by Calculated Risk on 7/02/2013 08:55:00 AM

Notes: This CoreLogic House Price Index report is for May. The recent Case-Shiller index release was for April. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Report Shows Home Prices Rise by 12.2 Percent Year Over Year in May

Home prices nationwide, including distressed sales, increased 12.2 percent on a year-over-year basis in May 2013 compared to May 2012. This change represents the biggest year-over-year increase since February 2006 and the 15th consecutive monthly increase in home prices nationally. On a month-over-month basis, including distressed sales, home prices increased by 2.6 percent in May 2013 compared to April 2013.

Excluding distressed sales, home prices increased on a year-over-year basis by 11.6 percent in May 2013 compared to May 2012. On a month-over-month basis, excluding distressed sales, home prices increased 2.3 percent in May 2013 compared to April 2013. Distressed sales include short sales and real estate owned (REO) transactions.

The CoreLogic Pending HPI indicates that June 2013 home prices, including distressed sales, are expected to rise by 13.2 percent on a year-over-year basis from June 2012 and rise by 2.9 percent on a month-over-month basis from May 2013. Excluding distressed sales, June 2013 home prices are poised to rise 12 percent year over year from June 2012 and by 2 percent month over month from May 2013.
...
“It’s been more than seven years since the housing market last experienced the increases that we saw in May, with indications that the summer months will continue to see significant gains,” said Dr. Mark Fleming, chief economist for CoreLogic. “As we approach the half-way point of 2013, home prices continue to respond positively to the reductions in home inventory thus far.”

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 2.6% in May, and is up 12.2% over the last year.  This index is not seasonally adjusted, and this is usually the strongest time of the year for price increases.

The index is off 21% from the peak - and is up 18.7% from the post-bubble low set in February 2012.

The second graph is from CoreLogic. The year-over-year comparison has been positive for fifteen consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

This is the largest year-over-year increase since 2006.

This was another very strong month-to-month increase.  Note: CoreLogic notes that prices are up year-over-year in all 50 states excluding distressed sales, and up in 97 of the 100 largest metro areas: "Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 97 were showing year-over-year increases in May, up from 94 in April 2013."

by Calculated Risk on 7/01/2013 09:00:00 PM

More grim news from Europe: Joblessness Edges Higher To Hit a Euro Zone Record

Unemployment in the euro zone continued its steady rise in May ... The jobless rate in the 17 countries that belong to the euro zone was 12.1 percent in May, adjusting for seasonal effects, according to a report from Eurostat, the European Union statistics agency. That figure compared with 12 percent in April ...

Joblessness in the euro zone has been rising almost without interruption since early 2008, when the financial crisis began, declining only briefly at the beginning of 2011. And analysts see little prospect for a sustained decline anytime soon ... Unemployment rates in Spain and Greece were about 27 percent in May, with youth unemployment remaining well above 50 percent. ... If there was any good news, economists said, it was that unemployment may not go up much more.

That is the "good news"?  Oh my ... epic failure.  Here is the Eurostat unemployment data.

Tuesday:
• All day: Light vehicle sales for June. The consensus is for light vehicle sales to increase to 15.5 million SAAR in June (Seasonally Adjusted Annual Rate) from 15.3 million SAAR in May.

• At 10:00 AM, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for May. The consensus is for a 2.0% increase in orders.

by Calculated Risk on 7/01/2013 04:21:00 PM

From the Financial Times: US construction hiring poised to explode (says Deutsche)

[A]ccording to economists at Deutsche Bank ... if the volume of housing starts accelerate as they expect, construction industry will need about 300,000 new workers in the second half of the year.
excerpt with permission

Earlier articles on construction employment:

• From Michelle Meyer at Merrill Lynch: Construction Coming Back

• From Kris Dawsey and Hui Shan at Goldman Sachs: Housing Sector Jobs Poised for a Comeback

• From Jed Kolko at Trulia: Here are the “Missing” Construction Jobs

• From Professor Tim Duy at EconomistsView: Employment Report Nothing If Not Consistent

This graph shows total construction employment as reported by the BLS (not just residential).

