by Calculated Risk on 11/06/2011 10:55:00 PM

Greece is trying to form a coalition government, and the current Greek Prime Minister George Papandreou is expected to resign on Monday. Meanwhile in Italy ...

From Bloomberg: Berlusconi’s Majority Unravels as Defections Mount Before Key Budget Vote

Prime Minister Silvio Berlusconi’s majority is unraveling before a key parliamentary vote tomorrow, with allies pressuring him to step aside after contagion from the region’s sovereign debt crisis pushed Italy’s borrowing costs to euro-era records.

From the NY Times: For Markets in Europe, the Focus of Fear Moves to Italy

Among fresh warning signs, Italy’s cost of borrowing has jumped to the highest rate since the country adopted the euro. Others signs include pressures building in the plumbing of Europe’s banking system. While those pressures are not yet at the levels experienced during the 2008 financial crisis ... they are high enough to cause worry, analysts say.

The Greek 2 year yield is down to 98%, and the Greek 1 year yield is up to 236%.

The Portuguese 2 year yield is at 20.1% and the Irish 2 year yield is up to 9.2%.

The Spanish 10 year yield is at 5.58% and the Italian 10 year yield is at 6.37%.

The Asian markets are mixed tonight. The Nikkei is down about 0.5%, the Hang Seng is down slightly.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 and Dow futures are down slightly.

Oil: WTI futures are up to $94.79 and Brent is up to $113.13 per barrel.

Yesterday:
• Schedule for Week of Nov 6th
• Summary for Week Ending Nov 4th

by Calculated Risk on 11/06/2011 07:00:00 PM

CR Note: This is a guest post from albrt.

Howdy folks, this is albrt. I'm trying to get back in the habit of writing for CR once in a while, so this is an update on MERS and its role in the ongoing housing finance mess. Background posts on MERS from a couple of years ago are here and here.

The item that inspired me to start posting again was the October 3 decision by Federal District Court Judge James Teilborg of Arizona, dismissing the 72 cases in the MERS multidistrict litigation.

Background

A federal "multidistrict litigation" case (commonly called an "MDL") is set up to resolve a question that has come up in a large number of courts. The first thing that happens in an MDL case is that someone requests a panel of federal judges to look at the cases, and they decide whether it would make sense to centralize the cases with one judge to address the common issues.

All of these cases were brought by borrowers to defeat or reverse a foreclosure, which means the borrower is the plaintiff and one or more entities on the lender side are the defendants. Generally a borrower brings a case like this because the house is located in a state where foreclosures can be done without going to court, often based on a document called a deed of trust rather than a true mortgage.

The lender defendants in six cases, including MERS, requested centralization in Arizona. The MDL panel decided to send cases involving allegations that "various participants in MERS formed a conspiracy to commit fraud and/or that security instruments are unenforceable or foreclosures are inappropriate due to MERS's presence as a party." The panel did not send claims involving other allegedly unlawful loan origination or collection practices.

When an MDL is opened up, other federal judges can send cases that appear to qualify, so the MDL eventually grew from 6 to 72 cases.

By the way, Judge Teilborg is the same judge who dismissed a similar case by a plaintiff named Cervantes, and his decision was recently upheld by the 9th Circuit. The MDL panel specifically chose to send the cases to Judge Teilborg "because he presided over Cervantes." The 9th Circuit's decision in September may have had a lot to do with the timing of this decision in October.

Judge Teilborg's Decision

Judge Teilborg considered motions to dismiss 20 of the MDL cases, and dismissed each of them. Judge Teilborg then dismissed the remaining 52 complaints, but ordered the plaintiffs to take their best collective shot at submitting a "consolidated amended complaint" that avoided the shortcomings identified in the previous 20 complaints. The October 3rd order dismissed the consolidated complaint, and dismissed each of the 72 MDL claims with prejudice. At least some of the cases are apparently still alive in other courts based on claims that were not covered by the MDL decision.

The Fraud Issues

The fraud issues were essentially disposed of by earlier rulings, including Cervantes, and did not figure prominently in the October 3 MDL decision. Federal court rules require fraud allegations to be specific. Fraud is a hard claim to prove - to simplify it a little, the plaintiff needs to identify false statements, and explain how the plaintiff was harmed by relying on the statements.

