by Calculated Risk on 6/01/2012 10:13:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined in April to 3.63%, down from 3.67% in March. The serious delinquency rate is down from 4.19% in April last year, and is at the lowest level since April 2009.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Freddie Mac reported that the Single-Family serious delinquency rate was unchanged at 3.51% in April. Freddie's rate is only down from 3.67% in April 2011. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

With the mortgage servicer settlement, I'd expect the delinquency rate to start to decline faster over the next year or so. I don't know why Fannie's delinquency rate is falling faster than for Freddie.

The "normal" serious delinquency rate is under 1%, so there is a long way to go.

Note: HUD also released the quarterly FHA Single-Family Mutual Mortgage Insurance Fund Programs report. This showed the FHA serious delinquency rate declined in Q1 to 9.4% from 9.6%, but this was probably just a seasonal decline.

Earlier employment posts:
• May Employment Report: 69,000 Jobs, 8.2% Unemployment Rate
• May Employment Summary and Discussion
• Employment Graphs

by Calculated Risk on 6/01/2012 07:02:00 PM

This is worth mentioning, from earlier today: The BEA released the Personal Income and Outlays report for April:

Personal income increased $31.7 billion, or 0.2 percent ... in April, according to the Bureau of Economic Analysis. Personal Personal consumption expenditures (PCE) increased $31.8 billion, or 0.3 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in April, compared with an increase of less than 0.1 percent in March. ... PCE price index -- The price index for PCE increased less than 0.1 percent in April, compared with an increase of 0.2 percent in March. The PCE price index, excluding food and energy, increased 0.1 percent, compared with an increase of 0.2 percent.

The following graph shows real Personal Consumption Expenditures (PCE) through April (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

This graph shows real PCE by month for the last few years. The dashed red lines are the quarterly levels for real PCE. You can really see the slow down in Q2 of last year. Even if May and June are flat compared to April this year, real PCE would increase around 2% in Q2.

Another key point is the PCE price index has only increased 1.8% over the last year, and core PCE is up 1.9%. And it looks like the year-over-year increases will decline further in May.

Also the personal saving rate declined to 3.4% in April.

Earlier employment posts:
• May Employment Report: 69,000 Jobs, 8.2% Unemployment Rate
• May Employment Summary and Discussion
• Employment Graphs

by Calculated Risk on 6/01/2012 03:28:00 PM

Based on an estimate from Autodata Corp, light vehicle sales were at a 13.78 million SAAR in May. That is up 17.9% from May 2011, and down 4.1% from the sales rate last month (14.37 million SAAR in April 2012).

This was below the consensus forecast of 14.5 million SAAR (seasonally adjusted annual rate).

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for May (red, light vehicle sales of 13.78 million SAAR from Autodata Corp).

Click on graph for larger image.

This was the weakest month this year. The year-over-year increase was large because of the impact of the tsuanmi and related supply chain issues in May 2011.

Sales have averaged a 14.43 million annual sales rate through the first five months of 2012, up sharply from the same period of 2011.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

This shows the huge collapse in sales in the 2007 recession.

All current Retail Graphs

Earlier employment posts:
• May Employment Report: 69,000 Jobs, 8.2% Unemployment Rate
• May Employment Summary and Discussion
• Employment Graphs

by Calculated Risk on 6/01/2012 01:50:00 PM

Catching up ... This morning the Census Bureau reported that overall construction spending increased in April:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during April 2012 was estimated at a seasonally adjusted annual rate of $820.7 billion, 0.3 percent above the revised March estimate of $818.1 billion. The April figure is 6.8 percent above the April 2011 estimate of $768.2 billion.

Private construction spending increased while public spending decreased:

Spending on private construction was at a seasonally adjusted annual rate of $549.7 billion, 1.2 percent above the revised March estimate of $543.4 billion. ... In April, the estimated seasonally adjusted annual rate of public construction spending was $271.0 billion, 1.4 percent below the revised March estimate of $274.7 billion..

Click on graph for larger image.

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

Private residential spending is 62% below the peak in early 2006, and up 14% from the recent low. Non-residential spending is 29% below the peak in January 2008, and up about 20% from the recent low.

