by Calculated Risk on 6/03/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending May 29, the advance figure for seasonally adjusted initial claims was 453,000, a decrease of 10,000 from the previous week's revised figure of 463,000. The 4-week moving average was 459,000, an increase of 1,750 from the previous week's revised average of 457,250.
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The advance number for seasonally adjusted insured unemployment during the week ending May 22 was 4,666,000, an increase of 31,000 from the preceding week's revised level of 4,635,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims increased this week by 1,750 to 459,000.

The dashed line on the graph is the current 4-week average. The current level of 453,000 (and 4-week average of 459,000) is still high, and suggests ongoing weakness in the labor market.

David Greenlaw at Morgan Stanley offered some possible reasons that claims have stayed elevated such as more ineligible filers and that "construction workers tend to file more frequently", although I'm not convinced. This is still disappointing ... the 4-week average has been moving sideways since December.

by Calculated Risk on 6/03/2010 08:15:00 AM

ADP reports:

Nonfarm private employment increased 55,000 from April to May 2010 on a seasonally adjusted basis, according to the ADP National Employment Report. The estimated change in employment from March to April 2010 was revised, from an increase of 32,000 to an increase of 65,000.

May’s rise in private employment was the fourth consecutive monthly gain. However, over these four months the increases have averaged a modest 39,000. The slow pace of improvement from February through May is consistent with the pause in the decline of initial unemployment claims that occurred during the winter months.

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

This is close to the consensus forecast of ADP showing an increase of 60,000 private sector jobs in May.

The BLS reports tomorrow, and the consensus is for an increase of 540,000 payroll jobs in May, on a seasonally adjusted (SA) basis, with over 400,000 temporary Census 2010 jobs.

by Calculated Risk on 6/02/2010 11:54:00 PM

BofA executive Jack Schakett made some interesting comments earlier today:

"There is a huge incentive for customers to walk away because getting free rent and waiting out foreclosure can be very appealing to customers."

Schakett noted that the foreclosure process is currently taking 13 to 14 months ...

For many the timeframe is apparently much longer. On Monday David Streitfeld wrote in the NY Times: Owners Stop Paying Mortgages, and Stop Fretting

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.
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More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property ...

These long foreclosure time lines can have a significant adverse impact on housing.

Housing economist Tom Lawler alerted me to a 2008 research paper by Freddie Mac economists Amy Crews Cutts and William A. Merrill: Interventions in Mortgage Default: Policies and Practices to Prevent Home Loss and Lower Costs. They studied the foreclosure time lines and costs in several states and found that 270 days is sufficient time to allow the borrower to cure, and any more time actually incentivizes the borrower to strategically default:

There are many challenges that policy makers, investors, servicers and borrowers face in minimizing the incidence of home loss through foreclosure. Among them is the tension between too little time in the foreclosure process, such that some borrowers are unable to recover from relatively mild setbacks before they lose the home but investors minimize pre-foreclosure time related costs, and too much time in the foreclosure process, such that the borrower is incented to let the home go to foreclosure sale during which no mortgage payments are made (in essence, free rent for a significant time) and investor costs rise rapidly.
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A sweet spot for the optimal time in foreclosure likely exists around a statutory timeline of 120 days (the current national median, and equivalent to 270 days after adding in 150 days for pre-referral loss mitigation activities by servicers through workouts) in which the borrower’s incentives are aligned with both a high probability of curing out of the foreclosure and keeping the pre-foreclosure costs to the investor contained.

One of unintended consequences of the government foreclosure delaying strategy (probably aimed at limiting supply and supporting house prices), is that strategic defaults have gained fairly widespread acceptance. And that means the eventual cost to the taxpayer will be higher than if the lenders had either modified the loans, or foreclosed, or approved a short sale, within about 270 days.

by Calculated Risk on 6/02/2010 08:47:00 PM

Here is a theme we've been discussing for a few years - when a homeowner is underwater, it is difficult to make a career move ...

From Rana Cash at the Atlanta Journal-Constitution: Real estate market stalls recruiting, promotions (ht Ann)

When executive Wade Ledbetter leaped at the opportunity to move up in his company, the shackles of relocation snatched him back down to earth.

That fabulous promotion came with a price: The $30,000 he’d invested in home improvements, the 20 percent he’d put down on his house and the extra payment every year for 7 1/2 years would be a wash, along with settling on a selling price well below what he’d paid for the home and just about all its contents. Add living away from his family in a one-bedroom apartment for eight months while his home languished on the market and his frustration accrued.

“It was horrible,” said Ledbetter, who relied in part on relocation assistance from his company. “It was constant, horrid stress. There were a number of times I said to myself, ‘What have I done?’ ”

Negative equity is impacting one of the historic strengths of the U.S. labor market - the ability of households to easily move from one region to another for a better employment opportunity.

by Calculated Risk on 6/02/2010 05:48:00 PM

From the American Bankruptcy Institute: May Consumer Bankruptcy Filings up 9 Percent from Last Year

The 136,142 consumer bankruptcies filed in May represented a 9 percent increase nationwide over the 124,838 filings recorded in May 2009, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). NBKRC’s data also showed that the May consumer filings represented a 6 percent decrease from the 144,490 consumer filings recorded in April 2010. ...

“While consumer filings dipped slightly from last month, housing debt and other financial burdens weighing on consumers are still a cause for concern,” said ABI Executive Director Samuel J. Gerdano. “Consumer filings this year remain on track to top 1.6 million filings.”

Click on graph for larger image in new window.

This graph shows the non-business bankruptcy filings by quarter using monthly data from the ABI and previous quarterly data from USCourts.gov.

Based on the comment from Gerdano, it appears the ABI has increased their forecast to over 1.6 million filings this year from their earlier forecast of just over 1.5 million filings this year.

Excluding 2005, when the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" was enacted (really a pro-lender act), the record was in 2003 when 1.62 million personal bankruptcies were filed. This year will be close to that level.

I wonder how many of these bankruptcy filings are by homeowners who lost their homes in foreclosure and are now trying to extinguish any related recourse debt (1st or 2nd)?