by Calculated Risk on 8/30/2020 11:46:00 AM

The employment report for August will be released on Friday, September 4th at 8:30 AM. The consensus is for 1.40 million jobs added in August, and for the unemployment rate to decrease to 9.8%.

There were 1.763 million jobs added in July, and the unemployment rate was at 10.2%.

There will be two distortions in the August employment report that are worth discussing.

The August employment report will show an increase of 237,800 in temporary Census hiring under Federal employment. Since these are temporary jobs, and only happen every ten years with the decennial Census, it makes sense to adjust the headline monthly Current Employment Statistics (CES) by Census hiring to determine the underlying employment trend.

The correct adjustment method is to take the headline number and subtract the change in the number of Census 2020 temporary and intermittent workers. For more, see: How to Report the Monthly Employment Number excluding Temporary Census Hiring

Click on graph for larger image.

Here is a page from the 2020 Census Paid Temporary Workers report released last week.

The temporary employment for the July and August reference weeks are circled in red.

As of the July BLS employment report reference week, there were 50,404 decennial Census temporary workers. As of August  reference week there were 288,204 temp workers.

This will boost August employment by 237,800 jobs.

Another distortion in the August employment report will be from education employment. There is a seasonal pattern to state and local education employment with a large number of educators usually hired in late Summer or early Fall - at the beginning of the school year - and then let go in June and July. Due to the pandemic, many of these educators were let go earlier than usual this year.

This led to a weird quirk in the seasonal adjustment for July. Although there were 960,000 state and local education jobs lost in July NSA (Not Seasonally Adjusted), this was reported as a gain of 245,000 jobs (SA). This was fewer jobs added (SA) than I expected, but it was difficult to tell how many year-round jobs had been lost.

As of February 2020, there were 10,979,000 state and local education employees. Approximately 2 million were seasonal (hired in the Fall, and then usually let go at the end of the school year), and the remaining almost 9 million are year round employees. As of July, all 2 million seasonal employees were let go, along with 635 thousand year round employees.

Usually we'd expect about 415,000 seasonal jobs hired in August (and then most of the remaining seasonal employees hired in September). However, since many school districts delayed the opening of the school year, my guess is few of these seasonal jobs were filled in August.

The BLS model will expect about 415,000 seasonal jobs added in August.  If fewer jobs are added, the BLS will report that education jobs were lost Seasonally Adjusted.   For example, if only 115,000 jobs are added in August, then the BLS will report around 300 thousand education jobs lost. 

Of course some of the year round jobs that were lost earlier in the year could be hired back.   However, since state and local governments are under financial pressure, it seems unlikely that many year round employees were hired back.

by Calculated Risk on 8/29/2020 06:27:00 PM

The US is now mostly reporting over 700,000 tests per day (fewer recently). Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly (or take actions to push down the number of new infections).

There were 760,818 test results reported over the last 24 hours.

There were 44,328 positive tests.

There have been over 29,000 COVID reported deaths in the first 29 days of August. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 5.8% (red line).

For the status of contact tracing by state, check out testandtrace.com.

And check out COVID Exit Strategy to see how each state is doing.

The second graph shows the 7 day average of positive tests reported.

The dashed line is the June low.

Note that there were very few tests available in March and April, and many cases were missed (the percent positive was very high - see first graph).

By June, the percent positive had dropped below 5% (lower than today).  If people stay vigilant, the number of cases might drop to the June low by the end of September (that would still be a large number of new cases, but progress).

by Calculated Risk on 8/29/2020 01:17:00 PM

The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public (just the number of banks and assets every quarter). Note: Bank CAMELS ratings are also not made public.

CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

DISCLAIMER: This is an unofficial list, the information is from public sources only, and while deemed to be reliable is not guaranteed. No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein and same is subject to errors and omissions. This is not intended as investment advice. Please contact CR with any errors.

Here is the unofficial problem bank list for August 2020.