Public construction spending is now 17% below the peak in March 2009 and at a new post-bubble low.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, both private residential and non-residential construction spending are positive, but public spending is down on a year-over-year basis. The year-over-year improvements in private non-residential is mostly related to energy spending (power and electric).

The year-over-year improvement in private residential investment is an important change (the positive in 2010 was related to the tax credit).
All Housing Investment and Construction Graphs

by Calculated Risk on 6/01/2012 11:50:00 AM

Another month, another disappointing employment report.

There appeared to be some additional weather related "payback" in May offsetting the relatively solid job growth during the winter months. As an example, construction employment was down 28,000 (seasonally adjusted), and "leisure and hospitality" declined by 9,000 jobs. Both were up solidly Not Seasonally Adjusted (NSA) in May. Construction was up 169,000 jobs, and leisure and leisure and hospitality increased 312,000 jobs NSA, but this is less than usual in May - probably because of the hiring during the winter - and the seasonally adjusted numbers were down. This weather "payback" is probably over now.

If we average over the first five months of the year, the economy has added 164,600 jobs per month (169,400 private sector per month). At this pace, the economy would add around 2 million private sector jobs in 2012; about the same as in 2011.

However weather payback probably only accounts for some of the recent slowdown in hiring.

Some numbers: There were 69,000 payroll jobs added in May, with 82,000 private sector jobs added, and 13,000 government jobs lost. The unemployment rate increased to 8.2%. The household survey showed a strong increase in employment (422,000 jobs added), but the participation rate increased too (from 63.6% to 63.8%) so that pushed up the unemployment rate. The household survey job gains - and increase in the participation rate - are small positives.

U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, increased so 14.8%.

The change in March payroll employment was revised down from +154,000 to +143,000, and April was revised down from +115,000 to +77,000.

The average workweek declined to 34.4 hours, and average hourly earnings increased slightly. "The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.4 hours in May. ... In May, average hourly earnings for all employees on private nonfarm payrolls edged up by 2 cents to $23.41. Over the past 12 months, average hourly earnings have increased by 1.7 percent.

There are a total of 12.7 million Americans unemployed and 5.4 million have been unemployed for more than 6 months.

The bottom line is this was another disappointing employment report.

Employment-Population Ratio, 25 to 54 years old

Click on graph for larger image.

Since the participation rate has declined recently due to cyclical (recession) and demographic (aging population) reasons, an important graph is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the employment-population ratio for this group was trending up as women joined the labor force. The ratio has been mostly moving sideways since the early '90s, with ups and downs related to the business cycle.

This ratio should probably move back to or above 80% as the economy recovers. So far the ratio has only increased slightly from a low of 74.7% to 75.7% in May (this was unchanged in May from April.)

Percent Job Losses During Recessions


This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at maximum job losses.

In the earlier post, the graph showed the job losses aligned at the start of the employment recession.

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) edged up to 8.1 million over the month. 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 part time workers increased in May to 8.1 millon.

These workers are included in the alternate measure of labor underutilization (U-6) that increased in May to 14.8%, up from 14.5% in April.

Unemployed over 26 Weeks

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

According to the BLS, there are 5.4 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 5.1 million in April. This reversed the decline over the previous two months, although the number is still down since the beginning of the year. Long term unemployment remains one of the key labor problems in the US.


All Employment Graphs

by Calculated Risk on 6/01/2012 10:00:00 AM

I'll have more on the employment report soon. PMI was at 53.5% in May, down from 54.8% in April. The employment index was at 56.9%, down from 57.3%, and new orders index was at 60.1%, up from 58.2%.

From the Institute for Supply Management: May 2012 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in May for the 34th consecutive month, and the overall economy grew for the 36th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 53.5 percent, a modest decrease of 1.3 percentage points from April's reading of 54.8 percent, indicating expansion in the manufacturing sector for the 34th consecutive month. The New Orders Index continued its growth trend for the 37th consecutive month, registering 60.1 percent in May. This represents an increase of 1.9 percentage points from April and also the highest level recorded by the index since April 2011. The Prices Index for raw materials fell to 47.5 percent in May, dropping 13.5 percentage points from April, indicating lower prices for the first time since December 2011. Comments from the panel generally reflect stable-to-strong orders, with sales showing steady improvement over the first five months of 2012."

