by Calculated Risk on 6/03/2010 08:34:00 PM

Earlier I posted: Oil Gusher impacting Gulf Coast Hotels

William Spain at MarketWatch has more: Spill could mean dark times for Sunshine State

At stake [in Florida] alone are hundreds of thousands of jobs and perhaps billions of dollars in revenue, depending on when and where the oil from BP PLC's runaway well makes landfall.

Although the beaches were still in the clear as of Thursday afternoon, widespread reports of vacation cancellations are already coming in ...

"It is already ugly," said John Fareed, a partner at Fareed Zapala Koepke, an Orlando-based hospitality-industry consultancy. "When it hits, it will be real and will position itself in the psyche of consumers who are getting ready to make vacation plans. It is going to have a huge impact in terms of future bookings and cancellations.

"Every indication from the people we work with is that bookings have slowed to a trickle".

Of course the loss of tourism pales in comparison to the ecological damage from the oil gusher.

by Calculated Risk on 6/03/2010 03:36:00 PM

Here are two graphs from the Atlanta Fed weekly Financial Highlights released today (graph as of June 2nd):

Click on graph for larger image in new window.

From the Atlanta Fed:

Despite the latest announcement of planned austerity measures by Spain, Portugal, and Italy, uncertainty around the adjustment
challenges in peripheral Europe continues to weigh on the region’s bond prices.

Downgrading of Spanish sovereign debt by Fitch and ongoing concerns about the Spanish banking sector further added to investor worries.

Compared with two weeks ago, peripheral Europe's bond spreads to bunds have widened by 30 basis points (bps) on average.

After declining early last week, sovereign debt spreads have begun widening for peripheral euro area countries. As of June 1, the 10-year bond spread stands at 503 basis points (bps) for Greece, 219 bps for Ireland, 195 bps for Portugal, and 162 bps for Spain.

Similarly, CDS spreads have risen after the initial response to the stabilization package.

It should be noted that the German government, through its financial services regulator BaFin, unilaterally and temporarily banned naked short selling of sovereign debt securities, naked credit default swaps on European sovereign
debt in which the buyer has no hedging demand, and naked short sales in 10 prominent German financials.

After declining following the policy response, the bond and CDS spreads have resumed their steady climb - especially for Greece and Portugal.

And from Reuters today: Hungary Warns of Deficit Overshoot; EU Urges Action

Hungary ... government officials reiterated the 2010 fiscal gap may reach almost twice the target agreed with lenders including the EU. ... Public finances were in much worse shape than previously expected and there was only a slim chance of avoiding a Greek-style scenario, news portal napi.hu cited [the vice chairman of the ruling Fidesz party, Lajos Kosa] as saying.

The euro is down to 1.2166 dollars, the lowest level in four years.

by Calculated Risk on 6/03/2010 02:43:00 PM

From Christine Blank at HotelNewsNow.com: Oil-spill update: Hotels report mixed results

Tourism officials and hotel operators in Gulf of Mexico coastal regions say they are struggling with occupancy and reservations, but some areas are suffering more than others.
...
“We have had some cancellations. It is hitting the beachfront properties hard and the casinos have seen some impact ... and the charter boat companies,” said Richard Forester, executive director of the Mississippi Gulf Coast Convention and Visitors Bureau in Biloxi.
...
“Our members are experiencing unprecedented cancellations heading into their peak season, and this advertising campaign is critical to our economic survival,” said Carol Dover, president and CEO of the Florida Restaurant and Lodging Association in Tallahassee ... Many hoteliers in Northwest Florida that are typically at 90 percent occupancy rates heading into the Memorial Day weekend, were reporting a drop in bookings by 30 percent, according to the FRLA.
...
Texas’s coastal hotels also are feeling an impact, but that could be due to the overall U.S. economy more than to the oil spill.

“We have yet to have any cancellations [because of the oil spill],” said Theresa Elliott, GM of Casa del Mar Beachfront Suites, Galveston, Texas. ... Galveston-area hotels are significantly discounting rooms to boost stays, such as 20-percent off Sunday through Thursday stays, according to Elliott.

The economic impact of the oil gusher is unclear, although tourism, fishing and shipping are all being impacted.

by Calculated Risk on 6/03/2010 12:51:00 PM

This is probably a safe prediction: There will be some really bad reporting tomorrow.

Note: The May headline payroll number will be large (consensus is for 540,000 payroll jobs added in May), but this will include around 400,000 temporary Census jobs.

I think this poor reporting will fall into two major categories:

1) Reporters who use the headline payroll number and write that this shows the recovery is picking up steam. We will probably see someone use the headline number and write something like "This is the largest monthly gain since September 1983" - well, were there 400,000+ temporary Census hires in September 1983? If not, why does this comparison matter?

2) Anyone who calls the number of temporary census workers "fake" or subtracts the birth/death adjustment from the seasonally adjusted headline number.

I've spoken with actual Census workers, and I guarantee their jobs are not "fake". Their jobs are real but temporary, and it is appropriate to subtract the Census 2010 workers from the headline payroll number to determine the underlying trend (even though it is obvious, I verified this calculation with the Census Bureau).

And no matter what anyone thinks of the birth / death model, the adjustment is added to the NSA numbers - and can't be subtracted from the SA numbers. Note: I think the birth / death model is useful although we have to aware of the weaknesses (it misses turning points - something I wrote about in 2006).

The employment report has many useful numbers. But the key payroll number is U-3 minus the number of Census 2010 temporary workers. The Census Bureau is tasked with reporting an estimate of the number of payroll jobs each month - so they include the Census 2010 jobs - but they also provide the information on the number of Census hires (the report will be released here).

It is the responsibility of anyone reporting on the numbers to do the heavy math and subtract the Census workers from the headline number. I will report both numbers.

Starting in June, the impact of the Census 2010 on the payroll report will be negative - see: Impact of Census 2010 on Payroll Report. That will require adding the temporary Census 2010 workers back to determine the underlying trend.

For some reason, print reports tend to contain the first mistake, and online reports the second error. Both are poor reporting, although the second is far more egregious (because the statements are blatantly false).

Oh well ... sorry for the rant, but I'm already seeing some really bad "analysis".

by Calculated Risk on 6/03/2010 10:00:00 AM

The May ISM Non-Manufacturing index was at 55.4%, unchanged from April (slightly below expectations). The employment index showed some growth after 28 consecutive months of contraction.

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

Economic activity in the non-manufacturing sector grew in May for the fifth consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee; and senior vice president — supply management for Hilton Worldwide. "The NMI (Non-Manufacturing Index) registered 55.4 percent in May, the same percentage as registered in both April and March, indicating continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 0.8 percentage point to 61.1 percent, reflecting growth for the sixth consecutive month. The New Orders Index decreased 1.1 percentage points to 57.1 percent, and the Employment Index increased 0.9 percentage point to 50.4 percent, reflecting growth for the first time after 28 consecutive months of contraction. The Prices Index decreased 4.1 percentage points to 60.6 percent in May, indicating that prices are still increasing but at a slower rate than in April. According to the NMI, 16 non-manufacturing industries reported growth in May. Respondents' comments remain mostly positive about current business conditions and the general direction of the economy."
emphasis added