by Calculated Risk on 8/05/2011 08:30:00 AM

From MarketWatch: U.S. economy gained 117,000 jobs in July

The U.S. economy added 117,000 jobs in July and an even larger 154,000 in the private sector while the unemployment rate fell to 9.1% from 9.2%, partly because 193,000 people dropped out of the labor force, according to the latest government data. Job gains in May and June were also revised up by a combined 56,000, the Labor Department reported Friday. Average hourly wages rose 10 cents, or 0.4%, to $23.13. The workweek was unchanged at 34.3 hours.

Click on graph for larger image in graph gallery.

This graph shows the unemployment rate.

The unemployment rate decreased to 9.1%.

Note: The BLS website crashed - I'll add the Participation rate and Employment to population ratio soon.

This graph shows the job losses from the start of the employment recession, in percentage terms aligned at the start of the recession. The dotted line is ex-Census hiring.

The current employment 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 was still weak, but better than expectations for payroll jobs, and the unemployment rate. The 154,000 private sector jobs - and 56,000 in upward revisions to May and June are improvements. I'll have much more soon ...

by Calculated Risk on 8/04/2011 08:58:00 PM

Tomorrow the BLS will release the July Employment Situation Summary at 8:30 AM ET. Bloomberg is showing the consensus is for an increase of 75,000 payroll jobs in July, and for the unemployment rate to hold steady at 9.2%.

I've seen estimates all over the place, including hearing a few whispers of a negative headline number. This isn't surprising since the economic data for July was weak - especially over the last couple of weeks as companies and individuals prepared for a possible U.S. government default.

However the BLS survey reference week includes the 12th of the month (the 2nd full week of July), and that was before the economy froze up due to the D.C. debate, and also before the European crisis really flared up again. So even with the downbeat economic reports, it is possible that the headline number could be at or above consensus.

No wonder people are uncertain! Here is a summary of recent data:

• The ADP employment report (private sector only) showed an increase of 114,000 payroll jobs in July. Of course, in June, ADP initially reported an increase of 157,000 jobs and the BLS only reported a gain of 57,000 private sector jobs (and only 18,000 total jobs including government layoffs). The ADP uses the same reference week as the BLS. Also note that government payrolls have been shrinking by about 30,000 each month.

• Initial weekly unemployment claims averaged about 412,000 per week in July, down slightly from the 427,000 average in June. Not great, but an improvement.

• The ISM manufacturing employment index decreased to 53.5%, down from 59.9% in June, and the ISM non-manufacturing index decreased to 52.5% in July from 54.1%. Based on a historical correlation between the ISM indexes and the BLS employment report, these readings would suggest close to 100,000 private payroll jobs added for services and manufacturing in July (similar to the ADP report).

• The final July Reuters / University of Michigan consumer sentiment index decreased to 63.7 from 71.5 in June. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. This might have been impacted by the debt ceiling debate, but in general this would suggest a weak labor market.

• And on the unemployment rate from Gallup: Gallup Finds Unemployment Unchanged in July

U.S. unemployment, as measured by Gallup without seasonal adjustment, is at 8.8% at the end of July, showing essentially no change from June 2011 (8.7%) or July a year ago (8.9%).

NOTE: The Gallup poll results are Not Seasonally Adjusted (NSA), so use with caution. Usually the NSA unemployment rate increases in July, so this would suggest little change in the unemployment rate.

My guess is that payroll growth was positive in July, but I'll take the "under" on the consensus based on the weak economic news.

by Calculated Risk on 8/04/2011 05:57:00 PM

LPS Applied Analytics released their June Mortgage Performance data. From LPS:

The June Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE: LPS) shows that, while still down 16.4 percent from the start of the year, foreclosure starts increased by more than 10 percent in June 2011. Delinquencies were also up, but incrementally, showing a 2.4 percent increase over May. As of the end of June, 4.1 million loans were either 90+ days delinquent or in foreclosure, representing a 12.8 percent increase since June 2010.

Foreclosure timelines continue their upward trajectory, with the average loan in foreclosure having been delinquent for a record 587 days. More than 40 percent of 90+-day delinquencies have not made a payment in more than a year. For loans in foreclosure, 35 percent have been delinquent for more than two years.

