by Calculated Risk on 2/07/2010 03:41:00 PM

First, via NPR: The Super Bowl Stock Market Predictor

The Super Bowl Stock Market Predictor holds that if a team from the old NFL wins, the market will rise in that year; if a team from the old AFL wins, the market will fall.

Both the Colts and the Saints qualify as "old NFL", so that is bad news for the bears!

Second, from Bloomberg: Greenspan Says Unemployment Not Likely to Fall Soon

Former Federal Reserve Chairman Alan Greenspan said it is “very difficult” to see U.S. unemployment falling soon and that an economic recovery is “going to be a slow, trudging thing.” He also expressed concern about falling stock prices.

Uh oh, it makes me nervous when I agree with Greenspan, so maybe the recovery will be "V-shaped" and unemployment will fall quickly!

Just joking of course - I still think the recovery will be sluggish and unemployment will stay elevated for some time.

by Calculated Risk on 2/07/2010 11:59:00 AM

People will be watching the so called PIGS (Portugal, Ireland, Greece and Spain) this week for any updates on a possible sovereign debt crisis. And don't forget Eastern Europe and the Baltic states too, especially Latvia.

The Economist has a preview on Greece:

TAX-COLLECTORS and customs officers in Greece have already walked out in protest against planned austerity measures by the government. On Wednesday February 10th it will be the turn of civil servants, doctors and other state workers. A much bigger strike is expected later in the month and past experience suggests that protests could turn nasty. Yet unless Greece gets a grip on its public finances, the government will struggle to finance its loans. Similar anxieties are emerging elsewhere in Europe.

On Tuesday, the NFIB Small Business Optimism for January will be released, the Job Openings and Labor Turnover Survey (JOLTS) survey for December, and Wholesale Inventories report for December.

On Wednesday, the Census Bureau will release the December Trade Balance report (consensus is for a trade deficit of about $36 billion, the same as last month) and the MBA will release the weekly Mortgage Applications report. Also Wednesday will be a busy day for Fed Speak.

On Thursday, the Retail Sales report for January will be released. Consensus is for a 0.4% increase (Bloomberg consensus 0.3%), and 0.6% ex-autos. The weekly initial unemployment claims report will be closely watched, and the consensus is for a decline to under 460,000. Business inventories will also be released on Thursday.

Consumer sentiment will be released on Friday, and the West Coast port traffic will probably also be released this week - and of course more bank failures.

And a summary of last week ...

Employment Report: 20K Jobs Lost, 9.7% Unemployment Rate

Click on graph for larger image.

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 20,000 in January and the unemployment rate decreased to 9.7%. The economy has lost almost 4.0 million jobs over the last year, and 8.42 million jobs since the beginning of the current employment recession.

The second graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).

For the current employment recession, employment peaked in December 2007, and this is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only the early '80s recession with a peak of 10.8 percent was worse).

This graph shows the employment-population ratio; this is the ratio of employed Americans to the adult population.

The Employment-Population ratio ticked up slightly to 58.4% in January, after plunging since the start of the recession. This is about the same level as in 1983.

Note: the above graph doesn't start at zero to better show the change.

The fourth graph shows the number of workers unemployed for 27 weeks or more (blue). The red line is the same data as a percent of the civilian workforce.

According to the BLS, there are a record 6.31 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 4.1% of the civilian workforce. (note: records started in 1948)

The number of long term unemployed, and the dramatic plunge in Employment-Population ratio, are two of the key stories of this recession.

U.S. Light Vehicle Sales 10.8 Million SAAR in January

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for January (red, light vehicle sales of 10.78 million SAAR from AutoData Corp).

This is the lowest level since October and below the levels of last July. Obviously sales were boosted significantly by the "Cash-for-clunkers" program in August and some in July.

The current level of sales are still very low, and are still below the lowest point for the '90/'91 recession (even with a larger population).

Homeownership Rate Declines to Early 2000 Level

The homeownership rate declined to 67.2% in Q4 and is now at the levels of early 2000.