The 9th Circuit said:

Although the plaintiffs allege that aspects of the MERS system are fraudulent, they cannot establish that they were misinformed about the MERS system, relied on any misinformation in entering into their home loans, or were injured as a result of the misinformation. If anything, the allegations suggest that the plaintiffs were informed of the exact aspects of the MERS system that they now complain about.

The 9th Circuit apparently based the latter observation on the deed of trust itself, which said MERS would be the beneficiary and the note could be transferred without notice, which was basically what happened.

The Invalidation Issue

Judge Teilborg summarized the issue like this:

Fundamentally, all of Plaintiffs' claims turn on their contention that naming MERS as a beneficiary on the deeds of trust, and the subsequent operation of the MERS system, splits the MERS deeds of trust from their promissory notes and renders these notes unsecured and unenforceable. . . . The documents alleged to be false would only be false if there is legal merit to these arguments; the wrongful foreclosures would only be wrongful if one of these theories holds.

Judge Teilborg decided that naming MERS as a beneficiary on a deed of trust does not permanently destroy the security interest and completely bar foreclosure. That eliminated the second major MDL claim, although Judge Teilborg recognized that some of the plaintiffs might be able to get some relief based on narrower allegations about what happened in their specific cases.

Miscellaneous Points

The plaintiffs argued that the deeds of trust in some of these cases could qualify as "false documents" for the purpose of an Arizona Statute prohibiting the recording of false documents. In addition to ruling that the documents could not be considered "false" based on general MERS invalidity, Judge Teilborg said "robosigning" was an issue between the parties to the assignment, and was not something the borrowers could sue over. I'm not sure this is right. Although courts in non-judicial foreclosure situations have generally have not upheld a broad "show me the note" doctrine, in at least some situations borrowers may have a right to know that the person foreclosing can prove title to the loan and the deed of trust.

Judge Teilborg also decided that the foreclosures could not be wrongful unless the plaintiffs had not defaulted. The plaintiffs argued that a foreclosure can be wrongful in other ways. The law is unclear on this point, and a decision from a state court while the MDL decision is up on appeal could change the outcome.

My Conclusions

I would be the last person to argue that banks did nothing wrong in the last ten years. I am very critical of the banks, and of the way the Bush-Obama administration has dealt with the banks. However, I am in about 90% agreement with Judge Teilborg that the plaintiffs in the MDL litigation were wrong about their two central arguments.

I haven't seen any evidence that the banks were intentionally trying to fool borrowers when they developed MERS. The banks were trying to avoid recording fees, and they were trying to develop a system for offloading inherently bad loans onto the buyers of mortgage backed securities and derivatives. I don't think the banks cared at all about borrowers.

Judge Teilborg also seems to me to be correct about automatically invalidating MERS mortgages. It is clear that there are many foreclosure cases where the wrong party has done the wrong thing, sometimes spectacularly wrong. Many of those foreclosures should be halted until things are sorted out. But even in the worst case scenario a judge can probably figure out who owns what, and eventually allow somebody to foreclose if the borrower isn't paying. That will be costly, but there is no reason why the mortgage should be permanently invalidated.

With 72 cases in this MDL, it is certainly possible that one or more plaintiffs will succeed in persuading the 9th Circuit that Judge Teilborg overlooked something. But there isn't any broad legal doctrine of "Bank error in your favor! Collect 1 free house." Screwed up paperwork makes things more difficult for borrowers in some respects, but it can also work in the borrower's favor in negotiations for a modification, or especially in bankruptcy. It rarely ends up completely and permanently invalidating the bank's security interest.

In fact, some folks may remember the case of Olga, whose mortgage was invalidated in bankruptcy. The lender appealed, and from what I can tell by looking at later court documents the parties reached a settlement including a mortgage modification. Even Olga does not appear to have gotten a free house.

Some lenders have apparently learned at least part of the lesson, and have stopped filing foreclosures in the name of MERS. If MERS assigns the deed of trust to the correct entity, that should resolve a lot of the complications by reuniting the mortgage and the note.

If folks have questions, I can try to address them in a follow-up post.

by Calculated Risk on 11/06/2011 03:29:00 PM

From Athens News: Coalition government deal reached

According to sources, Greek prime minister George Papandreou and opposition leader Antonis Samaras agreed on the form of a coalition governments at talks hosted by the president Karolos Papoulias on Sunday.

According to an announcement [from] the Presidency George Papandreou will not lead the new government. The new government will ratify the EU deal of Oct. 26th and afterwards will lead the country to elections.