Looking at the differences between judicial and non-judicial foreclosure states, the LPS data shows that the foreclosure pipeline ratio – that is, the number of loans either 90+ days delinquent or in foreclosure divided by the six-month average of foreclosure sales – is more than three times as high for judicial foreclosure states. Additionally, the slowdown associated with foreclosure moratoria has been almost exclusively felt in judicial states.

According to LPS, 8.15% of mortgages were delinquent in June, up from 7.96% in May, and down from 9.55% in June 2010.

LPS reports that 4.12% of mortgages were in the foreclosure process, up slightly from 4.11% in May, and up from 3.66% in June 2010. This gives a total of 12.27% delinquent or in foreclosure. It breaks down as:

• 2.38 million loans less than 90 days delinquent.
• 1.91 million loans 90+ days delinquent.
• 2.17 million loans in foreclosure process.

For a total of 6.45 million loans delinquent or in foreclosure in June.

Click on graph for larger image in graph gallery.

This graph shows the total delinquent and in-foreclosure rates since 1995.

The total delinquent rate has fallen to 8.15% from the peak in January 2010 of 10.97%. A normal rate is probably in the 4% to 5% range, so there is a long long ways to go.

However the in-foreclosure rate at 4.12% is barely below the peak rate of 4.21% in March 2011. There are still a large number of loans in this category (about 2.17 million) - and the average loan in foreclosure has been delinquent for a record 587 days!

This graph provided by LPS Applied Analytics shows the days delinquent for the loans in foreclosure.

About 35% of those 2.17 million loans in the foreclosure process have not made a payment in over 2 years. Another 34% have not made a payment in over a year (but less than 2 years). That is around 1.5 million properties.

Many of these long term in-foreclosure properties are in judicial states.

The third graph shows foreclosure sales by the previous month's delinquency bucket.

Foreclosure sales are down compared to last year, regardless of time in delinquency - although sales are slowly picking up. Also the servicers are foreclosing a lower percentage of long term in-foreclosure properties - these long term in-foreclosure properties are just hanging over the housing market (mostly in judicial states like Florida).

by Calculated Risk on 8/04/2011 04:15:00 PM

From the WSJ: Dow Tumbles 500 Points, Putting It in Red for Year

The Dow slid 512.61 points, or 4.3%, to 11383.83, erasing all its gains for 2011.
...
The Standard & Poor's 500-stock index fell 60.26 points, or 4.8%, to 1200.08, putting it in correction territory, having fallen more than 10% since May. The Nasdaq Composite slumped 136.68 points, or 5.1%, to 2556.39, also in the red for the year.

The Chicago Board Options Exchange's Volatility Index, known as the fear gauge, broke the 30 level for the first time since March 16, up 30% at 30.48.

Here is a table of the largest one day declines (in percentage terms) for the S&P 500 since January 1950. There were quite a few large down days in 2008 and early 2009 ...

Largest S&P 500 One Day Percentage Declines since 1950
	Date	Percent Decline	Close	Previous Close	Six Months Later
1	10/19/1987	-20.5%	224.84	282.70	15.3%
2	10/15/2008	-9.0%	907.84	998.01	-4.7%
3	12/1/2008	-8.9%	816.21	896.24	15.7%
4	9/29/2008	-8.8%	1,106.42	1,213.27	-28.8%
5	10/26/1987	-8.3%	227.67	248.22	15.3%
6	10/9/2008	-7.6%	909.92	984.94	-5.9%
7	10/27/1997	-6.9%	876.99	941.64	23.7%
8	8/31/1998	-6.8%	957.28	1,027.14	28.0%
9	1/8/1988	-6.8%	243.40	261.07	11.7%
10	11/20/2008	-6.7%	752.44	806.58	17.9%
11	5/28/1962	-6.7%	55.50	59.47	10.6%
12	9/26/1955	-6.6%	42.61	45.63	14.1%
13	10/13/1989	-6.1%	333.65	355.39	3.2%
14	11/19/2008	-6.1%	806.58	859.12	10.1%
15	10/22/2008	-6.1%	896.78	955.05	-5.0%
16	4/14/2000	-5.8%	1,356.56	1,440.51	-2.0%
17	10/7/2008	-5.7%	996.23	1,056.89	-18.1%
18	6/26/1950	-5.4%	18.11	19.14	10.0%
19	1/20/2009	-5.3%	805.22	850.12	18.1%
20	11/5/2008	-5.3%	952.77	1,005.75	-4.8%
21	11/12/2008	-5.2%	852.30	898.95	4.8%
22	10/16/1987	-5.2%	282.70	298.08	-8.1%
23	11/6/2008	-5.0%	904.88	952.77	2.7%
24	9/17/2001	-4.9%	1,038.77	1,092.54	12.2%
25	2/10/2009	-4.9%	827.16	869.89	21.8%
26	9/11/1986	-4.8%	235.18	247.06	23.4%
27	8/4/2011	-4.8%	1,200.08	1,260.34	---
28	9/17/2008	-4.7%	1,156.39	1,213.60	-31.3%
29	9/15/2008	-4.7%	1,192.70	1,251.70	-36.8%
30	3/2/2009	-4.7%	700.82	735.09	47.1%
31	2/17/2009	-4.6%	789.17	826.84	27.2%
32	4/14/1988	-4.4%	259.75	271.58	7.0%
33	3/12/2001	-4.3%	1,180.16	1,233.42	-8.0%
34	4/20/2009	-4.3%	832.39	869.60	31.7%
35	3/5/2009	-4.3%	682.55	712.87	46.2%
36	11/30/1987	-4.2%	230.30	240.34	10.0%
37	11/14/2008	-4.2%	873.29	911.29	4.2%
38	9/3/2002	-4.2%	878.02	916.07	-6.4%
39	10/2/2008	-4.0%	1,114.28	1,161.06	-25.1%
40	10/25/1982	-4.0%	133.32	138.83	20.3%

