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

The following graph shows the maximum number of net jobs lost after the end of several official recessions (both in numbers and as a percent of peak employment prior to the start of the recession).

Note: The last two columns assume the 2007 recession officially ended in June 2009 or in July 2009. Recessions are labled by starting year.

Click on graph for larger image in new window.

Even if the economy started adding jobs in November (very unlikely), the 2009 recovery would already be one of weakest for job creation.

The recovery following the 2001 recession was the worst for job creation, with the bottom for employment happening in August 2003, twenty one months after the official end of the recession.

This graph shows the job losses from the start of the employment recession, in percentage terms.

Look at the brown line for the 2001 recession. According to NBER, the 2001 recession lasted 8 months, but the job losses continued for another 21 months (the brown line bottoms in month 29) - and employment didn't reach the pre-recession level for 46 months.

In terms of jobs lost, the 2009 "recovery" might be even worse than the 2001 recovery.

Maybe we should call this a "job loss" recovery?

by Calculated Risk on 11/09/2009 08:39:00 AM

St. Louis Fed President James Bullard told the Financial Times that uncertainty about the inflation outlook is the most since 1980.

From the Financial Times: Uncertainty ‘high’ over inflation outlook

“For 2009, in particular, and maybe a little bit into 2010, you have to worry about getting out of the recession, establishing your recovery, making sure the recovery has really taken hold. And then, at the appropriate time, when things are all going forward, you have to switch gears and watch whether the inflation rate is coming up.” [Bullard said]
excerpted with permission

Bullard noted that the first step would not be raising the Fed Funds rate, and unwinding some of the unconventional policy. Bullard also added the Fed is concerned about asset bubbles this time:

What is different this time is that the argument about staying too low for too long is going to weigh pretty heavily on the committee. It is more than just: ‘What does the output gap look like; what does inflation look like?’ ”

He said it was also the issue of whether “you are generating the conditions that might foster a bubble that really might come back to hurt you later? I think this will be a big issue for the committee.”

My comment: historically the Fed does not raise rates until well after the unemployment rate peaks. And the Fed plans on buying MBS through the first quarter of 2010 - so Bullard's comment about starting to switch gears "a little bit into 2010" is probably way too early.

by Calculated Risk on 11/08/2009 11:58:00 PM

A quote from a conference this weekend, from the NY Times:

"There are families not eating at the end of the month,” said Stephen Quinn, executive vice president and chief marketing officer at Wal-Mart Stores, and “literally lining up at midnight” at Wal-Mart stores waiting to buy food when paychecks or government checks land in their accounts.

by Calculated Risk on 11/08/2009 08:28:00 PM

Here is some more on a theme we've been discussing ...

From Carolyn Said at the San Francisco Chronicle: Default notices rising in upper echelon ZIPs (ht Hymn)

In upscale communities such as Los Altos, Greenbrae and Alamo, where median prices top $1 million, about twice as many households received default notices from January to September as in the same period in 2008, according to recorders' office data compiled by MDA DataQuick, a San Diego real estate research firm.

The same is true for mid-scale areas with median prices around $500,000, such as Walnut Creek, Los Gatos and Campbell.

"The question is, could this be the beginning of something that gets a whole lot worse?" said Andrew LePage, an analyst with DataQuick. "The distress in the high end right now is important to watch; it helps explain why we have more sales (of high-end homes). More distress means more-motivated and more-realistic sellers. We're just starting to find out whether the riskier loans that were not subprime will come back to haunt us."

There is much more in the article. The mid-to-high end will never see the levels of foreclosure activity as some of the low end areas - and the process will take longer because many of these homeowners have other financial resources. But I do expect further price declines in many mid-to-high end areas as distress sales increase.

by Calculated Risk on 11/08/2009 03:58:00 PM

On Monday, the Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices for October will probably be released. This survey was available for the FOMC meeting last week, and tight lending standards and weak loan demand is probably one of the reasons the FOMC expects economic activity "to remain weak for a time".

This will also be a busy week for Fed Speak. We might get somewhat different economic outlooks on Tuesday from San Francisco Fed President Dr. Janet Yellen in the morning and Dallas Fed President Richard Fisher in the evening.

Dr. Yellen will be the keynote speaker at the Lambda Alpha International Fall Real Estate Seminar in Phoenix. She is expected to discuss the economic outlook with an emphasis on real estate. In the evening, Richard Fisher will speak at the Headliners Club of Austin, Texas.

Last week on the economy:

ISM Manufacturing Index showed expansion in October, from the ISM: October 2009 Manufacturing ISM Report On Business®

ISM Service (Non-Manufacturing) also showed expansion in October, from ISM: October 2009 Non-Manufacturing ISM Report On Business®

Construction spending increased in September. Private residential construction spending was up, non-residential construction spending was down.

Light Vehicle Sales were as a 10.5 Million (SAAR) in October

Click on graph for larger image in new window.

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for October (red, light vehicle sales of 10.46 million SAAR from AutoData Corp). This was the first month over a 10 million sales rate (SAAR) - excluding the cash-for-clunkers months of July and August - since December 2008.

The American Bankruptcy Institute reported: October Consumer Bankruptcy Filings Reach New Highs, Up 28 Percent Over Last Year

This graph shows the non-business bankruptcy filings by quarter.

The quarterly rate is at about the same level as prior to when the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) took effect. There were over 2 million bankruptcies filed in Calendar 2005 ahead of the law change.

And on the employment report:

From David Leonhardt at the NY Times: Broader Measure of Unemployment Stands at 17.5%

Employment Report: 190K Jobs Lost, 10.2% Unemployment Rate

This graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).

The current employment recession has seen the worst job losses since WWII, and is the 2nd worst in terms of the unemployment rate (only early '80s recession with a peak of 10.8 percent was worse).

Unemployment: Stress Tests, Unemployed over 26 Weeks, Diffusion Index

Employment-Population Ratio, Record Part Time Workers, Weak Holiday Hiring

Here is a graph of seasonal retail hiring.

Retailers only hired 63.5 thousand workers (NSA) net in October.

This is essentially the same as in 2008 (59.1 thousand NSA), and suggests retailers are being very cautious with their seasonal hiring.

And there were five more bank failures on Friday taking the total to 120 in 2009:

From the LA Times: United Commercial Bank is shut down, sold to East West Bancorp. Note: Not only did the FDIC DIF take an estimated $1.4 billion loss because of the failure of United Commercial Bank, but the TARP lost $299 million.

Unofficial Problem Bank List Grows to 505

And a couple other stories of interest:

From Diana Golobay at HousingWire: FHA Delays Yearly Fiscal Report over ‘Accuracy’ of Methodology This raises the concern that the FHA will require a significant taxpayer bailout.

Fannie Mae: $18.9 Billion Loss, Requests Another $15 Billion

Best wishes to all.