Since construction employment bottomed in January 2011, construction payrolls have increased by 369 thousand.    Historically there is a lag between an increase in activity and more hiring - and it appears hiring should pickup significant in the 2nd half of 2013 (Merrill estimates 20 thousand construction jobs per month will be added this year, Goldman estimates 25 to 30 thousand jobs per month, Deutsche Bank around 50 thousand jobs per month in the 2nd half).

by Calculated Risk on 7/01/2013 01:31:00 PM

By request, here is an update to four key indicators used by the NBER for business cycle dating: GDP, Employment, Industrial production and real personal income less transfer payments.

Note: The following graphs are all constructed as a percent of the peak in each indicator. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%.

These graphs show that most major indicators are still below the pre-recession peaks.

Click on graph for larger image.

This graph is for real GDP through Q1 2013.

Real GDP returned to the pre-recession peak in Q4 2011, and has hit new post-recession highs for six consecutive quarters.

At the worst point - in Q2 2009 - real GDP was off 4.7% from the 2007 peak.

This graph shows real personal income less transfer payments as a percent of the previous peak through the May report.

This measure was off 11.2% at the trough in October 2009.

Real personal income less transfer payments returned to the pre-recession peak in December, but that was due to a one time surge in income as some high income earners accelerated earnings to avoid higher taxes in 2013.   Real personal income less transfer payments declined sharply in January (as expected), and were still 3.3% below the previous peak in May.

Real personal income less transfer payments will probably be the last major indicator to return to pre-recession levels (excluding the spike last December).

The third graph is for industrial production through May 2013 - although production growth has slowed recently.

Industrial production was off over 17% at the trough in June 2009, and has been one of the stronger performing sectors during the recovery.

However industrial production is still 2.1% below the pre-recession peak.  This indicator might return to the pre-recession peak in late 2013 or in 2014.

The final graph is for employment and is through May 2013.  This is similar to the graph I post every month comparing percent payroll jobs lost in several recessions.

Payroll employment is still 1.8% below the pre-recession peak and will probably be back to pre-recession levels in 2014.

All of these indicators collapsed in 2008 and early 2009, and only real GDP is back to the pre-recession peak (personal income returned to the previous peak in December due to a one time increase in income). 

by Calculated Risk on 7/01/2013 11:05:00 AM

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

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during May 2013 was estimated at a seasonally adjusted annual rate of $874.9 billion, 0.5 percent above the revised April estimate of $870.3 billion. The May figure is 5.4 percent above the May 2012 estimate of $830.4 billion.
...
Spending on private construction was at a seasonally adjusted annual rate of $605.4 billion, nearly the same as the revised April estimate of $605.7 billion. ...

In May, the estimated seasonally adjusted annual rate of public construction spending was $269.5 billion, 1.8 percent above the revised April estimate of $264.7 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 52% below the peak in early 2006, and up 41% from the post-bubble low.

Non-residential spending is 32% below the peak in January 2008, and up about 26% from the recent low.

Public construction spending is now 17% below the peak in March 2009 and was up slightly in May.

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

On a year-over-year basis, private residential construction spending is now up 23%. Non-residential spending is down slightly year-over-year. Public spending is down 4.7% year-over-year.

A few key themes:
1) Private residential construction is usually the largest category for construction spending, and is now the largest category once again.  Usually private residential construction leads the economy, so this is a good sign going forward.

2) Private non-residential construction spending usually lags the economy.  There was some increase this time for a couple of years - mostly related to energy and power - but the key sectors of office, retail and hotels are still at very low levels.  I expect private non-residential to start to increase soon.

