by Calculated Risk on 9/06/2009 11:00:00 AM

In the comments yesterday we were comparing the "feel" of the current recession compared to the early '80s. Back then it seemed there were many more homeless people, and camps of "Reaganvilles" (an echo of the Hoovervilles during Depression) were sprouting up around the country. I commented that it seems there are far fewer homeless people now, so this story caught my eye ...

From the NY Times: Surge in Homeless Children Strains School Districts

While current national data are not available, the number of schoolchildren in homeless families appears to have risen by 75 percent to 100 percent in many districts over the last two years, according to Barbara Duffield, policy director of the National Association for the Education of Homeless Children and Youth, an advocacy group.

There were 679,000 homeless students reported in 2006-7, a total that surpassed one million by last spring, Ms. Duffield said.

With schools just returning to session, initial reports point to further rises. In San Antonio, for example, the district has enrolled 1,000 homeless students in the first two weeks of school, twice as many as at the same point last year.

by Calculated Risk on 9/06/2009 08:00:00 AM

From the WSJ: G-20 Agree to Boost Banks' Capital Requirements, Set Rules on Bonuses

The agreement on bankers' pay calls for a large portion of bonuses to be clawed back if bank performance subsequently deteriorates. It also calls for the deferral of a share of bonuses. ... More detailed proposals will be worked on in coming weeks by the Financial Stability Board ... Officials want the new rules in place before bonuses are paid out at year-end.

And on capital requirements:

... the officials [agreed] that more needs to be done to boost banks' capital cushions "once recovery is assured." ...

In a victory for Mr. Geithner ... there was also agreement that the leverage of international banks – the ratio of their total equity to their total assets -- should be capped. ... Officials fear that if the capital is not raised, undercapitalized 'zombie banks' would be unable to lend and would block economic recovery.

Here is the Communiqué - UK, 5 September 2009 (PDF 13KB)

And Declaration on further steps to strengthen the financial system, 5 September 2009 (PDF 15.5KB)

by Calculated Risk on 9/05/2009 10:38:00 PM

This is a story that will keep building as workers exhaust their extended unemployment benefits ...

From the Boston Globe: State jobless pay to end for many

Massachusetts is experiencing its first wave of jobless workers to exhaust unemployment benefits after nearly two years of rising unemployment, state labor officials said.

The state this week sent out letters notifying about 2,500 jobless workers that they had or would soon receive their last unemployment checks, having used up state and federal extensions that provided up to 79 weeks, or about 18 months, of benefits. The state expects about 21,000 jobless workers to run out of unemployment benefits by Thanksgiving.

And on extending the unemployment benefits for another 13 weeks, from the SF Chronicle: 4 stimulus breaks due to run out at year end

The stimulus act increased the weekly unemployment benefit by $25 per week, allowed people to deduct up to $2,400 in benefits on their federal tax return and extended the federal government's extended benefits program, which provides additional compensation to people who have used up their regular state benefits.

In California, a person who exhausted 26 weeks of state benefits could get up to 20 more weeks under the first federal extension, then up to 13 weeks under a second extension and up to 20 weeks more under a third extension. The first and second extensions were supposed to expire in the spring but the stimulus extended them until Dec. 31. The stimulus also provided 100 percent federal funding for the third extension.

All these federal benefits sunset after Dec. 31. A person who was already receiving extended benefits on Jan. 1 could finish that round of benefits, but not start the next extension. A person who was still receiving their regular state benefits on Jan. 1 would get no extended benefits.

HR3404, sponsored by Rep. Jim McDermott, D-Wash., would extend all of the expiring provisions through next year. It also would create a fourth extension of up to 13 weeks for people in high-unemployment states.

It is very likely that this bill will pass soon (the Senate bill is S. 1647).

by Calculated Risk on 9/05/2009 07:25:00 PM

Although the unemployment rate is noisy month-to-month, we can use the graph and formula from Unemployment and Net Jobs to guess when the unemployment rate will reach 10%.

This graph from that previous posts shows the quarterly change in net jobs (on the x-axis) as a percentage of the civilian workforce, and the change in the unemployment rate on the y-axis.

The data is for the last 40 years: 1969 through Q2 2009.

Click on graph for larger image in new window.

The Red squares are for 2008, and for the first two quarters of 2009.

The U-3 headline unemployment rate for August was reported at 9.7% (this is actually rounded up from 9.66%).

If net job losses average over 200 thousand per month, the unemployment rate will probably hit 10% in October.

If net job losses average 100 to 200 thousand per month, the unemployment rate will probably reach 10% in November.

With 50 thousand net job losses per month, it will probably take until December.

And if the economy averages zero net job losses per month, the unemployment rate will probably hit 10% in January or so.

These are just estimates - the series is noisy month-to-month - and it is possible the unemployment rate could hit 10% this month.

As I noted previously, this graph also suggests the economy needs to be adding about 0.33 percent of the civilian workforce per quarter to keep the unemployment rate from rising. That is about 170 thousand net jobs per month. Note: The civilian workforce in August was 154.6 million. 0.33% of 154.6 million is 510 thousand jobs per quarter or 170 thousand per month.

Note that the trend line is a 2nd order polynomial (equation on graph). When the economy starts to add jobs, more people start looking for work - and the relationship between net jobs and unemployment rate is not linear.

by Calculated Risk on 9/05/2009 01:49:00 PM

Here is an update. See the post last month for much more discussion ...

Click on graph for larger image in new window.

This graph shows housing starts (both total and single unit) and unemployment (inverted).

You can see both the correlaton and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn't hold.

This suggests unemployment might peak in Spring 2010.