by Calculated Risk on 2/10/2011 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Feb. 5, the advance figure for seasonally adjusted initial claims was 383,000, a decrease of 36,000 from the previous week's revised figure of 419,000. The 4-week moving average was 415,500, a decrease of 16,000 from the previous week's revised average of 431,500.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims for the last 10 years. The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 16,000 to 415,500.

This is the lowest level for initial weekly unemployment claims since July 2008, although the 4-week average was a little lower early last month. The fairly rapid decline in the 4-week average over the last few months has been good news.

by Calculated Risk on 2/09/2011 08:20:00 PM

From CoStar: CoStar Commercial Repeat-Sale Indices, February 2011 Release

• At the national level, CoStar’s Investment Grade Repeat-Sale Index was up nearly 7% for the month of December continuing the see-saw pattern observed with oscillating monthly pricing data, resulting in a slight positive quarter. ... From its peak in July 2007, the Investment Grade pricing index is down 34.1%, with the trough occurring in January 2010 when the Index was down 40%.

• The strong performance of the Investment Grade index was enough to lift the U.S. national Composite Index, which is an equal-weighted repeat sales analysis of all commercial real estate sales, with two thirds of the transaction count contained within the General Index. The Composite Index was up 1.8% for the month, down 5.8% for the quarter and down 6.3% for the year. Overall the Composite Index is down 22% over the past two years.
emphasis added

Click on graph for larger image in new window.

This graph from CoStar shows the indexes for investment grade, general commercial and a composite index. The general commercial index was down, the other two were up slightly from November.

It is important to remember that there are very few CRE transactions (compared to residential), and that there is a high percentage of distressed sales, so prices are very volatile. On the number of "pairs":

The CCRSI January 2011 report is based on data through the end of December, 2010. In December of 2010 983 pair sales were recorded compared to 656 in the prior month, 610 in October and 690 in September. It is typical to see volume increase at year end. In December of 2009 the pair sales count was 807, so volume on this basis is up 22% from a year earlier. Distress sales as a percent of the total has been increasing in each of the four quarters in 2010 with just over 20% in the 4th quarter with 18.5% for all of 2010. By property type the highest percent of distress in the fourth quarter were for Hospitality at 36%, followed by Multifamily at 24%, office at 21% and industrial and retail both near 19%.

So this is based on only 983 transactions.

by Calculated Risk on 2/09/2011 05:45:00 PM

From NY Fed Vice President Brian Sack: Implementing the Federal Reserve’s Asset Purchase Program. This is for those interested in how the asset purchase program (QE2) works. A couple of excerpts:

[T]he Desk has been able to purchase large volumes of securities in a rapid manner, as required by the policy decisions made by the FOMC. Indeed, over the period since the FOMC's decision to expand the SOMA portfolio, the Desk has purchased about $300 billion of Treasury securities. That total includes about $220 billion of purchases out of the intended $600 billion expansion of the portfolio, and another $80 billion of purchases associated with the reinvestment of principal payments on agency debt and mortgage-backed securities. In terms of the monthly pace, the purchases so far have been running at about $105 billion per month, consisting of roughly $75 billion in new investments and $30 billion of reinvestments. To meet this pace, the Desk has been operating in the market on nearly every available day.

And on the recent increase in rates:

Since early November, one of the notable developments in financial markets has been the sharp increase in longer-term interest rates. At first glance, this change may seem at odds with the portfolio balance channel. However, it is important to understand the factors that led to the increase in interest rates in the current circumstances.

The upward movement in longer-term interest rates in large part reflects the greater optimism among investors about the outlook for economic growth. Investors revised up their baseline forecasts for the economy and reduced the perceived downside risks that they see around that outlook. This shift in the outlook led the market to price in the possibility of earlier increases in short-term interest rates and to scale back the size of asset purchases that they expect from the Federal Reserve. Both of those developments contributed to the significant rise in yields.