by Calculated Risk on 8/04/2011 01:02:00 PM

Admitting the obvious ... from the WSJ: Letter from the President of the European Commission José Manuel Barroso

Developments in the sovereign bond markets of Italy, Spain and other euro area Member States are a cause of deep concern ... they reflect a growing scepticism among investors about the systemic capacity of the euro area to respond to the evolving crisis.
...
The 21st of July bold decisions on the Greek package and the increased flexibility of the EFSF (precautionary use, recapitalisation of banks and intervention in secondary bond markets), are not having their intended effect on the markets.
...
[I]t is clear that we are no longer managing a crisis just in the euro-area periphery. ... We need also to consider how to further improve the effectiveness of both the EFSF and the ESM in order to address the current contagion.
...
I would like to call on you to accelerate the approval procedures for the
implementation of these decisions so as to make the EFSF enhancements operational very soon.

Here is a graph of the 10 year spread (Italy to Germany) from Bloomberg. And for Spain to Germany. The Italian spread is at a record 389.5, the Spanish spread is at are record 398.5. The race is on ...

Here are the links for bond yields for several countries (source: Bloomberg):

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year

by Calculated Risk on 8/04/2011 10:53:00 AM

From the National Multi Housing Council (NMHC): Apartment Sector Continues Across-the-Board Improvement, NMHC Market Conditions Survey Finds

The Market Tightness Index, which examines vacancies and rents, came in at 82, down from a record 90. This is the sixth straight quarter the index has topped 50. Though down slightly from last quarter’s record level, two-thirds of respondents noted tighter markets (lower vacancies and/or higher rents) compared with three months earlier.
...
“Demand for apartment residences continues to rise, even as the overall economy remains hampered by the aftermath of the housing bubble,” said NMHC Chief Economist Mark Obrinsky. “For the fifth time in the last six quarters, all four survey measures of market health showed improvement over the prior three months. Markets are tighter, debt and equity capital are more available and sales volume is rising.”

Click on graph for larger image in graph gallery.

This graph shows the quarterly Apartment Tightness Index.

The index has indicated tighter market conditions for the last six quarters and although down from the record 90 in April - a reading of 82 is still very strong. A reading above 50 suggests the vacancy rate is falling and / or rents are rising. This data is a survey of large apartment owners only.

This fits with the recent Reis data showing apartment vacancy rates fell in Q2 2011 to 6.0%, down from 6.2% in Q1 2011, and 7.8% in the Q2 2010.

New multi-family construction is one of the few bright spots for the U.S. economy and this survey indicates demand for apartments is still strong.

