by Calculated Risk on 10/06/2013 08:24:00 PM

From Ben Casselman at the WSJ: Workers Stay Put, Curbing Jobs Engine

Workers aren't quitting their jobs to pursue better opportunities. Companies aren't filling positions when they do open up.

Economists refer to job turnover that doesn't change the overall number of employees at a company as "churn." In normal times, churn dwarfs job creation and destruction, as millions of workers resign or are fired and are replaced. By a wide array of measures, however, rates of churn remain far below normal. In 2007, nearly three million workers quit their jobs each month. In July, just 2.3 million did, a figure that has improved only modestly since the recession ended.

Churn doesn't get as much attention as new-job creation, but to people looking for work, it's just as important.
...
Policy makers are taking notice. Federal Reserve Vice Chairwoman Janet Yellen ... last year highlighted the low rate of so-called voluntary quits as an important sign that the economy isn't improving as rapidly as the falling unemployment rate might suggest.

This data is found in the monthly Job Openings and Labor Turnover Survey (JOLTS). Here is a graph from last month's survey:

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Total turnover (churn) is the light blue and red combined.  This is still low. 

Quits are in light blue and have been trending up, but still low.  These are voluntary separations and more quits usually indicate a better labor market.

NOTE: The JOLTS for August is scheduled to be released on Tuesday, but will probably be delayed by the government shutdown.

Monday:
• Early: The LPS August Mortgage Monitor report. This is a monthly report of mortgage delinquencies and other mortgage data.

• At 3:00 PM ET, the Consumer Credit report for August from the Federal Reserve. The consensus is for credit to increase $12.8 billion in August.

Weekend:
• Schedule for Week of October 6th

The Nikkei is up about 0.2%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 8 and DOW futures are down 60 (fair value).

Oil prices are down with WTI futures at $103.55 per barrel and Brent at $109.26 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are below $3.40 per gallon.  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 10/06/2013 09:53:00 AM

• The reason the Republicans shutdown the government is an attempt by "conservative" groups to "defund Obamacare".  From the NY Times: A Federal Budget Crisis Months in the Planning

Shortly after President Obama started his second term, a loose-knit coalition of conservative activists led by former Attorney General Edwin Meese III gathered in the capital to plot strategy. ...

Out of that session, held one morning in a location the members insist on keeping secret, came a little-noticed “blueprint to defunding Obamacare,” signed by Mr. Meese and leaders of more than three dozen conservative groups.

It articulated a take-no-prisoners legislative strategy that had long percolated in conservative circles: that Republicans could derail the health care overhaul if conservative lawmakers were willing to push fellow Republicans — including their cautious leaders — into cutting off financing for the entire federal government.

“We felt very strongly at the start of this year that the House needed to use the power of the purse,” said one coalition member ...

Last week the country witnessed the fallout from that strategy: a standoff that has shuttered much of the federal bureaucracy and unsettled the nation.

• This is a radical approach to public policy and it is Not Gonna Happen.

• All of the furloughed federal workers will be paid in full for lost pay during the shutdown. The House passed this bill on Saturday by a 407-0 vote. So workers will be paid for not working.

• Most defense workers have been recalled. From the NY Times: Hagel Recalls Most Defense Department Workers

Defense Secretary Chuck Hagel made a surprise announcement on Saturday that he would recall next week almost all of the 400,000 civilian employees of the Defense Department who had been sent home when the government shut down.

Mr. Hagel said the decision that “most D.O.D. civilians” would now be exempted from furloughs came after Pentagon and Justice Department lawyers interpreted a budget law passed just before the shutdown to include a larger number of workers.

• Congress will pay-the-bills (aka raise the "debt ceiling"). This is not negotiable. Treasury believes they will be low on funds by October 17th.

• Monday, October 14th is Columbus Day (A Federal holiday), and the week of October 14th through October 18th is a "Constituent Work Week" (aka recess). The current schedule is to the have no votes after 3 PM ET on Friday October 11th, so Congress can leave Washington Friday night. It is very unlikely that Congress will leave town that week without agreeing to "pay the bills".

• The bottom line is: 1) the shutdown was caused by groups making non-negotiable demands, 2) the shutdown will be expensive, and my guess is 3) the shutdown will probably end before Congress goes on recess.

by Calculated Risk on 10/05/2013 07:52:00 PM

Note: We will probably see some impact on travel over the next week or two from the government shutdown. The data below is before the shutdown.

From HotelNewsNow.com: STR: US results for week ending 28 September

In year-over-year comparisons, occupancy rose 5.8% to 67.8%; ADR was up 8.3% to $115.47; and RevPAR increased 14.5% to $78.31.

The 4-week average of the occupancy rate is close to normal levels.

