by Calculated Risk on 4/03/2009 09:36:00 AM

Note: earlier Employment post: Employment Report: 663K Jobs Lost, 8.5% Unemployment Rate and Part Time for Economic Reasons Hits 9 Million

Click on graph for larger image in new window.

This 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 was a slow starter (in terms of job losses and declines in GDP).

However job losses have really picked up in recent months (red line cliff diving on the graph), and the current recession is now the worst recession in percentage terms since the 1950s - although not in terms of the unemployment rate.

In the early post-war recessions (1948, 1953, 1958), there were huge swings in manufacturing employment and that lead to larger percentage losses. For the current recession, the job losses are more widespread.

In March, job losses were large and widespread across the major industry sectors
BLS, March Employment Report

Here is a look at how "widespread" the job losses are using the employment diffusion index from the BLS.

The BLS diffusion index is a measure of how widespread changes in employment are. Some people think it measures the percent of industries increasing employment, but that isn't quite correct.

From the BLS handbook:

The diffusion indexes for private nonfarm payroll employment are based on estimates for 278 industries, while the manufacturing indexes are based on estimates for 84 industries. Each component series is assigned a value of 0, 50, or 100 percent, depending on whether its employment showed a decrease, no change, or an increase over a given period. The average (mean) value is then calculated, and this percent is the diffusion index number.

So it is possible for the diffusion index to increase (like manufacturing increased from 11.4 to 15.7) not because industries are hiring, but because fewer industries are losing jobs.

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

Before September, the all industries employment diffusion index was close to 40, suggesting that job losses were limited to a few industries. However starting in September the diffusion index plummeted. In December, the index hit 20.5, suggesting job losses were very widespread. The index has only recovered slightly since then (22 in March).

The manufacturing diffusion index has fallen even further, from 40 in May 2008 to just 6 in January 2009. The manufacturing index recovered slightly to 15.7 in March.

by Calculated Risk on 4/03/2009 09:11:00 AM

From the BLS report:

In March, the number of persons working part time for economic reasons (some-times referred to as involuntary part-time workers) climbed by 423,000 to 9.0 million.

Click on graph for larger image in new window.

Not only has the unemployment rate risen sharply to 8.5%, but the number of workers only able to find part time jobs (or have had their hours cut for economic reasons) is now at a record 9.0 million.

Of course the U.S. population is significantly larger today (about 305 million) than in the early '80s (about 228 million) when the number of part time workers almost reached 7 million. That is the equivalent of about 9.3 million today, so population adjusted this isn't quite a record - yet - but it is getting close.

And the rapid increase is stunning ...

by Calculated Risk on 4/03/2009 08:30:00 AM

From the BLS:

Nonfarm payroll employment continued to decline sharply in March (-663,000), and the unemployment rate rose from 8.1 to 8.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Since the recession began in December 2007, 5.1 million jobs have been lost, with almost two-thirds (3.3 million) of the decrease occurring in the last 5 months. In March, job losses were large and widespread across the major industry sectors.

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 663,000 in March. January job losses were revised to
741,000. The economy has lost almost 3.3 million jobs over the last 5 months, and over 5 million jobs during the 15 consecutive months of job losses.

The unemployment rate rose to 8.5 percent; the highest level since 1983.

Year over year employment is strongly negative (there were 4.8 million fewer Americans employed in Mar 2009 than in Mar 2008). This is another extremely weak employment report ... more soon.

by Calculated Risk on 4/02/2009 09:09:00 PM

From the WSJ: Companies Sold Office Space at a Fast Pace

Companies struggling to cut costs dumped a near-record 25 million square feet of office space in the first quarter, driving vacancy up and rents down, according to data to be released today by Reis Inc.
...
The office vacancy rate nationwide rose to 15.2% from 14.5% in the previous quarter, and likely will surpass 19.3% over the next year, according to Reis, a New York firm that tracks commercial property. That would put the vacancy rate above the level during the real-estate bust of the early 1990s, the worst on record.

Click on graph for larger image in new window.

This graph shows the office vacancy rate starting 1991.

A little over one month ago, REIS was forecasting office vacancy rates would reach 17.6% in 2010. Now they are forecasting 19.3%!

by Calculated Risk on 4/02/2009 07:34:00 PM

From Ruth Simon and Michael Phillips at the WSJ: Homeowner-Aid Plan Caught in Second-Loan Spat

The Obama administration's $75 billion effort to help troubled homeowners avoid foreclosure has hit a stumbling block: a fight over how to aid borrowers who have more than one home loan.
...
One problem is that first and second mortgages are often owned by different parties and may be handled by different mortgage servicers, the companies that collect checks from the borrowers.

This refers to Part II of the Obama plan - under Part II the lender must bring the total monthly payments on mortgages to 38% of the borrowers gross income, and then the U.S. will match dollar for dollar from 38% down to 31% debt-to-income ratio for the borrower. But it was never clear what happens if the borrower had a 2nd mortgage. The only references in Part II to 2nd liens was in the Home Affordable Modification Program Housing Counselor Q&As:

What if the borrower has a second mortgage and would like to apply for a Home Affordable Modification?

Under the Home Affordable Modification program, junior lien holders will be required to subordinate to the modified loan. However, through the Home Affordable Modification an incentive payment of up to $1,000 is available to pay off junior lien holders. Servicers are eligible to receive an additional $500 incentive payment for efforts made to extinguish second liens on loans modified under this program.

That definitely isn't very clear, and most 2nd lien holders wouldn't want to take $1,000. As the WSJ notes:

Banks and other financial institutions own as much as 90% of the $1.08 trillion in home-equity loans and lines of credit in the marketplace ... Bank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co. and Citigroup Inc. have the largest home-equity portfolios, SMR said.
...
"We are going to have to take a haircut on the second" lien, said one bank executive. "But we don't think we should get wiped out."

And here is one possibility being discussed:

One proposal would require lenders to cap monthly payments on second loans at a set percentage of the borrower's gross income. The lender would be expected to "eat the vast majority" of the cost, with the government subsidizing a small portion ...

Conflicting interests ... what a surprise.