A final note: This index helped me call the bottom for effective rents (and the top for vacancy rate) over a year ago.

by Calculated Risk on 8/04/2011 08:30:00 AM

The DOL reports:

in In the week ending July 30, the advance figure for seasonally adjusted initial claims was 400,000, a decrease of 1,000 from the previous week's revised figure of 401,000 [from 398,000]. The 4-week moving average was 407,750, a decrease of 6,750 from the previous week's revised average of 414,500.

The following graph shows the 4-week moving average of weekly claims since January 2000 (longer term graph in graph gallery).

Click on graph for larger image in graph gallery.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week to 407,750.

The 4-week average is still elevated, but has been moving down since mid-May. This is the lowest level for the 4-week average since early April.

by Calculated Risk on 8/03/2011 09:22:00 PM

Also from CNBC: Japan Intervenes in FX Markets, Dollar Jumps Versus Yen; Finance Minister Holding Emergency Press Conference

From Floyd Norris at the NY Times: The Truth About Fundamentals

Herewith I offer a fundamental law about fundamentals:

If a government feels a need to proclaim that its economic fundamentals are strong, they are not.

And then he quotes Italian Prime Minister Silvio Berlusconi:

“Our economy is healthy. The country is economically and financially solid.”

Of course some people will also point to this comment by White House Spokesman Jay Carney today:

“We do not believe that there is a threat of a double-dip recession.”

I don't think there will be a double-dip in the U.S., but as Paul Krugman noted there is definitely a threat.

Back to Europe. As bond values fall, banks in Italy and Spain that hold many of their home country's bonds, are having funding problems. They are having to turn to the ECB for funding. Another key point from the NY Times: Europe’s Banks Struggle With Weak Bonds

[T]he European Financial Stability Fund, Europe’s so-called bazooka rescue fund that it endowed last month with the powers to recapitalize weak banks, will not be able to offer any such aid for at least two months.

According to a stability fund official, staff members there are working night and day to recast the entity, but do not expect to be finished until the end of August. At that point, it must be approved by the parliaments of the 17 countries that use the euro currency.

The markets may not wait.

Here is a graph of the 10 year spread (Italy to Germany) from Bloomberg. And for Spain to Germany. Although the spreads eased slightly today, if the spreads increase much more, Italy and Spain might be knocking on the bailout door.

Earlier:
• ADP: Private Employment increased 114,000 in July
• ISM Non-Manufacturing Index indicates slower expansion in July
• CoreLogic: Home Price Index increased 0.7% in June

by Calculated Risk on 8/03/2011 06:52:00 PM

On graphs: All graphs are free to use - all I ask is credit and a link for online sites, and a mention of http://www.calculatedriskblog.com/ in printed material.

To obtain a large graph, use the Graph Gallery - select a graph (tabs at the top are for the various galleries) and click on "Print" in the lower left.

Data Sources: Enjoy!

I'm frequently asked for sources of data, so here is an updated list ranking economic data. For each indicator I've included a link to the source, and a link to the current graph gallery.

These lists are not exhaustive, and the rankings are not static. As an example, right now initial weekly unemployment claims is ‘B List’ data, but when (if) the expansion takes hold, weekly claims will move unceremoniously to the 'D List'.

I've marked several indicators with '***' indicating I think this data is currently more important than usual. This includes weekly claims and several real estate related releases (delinquency reports, negative equity, vacancy rates).

Some of the lower ranked data is useful as leading indicators. As an example, the Architecture Billings Index is a leading indicator for investment in commercial real estate. And the NMHC apartment survey leads changes in apartment rents and vacancy rates. Also some of the lower ranked data helps forecast some of the more important data.

Note: There has been some research (by Wall Street analysts) about how "surprises" for many of these indicators impact the stock market. In general the ranking is similar to this list, with the employment situation report being #1. Surprisingly (at least to me) investors tend to react more to "surprises" for existing home sales than new home sales, even though the later is far more important from an economic perspective.