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2013, yellow is for 2012, blue is "normal" and black is for 2009 - the worst year since the Great Depression for hotels.

Through September 28th, the 4-week average of the occupancy rate is slightly higher than the same period last year and is tracking just above the pre-recession levels.  The 4-week average of the occupancy rate would usually increase seasonally over the next several weeks, before declining during the holidays. 

Overall - before the shutdown - this has been a decent year for the hotel industry.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 10/05/2013 12:51:00 PM

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

Here is the unofficial problem bank list for October 4, 2013.

Changes and comments from surferdude808:

The FDIC released its enforcement action activity through August 2013 on Monday , September 30th, which was a change in the timing of the release as they usually release on the last Friday of the month. In this case, that would have been Friday, September 27th. We are unsure if this a permanent change going forward or one-off because of some technical issue. The release did contribute to many changes to the Unofficial Problem Bank List. Moreover, it allowed us to update the quarterly transition matrix.

This week there were eight removals and three additions that leave the list holding 685 institutions with assets of $238.7 billion. A year ago, the list held 873 institutions with assets of $334.9 billion.

All removals were action terminations for First Bank and Trust, New Orleans, LA ($716 million); The Delaware County Bank and Trust Company, Lewis Center, OH ($506 million Ticker: DCBF); Cornerstone Bank, Fargo, ND ($233 million); The Citizens Bank of Forsyth County, Cumming, GA ($218 million); Monterey County Bank, Monterey, CA ($211 million Ticker: NRLB); First Security Bank of Nevada, Las Vegas, NV ($119 million); First Sound Bank, Seattle, WA ($106 million Ticker: FSWA); and Town Center Bank, Frankfort, IL ($89 million).

The three additions were Hancock Bank & Trust Company, Hawesville, KY ($317 million); Marshall County State Bank, Varna, IL ($31 million); and Bank of Monticello, Monticello, GA ($93 million). Who would have thought there was a bank in Georgia left to be put under an enforcement action.

With the passage of the third quarter of 2013, we have updated the Unofficial Problem Bank List transition matrix. Full details may be found in the accompanying table. Also, we have added a time series chart depicting the disposition status of banks whose presence has graced the list.

Click on graph for larger image.

In all, there have been 1,659 institutions that have made an appearance on the list. So far, nearly 59 percent or 1,064 of the banks that have appeared on the list have been removed. Action termination has now solidly overtaken failure as the largest manner of exit. Actions have been terminated against 441 banks. During the latest quarter, the banking regulators accelerated action terminations as 64 were removed. At the start of the quarter, the list had 701 banks, so the removal rate was 9.1 percent of the start balance. This removal rate was well above the previous quarterly high of 6.1 percent in the first of 2013 and the absolute number of 53 removals in the third quarter of 2012.

Despite the acceleration of terminations, the other manners of removal still exceed a turnaround in condition that results in action termination. Failures total 368 and, at $293.6 billion, they do account for a far greater share of assets removed than terminations at $191.9 billion. So far, failures have represented 22.1 percent of banks that have appeared on the list, which is well above the low double digit failure rate usually cited by the media for banks that appear on the official list. Voluntary closings and mergers sum to 10 percent of banks that have appeared on the list. The list was first published in August 2009 with 389 banks, so after more than four years, 90 still remain, indicating that its taking many banks a long time to rehabilitate themselves.

Next week should be comparatively quiet as to changes. There is nothing new to pass along on Capitol Bancorp, Ltd.

Unofficial Problem Bank List
Change Summary
		Number of Institutions	Assets ($Thousands)
Start (8/7/2009)		389	276,313,429
Subtractions
	Action Terminated	117	(37,076,372)
	Unassisted Merger	28	(4,624,747)
	Voluntary Liquidation	4	(10,584,114)
	Failures	150	(183,316,242)
	Asset Change		(8,593,209)
Still on List at 6/30/2013		90	32,118,745
Additions		595	206,591,667
End (10/4/2013)		685	238,710,412
Intraperiod Deletions1
	Action Terminated	324	154,815,490
	Unassisted Merger	126	58,722,086
	Voluntary Liquidation	7	1,760,816
	Failures	218	110,261,224
	Total	675	325,559,616
1Institution not on 8/7/2009 or 10/4/2013 list but appeared on a weekly list.

by Calculated Risk on 10/05/2013 08:55:00 AM

Special Note: With the government shutdown, some economic data has been delayed. The first section is a list of delayed reports so far. If the shutdown ends, some of these delayed reports might be released soon.

The key report this week is September retail sales on Friday.

Other key releases include the trade deficit on Tuesday and FOMC minutes on Wednesday. 

----- Delayed Reports -----
Delayed: Construction Spending for August. The consensus is for a 0.4% increase in construction spending.

Delayed: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for August. The consensus is for a 0.2% increase in orders.

