by Calculated Risk on 12/09/2009 08:46:00 AM

The MBA reports: Mortgage Applications Increase in Latest MBA Weekly Survey

The Market Composite Index, a measure of mortgage loan application volume, increased 8.5 percent on a seasonally adjusted basis from one week earlier. ...

The Refinance Index increased 11.1 percent from the previous week and the seasonally adjusted Purchase Index increased 4.0 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.88 percent from 4.79 percent, with points increasing to 1.17 from 1.00 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This ends a six week run of declining 30-year fixed rates which may have triggered the increase in refinance applications.
emphasis added

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

In the past, the MBA index was somewhat predictive of future sales, but it has been questionable for some time. The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007 even though activity was actually declining.

Recently there has been a substantial number of cash buyers, so the MBA index missed the strength of the recent existing home sales increase. However - even with the increase in the purchase index this week - the recent plunge in the purchase index is probably worth watching.

by Calculated Risk on 12/08/2009 11:59:00 PM

From the BLS: Job Openings and Labor Turnover Summary

There were 2.5 million job openings on the last business day of October 2009, the U.S. Bureau of Labor Statistics reported today. The job openings rate was unchanged over the month at 1.9 percent. The openings rate has held relatively steady since March 2009. The hires rate (3.0 percent) and the separations rate (3.2 percent) were essentially unchanged and remained low.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. Remember the CES (Current Employment Statistics, payroll survey) is for positions, the CPS (Current Population Survey, commonly called the household survey) is for people. See Jobs and the Unemployment Rate for a comparison of the two surveys.

The following graph shows job openings (yellow line), hires (blue Line), Quits (green bars) and Layoff, Discharges and other (red bars) from the JOLTS. Red and green added together equals total separations.

Unfortunately this is a new series and only started in December 2000.

Click on graph for larger image in new window.

Notice that hires (blue line) and separations (red and green together) are pretty close each month. When the blue line is above total separations, the economy is adding net jobs, when the blue line is below total separations, the economy is losing net jobs.

According to the JOLTS report, there were 3.966 million hires in October, and 4.203 million separations, or 237 thousand net jobs lost.

I'm not sure if openings are predictive of future hires (the data set is limited), but openings near a series low can't be a positive. Separations have declined sharply, with fewer quits and layoffs, but hiring has not picked up. And quits at a series low suggests those that are employed were holding on to their current jobs in October.

by Calculated Risk on 12/08/2009 08:23:00 PM

Meredith Whitney's comments this morning sounded like something right out of "American Apocalypse I":

The government is running out of ways to help the economy as the US faces major issues regarding credit and employment ahead, banking analyst Meredith Whitney told CNBC.

"I think they're out of bullets," Whitney said in an interview during which she reinforced remarks she made last month indicating she is strongly pessimistic about the prospects for recovery.

Primary among her concerns is the lack of credit access for consumers who she said are "getting kicked out of the financial system."

In American Apocalypse, Nova imagines the economic recovery stalling, leading to the collapse of another major financial firm, the unemployment rate rising to 14% and the fabric of society starting to unravel.

Nova's protagonist, Gardener, loses his job, and is forced to face the challenges of the street. Almost vacant strip malls, "car people", "tree people" and tent cities are all part the scenery.

The book is reminiscent of other post-apocalyptic stories - like "Alas, Babylon" following a nuclear war - except the financial and social crisis of American Apocalypse builds slowly throughout the story, adding tension to the challenges of survival. Gardener lives in a suburb of D.C. that faces cutbacks in services, creating more hardships for the homeless and unemployed. Eventually the town goes bankrupt, and an Old West style of justice becomes the norm - and Gardener discovers a Charles Bronson "Death Wish" like talent.

American Apocalypse I Buy it Now!

Here is an excerpt:

I am sure that someday a history will be written of our times, I am just not sure from whose perspective it will be written. Eventually there will be a Gibbons to write the Decline and Fall, but I am positive it will not be Europe or America that produces the author.

The fragmentation of information sources was accelerating. Print had failed as a business model, at least of the daily news; digital broadcast news was homogeneous for the most part. The only difference in the networks was what shade of the official color you wanted. Online news was the least regulated and most interesting; the only problem was the amount of noise one had to sift through to find a reliable source. I was still reading Calculated Risk then, this was before the 'Information Consolidation Act' shut him down.

Oh no, watch out for the ICA!

Nova has a website where he is currently posting chapters from Part II.

The book is fast paced and gripping; a terrifying portrait of what seems a little too possible.

Disclosure: Nova sent me an unsolicited proof copy of his book. I’ve received no compensation for this review.

by Calculated Risk on 12/08/2009 05:38:00 PM

The following information is from the JPMorgan Chase presentation today at the Goldman Sachs Financial Services Conference.

Click on graph for larger image in new window.

The first slide (page 18 in the presentation) shows the progress of the various modification programs at JPM Chase. Only 2% of all trial modification have become permanent (4,302 or 199,033 trial mods).

29% fail to make all their payments during the trial modification program. Another 51% fail to submit all documentation.

The other modification programs are having more success.

The second slide is even more important (slide 15 in the presentation). This shows the weak demand for loans in all categories.

Mortgage 3Q09 YTD applications down 10% YoY

Card 3Q09 YTD sales volume down 7% YoY

Average large corporate loans down 24% YoY to $66.3B at 3Q09 from $86.6B at 3Q08 due to lower demand and increased access to capital markets

Average Mid-Corporate and Middle Market loans down 13% YoY to $51.9B at 3Q09 from $59.6B at 3Q08 due to lower demand and utilization rates

Business Banking 3Q09 YTD origination volume down 66% YoY due to lower demand and tighter underwriting standards

The presentation isn't all gloomy (see page 14):

Overall Commentary

Some initial signs of stability in consumer delinquency trends, but we are not certain if this trend will continue

Prime and subprime mortgage delinquencies impacted by foreclosure moratorium, extended REO timelines and trial modifications

by Calculated Risk on 12/08/2009 04:06:00 PM

From Bloomberg: Companies in U.S. More Upbeat on Sales Than Jobs, Surveys Show

Chief executive officers, supply managers and small business leaders in the U.S. said a pickup in sales next year will not lead to a surge in hiring, surveys showed.

Three times as many company chiefs anticipate sales will grow over the next six months than project payrolls will climb, according to a survey by the Washington-based Business Roundtable. A poll by the Institute for Supply Management found service companies, which account for almost 90 percent of the economy, forecast additional job cuts in 2010.

Here is the Business Roundtable CEO survey. Of the CEOs surveyed, 68% percent sales to increase over the next 6 months, but only 19% thought their U.S. employment would increase (compared to 31% who thought their employment would decrease).

Here is the ISM survey: Economic Recovery Continues in 2010. On service employment:

For 2010, 15 percent of respondents expect higher levels of employment, 27 percent anticipate lower levels, and 58 percent expect their employment levels to be unchanged.

This shows that hiring plans are still weak, although the recent Manpower survey showed some improvement in hiring plans.