Note: graph starts at 60% to better show the change.

The Census report also showed the homeowner vacancy rate increase to 2.7%, and the rental vacancy rate was at 10.7% (see graphs here).

This data suggests there are about 1.8 million excess vacant housing units in the U.S. (above the normal levels). For analysis, see: Housing Stock and Flow

Construction Spending Declines in December

Residential construction spending decreased in December, and nonresidential spending increased slightly.

Private residential construction spending is now 61.5% below the peak of early 2006.

Private non-residential construction spending is 22.0% below the peak of October 2008.

Other Economic Stories ...

From David Streitfeld at the NY Times: No Aid or Rebound in Sight, More Homeowners Just Walk Away

From the Fed: Banks Cease Tightening Standards, Loan Demand Weakens Further

From Dina ElBoghdady and Dan Keating at the WaPo: Rising FHA default rate foreshadows a crush of foreclosures

Q4: Office, Mall and Lodging Investment

From the Institute for Supply Management: ISM Manufacturing Index Shows Expansion in January

From the Institute for Supply Management: ISM Non-Manufacturing Shows Slight Expansion in January

From the National Multi Housing Council (NMHC): Apartment Market Conditions Steady; Sales Volume and Equity Financing Improve, According to NMHC Quarterly Survey

December PCE and Saving Rate

From the American Bankruptcy Institute: January Consumer Bankruptcy Filings Decrease 10 Percent from December

Unofficial Problem Bank Lists Increases to 605

Best wishes to all.

by Calculated Risk on 2/07/2010 08:37:00 AM

From Kenneth Harney in the LA Times: 'Cash-in' refis growing in popularity

In Freddie Mac's latest quarterly survey of refinancings, 33% of homeowners put cash into the deal to lower their mortgage balances, the highest percentage ever. By contrast, only 27% of refinancers took cash out -- the lowest percentage on record.

... there has been a steady rise since the fourth quarter of 2007, when cash-ins hit 9%, up from just 5% of all refis earlier that year.

By early 2009, they accounted for 13% of refinancings, then grew to 18% in the third quarter. After that, cash-ins jumped to 33% in the final three months of 2009.

Harney discusses two reasons for "cash-in" refis: 1) Paying down the mortgage can get the borrower a better loan and avoid PMI, and 2) with interest rates so low on money market funds and CDs, paying down the mortgage offers a higher return.

This "cash-in" has shown up in the Fed's Flow of Funds data.

Click on graph for larger image in new window.

This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.

For Q3 2009, the Net Equity Extraction was minus $91 billion, or negative 3.3% of Disposable Personal Income (DPI). Q4 data will be released on March 11th.

This decline was partially because of debt cancellation per foreclosure sales, and some from modifications, like Wells Fargo's principal reduction program, and partially due to homeowners paying down their mortgages as opposed to borrowing more.

Maybe "mortgage burning parties" will make a comeback too.

Note: Mortgage burning link is to an audio of NPR story last year: Mortgage-Burning Parties Almost Extinct

by Calculated Risk on 2/06/2010 11:15:00 PM

A couple of past favorites, standup economist Yoram Bauman (see his classic Principles of economics, translated ) and singer Merle Hazard (Inflation or Deflation? and H-E-D-G-E ), appear in the video ...

by Calculated Risk on 2/06/2010 07:41:00 PM

From Michelle Singletary at the WaPo: Paying your credit card bill before the mortgage

TransUnion ... recently released a report showing that an increasing number of consumers are choosing to pay their credit card bills before their monthly mortgages. ... The percentage of people delinquent on their mortgages but current on credit cards jumped to 6.6 percent in the third quarter of 2009, up from 4.9 percent in the third quarter of 2008.
...
The percentage of consumers current on their credit cards but delinquent on their mortgages first surpassed the percentage of consumers up to date on their mortgages but delinquent on their credit cards in the first quarter of 2008, according to TransUnion.