Delayed: Employment Report for September. The consensus is for an increase of 178,000 non-farm payroll jobs in September; the economy added 169,000 non-farm payroll jobs in August. The consensus is for the unemployment rate to be unchanged at 7.3% in September.

----- Monday, October 7th -----
Early: The LPS August Mortgage Monitor report. This is a monthly report of mortgage delinquencies and other mortgage data.

3:00 PM: Consumer Credit for August from the Federal Reserve. The consensus is for credit to increase $12.8 billion in August.

----- Tuesday, October 8th -----
7:30 AM ET: NFIB Small Business Optimism Index for September.

8:30 AM: Trade Balance report for August from the Census Bureau.

Imports increased in July, and exports decreased.

The consensus is for the U.S. trade deficit to increase to $40.0 billion in August from $39.1 billion in July.

10:00 AM: Job Openings and Labor Turnover Survey for August from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings decreased in July to 3.689 million, down from 3.869 million in June. number of job openings (yellow) is up 5.4% year-over-year compared to July 2012. 

Quits were up in July, and quits are up about 8% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

----- Wednesday, October 9th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for August. The consensus is for a 0.4% increase in inventories.

2:00 PM: FOMC Minutes for Meeting of September 17-18, 2013.

----- Thursday, October 10th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 310 thousand from 308 thousand last week.  This data is gathered by the states and will continue to be released.

----- Friday, October 11th -----
8:30 AM ET: Retail sales for September will be released.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales are up 28.7% from the bottom, and now 12.8% above the pre-recession peak (not inflation adjusted)

The consensus is for retail sales to be unchanged in September, and to increase 0.4% ex-autos.

8:30 AM: Producer Price Index for September. The consensus is for a 0.2% increase in producer prices (0.1% increase in core).

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (preliminary for October). The consensus is for a reading of 75.0, down from 77.5 in September.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for August.  The consensus is for a 0.2% increase in inventories.

by Calculated Risk on 10/04/2013 08:42:00 PM

Some thoughts from Alec Phillips at Goldman Sachs: Will the Federal Shutdown End with a Debt Ceiling Increase?

In our view, the most likely outcome of the current fiscal dispute is an agreement that combines an increase in the debt limit and a "continuing resolution" that reopens the federal government. We would expect this to pass no earlier than the end of next week (i.e., October 11-12) and more likely sometime around the Treasury's projected deadline of October 17.

Other outcomes are possible, but we believe they have lower probabilities. It is possible that political pressure to end the shutdown could build, but polling thus far does not indicate this has happened yet. It is also possible that if the effort to resolve the two issues together fails, the shutdown could remain unresolved even after the debt limit has been increased. This is a possibility, but we see it as less likely than a combined continuing resolution and debt limit increase.

The intense public focus on the shutdown may have actually raised the possibility of a "clean" debt limit increase. While the situation could go a number of ways, it still appears that the risk of a failure to raise the debt limit is low and that the shutdown has not had a negative effect on the prospects for increasing it.

And Phillips also mentions:

Congress is scheduled to go on recess the week of October 13, but this would presumably have to be cancelled if the debt limit had not yet been addressed. In the past, seemingly intractable political disputes have often been resolved around the start of planned congressional recesses.
emphasis added

Can't miss recess ...

by Calculated Risk on 10/04/2013 06:09:00 PM

From Ethan S. Harris at Merrill Lynch: Macro viewpoint: Breaking bad

We have changed our call: our base case is now for either a two-week shutdown or for more than one shutdown. With weak growth momentum and more damage from Washington, we are lowering 3Q growth to 1.7% and 4Q to 2.0%. We are also pushing Fed tapering to Jan 2014.

There has been no change in rhetoric despite public opinion polls that strongly oppose the shutdown and that are particularly critical of Republicans. ... Most respondents also disagree with the strategy of shutting down the government over the health care law: basically by 3-to-1 in polls by Quinnipiac University, CBS News and CNBC.

The Affordable Care Act (ACA) continues to be in the center of the battle. In our view, this is an issue where there is no compromise. We believe it would take truly extraordinary circumstances for the President to agree to undercut his proudest legislative achievement; even a small concession would likely lead to further demands at each budget deadline.
...
Our new baseline assumes a two week shutdown, but no violation of the debt ceiling. ... We also continue to fear a much worse outcome. Recall that the failure to pass a continuing resolution cuts government spending by roughly one percent of GDP, while failure to raise the debt ceiling requires balancing the budget – a 4% of GDP cut in spending. ... Failure to raise the debt ceiling by the end of October would be catastrophic, in our view.
emphasis added

It is time for the House to end the shutdown.

by Calculated Risk on 10/04/2013 02:38:00 PM

From mortgage banker Lou Barnes:

The shutdown itself can't be quantified. ...