Here are the monthly changes and a few comments from surferdude808:

Update on the Unofficial Problem Bank List for August 2020. During the month, the list increased by one to 66 banks after one addition. From last month, aggregate assets increased by a sizable $5.7 billion to $58.4 billion. $5.3 billion of the increase in assets came from updated asset figures from the FDIC for the second quarter of 2020. Further, the asset growth was attributable largely to a $3.7 billion increase at Deutsche Bank Trust Company Americas. A year ago, the list held 76 institutions with assets of $54.6 billion. Added this month was The First National Bank and Trust Company of Vinita, Vinita, OK ($347 million). This past Tuesday, the FDIC provided updated figures on the Official Problem Bank List. As of the second quarter of 2020, the FDIC said its list had 52 institutions with assets of $48.1 billion. Last quarter, the official list had 54 institutions with assets of $44.5 billion. Hence, there was a $3.6 billion increase in assets on the FDIC during the recent calendar quarter, which about matches that asset growth at Deutsche Bank.

by Calculated Risk on 8/29/2020 08:11:00 AM

The key report this week is the August employment report on Friday.

Other key indicators include the August ISM manufacturing and services indexes, August auto sales, and the July trade deficit.

For data nerds, the BLS will release their 10 year Labor Force Projections on Tuesday.

----- Monday, August 31st -----
10:30 AM: Dallas Fed Survey of Manufacturing Activity for August. This is the last of the regional Fed surveys for August.

----- Tuesday, September 1st -----
10:00 AM: ISM Manufacturing Index for August. The consensus is for the ISM to be at 54.5, up from 54.2 in July.

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

The PMI was at 54.2% in July, the employment index was at 44.3%, and the new orders index was at 61.5%.

10:00 AM: Construction Spending for July. The consensus is for a 1.0% increase in construction spending.

All day: Light vehicle sales for August. The consensus is for light vehicle sales to be 15.2 million SAAR in August, up from 14.5 million in July (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the current sales rate.

10:00 AM: The BLS is scheduled to release Labor Force projections through 2029.

----- Wednesday, September 2nd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for August. This report is for private payrolls only (no government). The consensus is for 900,000 payroll jobs added in August, up from 167,000 added in July.

----- Thursday, September 3rd -----
8:30 AM: The initial weekly unemployment claims report will be released. The early consensus is for a 950 thousand initial claims, down from 1.006 million the previous week.

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

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $52.3 billion in July, from $50.7 billion in June.

10:00 AM: ISM Services Index for August.

----- Friday, September 4th -----
8:30 AM: Employment Report for August.   The consensus is for 1.40 million jobs added, and for the unemployment rate to decrease to 9.8%.

There were 1.763 million jobs added in July, and the unemployment rate was at 10.2%.

This graph shows the job losses from the start of the employment recession, in percentage terms.

The current employment recession was by far the worst recession since WWII in percentage terms, and the worst in terms of the unemployment rate.

by Calculated Risk on 8/28/2020 08:11:00 PM

The US is now mostly reporting over 700,000 tests per day (fewer recently). Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly (or take actions to push down the number of new infections).

There were 772 thousand test results reported over the last 24 hours.

There were 47 thousand positive tests.

There have been over 28,000 COVID reported deaths in the first 28 days of August. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 6.1% (red line).

For the status of contact tracing by state, check out testandtrace.com.

And check out COVID Exit Strategy to see how each state is doing.

by Calculated Risk on 8/28/2020 01:39:00 PM

Some interesting data from housing economist Tom Lawler:

Below is a table showing July residential home sales and inventories for counties with beach resorts or, in the case of Monroe County, mountain resorts. Data are MLS based unless otherwise noted.

Selected Transfer Payments Billions of dollars, SAAR
	Residential Home Sales			Residential Inventory
	July-20	July-19	% Chg.	July-20	July-19	% Chg.
Barnstable Co., MA (Cape Cod)*	881	618	42.6%
Outer Banks, NC	389	185	110.3%	881	1506	-41.5%
Hilton Head, SC	709	503	41.0%	1676	2321	-27.8%
Sussex Co, DE (Rehoboth Beach)	695	437	59.0%	1614	2659	-39.3%
Worcester Co., MD (Ocean City)	374	190	96.8%	634	1150	-44.9%
Baldwin Co., AL (Orange Beach)	895	649	37.9%	2011	2875	-30.1%
Monroe Co., PA (Poconos)	418	283	47.7%	723	1668	-56.7%
*Based on Deeds Recorded

by Calculated Risk on 8/28/2020 11:41:00 AM

From Merrill Lynch:

2Q GDP was revised up to -31.7% qoq saar in the second release. 3Q GDP tracking rose by 2pp to 19% following recent strong capex and housing data. [August 28 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 15.3% for 2020:Q3. [August 28 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2020 is 28.9 percent on August 28, up from 25.6 percent on August 26. [August 28 estimate]

It is important to note that GDP is reported at a seasonally adjusted annual rate (SAAR).  A 25% annualized increase in Q3 GDP, is about 5.7% QoQ, and would leave real GDP down about 5.1% from Q4 2019.