"The implosion of the mortgage industry over the last 24 months, the resetting of adjustable-rate mortgages and the weak job market have all come together to redefine how consumers are managing their finances and meeting or not meeting their credit obligations," said Ezra Becker, director of consulting and strategy in TransUnion's financial services business unit.

Check out the numbers for California and Florida!

This behavior first showed up with subprime borrowers, from Bloomberg in June 2007: Subprime Borrowers More Apt to Pay Card Debt, Ignore Mortgages

The riskiest borrowers in the U.S. are more likely to pay off their credit-card debt than their mortgage, bucking historical trends, a new study shows.
...
Bankers in the past have reasoned that consumers would give up everything else before they risked losing their homes, making mortgages less risky than other forms of lending. The report found borrowers with strong ratings still follow the historic trend of paying their mortgage before their credit-card debt.

The penchant of subprime borrowers to do the opposite may be ``a potential shift in this payment paradigm,'' the study said.

Another "subprime" behavior goes mainstream ...

by Calculated Risk on 2/06/2010 03:57:00 PM

TIME asks: The Great Recession: Will Construction Workers Survive?

Nationally, unemployment fell to 9.7% in January, but in construction it jumped to 24.7% ... "In the previous 14 years, I had not been out of work for more than one week," says Pat O'Connor, 57, a Connecticut carpenter. With no work since July, O'Connor says, "It is a bad dream turning into a nightmare. Is construction dead? It's just horrible right now. No one expected this. It's a depression."

And it won't get better in 2010.

The following graph shows construction employment (total) and as a percent of non-farm payroll employment.

Click on graph for larger image in new window.

Although construction employment is off 2.1 million workers since the peak, there will be no increase any time soon.

Looking at the graph, it appears construction employment continues to decline for a time after a recession ends - or only picks up a little. However this masks the contributions from the two components of construction: residential and non-residential.

Residential investment (and residential construction) usually leads the economy out of recession, and non-residential construction lags the economy. Unfortunately the BLS didn't start breaking out residential construction employment until recently, but that is the pattern.

This time any improvement in residential construction employment will be small, in fact completions in 2010 will be at an all time record low (see: Housing Stock and Flow).

The TIME article notes:

In downtown Los Angeles, just east of Little Tokyo, one of the only active construction sites is a 53-unit apartment building at Alameda and 4th Street.

And when that is completed, the opportunities will be few. In 2010 the number of 5+ unit completions will collapse:

The blue line is for multifamily starts and the red line is for multifamily completions. For the most part, all the multifamily units that will be delivered in 2010 have already been started since, according to the Census Bureau, it takes on average over 1 year to complete these projects.

Since multifamily starts collapsed in 2009, completions will collapse in 2010 - and construction employment will suffer.

And non-residential investment (and employment) is still getting crushed (see: Q4: Office, Mall and Lodging Investment). As these projects are completed, more construction workers will be let go.

So the outlook for construction employment in 2010 is grim.

by Calculated Risk on 2/06/2010 12:38:00 PM

This is probably worth reviewing again, and I've added several graphs to show the relationship between net payroll jobs (establishment survey) and the unemployment rate (household survey) over different periods.

As I noted yesterday, a common question is: How could there be fewer payroll jobs, but the unemployment rate declined? This is because the data comes from two separate surveys. The establishment survey showed a loss of 20,000 payroll jobs in January, but the household survey showed an increase in the employment level of 541,000.

The number to use for jobs is the establishment survey, but the unemployment number is based on the household survey. The two surveys can diverge over the short period, but over time it will all work out. This was a hot topic last year when the unemployment rate decline to 9.4% in July, and some commentators wondered if the unemployment rate had peaked (see: Unemployment and Net Jobs).

Here are a series of graphs showing this relationship over several different periods.

The first graph shows the one month change in net jobs (on the x-axis) as a percentage of the payroll jobs, and the change in the unemployment rate on the y-axis.

The data is for the last 40 years: 1969 through January 2010.

Click on graph for large image.