UPDATE:

From the NY Times: Leaders in Greece Agree to Form a New Government

After crisis talks on Sunday night, Prime Minister George Papandreou and his main rival agreed to create a new unity government in Greece that will not be led by Mr. Papandreou, according to a statement released Sunday night by the Greek president, who mediated the talks.

Mr. Papandreou and the opposition leader Antonis Samaras agreed to meet again on Monday to hammer out the details. The name of the new prime minister is not expected until then.

by Calculated Risk on 11/06/2011 01:50:00 PM

On Friday I noted that retailers hired seasonal workers at close to the pre-crisis pace in October. Reader Hd asked about the correlation between seasonal hiring and retail sales. Below is a scatter graph of historical October retail hiring vs. the real increase in retail sales.

First, here is the NRF forecast for this year: NRF Forecasts Holiday Sales Increase of 2.8 Percent to $465.6 Billion

The 2011 holiday season can be summed up in one word: average. On the heels of a holiday season that outperformed most analysts’ expectations, holiday retail sales for 2011 are expected to increase 2.8 percent to $465.6 billion, according to the National Retail Federation. While that growth is far lower than the 5.2 percent increase retailers experienced last year, it is slightly higher than the ten-year average holiday sales increase of 2.6 percent.
...
NRF used its holiday forecasting model to create a projection for seasonal hiring in retail. According to NRF, retailers are expected to hire between 480,000 and 500,000 seasonal workers this holiday season, which is comparable to the 495,000 seasonal employees they hired last year.
...
Retail industry sales include most traditional retail categories including discounters, department stores, grocery stores, and specialty stores, and exclude sales at automotive dealers, gas stations, and restaurants.

Here is a repeat of the graph of retail hiring based on the BLS employment report:

Click on graph for larger image.

This graph shows the historical net retail jobs added for October, November and December by year.

Retailers hired 141.5 thousand workers (NSA) net in October. This is about the same level as in 2003 through 2006 and the same as in 2010. Note: this is NSA (Not Seasonally Adjusted).

The scatter graph is for the years 1993 through 2010 and compares October retail hiring with the real increase (inflation adjusted) for retail sales (Q4 over previous Q4).

In general October hiring is a pretty good indicator of seasonal sales. R-square is 0.69 for this small sample. Note: This uses retail sales in Q4, and excludes autos, gasoline and restaurants.

This suggests a real gain of around 2.5% in Q4 (plus inflation), well above the NRF forecast of 2.8% nominal (including inflation).

However November is the key month for seasonal retail hiring, and if retailers hire 330,000+ seasonal workers in November like last year, this retail season will probably be solid.

by Calculated Risk on 11/06/2011 08:43:00 AM

It seems likely the Greek Prime Minister George Papandreou will resign today after an agreement is reached on a coalition government and an interim Prime Minister.

There is a cabinet meeting starting at 9 AM ET.

From Athens News: Negotiations over coalition underway

The government spokesman announced on Sunday morning, speaking on a current affairs TV programme, that an agreement over a coalition or unity government could be worked out the same day, while adding that the name of a new prime minister could also be announced.

Spokesman Ilias Mossialos underlined that negotiations are underway, clarifying that the name of the new premier must be announced by tomorrow. However, he cautioned that current Prime Minister George Papandreou would resign only when the two issues are finalised.

... main opposition New Democracy party cadres have been quoted as saying the party will agree to such a prospect as long as a transitional government lasts no longer than six weeks, time enough to ratify and implement a series of landmark recent agreements Athens has signed with its creditors.

From the WSJ: Greek Leader May Step Down

Greek Prime Minister George Papandreou may announce his resignation after a cabinet meeting Sunday that will pave the way for a coalition government ... Earlier in the day, Antonis Samaras, the head of Greece's main opposition New Democracy party, called for Mr. Papandreou's immediate resignation, indicating that he was open to talks with the ruling socialists over forming a coalition government.

by Calculated Risk on 11/05/2011 08:38:00 PM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Nov 4, 2011. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

Very quiet week for changes to the Unofficial Problem Bank List as there were only two removals. After the removals, the list holds 985 institutions with assets of $406.3 billion. A year ago, the list had 894 institutions with assets of $418.5 billion. It appears that the FDIC and OCC will be releasing their new enforcement actions during the last week of the month; thus, most changes to the list during the interim weeks will be from failures or unassisted mergers.