Click on graph for larger image.

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

This was below expectations of 54.0%. This suggests manufacturing expanded at a slower rate in May than in April.

Although this was slightly weaker than expected, new orders were up and prices were down. Not all bad.

by Calculated Risk on 6/01/2012 08:30:00 AM

From the BLS:

Nonfarm payroll employment changed little in May (+69,000), and the unemployment rate was essentially unchanged at 8.2 percent, the U.S. Bureau of Labor Statistics reported today.
...
The civilian labor force participation rate increased in May by 0.2 percentage point to 63.8 percent, offsetting a decline of the same amount in April. The employment-population ratio edged up to 58.6 percent in May.
...
The change in total nonfarm payroll employment for March was revised from +154,000 to +143,000, and the change for April was revised from +115,000 to +77,000.

Click on graph for larger image.

This was a weak month, and the previous two months were revised down.

This was below expectations of 150,000 payroll jobs added.

The second graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate increased to 8.2% (red line).

The Labor Force Participation Rate increased to 63.8% in May (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 recent decline is due to demographics.

The Employment-Population ratio increased to 58.6% in May from 58.4% in April (black line).

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

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

This was weaker payroll growth than expected (expected was 150,000). More later ...

by Calculated Risk on 5/31/2012 09:09:00 PM

The June contest starts on Friday with four questions (see below). For the economic question contest in May, the leaders were (Congratulations all!):

1) Bill Dawers
2) Bill (Calculated Risk)
3) (2 way tie) Liye Ma
3) Jon Fader
5) (3 way tie) David Fiene
5) Joey Cordero
5) Andrew Marrinson

Friday will be another busy day:

• At 8:30 AM ET, the BLS is scheduled to release the employment situation report for May. The consensus is for an increase of 150,000 non-farm payroll jobs in May, up from the 115,000 jobs added in April. Earlier I posted an employment preview.

• Also at 8:30 AM the Personal Income and Outlays report for April will be released. The consensus is for a 0.3% increase in personal income in April, and a 0.3% increase in personal spending, and for the Core PCE price index to increase 0.1%.

• At 10:00 AM ET, the ISM Manufacturing Index for May is scheduled for release. The consensus is for a slight decrease to 54.0 from 54.8 in April. The regional Fed surveys were mixed this month. Also the Chicago PMI released this morning was weaker than expected, and Markit has introduced a new "Flash PMI" for the US showing "the seasonally adjusted PMI falling from 56.0 in April to 53.9". This would suggest a larger decrease in the ISM index.

• Also at 10:00 AM, the Census Bureau will release Construction Spending for April. The consensus is for a 0.4% increase in construction spending.

• And during the day, the auto manufacturers will report light vehicle sales for May. Light vehicle sales are expected to increase to 14.5 million from 14.4 million in April (Seasonally Adjusted Annual Rate).

by Calculated Risk on 5/31/2012 04:15:00 PM

Note: U.S. District Court Judge Collyer approved the consent order for the mortgage servicer settlement on April 5th, and so far there hasn't been a significant impact from the agreement on delinquencies or foreclosure sales.

LPS released their Mortgage Monitor report for April today. According to LPS, 7.12% of mortgages were delinquent in April, up slightly from 7.09% in March, and down from 7.97% in April 2011.

LPS reports that 4.14% of mortgages were in the foreclosure process, unchanged from March, and also unchanged from April 2011.

This gives a total of 11.26% delinquent or in foreclosure. It breaks down as:

• 1,927,000 loans less than 90 days delinquent.
• 1,595,000 loans 90+ days delinquent.
• 2,048,000 loans in foreclosure process.

For a total of 5,570,000 loans delinquent or in foreclosure in April. This is down from 6,388,000 in April 2011.

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

Click on graph for larger image.

The total delinquency rate has fallen to 7.12% 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 ways to go.

The in-foreclosure rate was at 4.14%, down from the record high in October 2011 of 4.29%. There are still a large number of loans in this category (about 2.05 million).

The second graph shows foreclosure starts by investor.