Obviously there is a correlation - the more jobs added (further right on the x-axis), the more the unemployment rate declines (y-axis). And generally the more jobs lost, the more the unemployment rate increases. But R² is only 0.31 on a monthly basis - pretty noisy.

The large Red triangle (with arrow) is the most recent month. It is somewhat of an outlier, but still on the edge of the scatter pattern.

The second graph covers the same period but on a three month basis (note: this graph uses rolling three month periods, so the data is not all independent).

Now we see a much sharper correlation. R² is 0.69.

The red triangle is the most recent three month period, and this is somewhat of an outlier.

Note that the trend line is a 2nd order polynomial. When the economy starts to add jobs, more people start looking for work - and the relationship between net jobs and the unemployment rate is not linear.

Lets expand this to two longer periods: six months and one year.

The third graph is for the six month change in payroll jobs and the unemployment rate. R² is 0.79.

Once again the red triangle is for the most recent period. The change is on the edge of the scatter, but appears pretty normal. The increase in the unemployment rate is a little lower than expected over the last six months, probably because of the sharp decline in the number of people participating in the labor force.

And the final graph is for the annual change. R² is 0.81.

Once again this graph uses rolling periods, so the data is not independent.

The red triangle is for the most recent year, and is probably low because of the sharp decline in employment participation (one of the unusual features of the current employment recession).

So what does this mean going forward for the unemployment rate? It is probably reasonable to expect that the employment-population ratio has stopped falling. Therefore, to see consistent declines in the unemployment rate, we would probably have to see sustained payroll growth of over 150 thousand per month.

Since I expect the recovery to be sluggish, I wouldn't be surprised to see the unemployment rate at or near this level (or even higher) for some time.

by Calculated Risk on 2/06/2010 09:18:00 AM

“We have control of the ship, we have a plan.”
María Teresa Fernández de la Vega, Spain’s deputy premier
From the Financial Times: Spain and Portugal fight to calm investors

Spanish and Portuguese debt and equity markets were hard hit by Greece-related doubts among investors, partly because Madrid and Lisbon ran up budget deficits to dampen the effects of the economic crisis and partly because of fears for eurozone cohesion.
...
“In a country with such high unemployment, how will it be possible to reduce the public deficit?” asked Prof [Juan José Toribio, economics professor at Iese Business School]
excerpted with permission

Reuters is quoting European Central Bank Governing Council member Ewald Nowotny as saying talk of a Eurozone breakup is "absurd". And Bloomberg is quoting Nowotny on the exchange rate:

“There’s no worrying development. Foreign exchange rates naturally fluctuate.”

And more from the NY Times: Debt Problems Chip Away at Fortress Europe

And from the WaPo: Debt crisis unsettles European economy

Senior officials at the major rating agencies on Friday played down the risk of an immediate debt crisis, saying even nations such as Greece have enough reserves to put off for months a day of financial reckoning. ... is especially hitting banks and other institutions with broad exposure to the sovereign debt of the "PIGS" of Europe -- Portugal, Ireland, Greece and Spain.

And more from Paul Krugman on the problems of a single currency: The Spanish Tragedy

We might get further updates on Sunday ...

by Calculated Risk on 2/05/2010 10:47:00 PM

Note: Earlier employment posts today:

Employment Report: 20K Jobs Lost, 9.7% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

Employment-Population Ratio, Part Time Workers, Temporary Workers

Unemployed over 26 Weeks and Seasonal Adjustment

This is an unofficial list of Problem Banks compiled only from public sources. Changes and comments from surferdude808:

During the week, the Unofficial Problem Bank List changed by a net of six institutions to 605 and aggregate assets increased to $328.7 billion from $322.5 billion.

Deletions include the one failure tonight -- 1st American State Bank of Minnesota, and one action that was terminated by the OCC against Palm Desert National Bank during January. However, look for Palm Desert National Bank to come back on the list in the near future as the Federal Reserve issued a Written Agreement against the bank’s parent company this week. Frequently during this cycle, the OCC will terminate a Supervisory Agreement only to replace it with a Cease & Desist or Consent Order.