The removals this week were the two failures -- SunFirst Bank, Saint George, UT ($213 million) and Mid City Bank, Inc., Omaha, NE ($125 million), which were the first failures in Utah and Nebraska this year. Many readers may remember that the Vice Chairman of SunFirst Bank was arrested by federal authorities this past spring because of his involvement in operating an online poker website. Because of potential litigation, the FDIC is retaining about $15 million of SunFirst Bank's deposits.

Earlier:
• Schedule for Week of Nov 6th
• Summary for Week Ending Nov 4th

by Calculated Risk on 11/05/2011 05:06:00 PM

The Association of American Railroads (AAR) reports carload traffic in October increased 1.7 percent compared with the same month last year, and intermodal traffic (using intermodal or shipping containers) increased 3.6 percent compared with October 2010. On a seasonally adjusted basis, carloads in October were up 0.5% from last month, and intermodal in October was up 0.8% from September.

U.S. freight railroads originated 1,215,627 carloads in October 2011, an average of 303,907 per week, up 1.7% over October 2010, and the highest average of any month since October 2008. It’s also the biggest year-over-year percentage increase since March 2011.

Click on graph for larger image.

This graph shows U.S. average weekly rail carloads (NSA).

Rail carload traffic collapsed in November 2008, and now, over 2 years into the recovery, carload traffic is about half way back.

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

On a non-seasonally adjusted basis, U.S. rail intermodal originations averaged 243,892 trailers and containers per week in October 2011, up 3.6% over October 2010. That’s the highest weekly average for any month since October 2006 and the sixth highest weekly average of any month in history.

October is almost always the top month for intermodal traffic because it’s when retailers do the bulk of their stocking up for the holidays.
excerpts with permission

Rail traffic improved in October, but this is still sluggish growth.

Earlier:
• Schedule for Week of Nov 6th
• Summary for Week Ending Nov 4th

by Calculated Risk on 11/05/2011 01:11:00 PM

Earlier:
• Summary for Week Ending Nov 4th

This will be a light week for economic releases. The key economic release this week is the September trade balance report on Thursday. Also consumer sentiment might recover some more in November (released on Friday).

The Federal Reserve Senior Loan Officer Survey will probably be released on Monday, and might show if there is any impact on U.S. lending from the European financial crisis. Also there will be several Fed speeches this week.

----- Monday, Nov 7th -----
2:00 PM ET: The October 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve. The July survey indicated some slight easing of standards and slightly more demand for most types of loans except residential real estate.

3:00 PM: Consumer Credit for September. The consensus is for a $5 billion increase in consumer credit.

----- Tuesday, Nov 8th -----
7:30 AM: NFIB Small Business Optimism Index for October. This index increased to 88.9 in September from 88.1 in August. The consensus is for a small increase to 89.3.

10:00 AM: Job Openings and Labor Turnover Survey for September from the BLS. In general job openings have been trending up, however overall labor turnover remains low.

----- Wednesday, Nov 9th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been especially weak since early August, although this doesn't include cash buyers.

9:00 AM: Ceridian-UCLA Pulse of Commerce Index™ This is the diesel fuel index for October (a measure of transportation).

9:30 AM: Fed Chairman Ben S. Bernanke, Welcoming Remarks, At the Federal Reserve Conference on Small Business and Entrepreneurship during an Economic Recovery, Washington, D.C. 9:30 a.m. ET

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for September. The consensus is for a 0.6% increase.

----- Thursday, Nov 10th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a slight increase to 400,000 from 397,000 last week. The 4-week average has declined recently, but is still above 400,000.

8:30 AM: Trade Balance report for September from the Census Bureau. The consensus is for the U.S. trade deficit to be around $46.3 billion, up from from $45.6 billion in August. Exports activity to Europe will be closely watched.

8:30 AM: Import and Export Prices for October. The consensus is a for a 0.2% decrease in import prices.

----- Friday, Nov 11th -----
*** Veterans Day, Markets Open ***

9:55 AM: Reuters/University of Mich Consumer Sentiment preliminary for November.

Consumer sentiment declined sharply in July and August - from 71.5 in June to 55.7 in August - the August reading was just above the crisis low of 55.3 in November 2008.

