by Calculated Risk on 5/06/2009 01:32:00 PM

I added a caution with the ADP employment report this morning: "The ADP employment report hasn't been very useful in predicting the BLS numbers ..."

Several readers have sent me graphs showing that ADP and BLS employment numbers track pretty well over time. That is true - after revisions.

However I think in real time the ADP report isn't that useful for forecasting the BLS numbers (although it might offer a suggestion).

Click on graph for larger image in new window.

This graph compares the ADP and BLS employment numbers (note: non-government) as originally released since last Summer.

Here is the original releases for ADP and for the BLS.

Although the two reports generally move together, there have been a number of significant misses; as examples: September, November and December of last year.

The consensus for BLS reported job losses is 630,000 (including government, to be announced Friday), and the ADP report suggests the losses might be a little lower.

However, initial weekly unemployment claims only declined slightly in April, and for the headline number (that includes government - not included in ADP) there have been a number of reports of local government layoffs.

John A. Challenger, chief executive officer of the placement company, said [this morning] ... “state and local governments, as well as school districts, are really feeling the impact of this downturn.”

I think the job losses could be less than the average of the last 5 months (averaged 660 thousand per month), but not much less.

by Calculated Risk on 5/06/2009 12:15:00 PM

From Bloomberg: Wells Fargo Said to Need $15 Billion in New Capital

Wells Fargo & Co., the fourth-largest U.S. bank by assets, requires about $15 billion in new capital as a result of regulators’ stress test on the lender ...

JPMorgan Chase & Co. doesn’t need to raise its capital, people with knowledge of its results said, while Goldman Sachs Group Inc. and Bank of New York Mellon Corp. have taken actions that suggest they also passed their reviews.

The leaks just keep coming ...

by Calculated Risk on 5/06/2009 10:10:00 AM

From Bloomberg: Rich Americans Default on Luxury Homes Like Subprime Victims (ht Lance)

Chuck Dayton put down a quarter of the $950,000 purchase price when he bought his house in Newport Beach, California, in 2004. ... Dayton, 43, went into default four months ago because he couldn’t afford payments on the three-bedroom home, located within a block of the Pacific Ocean.
...
Dayton said he financed the purchase of his home, 40 miles south of Los Angeles in Orange County, with a payment-option adjustable-rate mortgage now serviced by JPMorgan’s Washington Mutual.
...
Dayton refinanced in February 2007 with a $1 million loan from Washington Mutual ... He also took out two private mortgages and now has a balance of $106,000 on those loans ... Dayton went into default on Jan. 29 and owes $46,584 in delinquent payments and penalties, according to First American CoreLogic ...

The number of U.S. homes valued at more than $729,750, the jumbo-loan limit in the most affluent areas, entering the foreclosure process jumped 127 percent during the first 10 weeks of this year from the same period of 2008, data compiled by RealtyTrac Inc. of Irvine, California, show. The rate rose 72 percent for homes valued at less than $417,000 and 78 percent for all homes

The next wave of defaults is building ... this time in the mid-to-high range.

by Calculated Risk on 5/06/2009 08:50:00 AM

The ADP employment report hasn't been very useful in predicting the BLS numbers, but here it is anyway: April ADP Report:

Nonfarm private employment decreased 491,000 from March to April 2009 on a seasonally adjusted basis, according to the ADP National Employment Report®. The estimated change of employment from February to March was revised by 34,000, from a decline of 742,000 to a decline of 708,000.

And from Bloomberg: U.S. April Job Cuts Rise 47% From a Year Ago, Challenger Says

Job cuts announced by U.S. employers in April increased 47 percent from a year earlier, led by government agencies and companies in the automotive industry, while the total was the lowest since October.
...
“Job cuts are still at recession levels, but the fact that they are falling is certainly promising and may suggest that employers are starting to feel a little more confident about future business conditions,” John A. Challenger, chief executive officer of the placement company, said in a statement. Still, he said, “state and local governments, as well as school districts, are really feeling the impact of this downturn.”

The BLS report for April will be released Friday. Hopefully the pace of job losses has slowed - over the last 5 months the BLS has reported 3.3 million net jobs lost!

by Calculated Risk on 5/05/2009 11:58:00 PM

From Reuters: Bank of America to need $34 billion in capital: source

Bank of America (BAC.N) has been deemed to need an additional $34 billion in capital, according to the results of a government stress test, a source familiar with the results said on Tuesday.

From the WSJ: BofA Needs $35 Billion Jolt

And Bloomberg: Tests Said to Show Bank of America Has Biggest Need

Regulators have determined that Bank of America Corp. has the largest need for new capital among the 19 biggest U.S. banks subjected to stress tests, according to people familiar with the matter.

Citigroup Inc.’s shortfall is more limited because the company already plans to convert government preferred shares to common stock, the people said.