There were eight additions this week including Bank of Smithtown, Smithtown, NY ($2.7 billion, Ticker: SMTB); CF Bancorp, Port Huron, MI ($1.8 billion, Ticker: CTZN); The Cowlitz Bank, Longview, WA ($578 million, Ticker: CWLZ); and Stoneham Savings Bank, Stoneham, MA ($426 million).

The list is compiled from regulator press releases or from public news sources (see Enforcement Action Type link for source). The FDIC data is released monthly with a delay, and the Fed and OTC data is more timely. The OCC data is a little lagged. Credit: surferdude808.

See description below table for Class and Cert (and a link to FDIC ID system).

For a full screen version of the table click here.

The table is wide - use scroll bars to see all information!

NOTE: Columns are sortable - click on column header (Assets, State, Bank Name, Date, etc.)



Class: from FDIC

The FDIC assigns classification codes indicating an institution's charter type (commercial bank, savings bank, or savings association), its chartering agent (state or federal government), its Federal Reserve membership status (member or nonmember), and its primary federal regulator (state-chartered institutions are subject to both federal and state supervision). These codes are:

N National chartered commercial bank supervised by the Office of the Comptroller of the Currency

SM State charter Fed member commercial bank supervised by the Federal Reserve

NM State charter Fed nonmember commercial bank supervised by the FDIC

SA State or federal charter savings association supervised by the Office of Thrift Supervision

SB State charter savings bank supervised by the FDIC

Cert: This is the certificate number assigned by the FDIC used to identify institutions and for the issuance of insurance certificates. Click on the number and the Institution Directory (ID) system "will provide the last demographic and financial data filed by the selected institution".

by Calculated Risk on 2/05/2010 08:15:00 PM

From the WaPo: Mortgage bankers group sells D.C. offices to Bethesda company (ht John, Ann)

The Mortgage Bankers Association ... fell victim to the collapse of the market and sold its $90 million headquarters in downtown Washington on Friday for $41 million.
...
The Mortgage Bankers Association moved into the building in 2008 just as the real estate market was crashing ...

Sounds like they were drinking their own Kool-Aid!

by Calculated Risk on 2/05/2010 05:41:00 PM

First American
February's sweet sixteen
Embraced now by Feds
by Soylent Green is People
From the FDIC: Community Development Bank, FSB, Ogema, Minnesota, Assumes All of the Deposits of 1st American State Bank of Minnesota, Hancock, Minnesota

1st American State Bank of Minnesota, Hancock, Minnesota was closed today by the Minnesota Department of Commerce, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ... As of December 31, 2009, 1st American State Bank of Minnesota had approximately $18.2 million in total assets and $16.3 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $3.1 million. ... 1st American State Bank of Minnesota is the 16th FDIC-insured institution to fail in the nation this year, and the third in Minnesota. The last FDIC-insured institution closed in the state was Marshall Bank, N.A., Hallock , January 29, 2010.

Small banks count too.

by Calculated Risk on 2/05/2010 03:19:00 PM

The Federal Reserve reports:

Consumer credit decreased at an annual rate of 4-3/4 percent in the fourth quarter of 2009. Revolving credit decreased at an annual rate of 13 percent, and nonrevolving credit was unchanged on net. In December, consumer credit decreased at an annual rate of 3/4 percent.

Click on graph for larger image in new window.

This graph shows the year-over-year (YoY) change in consumer credit. Consumer credit is off 4.0% over the last 12 months.

Consumer credit has declined for a record 11 straight months - and declined for 14 of the last 15 months and is now 4.8% below the peak in July 2008. It is difficult to get a robust recovery without an expansion of consumer credit - unless the recovery is built on business investment and exports (seems unlikely to be robust).