A-List
• BLS: Employment Situation Report (Employment Graphs)
• BEA: GDP Report (quarterly) (GDP Graphs)

B-List
• Census: New Home Sales (New Home Graphs)
• Census: Housing Starts (Housing Graphs)
• ISM Manufacturing Index (ISM Graph)
• Census: Retail Sales (Retail Graphs)
• BEA: Personal Income and Outlays (graph)
• Fed: Industrial Production (graphs IP and Capacity Utilization)
• BLS: Core CPI (graph CPI)
• ***DOL: Weekly Initial Unemployment Claims (graph weekly claims)

C-List
• Philly Fed Index (Graph Philly Fed)
• NY Fed Empire State Manufacturing Index (Graph Empire Index)
• Chicago ISM: Chicago PMI
• Census: Durable Goods
• ISM Non-Manufacturing Index (Graphs)
• House Prices: Case-Shiller and CoreLogic (House Price Graphs)
• NAR: Existing Home Sales (Graphs Existing Home)
• NAHB: Housing Market Index (Graph NAHB HMI)
• Census: Trade Balance (Graph Trade Balance)
• ***MBA: Mortgage Delinquency Data (Quarterly) (Graph MBA delinquency)
• ***LPS: Mortgage Delinquency Data (Graphs LPS Delinquency)
• ***CoreLogic: Negative Equity Report (quarterly) (Graphs Negative Equity)
• ***AIA: Architecture Billings Index (Graph ABI)
• ***Reis: Office, Mall, Apartment Vacancy Rates (Quarterly) (Graphs REIS Vacancy Rate)
• ***NMHC Apartment Survey (Quarterly) (Graph NMHC Survey)

D-List
• Reuters / Univ. of Michigan Consumer Confidence Index (Graph Consumer Confidence)
• MBA: Mortgage Purchase Applications Index (Graph MBA Index)
• BLS: Job Openings and Labor Turnover Survey (Graph JOLTS)
• Census: Construction Spending (Graph Construction Spending)
• ¹Census: Housing Vacancy Survey (Quarterly) (Graphs Homeownerhip, Vacancy Rates)
• Fed: Senior Loan Officer Survey (Quarterly)
• AAR: Rail Traffic (Graph Transportation)
• ATA: Trucking (Graph Transportation)
• Ceridian-UCLA: Diesel Fuel Index (Graph Transportation)
• NFIB: Small Business Survey (Graphs NFIB Survey)
• Fed: Flow of Funds (Quarterly) (Graph Household Net Worth)
• STR: Hotel Occupancy (Graph Hotel Occupancy)
• CRE Prices: CoStar, Moody’s (Graphs)
• Manufacturers: Light Vehicle Sales (Graph Vehicle Sales)
• NRA: Restaurant Performance Index (Graph)
• Fed: Consumer Credit
• DOT: Vehicle Miles Driven (Graph Miles Driven)
• LA Port Traffic (Graph Port Traffic)
• BLS: Producer Price Index
• ADP Employment Report
• Conference Board Confidence Index
• NAR: Pending Home Sales
• Census: State Unemployment Rates, (graph)

¹: There are questions about the accuracy of the HVS.

Sources (Government):
BEA: Bureau of Economic Analysis
BLS: Bureau of Labor Statistics
Census: Census Bureau
DOL: Dept of Labor
DOT: Dept. of Transportation
Fed: Federal Reserve

Sources (Industry):
AAR: Association of American Railroads
AIA: American Institute of Architects
ISM: Institute for Supply Management
LPS: Lender Processing Services
MBA: Mortgage Bankers Association
NAHB: National Association of Homebuilders
NAR: National Association of Realtors
NFIB: National Federation of Independent Business
NRA: National Restaurant Association
STR: Smith Travel Research

by Calculated Risk on 8/03/2011 03:14:00 PM

Here is a depressing report from the National Employment Law Project: States Made Unprecedented Cuts to Unemployment Insurance in 2011

NELP’s new analysis shows that in 2011, six states cut the maximum number of weeks that jobless workers can receive unemployment insurance to less than 26 weeks—a threshold that had served as a standard for all 50 states for more than half a century, until this year. Michigan, Missouri, and South Carolina cut their available weeks down to 20; Arkansas and Illinois cut down to 25; and Florida cut to between 12 and 23 weeks, depending on the state’s unemployment rate. Double-digit unemployment in Michigan, South Carolina, and Florida did not discourage lawmakers there from making the cuts.

... Indiana changed the formula it uses to calculate weekly benefit amounts so that the average unemployment check will drop from $283 to $220 a week.

Ouch.

More from the report:

Throughout the recession, states with inadequate unemployment insurance trust fund reserves have relied on loans from the federal government to pay state unemployment insurance benefits. This September, states will begin paying interest on these loans, and starting in 2012, the federal government will raise taxes on employers in borrowing states until loans are paid in full, as required by the law.