The following graph illustrates this decline.

Click on graph for larger image.

This graph shows the percent decline in real GDP from the previous peak (currently the previous peak was in Q4 2019).

This graph is through Q2 2020, and real GDP is currently off 10.2% from the previous peak.  For comparison, at the depth of the Great Recession, real GDP was down 4.0% from the previous peak.

The black arrow shows what a 25% annualized increase in real GDP would look like in Q3.

Even with a 25% annualized increase (about 5.7% QoQ), real GDP will be down about 5.1% from Q4 2019; a larger decline in real GDP than at the depth of the Great Recession.

by Calculated Risk on 8/28/2020 10:05:00 AM

Transfer payments decreased by $70 billion in July, but were still $1.7 trillion (on SAAR basis) above the February level.  Most of the increase in transfer payments - compared to the level prior to the crisis - is now from unemployment insurance. 

However, there will be sharp decline in unemployment insurance in August.

This table shows the amount of unemployment insurance and "Other" transfer payments since February 2020 (pre-crisis level).  The increase in "Other" was mostly due to other parts of the CARES Act such as the $1,200 one time payment.

Selected Transfer Payments Billions of dollars, SAAR
	Other	Unemployment Insurance
Feb	$506	$28
Mar	$515	$74
Apr	$3,379	$496
May	$1,354	$1,372
Jun	$743	$1,470
Jul	$748	$1,364

A key measure of the health of the economy (Used by NBER in recession dating) is Real Personal Income less Transfer payments.

Click on graph for larger image.

This graph shows real personal income less transfer payments since 1990.

This measure of economic activity increased 0.7% in July, compared to June, and was down 5.0% compared to February 2020 (previous peak).

Another way to look at this data is as a percent of the previous peak.

Real personal income less transfer payments was off 8.3% in April. This was a larger decline than the worst of the great recession.

Currently personal income less transfer payments are still off 5.0% (see red arrow).

by Calculated Risk on 8/28/2020 09:27:00 AM

Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance.

This data is as of August 25th.

From Forbearances Improve Slightly

After holding flat last week, the total number of mortgages in active forbearance improved slightly. Forbearances ticked down by just 1,000 over the past week, making the second consecutive week of basically zero net improvement.

This is not unexpected, as improvement has slowed toward the end of each of the past several months. It has generally followed a stair-step progression with the most improvement seen at the beginning of the month and slowing as we move toward the end.

According to Black Knight’s McDash Flash Forbearance Tracker, as of August 25, 3.9 million homeowners remain in active forbearance, representing 7.4% of all active mortgages. This is unchanged from last week (or the week prior). Together, they represent $828 billion in unpaid principal. Of these, 72% have had their terms extended.
...
As we’ve discussed previously, there are a number of factors that continue to represent significant uncertainty as we move forward, including the ongoing COVID-19 pandemic and the expiration of expanded unemployment benefits last month.
emphasis added

Click on graph for larger image.

CR Note: I'm still expecting another disaster relief package soon, but we might see an increase in forbearance activity in the coming weeks as we wait for additional relief.

by Calculated Risk on 8/28/2020 08:41:00 AM

The BEA released the Personal Income and Outlays report for July:

Personal income increased $70.5 billion (0.4 percent) in July according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $39.9 billion (0.2 percent) and personal consumption expenditures (PCE) increased $267.6 billion (1.9 percent).

Real DPI decreased 0.1 percent in July and Real PCE increased 1.6 percent. The PCE price index increased 0.3 percent. Excluding food and energy, the PCE price index increased 0.3 percent.

The July PCE price index increased 1.0 percent year-over-year and the July PCE price index, excluding food and energy, increased 1.3 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through July 2020 (2012 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income and the increase in PCE were below expectations.

Even if PCE stayed at this level in August and September, PCE growth would be around 35% annualized compared to Q2 (since PCE was so low in April).   But PCE would still be far below the levels at the beginning of 2020.