Note: The Fed reports a simple annual rate (multiplies change in month by 12) as opposed to a compounded annual rate. Consumer credit does not include real estate debt.

by Calculated Risk on 2/05/2010 01:37:00 PM

Usually I include a graph of the employment diffusion index in one of my employment posts - a measure of how widespread job losses (or gains) are - but the BLS moved everything around today, so it took me some time to find the data.

Click on graph for larger image in new window.

The BLS diffusion index for total private employment increased to 46.8 from 41.3 in December. This is the same level as in November.

Think of this as a measure of how widespread job losses are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS. From the BLS:

Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.

The diffusion index had been trending up, meaning job losses are becoming less widespread.

However a reading of 46.8 still shows a minority of industries are adding workers, and I'd expect the diffusion index to be at or above 50 when the employment recovery begins.

Earlier employment posts today:

Employment Report: 20K Jobs Lost, 9.7% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

Employment-Population Ratio, Part Time Workers, Temporary Workers

Unemployed over 26 Weeks and Seasonal Adjustment

by Calculated Risk on 2/05/2010 11:16:00 AM

Unemployed over 26 Weeks

Click on graph for larger image in new window.

The blue line is the number of workers unemployed for 27 weeks or more. The red line is the same data as a percent of the civilian workforce.

According to the BLS, there are a record 6.31 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 4.1% of the civilian workforce. (note: records started in 1948)

The number of long term unemployed is one of the key stories of this recession. Last year, David Leonhardt at the NY Times wrote an excellent piece about this: Wages Grow for Those With Jobs, New Figures Show

In the job market, at least, the recession’s pain has been unusually concentrated.
...
People who have lost their jobs are struggling terribly to find new ones. Since the downturn began in 2007, companies have been extremely reluctant to hire new workers, and few new companies have started. The economy and the job market are churning very slowly.
...
Try thinking of it this way: All of the unemployed people in the country are gathered in a huge gymnasium that’s been turned into a job search center. The fact that this recession is the worst in a generation means that there are many, many people in the gym. The fact that the economy is churning so slowly means that there is not much traffic into and out of the gym.

If you’re inside, you will have a hard time getting out. Yet if you’re lucky enough to be outside the gym, you will probably be able to stay there. The consequences of a job loss are terribly high, but — given that the unemployment rate is almost 10 percent — the odds of job loss are surprisingly low.

Seasonal Adjustment

Back in November, Floyd Norris at the NY Times asked: Did Unemployment Really Rise?

The economic reactions over the weekend to Friday’s employment report all started from the assumption that things grew much worse in October. The unemployment rate leaped to 10.2 percent from 9.8 percent. Another 190,000 jobs vanished.

Actually, none of that happened.

In reality, the government report says unemployment rates remained steady at 9.5 percent.

Norris was referring to the "Not Seasonally Adjusted" (NSA) number. I suppose now Norris will ask "Did unemployment really fall?". The NSA number for unemployment was 10.6% in January - a sharp increase from December, as opposed to the 9.7% SA headline number.

HOWEVER, as I pointed out when Norris wrote his article, there is a strong seasonal pattern to employment (and unemployment), and the Seasonally Adjusted number is the one to use. So if you see analysis featuring the NSA number (without pointing out the seasonal pattern to employment), just ignore it.

Earlier employment posts today:

Employment Report: 20K Jobs Lost, 9.7% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

Employment-Population Ratio, Part Time Workers, Temporary Workers

by Calculated Risk on 2/05/2010 09:39:00 AM

A common question is: how could there be fewer payroll jobs, but the unemployment rate declined? This is because the data comes from two separate surveys. The unemployment Rate comes from the Current Population Survey (CPS: commonly called the household survey), a monthly survey of about 60,000 households.

The jobs number comes from Current Employment Statistics (CES: payroll survey), a sample of approximately 400,000 business establishments nationwide.

The establishment survey showed a loss of 20,000 payroll jobs in January, but the household survey showed an increase in the employment level of 541,000. The number to use for jobs is the establishment survey, but the unemployment number is based on the household survey and the surveys can diverge over the short period, but over time this will work out (for more on the differences, see: Jobs and the Unemployment Rate).

