by Calculated Risk on 3/03/2010 04:50:00 PM

The BLS released the annual average state unemployment rates today.

Here is a scatter graph comparing the delinquency rate for mortgage loans (including all loans in foreclosure) vs. unemployment rate for all states as of Q4 2009.

Click on graph for larger image in new window.

There definitely is a relationship between delinquency rates and the unemployment rate, although some states stand out (like Florida), because of state specific foreclosure laws. Arizona and Nevada also have higher than expected foreclosure rates - possibly because of high investor activity during the housing bubble.

This does suggest that a large part of the delinquency problem is related to the unemployment problem.

Imagine if there were no unemployment benefits. As Mark Thoma noted yesterday, Unemployment Compensation has Broad Based Benefits, but one benefit he didn't mention is that it keeps households in place. Even though there is a relationship between the unemployment rate and the delinquency rate, I suspect the trend line would be steeper without unemployment benefits (so there would be even more delinquencies as the unemployment rate rises without benefits).

Here is a sortable table to find the data for each state (use scroll bar to see all data).

by Calculated Risk on 3/03/2010 02:00:00 PM

From the Fed: Beige Book

Reports from the twelve Federal Reserve Districts indicated that economic conditions continued to expand since the last report, although severe snowstorms in early February held back activity in several Districts. Nine Districts reported that economic activity improved, but in most cases the increases were modest. Overall conditions were described as mixed in the Atlanta and St. Louis Districts, though St. Louis noted further signs of improvement in some areas. Richmond reported that economic activity slackened or remained soft across most sectors, due importantly to especially severe February weather in that region.

On real estate:

Residential real estate markets improved in a number of Districts, remained weak or softened further in the New York, Atlanta, and Chicago Districts, was little changed in the San Francisco District, and characterized as mixed in the St. Louis District. Richmond also reported overall housing activity as mixed, but one contact noted that absent the harsh weather, market conditions might have improved. Adverse weather conditions also hampered home sales and construction in the New York, Philadelphia, and Atlanta Districts. Most Districts attributed stronger home sales to the home-buyer tax credit, with several contacts apprehensive about future sales once the credit expires on April 30. ... Home construction was down or stagnant in most Districts, with the exception of the Minneapolis, Kansas City, and Dallas Districts. Atlanta said the most pronounced weakness was among Georgia homebuilders, and San Francisco attributed weak construction activity to elevated home inventory levels. Home prices mostly remained flat or declined slightly, but signs of improvement were noted in the Boston and San Francisco Districts. ...

Commercial real estate conditions remained weak or declined further in most Districts, although some Districts noted slight stabilization or modest signs of improvement. ... Several Districts also noted that many tenants were pushing for, and in some cases receiving, concessions on rents. All Districts reporting on commercial construction said that activity remained weak or slow, except for some moderate boost from federal stimulus projects and other public construction.

Even without the snow, the increases were "modest".

by Calculated Risk on 3/03/2010 01:02:00 PM

From Altanta Fed President Dennis Lockhart: Recovery and Reform Excerpts:

My current forecast—and that of my staff at the Federal Reserve Bank of Atlanta—lines up with ... the modest recovery scenario.

The incoming data through last week have not made me alter my basic forecast, but I consider it still too early to make a definitive call on which scenario will play out. The January numbers, as you may know, have been mixed. Consumer spending was strong for the month, while business spending on capital goods was weak, and job growth was flat. Upside surprises in inventories, capital spending, and consumption could tip the scales in favor of a stronger growth forecast. I will be particularly attentive, watching for evidence of these developments as the recovery proceeds.

Because I hold to this forecast of modest recovery and believe inflation is likely to remain subdued, I fully support the message of the most recent FOMC statement to the effect that the fed funds target rate will remain exceptionally low for an extended period.

This is a follow-up to Lockhart's The Economic Outlook: A Tale of Two Narratives.

I still expect the recovery to be sluggish and choppy in 2010, but for the economy to avoid a "double dip" recession.

by Calculated Risk on 3/03/2010 10:00:00 AM

This report shows improvement in the service sector, although employment declined for the 26th consecutive month.

From the Institute for Supply Management: February 2010 Non-Manufacturing ISM Report On Business®

"The NMI (Non-Manufacturing Index) registered 53 percent in February, 2.5 percentage points higher than the seasonally adjusted 50.5 percent registered in January, indicating growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 2.6 percentage points to 54.8 percent, reflecting growth for the third consecutive month. The New Orders Index increased 0.3 percentage point to 55 percent, and the Employment Index increased 4 percentage points to 48.6 percent. The Prices Index decreased 0.8 percentage point to 60.4 percent in February, indicating an increase in prices paid from January. According to the NMI, nine non-manufacturing industries reported growth in February. Respondents' comments vary by industry and company about business conditions."
...
Employment activity in the non-manufacturing sector contracted in February for the 26th consecutive month. ISM's Non-Manufacturing Employment Index for February registered 48.6 percent. This reflects an increase of 4 percentage points when compared to the seasonally adjusted 44.6 percent registered in January.
emphasis added

by Calculated Risk on 3/03/2010 08:29:00 AM

ADP reports:

Nonfarm private employment decreased 20,000 from January to February 2010 on a seasonally adjusted basis, according to the ADP National Employment Report®. The estimated change of employment from December 2009 to January 2010 was revised down, from a decline of 22,000 to a decline of 60,000. The February employment decline was the smallest since employment began falling in February of 2008.

Two large blizzards smothered parts of the east coast during the reference period for the BLS establishment survey. The adverse weather had only a very small effect on today’s ADP Report due to the methodology used to construct it. However, the adverse weather is widely expected to depress the BLS estimate of the monthly change in employment for February, but boost it for March. Therefore, it would not be unreasonable to expect the BLS estimate for February (due out this Friday) to be less than today’s ADP Report even though the BLS estimate will include the hiring of temporary Census workers not captured in the ADP Report.

Note: ADP is private nonfarm employment only (no government jobs).

On the Challenger job-cut report from MarketWatch: Planned layoffs drop to lowest level since 2006

February's total of 42,090 planned layoffs was 41% below January's 71,482 and 77% lower than the 186,350 job cuts tracked in February 2009, at the depth of the recession. It was the lowest monthly total since July 2006.

The BLS reports on Friday, and the consensus is for a loss of 50,000 to 80,000 payroll jobs in February, on a seasonally adjusted (SA) basis, and the unemployment rate to increase slightly to 9.8%.