From LPS: "[O]verall foreclosure starts were down 2.6 percent in April, FHA foreclosure starts spiked significantly, jumping 73 percent during the month. The rise was driven primarily by defaults in 2008 and 2009 vintage loans, though all FHA vintages saw increases in foreclosure starts in April, despite that fact that the more recent vintages – from 2009 forward – have shown improved relative credit performance."

The third graph shows the FHA performance by vintage.

This graph shows the 90%+ delinquency rate by month since origination (number of payments).

The worst performing loans were in 2006, 2007 and 2008. The best performing loans were made in recent years.

However, as the last graph shows, the FHA made a huge number of loans in 2008, 2009 and 2010. According to the Case-Shiller national index, prices have fallen about about 18% since mid-2008, putting most of those FHA borrowers "underwater" on their mortgages. The price declines since mid-2009 and mid-2010 are much less.

From LPS: “In 2008, when the loan origination market virtually dried up, the FHA stepped in to fill the void,” explained Herb Blecher, senior vice president for LPS Applied Analytics. “FHA originations tripled that year, and increased to five times historical averages in 2009. High volumes like that, even with low default rates, can produce larger numbers of foreclosure starts. That represents a lot of loans to work through – the 2008 vintage alone represents some $14 billion of unpaid balances in foreclosure, and the overall FHA foreclosure inventory continues torise.”

There is much more in the Mortgage Monitor report.

by Calculated Risk on 5/31/2012 02:36:00 PM

Tomorrow the BLS will release the May Employment Situation Summary at 8:30 AM ET. Bloomberg is showing the consensus is for an increase of 150,000 payroll jobs in May, and for the unemployment rate to remain unchanged at 8.1%.

• More weather "payback"? The weather was mild in January and February, and Goldman Sachs analysts think there will be some more payback in the May report, they wrote last month: "[O]ur current best guess is that weather has boosted the level of payrolls by around 100,000 as of February, and may have shaved about 20,000 from the March report ... 50,000 in April and the remaining 30,000 in May." Goldman's forecast is that "nonfarm payroll employment increased by 125,000 in May".

Here is a summary of recent data:

• The ADP employment report showed an increase of 133,000 private sector payroll jobs in May. This would seem to suggest that the consensus for the increase in total payroll employment is too high - especially since public employment probably declined again - although the ADP report hasn't been very useful in predicting the BLS report for any one month. However ADP report has frequently been weaker than the BLS report for the month of May (although this is based on only 11 years of data).

• We don't have the May ISM manufacturing and service indexes to look at for employment, since the employment report is being released earlier than usual this month (on June 1st), so the ISM indexes will be released after the employment report.

• Initial weekly unemployment claims averaged about 375,000 in May, down slightly from the 377,000 average in April. Claims have been at about this level all year.

For the BLS reference week (includes the 12th of the month), initial claims were at 372,000; down from 389,000 for the reference week in April.

• The final May Reuters / University of Michigan consumer sentiment index increased to 79.3, up from the April reading of 76.4 This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. This suggests a weak but slightly improving labor market.

• The small business index from Intuit showed 40,000 payroll jobs added, down from 60,000 in April.

• And on the unemployment rate from Gallup: U.S. Unemployment Edges Down in Mid-May

U.S. unemployment, as measured by Gallup without seasonal adjustment, declined slightly to 8.2% in mid-May from 8.3% in April. Gallup's seasonally adjusted unemployment rate is 8.5% in mid-May, down slightly from 8.6% last month. ... Incorporating the upward seasonal adjustment of 0.3 percentage points that the BLS applied last May yields a seasonally adjusted rate for mid-May of 8.5%.

Note: Gallup only recently has been providing a seasonally adjusted estimate for the unemployment rate, so use with caution (Gallup provides some caveats).

• Conclusion: The overall feeling is that the economy weakened a little in May, and that might mean the employment report will disappoint tomorrow. Also there could be a little more "payback" from extra hiring during the mild winter. However the combined ISM reports suggest the consensus is close. On the positive side, weekly claims improved slightly compared to April, and consumer sentiment improved - but that might be because of lower gasoline prices.

There always seems to be some randomness to the employment report, but once again I'll take the under this month (under 150,000 payroll jobs).

For the economic contest in June: