by Calculated Risk on 6/05/2009 04:02:00 PM

First the market graph from Doug:

Click on graph for larger image in new window. The first graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears". Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

And since it is BFF (bank failure friday), here is an update from Bloomberg: FDIC Closes Seized Silverton Bank After Failing to Sell Assets (ht lncolnpk, mark, ron and others)

The Federal Deposit Insurance Corp. will shut Georgia’s Silverton Bank, seized by regulators in May, after failing to find a buyer for the assets.

A sale is “no longer feasible” and Silverton will be sold in parts, spokesman Andrew Gray said today in an e-mailed statement. The FDIC unsuccessfully sought a buyer before the bank was taken over by regulators May 1, he said.

Silverton was seized by regulators in early May.

by Calculated Risk on 6/05/2009 03:11:00 PM

From MarketWatch: U.S. consumer debt falls by $15.7 billion

Consumer credit fell by $15.7 billion, or 7.4% at an annual rate, to $2.52 trillion. It was the second largest decline in outstanding debt on record, exceeded by March's $16.6 billion drop.

Click on graph for larger image in new window.

This graph shows the year-over-year change in consumer credit. Consumer credit is off 1.4% over the last 12 months - however, consumer credit has declined at a 6.6% rate over the last 6 months - a record pace.

Note: Consumer credit does not include real estate debt.

by Calculated Risk on 6/05/2009 01:39:00 PM

A couple more graphs based on the (un)employment report ...

Click on graph for larger image in new window.

This graph show 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. As an example, in 1964 women were about 32% of the workforce, today the percentage is close to 50%.

This measure is at the lowest level since the early '80s and shows the weak recovery following the 2001 recession - and the current cliff diving!

From the BLS report:

The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in May at 9.1 million. The number of such workers has risen by 4.4 million during the recession.

Note: "This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs."

Not only has the unemployment rate risen sharply to 9.4%, 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 9.1 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.

Earlier employment posts today:

Employment Report: 345K Jobs Lost, 9.4% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

Unemployment Compared to Stress Test Scenarios, and Diffusion Index

by Calculated Risk on 6/05/2009 12:04:00 PM

First from Reuters: Fed's Lockhart: Can't wait too long to tighten (ht Alan)

The Federal Reserve needs to be "anticipatory" and not wait too long to tighten monetary policy, Atlanta Fed President Dennis Lockhart said in an interview published on Friday. ... Lockhart is a voter on the Fed's policy-setting Federal Open Market Committee, which meets June 23-24.

This is similar to the comments of Kansas Fed President Thomas Hoenig on Wednesday.

Yields are rising across the board, with the Ten Year yield at 3.84%.

This will push mortgage rates higher ... here is a scatter graph I posted last month showing the relationship between the Ten Year yield and 30 year mortgage rates.

Click on graph for larger image in new window.

This graph shows the relationship between the Ten Year yield (x-axis) and the 30 year mortgage rate (y-axis, monthly from Freddie Mac) since 1971. The relationship isn't perfect, but the correlation is very high.

Based on this historical data, a Ten Year yield at 3.84% suggests a 30 year mortgage rate of around 5.75%.

Freddie Mac reported that 30 year mortgage rates were at 5.29% for the week ending June 4th, and the MBA reported rates at 5.25% for the week ending May 29th. These rates should jump again next week putting pressure on the Fed.

by Calculated Risk on 6/05/2009 09:30:00 AM

Note: earlier Employment post: Employment Report: 345K Jobs Lost, 9.4% Unemployment Rate.

Click on graph for larger image in new window.

This 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. The Unemployment Rate in Q2 (only two months) is already higher than the "more adverse" scenario, and will probably rise further in June.

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

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

In May, job losses continued to be widespread across major industry sectors. Steep job losses continued in manufacturing, while the rate of decline moderated in several industries, including construction, professional and business services, and retail trade.
BLS, April Employment Report

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.

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 (32.7 in May), suggesting job losses are less widespread.

The manufacturing diffusion index has fallen even further, from 40 in May 2008 to just 6 in January 2009. The manufacturing index is still very low at 12, and manufacturing employment is still getting hit hard:

Steep job losses continued in manufacturing, while declines moderated in construction and several service-providing industries.