3) Public construction spending increased slightly in May - and it is possible public construction spending is near the bottom.  Public spending has declined to 2006 levels (not adjusted for inflation) and has been a drag on the economy for 4 years. In real terms, public construction spending has declined to 2001 levels.

by Calculated Risk on 7/01/2013 10:00:00 AM

The ISM manufacturing index indicated expansion in June. The PMI was at 50.9% in June, up from 49.0% in May. The employment index was at 48.7%, down from 50.1%, and the new orders index was at 51.9%, up from 48.8% in May.

From the Institute for Supply Management: June 2013 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in June following one month of contraction, and the overall economy grew for the 49th 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 50.9 percent, an increase of 1.9 percentage points from May's reading of 49 percent, indicating expansion in the manufacturing sector for the fifth time in the first six months of 2013. The New Orders Index increased in June by 3.1 percentage points to 51.9 percent, and the Production Index increased by 4.8 percentage points to 53.4 percent. The Employment Index registered 48.7 percent, a decrease of 1.4 percentage points compared to May's reading of 50.1 percent. Manufacturing employment contracted for the first time since September 2009, when the index registered 47.8 percent. The Prices Index registered 52.5 percent, increasing 3 percentage points from May, indicating that overall raw materials prices increased from last month. Comments from the panel generally indicate slow growth and improving business conditions."
emphasis added

Click on graph for larger image.

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

This was slightly above expectations of 50.5% and suggests manufacturing expanded in June.

by Calculated Risk on 7/01/2013 09:00:00 AM

From MarkIt: Markit U.S. Manufacturing PMI™ – final data

At 51.9, the final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) signalled only a modest manufacturing expansion in June. Having fallen from 52.3 in May, and dropping below the earlier flash estimate of 52.2, the PMI indicated the slowest rate of growth since last October.
...
Firms generally linked the increase in output to larger volumes of new work, though new order growth was little-changed from May’s modest pace. Much of the increase in new work originated domestically, with new export orders falling for the second month running and dropping at the sharpest rate since August 2009.
...
Employment in the manufacturing sector was broadly unchanged in June. This ended a 40-month sequence of increases. A number of firms commented that higher new order requirements were balanced with attempts to control costs.

“Manufacturing clearly down-shifted a gear between the first and second quarters, and is at risk of losing further momentum as we head into the second half of the year." [said Chris Williamson, Chief Economist at Markit]
...
Domestic demand is far from lively, but it is a deteriorating export scene that is causing the real problems. Export orders are being lost at the fastest rate since the height of the financial crisis in mid-2009."

The ISM PMI for June will be released at 10 AM today.

by Calculated Risk on 6/30/2013 10:14:00 PM

Monday:
• At 9:00 AM ET, the Markit US PMI Manufacturing Index for June will be released. The consensus is for the index to be unchanged at 52.3.

• At 10:00 AM, the ISM Manufacturing Index for June. The consensus is for an increase to 50.5 from 49.0 in May. Based on the regional surveys, a reading above 50 seems likely.

• Also at 10:00 AM, Construction Spending for May. The consensus is for a 0.6% increase in construction spending.

Weekend:
• Schedule for Week of June 30th

The Asian markets are red tonight with the Nikkei down 0.2%, and Shanghai Composite down 0.4%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 5 and DOW futures are down 25 (fair value).

Oil prices have mostly moved sideways recently with WTI futures at $96.07 per barrel and Brent at $101.70 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are down to about $3.50 per gallon. Based on Brent prices and the calculator at Econbrowser, I expect gasoline prices to fall a little more.

If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 6/30/2013 06:18:00 PM

This is a common question, and I suggest using the Atlanta Fed's Jobs Calculator tool to estimate how many jobs per month will be needed to reach a certain unemployment level.

As an example, for the unemployment rate to decline to 7.3% in December (the high end of the Fed's forecast), with the participation rate staying steady at 63.4%, would require about 150,000 jobs per month for the next seven months.  This seems very possible.

If the participation rate increases to 63.6%, than the economy would need to add 210,000 jobs per month for the unemployment rate to fall to 7.3% in December (this is just an estimate).

You can put in your own assumptions to the calculator.

