by Calculated Risk on 5/08/2009 03:08:00 PM

I took this video this morning (my first YouTube, so please excuse the quality).

This is a project in Irvine, CA called Central Park West. The project was built by Lennar and mothballed in 2007. I was surprised the area was open and fountains were all running, but unfortunately the information center was closed.

New condos like this are shadow inventory - they are not included in the Census Bureau new homes report, and they are not listed in the MLS. But they do exist.

Here are the Las Vegas "Manhattan West" photos mentioned in the video.

by Calculated Risk on 5/08/2009 01:03:00 PM

From Bloomberg: Fannie Mae to Tap $19 Billion in Treasury Capital

Fannie Mae ... asked the U.S. Treasury for a $19 billion capital investment and raised the possibility that its long-term survival may be dependent on continued government funding.

Fannie Mae, which took $15.2 billion in aid on March 31, cited the “unprecedented” housing market slump and government- mandated programs that are creating “conflicts in strategic and day-to-day decision making,” according to company filings today with the Securities and Exchange Commission.

Here is the section from the SEC 10-Q filing:

We face a variety of different, and potentially conflicting, objectives, including:

providing liquidity, stability and affordability in the mortgage market;

immediately providing additional assistance to the mortgage market and to the struggling housing market;

limiting the amount of the investment Treasury must make under our senior preferred stock purchase agreement with Treasury in order to eliminate a net worth deficit;

returning to long-term profitability; and

protecting the interests of the taxpayers.

These objectives create conflicts in strategic and day-to-day decision-making that could lead to less than optimal outcomes for some or all of these objectives. For example, limiting the amount of funds Treasury must invest in us under the senior preferred stock purchase agreement in order to eliminate a net worth deficit could require us to constrain some of our business activities, including activities targeted at providing liquidity, stability and affordability to the mortgage market. Conversely, to the extent we expand our efforts to assist the mortgage market, our financial results are likely to suffer, at least in the short term, which will increase the amount of funds that Treasury is required to provide to us and further limit our ability to return to long-term profitability. We regularly consult with and receive direction from our conservator on how to balance our objectives.

Accordingly, we currently are primarily focusing on the first two objectives listed above ...

Notice they are concentrating on the first two objectives above, and that does not include "protecting interest of taxpayers", "returning long-term profitability" or "limiting the investment from Treasury".

by Calculated Risk on 5/08/2009 11:19:00 AM

Update: from Bloomberg: Chrysler’s Dissenting Lenders Give Up Fight Over Sale

Chrysler LLC’s secured lenders that opposed the automaker’s bankruptcy sale of assets to a company run by Fiat SpA are dropping their fight in the bankruptcy court case ...

The group, calling itself Chrysler’s Non-TARP lenders, doesn’t plan to defend earlier objections and may withdraw them formally, said Tom Lauria, the White & Case attorney representing the group.

From Alan Ross Sorkin at the NY Times: 2 Funds Withdraw from Dissident Chrysler Group

OppenheimerFunds and Stairway Capital Management said on Friday that they were withdrawing from a group of dissident Chrysler creditors, days after it suffered a series of defeats in federal bankruptcy court...

Stairway also cited the shrinking roster of the dissident creditors as a reason to publicly withdraw its opposition to the Chrysler reorganization plan. “The fact simply is, however, our group has become too small to have a voice within the bankruptcy,” the firm said in its own statement.
...
At the outset last week, the group claimed about 20 members holding $1 billion in debt. When lawyers for the group filed a motion to disclose its membership under court seal, they said that the group held about $300 million.

Now only three creditors remain.

Sorkin has statements from Oppenheimer and Stairway. Here is an excerpt:

OppenheimerFunds has determined that the senior creditors can no longer reasonably expect to increase the recovery rate on the debt they hold by opposing the Taskforce’s restructuring plan.

It looks like the government's restructuring plan will prevail.

by Calculated Risk on 5/08/2009 09:25:00 AM

Note: earlier Employment post: Employment Report: 539K Jobs Lost, 8.9% Unemployment Rate.

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 over the last 6 months (4 million jobs lost, red line cliff diving on the graph), and the current recession is now the worst recession since WWII in percentage terms after 16 months - 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 large percentage losses. For the current recession, the job losses are more widespread.

In April, job losses were large and widespread across nearly all major private-sector industries.
BLS, April 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 12.7 to 26.5) 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 recovered since then (28.5 in April), although job losses are still widespread.

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 26.5 in April.

by Calculated Risk on 5/08/2009 08:30:00 AM

From the BLS:

Nonfarm payroll employment continued to decline in April (-539,000), and the unemployment rate rose from 8.5 to 8.9 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Since the recession began in December 2007, 5.7 million jobs have been lost. In April, job losses were large and widespread across nearly all major private-sector industries. Overall, private sector employment fell by 611,000.

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 539,000 in April. March job losses were revised to
699,000. The economy has lost almost 4 million jobs over the last 6 months, and over 5.7 million jobs during the 16 consecutive months of job losses.

The unemployment rate rose to 8.9 percent; the highest level since 1983.

Year over year employment is strongly negative (there were 5.2 million fewer Americans employed in Apr 2009 than in Apr 2008).

The second graph shows the unemployment rate compared to the stress test economic scenarios on a quarterly basis as provided by the regulators to the banks (no link).

This is a quarterly forecast: in Q1 the unemployment rate was higher than the "more adverse" scenario. For Q2, April is already higher than the "more adverse" scenario, and will probably rise further in May and June.

Note also that the unemployment rate has already reached the peak of the "baseline scenario".

This is another weak employment report ... more soon.