In contrast, the rise in yields does not appear to be driven by the concerns expressed by some that the asset purchase program would unleash a considerable rise in U.S. inflation and inflation expectations to levels well above those consistent with the Federal Reserve's mandate. Such an outcome would be detrimental to the economic outlook, leading to downward pressure on risky asset prices and a substantial weakening in the value of the dollar. However, what has taken place in U.S. markets to date does not resemble this outcome. Indeed, over the period since the November FOMC meeting, longer-term inflation expectations have remained at levels consistent with the Federal Reserve's mandate, risky asset prices have advanced and the dollar has held its ground.

by Calculated Risk on 2/09/2011 04:10:00 PM

Last year I mentioned a rumor that WikiLeaks might release some BofA documents.

Here is an update from Reuters: WikiLeaks Founder Suggests BofA Documents Are a Dud

The bombshell that WikiLeaks founder Julian Assange has said could "take down a bank or two" may in fact be something of a dud.
...
Assange said it consists of e-mails from the hard-drive of a Bank of America executive's computer and that the latest messages are dated sometime in 2006. ... Assange's private characterizations of the Bank of America material as being dated and difficult to interpret contrasts with inflammatory public statements he has made ... touting the significance of bank-related materials WikiLeaks has been planning to publish.

Note: I only mention this because I posted the rumor last year.

by Calculated Risk on 2/09/2011 12:58:00 PM

Fed Chairman Ben Bernanke has come under fire recently from many directions.

Of course I've been a frequent critic of Ben Bernanke over the years. I thought he missed the housing and credit bubble when he was a member of the Fed Board of Governors from 2002 to 2005. And I frequently ridiculed his comments when he was Chairman of the President Bush's Council of Economic Advisers from June 2005 to January 2006.

And we can't forget Bernanke's "contained" to subprime comments in March 2007. That became a running joke.

But I've also noted that once Bernanke started to understand the financial problems, he was very effective at providing liquidity for the markets. And there is no question that the short-term liquidity facilities were very effective and successful.

And I think Fed Chairman Ben Bernanke deserves praise today. His speech was very clear and he made several key points during the Q&A:

• QE is an extension of conventional monetary policy at the zero bound. As Bernanke noted

[T]he two types of policies affect the economy in similar ways. ... Conventional monetary policy easing works by lowering market expectations for the future path of short-term interest rates ... By comparison, the Federal Reserve's purchases of longer-term securities do not affect very short-term interest rates, which remain close to zero, but instead put downward pressure directly on longer-term interest rates.
With the Fed funds rate at the zero bound, the Fed had to resort to unconventional policy to provide further accommodation.

And with the unemployment rate near 10% (when QE2 started), and inflation well below the target rate, the Fed had no choice but to provide additional accommodation.

• Inflation in emerging markets is the responsibility of emerging market countries. The Fed is focused on inflation in the U.S., and the key measures of inflation show that inflation is below the Fed’s target of around 2%. For more on inflation, see Dr. Altig at Macroblog: Inflation confusion

• The U.S. needs a credible plan to reduce the long term deficit, but this doesn’t mean cutting the deficit in the short term since the U.S. economy still needs fiscal support.

• The debt and deficit are serious issues, but the debt ceiling debate is just political grandstanding. (I’ve made fun of both parties on this issue).

Right now I think the Fed is doing an excellent job with monetary policy, and I was very pleased that Bernanke stayed away from specifics on the deficit (not his responsibility).

by Calculated Risk on 2/09/2011 10:00:00 AM

Fed Chairman Ben Bernanke will testify before the House Budget Committee at 10 AM. "The Economic Outlook and Monetary and Fiscal Policy"

Here is the CNBC feed.

Prepared testimony: The Economic Outlook and Monetary and Fiscal Policy

by Calculated Risk on 2/09/2011 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 2000.