The consensus is for a slight increase in October to 61.5 from 60.9 in October.

by Calculated Risk on 11/05/2011 08:13:00 AM

The drama in Europe continues to overshadow the U.S. economic situation. Greece was the main topic this week, but Italy is a greater concern. I'll post some updates on Sunday.

The October employment report was the key economic story in the U.S. last week. There were only 80,000 jobs added in October. This included 104,000 private sector jobs added, and 24,000 government jobs lost. However the change in total employment was revised up for August and September. "The change in total nonfarm payroll employment for August was revised from +57,000 to +104,000, and the change for September was revised from +103,000 to +158,000."

Still sluggish employment growth.

The household survey showed an increase of 277,000 jobs in October. This increase in the household survey pushed the unemployment rate down slightly, even as more people participated in the workforce (labor force increased by 181,000). The unemployment rate declined to 9.0%, and the participation rate was unchanged at 64.2%. The employment population ratio also increased to 58.4% from 58.3%. This is the third straight monthly increase in the employment population ratio from the low in July at 58.1%.

Through the first ten months of 2011, the economy has added 1.256 million total non-farm jobs or just 125 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.47 million fewer payroll jobs than at the beginning of the 2007 recession.

At this pace (125 thousand jobs added per month) it will take over 4 years just to get back to the number of jobs in 2007 - and that doesn't account for population growth.

The economy has added 1.529 million private sector jobs this year, or about 153 thousand per month. There are a total of 13.9 million Americans unemployed and 5.9 million have been unemployed for more than 6 months. Overall this was another weak employment report and suggests sluggish economic growth.

The FOMC met this week with no policy changes. After the FOMC statement was released, Fed Chairman Ben Bernanke held a press briefing (video here, transcript here). Perhaps the key comment was:

"[T]he outlook remains unsatisfactory over the next few years and we'll continue to ask ourselves whether or not additional stimulus or additional actions can provide a better outcome and that's certainly something that is--remains on the table and we'll continue to evaluate as we go forward."

That suggests that the Fed will act if the outlook doesn't improve soon as compared to their current forecast. Their current forecast is already pretty dismal - clearly "unsatisfactory".

Also Bernanke almost pleaded for a little fiscal help from Congress:

"I think it would be helpful if we could get assistance from some other parts of the government to work with us to help create more jobs."

The U.S. economic data was mostly soft - suggesting sluggish growth. The ISM Manufacturing and service indexes indicated slower expansion in October. The Chicago PMI declined in October, the Dallas Fed manufacturing survey showed sluggish expansion, and the restaurant performance index was barely positive.

One bright spot was auto sales in October. According to an advance estimate for Autodata Corp, light vehicle sales were at a 13.26 million SAAR in October. That is the highest level this year (barely above the 13.24 million SAAR in February).

Sluggish growth continues.

All NEW Employment graph gallery (fast, no scripting)
Here is a summary in graphs:

• October Employment Report: 80,000 Jobs, 9.0% Unemployment Rate

Click on graph for larger image.

The BLS reported:

Nonfarm payroll employment continued to trend up in October (+80,000), and the unemployment rate was little changed at 9.0 percent, the U.S. Bureau of Labor Statistics reported today.

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

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

The unemployment rate declined to 9.0% (red line). The Labor Force Participation Rate was unchanged 64.2% in October (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, although some of the decline is due to the aging population.

The Employment-Population ratio increased to 58.4% in October (black line).

The third employment graph is the same as the first, except this graph is aligned at maximum job losses.

In terms of lost payroll jobs, the 2007 recession was by far the worst since WWII.

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) decreased by 374,000 to 8.9 million in October.

The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) decreased to 8.896 million in October from 9.27 million in September. This just reverses some of the increase last month.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 16.2% in October from 16.5% in September.

According to the BLS employment report, retailers hired seasonal workers at close to the pre-crisis pace in October.

Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. This graph that shows the historical net retail jobs added for October, November and December by year.

Retailers hired 141.5 thousand workers (NSA) net in October. This is about the same level as in 2003 through 2006 and the same as in 2010. Note: this is NSA (Not Seasonally Adjusted). This suggests retailers are somewhat optimistic about the holiday season.

This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

Only one category increased in October: The 6 to 14 weeks. This is due to the increase in short term unemployment in August and September. A little bit of recent good news is that short term unemployment (less than 5 weeks) has declined.

The the long term unemployed declined to 3.8% of the labor force - the number (and percent) of long term unemployed remains very high.

