 Institutions

Best wishes to all!