Here are a few more graphs based on the employment report ...

Employment-Population Ratio

The Employment-Population ratio ticked up slightly to 58.4% in January, after plunging since the start of the recession. This is about the same level as in 1983.

Click on graph for larger image in new window.

This graph shows the employment-population ratio; this is the ratio of employed Americans to the adult population.

Note: the graph doesn't start at zero to better show the change.

The general upward trend from the early '60s was mostly due to women entering the workforce.

The Labor Force Participation Rate increased slightly to 64.7% (the percentage of the working age population in the labor force). This is at the level of the early 80s.

Temporary Workers

From the BLS report:

In January, temporary help services added 52,000 jobs. Since reaching a low point in September 2009, temporary help services employment has risen by 247,000.

This graph shows temporary help services (seasonally adjusted) and the unemployment rate. Unfortunately the data on temporary help services only goes back to 1990, but it does appear temporary help and the unemployment rate have been inversely correlated.

The thinking is that before companies hire permanent employees following a recession, employers will first increase the hours worked of current employees and also hire temporary employees. Since the number of temporary workers increased sharply, some people think this might be signaling the beginning of an employment recovery.

However, there has been some evidence of a shift by employers to more temporary workers, and the saying may become "We are all temporary now!", so use this increase with caution.

Note: the Census Bureau hired 9,000 temporary workers in January as part of the decennial census, and now employs 24,000 temporary workers.

Part Time for Economic Reasons

From the BLS report:

The number of persons who worked part time for economic reasons (sometimes referred to as involuntary part-time workers) fell from 9.2 to 8.3 million in January. 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 workers only able to find part time jobs (or have had their hours cut for economic reasons) declined sharply to 8.3 million.

The all time record was set in October.

Overall there were some positives in the report: the unemployment rate declined, average hours worked increased slightly, part time workers declined, and the employment-population ratio ticked up slightly (after plunging sharply). This is just one month - and January is the always a little tricky because of the heavy seasonal adjustment. I'll have even more later ...

Earlier employment post today:

Employment Report: 20K Jobs Lost, 9.7% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

by Calculated Risk on 2/05/2010 08:30:00 AM

From the BLS:

The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000), the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.

Click on graph for larger image.

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 20,000 in January. The economy has lost almost 4.0 million jobs over the last year, and 8.42 million jobs since the beginning of the current employment recession. (note: job losses were 7.2 million before benchmark revision).

The unemployment rate declined to 9.7 percent. (I'll have more on that soon)

The second graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).

For the current recession, employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early '80s recession with a peak of 10.8 percent was worse).

I'll have much more soon ...

by Calculated Risk on 2/05/2010 01:13:00 AM

Just a late night update. The U.S. futures are up ...

Futures from CNBC indicate the Dow up 40 and the S&P 500 up 4. All that will change with the employment report!

And here are the Bloomberg Futures.

The Asian markets are all down, with the Nikkei off 2.6% and the Hang Seng off 2.9%.

Best to all.

by Calculated Risk on 2/04/2010 07:42:00 PM

Short sales are a hot topic, and Jillayne Schlicke has an interesting post: Predatory Short Sale Negotiators

I received a call the other day from a consumer who was in the process of purchasing a short sale home. The homeowner has defaulted on her mortgage and the trustee sale auction has been postponed a few times now that this buyer’s firm offer has finally reached the lender’s loss mitigation decision-maker. Once the offer was accepted by the seller, the homebuyer was surprised to learn that there’s a third party involved, a “Short Sale Negotiator” who is charging an additional $9,000 fee on top of the real estate commissions paid to both the agent for the seller and the agent for the buyer. The Short Sale Negotiator is demanding that the homebuyer sign an agreement that the homebuyer will be responsible for paying the $9,000 fee. The homebuyer emailed me asking what I thought of this additional fee and could I offer some advice.