We are still taking applications, locking rates, processing our little hearts out, and closing. Our principal problem: in the post-Bubble spasm authorities decided that ALL borrowers should produce two years' tax returns (not just the few self-employed, or owners of rental property, or those needing investment income to qualify). And authorities decided that neither the borrowers nor their CPAs could be trusted to give us true copies, so we must pull transcripts from the IRS (the dreaded 4506T).

The IRS is shut. When it re-opens it will have to process a backlog growing by the hour. Are the authorities helping by waiving the transcript, or granting good faith safe harbor? NooOOOooo. Many lenders -- to their great credit -- seem willing to defer the risk to post-closing. However, home sales and closings will suffer soon, if only by expired rate locks.

Time to end the shutdown.

by Calculated Risk on 10/04/2013 11:57:00 AM

From the Association of American Railroads (AAR): AAR Reports Increased Intermodal, Carload Traffic for September and the Week

The Association of American Railroads (AAR) today reported increased total U.S. rail traffic for the month of September 2013, with intermodal and carload volume increasing overall compared with September 2012. Intermodal traffic in September totaled 1,027,522 containers and trailers, up 4.4 percent (43,055 units) compared with September 2012. The weekly average of 256,881 intermodal units in September was the second-highest monthly average of any month in history. The three highest-volume intermodal weeks in history for U.S. railroads occurred last month; only the Labor Day holiday prevented it from being the highest-volume intermodal month in history.
...
“Those who follow the rail industry know that carloads of grain and coal can rise or fall by substantial amounts for reasons that have little or nothing to do with the state of the economy,” said AAR Senior Vice President John T. Gray. “Not so with most other rail traffic categories, however. The fact that rail carloads excluding coal and grain were up 4.9 percent in September — the biggest year-over-year monthly gain since last December — is a hopeful sign.”
emphasis added

Click on graph for larger image.

This graph from the Rail Time Indicators report shows U.S. average weekly rail carloads (NSA).  Green is 2013.

U.S. rail carloads totaled 1,159,784 in September 2013, an average of 289,946 per week and up 0.7% (7,595 carloads) over September 2012. A 0.7% increase isn’t much, but it’s the first time since the end of 2011 that there’ve been two straight months with year-over-year monthly increases in total carloads. With the exception of January, carloads each month in 2013 have tracked 2012 extremely closely....

Carload gains in September 2013 were led by crushed stone, gravel, and sand, which saw carloads up 8,253, or 10.0%, over September 2012 ... The commodity with the largest year-over-year carload decline in September 2013 was coal, which saw carloads fall 12,894 (2.7%) from September 2012.

Note that lumber was up 9.8% from a year ago.

Graphs and excerpts reprinted with permission.

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

Intermodal traffic is on track for a record year in 2013.

U.S. railroads originated 1,027,522 intermodal containers and trailers in September 2013, an average of 256,881 per week. That’s up 4.4% (43,055 units) over September 2012 and the second-highest monthly average of any month in history. If not for the Labor Day holiday, September would have been the highest-volume intermodal month in history. The fourth week of September had the highest intermodal volume (269,853 units) of any week in history; the second week of September 2013 had the second-highest intermodal volume (265,873 units) in history; and the third week of September had the third-highest intermodal volume (262,897) in history.

Rail traffic and the economy usually grow together, so this is a good sign for the overall economy (at least through September).

by Calculated Risk on 10/04/2013 11:25:00 AM

From Treasury Secretary Jack Lew: U.S. failure to pay bills hurts everyone

An increase in the debt limit simply allows us to pay our bills. Without a debt limit increase, our government will — in a matter of days — not have the resources it needs to make good on its commitments.

Only Congress has the power to lift the debt limit. That means only Congress can clear the way for our government to meet all of its financial obligations.

The United States has met all its financial obligations for more than 200 years. We are a nation that keeps our word. We are a nation that stands behind our full faith and credit.

Some claim that the United States does not need to meet every one of its commitments. They argue that the government could pay certain bills and let others go unpaid without consequences.

The United States cannot be put in a position of having to choose which commitments it should meet. How could we possibly decide among supporting our veterans, maintaining food assistance for children in need, or sending Medicare payments to hospitals?

CR Note: I think Congress will pay the bills (i.e. raise the "debt ceiling"). As I've noted, the "debt ceiling" sounds virtuous, but it isn't. It is actually just a question of paying the bills. As Republican Senator Mitch McConnell said in 2011, if the debt ceiling isn't raised the "Republican brand" would become "toxic" and synonymous with fiscal irresponsibility. If Congress stopped paying the bills - for the first time in 237 years (except some minor glitches) - people will remember when they vote. So it won't happen; Congress will pay the bills.