Another frequent question is when will the unemployment rate fall to 6.5% (the Fed's threshold, but not trigger, for raising the Fed's funds rate). If the participation rate stays steady, the unemployment rate will fall to 6.5% in December 2014 if the economy adds around 185,000 jobs per month.   This is consistent with the Fed not raising rates until 2015 or later.

by Calculated Risk on 6/30/2013 09:54:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for June 28, 2013.

Changes and comments from surferdude808:

With the FDIC releasing its enforcement actions through May 2013, there were many changes to the Unofficial Problem Bank List. For the week, there were seven removals and five additions that leave the at 749 institutions with assets of $273.3 billion. For the month of June, the list fell by a net 12 institutions after seven additions, seven action terminations, six unassisted mergers, five failures, and one voluntary liquidation. Assets fell by $4.02 billion, which is the smallest decline since a $3.99 billion in November 2012. In addition, there was a noticeable slowdown in action terminations, which were last at this level in November 2011.

This week actions were terminated against Farmers Bank, Ault, CO ($232 million); Peoples Bank & Trust Company, Owenton, KY ($64 million); Lakeview Bank, Lakeville, MN ($54 million); Park State Bank, Duluth, MN ($30 million); and Roxbury Bank, Roxbury, KS ($14 million). Also, the FDIC terminated a Prompt Corrective Action order against First Sound Bank, Seattle, WA ($123 million), but it is still subject to a Consent Order. Other removals from finding merger partners include First National Bank of Illinois, Lansing, IL ($374 million) and Community State Bank, Norwalk, WI ($24 million).

Additions this week were Bay Cities Bank, Tampa, FL ($534 million); Oswego Community Bank, Oswego, IL ($194 million); SunSouth Bank, Dothan, AL ($178 million); VistaBank, Aiken, SC ($109 million); and First State Bank of Swanville, Swanville, MN ($30 million).

As promised last week, we have updated the transition matrix with the passage of the second quarter of 2013. Full details may be found in the accompanying table. As depicted, there have been a total of 1,644 institutions with assets of $811.4 billion that have appeared on the list. A little more the 54 percent of the institutions that have appeared on the list have been removed. A total of 895 institutions are no longer on the list. Since the publishing start of this list in 2009, failure has been the primary manner of exit; however, at this point, terminations are now responsible for more removals at 377. Close behind are failures at 363 while finding a merger partner has been responsible for 144 removals. While failures have slipped as the primary form of exit from the list, the amount of assets removed for failure total $292.6 billion, which dwarfs $164.4 billion in assets from institutions where actions were terminated.

As discussed above, there was a discernible slowdown in the pace of action terminations this month and quarter. There were 34 terminations during the quarter, which represented 4.5 percent of the 757 institutions that were on the list at the start of the quarter. During the first quarter of 2013, the termination rate was 6.1 percent. The 34 terminations were the lowest quarterly count since 32 in the first quarter of 2012. There were 108 institutions still hanging around from the original publication at the start of the second quarter of 2013, but only four were removed this quarter because of action termination, which was a much lower termination rate of 3.7 percent. The transition methods of the 389 institutions on the original list in August 2009 does differ significantly from the pool of subsequent additions.

Unofficial Problem Bank List
Change Summary
		Number of Institutions	Assets ($Thousands)
Start (8/7/2009)		389	276,313,429
Subtractions
	Action Terminated	108	(31,933,282)
	Unassisted Merger	27	(4,452,830)
	Voluntary Liquidation	4	(10,584,114)
	Failures	150	(183,316,242)
	Asset Change		(8,734,399)
Still on List at 6/30/2013		100	37,292,562
Additions		649	235,975,860
End (6/30/2013)		749	273,268,422
Intraperiod Deletions1
	Action Terminated	269	132,439,197
	Unassisted Merger	117	55,560,134
	Voluntary Liquidation	7	1,760,816
	Failures	213	109,331,508
	Total	606	299,091,655
1Institution not on 8/7/2009 or 6/30/2013 list but appeared on a weekly list.