by Calculated Risk on 9/06/2007 12:22:00 AM

This is a story (sorry no link) that is of interest because the economists at Bear Stearns have been among the most bullish on Wall Street.

Bear Stearns economists have lowered their forecast for U.S. growth, and are now forecasting U.S. real GDP growth at 1.5% in Q4 2007, and 1.25% in the first half of 2008, with a 35% chance of recession. As a comparison, here is an excerpt from their June forecast:

"We're maintaining our forecasts for ... more [than 3% real GDP growth] in the second half of 2007, a decline in the unemployment rate, one or two Fed hikes in the second half, and a somewhat stronger dollar as the Fed shift toward hikes becomes apparent."

Now they are forecasting unemployment to "rise above 5%" in 2008. They also expect "incremental weakness" in consumption and commercial construction. They must be reading this blog!

Imagine what the more bearish economists are thinking.

by Calculated Risk on 9/05/2007 08:32:00 PM

From the WSJ: Countrywide Cuts 900 More Jobs

Countrywide Financial Corp. announced another 900 job cuts as the company slashes costs in the face of a drop in lending volumes and rising defaults.
...
On Wednesday, Countrywide said the 900 layoffs were mainly in its mortgage-production divisions. ...

The company's work force totals around 60,000.

Every rumor I heard seemed to increase the number of job cuts. Nine hundred is still a large number, especially if you are 1 of the 900.

by Calculated Risk on 9/05/2007 07:02:00 PM

NOTE: This graph is from ADP and shows total private employment based on ADP and BLS reports (in thousands). Both reports are currently showing around 115.5 million employed (SA). Ignore the "change" label on the side of the ADP graph.

The following graphs compares the ADP vs. the BLS reports.

Click on graph for larger image.

ADP August Employment Report

Nonfarm private employment grew 38,000 from July to August of 2007 on a seasonally adjusted basis, according to the ADP National Employment ReportTM.

This month’s ADP National Employment Report suggests that a deceleration of employment may be underway. The August increase of 38,000 was the smallest since June of 2003 and the second consecutive weak monthly reading.

Last month ADP wasn't close to the BLS data for private sector employment. Still, this is the second consecutive month with the ADP report showing weak employment gains for the private sector. Last month the ADP report showed private sector employment increased by 48,000; the BLS report showed the private sector increased 120,000.

Perhaps the BLS is missing the turning point.

by Calculated Risk on 9/05/2007 02:45:00 PM

From the Fed's Beige Book:

Reports from the Federal Reserve Districts indicate that economic activity has continued to expand.
...
Most Banks reported that the recent developments in financial markets had led to tighter lending standards for residential mortgages, which was having a noticeable effect on housing activity, and several noted that the reduction in credit availability added to uncertainty about when the housing market might turn around. While several Banks noted that commercial real estate markets had also experienced somewhat tighter credit conditions, a number commented that credit availability and credit quality remained good for most consumer and business borrowers. Outside of real estate, reports that the turmoil in financial markets had affected economic activity during the survey period were limited.
emphasis added.

And on Real Estate and Construction:

Residential real estate and construction weakened further in most Districts while the commercial market remained steady. Most Districts reported weak or declining residential sales and declining or stable prices. Markets in a few Districts did show some strength. Both sales and prices have been increasing in the Massachusetts housing market; the New York City apartment market remains tight as rents rise; and home sales rose in Louisville. Inventories of unsold homes are generally reported to be high. Moreover, contacts in Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Kansas City, and Dallas believe softness in the market will continue in the near future, with potential for further declines.

Commercial real estate and construction markets were generally stable to expanding across the Districts. Philadelphia, Minneapolis, and San Francisco indicated continued expansion in nonresidential construction and commercial real estate. Dallas described the level of nonresidential activity as high, and St. Louis said commercial construction remained strong. New York, Cleveland, Richmond, Atlanta, Chicago, and Kansas City indicated commercial construction and real estate markets were steady or stable. Vacancy rates are reported to be low or declining in most Districts, and rents are rising modestly in many. Boston, New York, Richmond, Chicago, Kansas City, and Dallas noted some tightening of credit in the commercial real estate market.

by Calculated Risk on 9/05/2007 12:23:00 PM

From Bloomberg: Commercial Real Estate in U.S. Poised for Price Drop (hat tip Brian, Ryan)

U.S. commercial real estate prices may fall as much as 15 percent over the next year in the broadest decline since the 2001 recession as rising borrowing costs force property owners to accept less or postpone sales.

``People aren't willing to do deals right now,'' said Howard Michaels, the New York-based chairman of Carlton Advisory Services Inc., ... ``The expectation is that prices will come down.''

Investors in July bought the fewest commercial properties since August 2006 and apartment building acquisitions were down 50 percent from June, data compiled by industry consultants at New York-based Real Capital Analytics Inc. show. ...

``There are so many deals falling apart,'' said David Lichtenstein, chief executive officer of Lakewood, New Jersey- based Lightstone Group, an owner of more than 20,000 apartments and 30 million square feet of office and retail space. ``People who can get out are getting out.''

More hints of an impending slump in CRE.