All NEW Employment graph gallery (fast, no scripting)
• U.S. Light Vehicle Sales at 13.26 million SAAR in October, Highest since Aug 2009

Based on an estimate from Autodata Corp, light vehicle sales were at a 13.26 million SAAR in October. That is up 9.2% from October 2010, and up 1.7% from the sales rate last month (13.04 million SAAR in Sept 2011). This was just above the February sales and the highest sales rate since August 2009 ("Cash-for-clunkers")

This was slightly above the consensus forecast of 13.2 million SAAR.

Growth in auto sales should make a positive contribution to Q4 GDP. Sales in Q3 averaged 12.45 million SAAR, and if November and December are at the October rate, sales will be up 6.5% in Q4 over Q3.

• ISM Manufacturing index indicates slower expansion in October

PMI was at 50.8%% in October, down from 51.6% in September. The employment index was at 53.5%, down from 53.8%, and new orders index was at 52.4%, up from 49.6%.

From the Institute for Supply Management: October 2011 Manufacturing ISM Report On Business®

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

This was below expectations of 52.0%, and suggests manufacturing expanded at a slightly slower rate in October than in September.

• LPS: Foreclosure timelines increase, Mortgage delinquency rate declines slightly in September

From LPS Applied Analytics: LPS' Mortgage Monitor Report Shows Significant Difference in Inventories, Timelines Between Judicial and Non-Judicial States

According to LPS, 8.09% of mortgages were delinquent in September, down from 8.13% in August, and down from 9.27% in September 2010.


LPS reports that 4.18% of mortgages were in the foreclosure process, up from 4.11% in August, and up from 3.84% in September 2010. This gives a total of 12.27% delinquent or in foreclosure. It breaks down as:

• 2.36 million loans less than 90 days delinquent.
• 1.84 million loans 90+ days delinquent.
• 2.17 million loans in foreclosure process.

For a total of 6.37 million loans delinquent or in foreclosure in September.

The total delinquent rate has fallen to 8.09% 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 4.18% 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, for judicial states, the average loan in foreclosure has been delinquent for 761 days (six months less for non-judicial states).

• Construction Spending increased slightly in September

The Census Bureau reported that overall construction spending increased in September:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during September 2011 was estimated at a seasonally adjusted annual rate of $787.2 billion, 0.2 percent (±1.8%)* above the revised August estimate of $786.0 billion. The September figure is 1.3 percent (±1.9%)* below the September 2010 estimate of $797.3 billion.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 66% below the peak in early 2006, and non-residential spending is 34% below the peak in January 2008.

Public construction spending is now 12% below the peak in March 2009.


• ISM Non-Manufacturing Index indicates expansion in October

The October ISM Non-manufacturing index was at 52.9%, down slightly from 53.0% in September. The employment index increased in October to 53.3%, up from 48.7% in September. From the Institute for Supply Management: October 2011 Non-Manufacturing ISM Report On Business®

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was slightly below the consensus forecast of 53.0% and indicates slightly slower expansion in October than in September. The employment index indicated expansion in October following contraction in September.

• Other Economic Stories ...
• Chicago PMI at 58.4, down from 60.4 in September
• Dallas Fed Manufacturing Survey shows sluggish expansion
• Restaurant Performance Index increased in September
• ADP: Private Employment increased 110,000 in October
• HVS: Q3 Homeownership and Vacancy Rates

by Calculated Risk on 11/04/2011 09:30:00 PM

A couple of forecast upgrades:

Merrill Lynch: "An improvement in domestic demand and inventory rebuilding has led us to revise Q4 GDP growth to 3.0% from 2.3%"

Goldman Sachs: "We have revised up our Q4 GDP forecast to 2.0% (quarter-over-quarter annualized) from 1.0% previously. The revision primarily reflects an upgrade to consumer spending, which showed solid momentum at the end of the third quarter."

It is important to remember that this is still sluggish growth, and not enough to reduce the unemployment rate. And there are significant downside risks from the European financial crisis and U.S. fiscal tightening in 2012.

Here are the earlier employment posts (with graphs):
• October Employment Report: 80,000 Jobs, 9.0% Unemployment Rate
• Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
• Seasonal Retail Hiring, Duration of Unemployment, Unemployment by Education and Diffusion Indexes
• NEW Employment graph gallery (fast, no scripting)