Jillayne walks us through the details of this deal and the regulations regarding a "short sales negotiator", as an example, in Washington, the "negotiator" has to be a "licensed real estate agent ... a licensed loan originator or otherwise exempt from licensing such as an attorney".

There is value to the buyer in having someone with experience negotiate with the banks. If the listing and selling agents don't have the necessary experience and contacts, using another agent (or lawyer) to negotiate the deal makes sense. However I'd suggest the agents pay for the "negotiator" since negotiating the deal is usually part of the agent's responsibilities.

If the agents won't pay, Jillayne suggests: "Ask for the negotiator’s [fee] to be put on the HUD I Settlement Statement as a seller’s closing cost. There’s a chance the lender will pay it." If not, the buyer has to decide if the house is worth the additional fee. But one thing is clear - no fee should be paid outside of the settlement statement so that all parties are aware of all the details.

by Calculated Risk on 2/04/2010 04:50:00 PM

Since there is some interest in the stock market, here is a different graph from Doug ...

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner). His comments:

This chart is an offshoot of my Four Bad Bears. It shifts the point of alignment from the pre-bear highs to the bear bottom in the Oil Crisis and Tech Crash, the first major low in the 1929 Dow, and the March 9th closing low for our current Financial Crisis.

As the chart illustrates, the S&P 500 lows in 1974 and 2002 marked the beginnings of sustained recoveries. The Dow low in 1929 failed 11 months later.

Here is the same chart adjusted for inflation.

The second graph shows the S&P 500 since 1990.

The dashed line is the closing price today. The S&P 500 was first at this level in March 1998; almost 12 years ago.

The market is off 7.6% from the recent peak - still not a "correction", but we almost had our Dow 10K hats on (the Dow dipped under 10,000, but closed at 10,002)!

The S&P 500 is up 57% from the bottom in 2009 (387 points), and still off 32% from the peak (502 points below the max).

by Calculated Risk on 2/04/2010 03:22:00 PM

The BLS will release the January employment report tomorrow morning, and the consensus forecast is for a small net gain in payroll jobs in January, on a seasonally adjusted (SA) basis, and the unemployment rate flat at 10.0%.

A few points on the employment report:

1) the annual benchmark revision for March 2009 will be released as part of the report. The preliminary estimate was for 824,000 more jobs lost than the original reports (my graphs will include the revisions),

2) January is heavily adjusted for seasonal factors - even in good years there are around 2.5 million payroll jobs lost in January. The SA number is the one to follow.

3) The ISM Manufacturing report suggested some small job gains in the manufacturing sector.

ISM's Employment Index registered 53.3 percent in January, which is 3.1 percentage points higher than the seasonally adjusted 50.2 percent reported in December. This is the second month of growth in manufacturing employment, and the highest reading since April 2006.

4) The ISM non-Manufacturing report suggested more job losses in the service sectors.

Employment activity in the non-manufacturing sector contracted in January for the 25th consecutive month. ISM's Non-Manufacturing Employment Index for January registered 44.6 percent.

5) The ADP report showed private sector job losses of 22 thousand in January. Recently ADP has usually indicated more job losses than the BLS, but that isn't always true. Also the ADP report mix was inverted from ISM, with ADP showing job growth in the service sector and job losses in manufacturing:

Nonfarm private employment decreased 22,000 from December 2009 to January 2010 on a seasonally adjusted basis ... January’s ADP Report estimates nonfarm private employment in the service-providing sector increased by 38,000, the second consecutive monthly increase. However, this employment growth was not enough to offset continued losses in the goods-producing sector.

6) The initial weekly claims number this morning would suggest continuing job losses.

In the week ending Jan. 30, the advance figure for seasonally adjusted initial claims was 480,000, an increase of 8,000 from the previous week's revised figure of 472,000. The 4-week moving average was 468,750, an increase of 11,750 from the previous week ...

There other are factors too - like the weather (cold in early January), and Census Bureau hiring (probably minimal).

And finally, it is important to remember that the economy needs to add something close to 125,000 jobs per month just to keep up with the growth the working age population.