Press Release: PCI Posts 14th Consecutive Month of Year-Over-Year Growth

The Ceridian-UCLA Pulse of Commerce Index™ (PCI), issued today by the UCLA Anderson School of Management and Ceridian Corporation fell 0.3% on a seasonally and monthly workday adjusted basis in January, giving up some of December’s exceptional 1.8% sequential gain. Because of the very strong December showing, the three-month annualized moving average is up 5.1% and gaining strength.
...
The combined effect of very strong sequential gains in December and holding onto most of those gains in January suggest growth in industrial production for January equal to 0.3% when reported on February 16th.
...
The Ceridian-UCLA Pulse of Commerce Index™ is based on real-time diesel fuel consumption data for over the road trucking ...

Note: This index does appear to track Industrial Production over time (with plenty of noise). Industrial Production for December will be released February 16th.

by Calculated Risk on 2/09/2011 07:33:00 AM

The MBA reports: Mortgage Applications Decrease as Rates Jump in Latest MBA Weekly Survey

The Refinance Index decreased 7.7 percent from the previous week. The seasonally adjusted Purchase Index decreased 1.4 percent from one week earlier.
...
"Mortgage rates increased last week as many incoming economic indicators continue to show stronger growth than had been anticipated. Refinance volume continues to be low, as fewer homeowners with equity have any incentive to refinance," said Michael Fratantoni, MBA’s Vice President of Research and Economics. "We are at the beginning of the spring buying season, but purchase volume remains weak on a seasonally adjusted basis."
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 5.13 percent from 4.81 percent, with points decreasing to 0.84 from 1.02 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the highest contract 30-year rate recorded in the survey since the week ending April 9, 2010.

Click on graph for larger image in graph gallery.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The four-week moving average of the purchase index suggests weak home sales through the first few months of 2011. That is quite an increase in mortgage rates!

by Calculated Risk on 2/08/2011 09:41:00 PM

From Binyamin Appelbaum at the NY Times: Plans Near for Freddie and Fannie

[The] report will be released as early as Friday, [and] will present a range of options without stating a preference.
...
One possibility ... would not create any federal replacement for Fannie and Freddie, leaving the private markets to provide mortgages for most Americans. The alternative approaches instead would continue some form of federal mortgage backstop.
...
One potential compromise described in current drafts of the administration’s proposal would reduce the government’s role to a last line of defense for the mortgage market. ... During normal times, the insurer would guarantee no more than 10 percent of mortgages, but in times of crisis, the government could raise that cap, offering guarantees to a broader range of investors so that money continues to flow into the mortgage market and credit remains available.

At the least, having Fannie and Freddie as the "last line of defense" seems to make sense. When the next crisis happens - and it will happen - if there is only a "private market", then the government would have to scramble to provide mortgages (a free fall would never be allowed), so you might as well plan for it in advance.

by Calculated Risk on 2/08/2011 06:45:00 PM

After my "D-List Data" post, I've received several requests to try to create a list of economic data by priority. I'm working on it, in the meantime, here is some more data for D-List.

I follow three measures of transportation: rail traffic, trucking and a diesel fuel index (Ceridian-UCLA Pulse of Commerce Index). I also occasionally review press releases for UPS and FedEx for comments on the economy and forecasts.

This is not primary data, but it is sometimes helpful in confirming other data. As an example, last year I was looking for a mid-year / 2nd half slowdown, and the transportation data was useful in confirming the slowdown was happening.

These indicators mostly improved towards the end of the year, confirming the brighter outlook.

The January rail traffic report released today by the Association of American Railroads suggests the economy expanded further in January. The January Pulse of Commerce Index (PCI) will be released tomorrow morning at 9 AM ET.

The PCI is also somewhat correlated to Industrial Production (IP) from the Federal Reserve (although the relationship is a bit noisy). So the release tomorrow will give us a hint on January IP to be released on Wednesday Feb 16th.

Finally, rail traffic is an example of excess capacity in the economy. The railroad companies are always investing in maintenance and repairs, but investment in new equipment will probably not pick up significantly until traffic starts to approach the levels seen in 2006 – the peak year (still a long ways to go).

Here is the graph gallery for transportation.