RSS Feed by Calculated Risk on 6/06/2010 06:20:00 PM
Sunday, June 06, 2010
Hungary: Never mind
Here is the weekly summary and look ahead.
The furious backpedaling continues ...
From the WSJ: Hungary Seeks to Reassure Lenders and Investors
Hungary's new cabinet huddled in an emergency session over the weekend to devise an economic plan aimed at restoring confidence in the nation's creditworthiness, as the government backtracked on officials' earlier comments that the country could default on its debts.
From Reuters: Analysis: Hungary faces struggle to regain trust of markets
Hungary is likely to take months to regain the trust of financial markets after politicians in its new government made controversial comments ...The euro is down to 1.1956 dollars.
This makes me think of Gilda Radner: "Never mind".
Weekly Summary and a Look Ahead
by Calculated Risk on 6/06/2010 11:59:00 AM
The key economic report this week will be April retail sales to be released on Friday.
On Monday, the Fed will release Consumer Credit for April at 3 PM ET. Consumer credit has declined sharply since mid-2008, especially revolving debt (credit cards). Also this week, the May rail traffic report from the Association of American Railroads (AAR) and May LA port traffic will probably be released.
On Tuesday, the National Association of Independent Business (NFIB) will release the small business optimism survey for May. The NFIB pre-released the employment survey on Friday and the employment outlook was described as “bleak”. Also on Tuesday the Job Openings and Labor Turnover Survey (JOLTS) for April will be released at 10 AM by the BLS. This report has been showing very little turnover in the labor market and few job openings.
On Wednesday, the MBA will release the mortgage purchase applications index. This has been falling sharply suggesting a sharp decline in home sales after the expiration of the tax credit. Also on Wednesday, Wholesale Inventories and the Fed’s Beige Book will be released. Fed Chairman Ben Bernanke will testify at 10 AM before the house budget committee (the hearing is about the State of the Economy: View from the Federal Reserve), and the NY Fed’s Brian Sack will speak at noon at the New York Association of Business Economics.
On Thursday the April Trade Balance report will be released at 8:30 AM by the Census Bureau. The consensus is for a further increase in the U.S. trade deficit to around $41 billion (from $40.4 billion). Also on Thursday, the closely watched initial weekly unemployment claims will be released. Consensus is for a decline to 448K from 453K last week.
Also on Thursday, the Fed will release the Q1 Flow of Funds report, and the May Ceridian-UCLA Pulse of Commerce Index (based on diesel fuel consumption) will be released. Last month this was the one of the first indicators that showed the economy slowed in April.
On Friday May retail sales will be released at 8:30 AM. The consensus is for an increase of 0.3% from the April rate, and 0.1% increase ex-autos. Also the May Reuter's/University of Michigan's Consumer sentiment index will be released at 9:55 AM, and April Business inventories will be released at 10 AM.
And of course the FDIC will probably have another busy Friday afternoon ...
And a summary of last week:
From the BLS:
Total nonfarm payroll employment grew by 431,000 in May, reflecting the hiring of 411,000 temporary employees to work on Census 2010, the U.S. Bureau of Labor Statistics reported today. ... The unemployment rate edged down to 9.7 percent.
Click on graphs for a larger image.This graph shows the job losses from the start of the employment recession, in percentage terms. This really shows how stunning the job losses were during the great recession.
The dotted line is the job losses ex-Census. Census 2010 hiring was 411,000 in May.
The recession that started in 2007 was by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early '80s recession with a peak of 10.8 percent was worse).
This graph shows the same data, but this time aligned at the bottom of the recession.Notice that the 1990 and 2001 recessions were followed by jobless recoveries - and the eventual job recovery was gradual. In earlier recessions the recovery was somewhat similar and a little faster than the decline (somewhat symmetrical).
This graph shows the Employment-Population ratio. The ratio decreased to 58.7% in May (from 58.8% in April). This had been increasing after plunging since the start of the recession.Note: the graph doesn't start at zero to better show the change.
The Labor Force Participation Rate decreased to 65.0% from 65.2% in April. This is the percentage of the working age population in the labor force. This decline is disappointing. The decline in participation was a key reason the unemployment rate declined.
This graph shows the long term unemployed. The blue line is the number of workers unemployed for 27 weeks or more. The red line is the same data as a percent of the civilian workforce.According to the BLS, there were a record 6.72 million workers who had been unemployed for more than 26 weeks (and still want a job). This was a record 4.34% of the civilian workforce. (note: records started in 1948)
Based on an estimate from Autodata Corp, light vehicle sales were at a 11.63 million SAAR in May. This is up 18.1% from May 2009 (when sales were very low), and up 3.9% from the April sales rate.This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for May (red, light vehicle sales of 11.63 million SAAR from Autodata Corp).
The 136,142 consumer bankruptcies filed in May represented a 9 percent increase from May 2009 total. This graph shows the non-business bankruptcy filings by quarter using monthly data from the ABI and previous quarterly data from USCourts.gov.
The American Bankruptcy Institute (ABI) has increased their forecast to over 1.6 million filings this year .
This graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.Private residential construction spending appears to have bottomed in early 2009, but has been mostly moving sideways since then. Residential spending is now 61% below the peak of early 2006.
Private non-residential construction spending is now 29% below the peak of late 2008.
Best wishes to all.
Krugman: "Lost Decade, Here We Come"
by Calculated Risk on 6/06/2010 08:49:00 AM
First, from the Financial Times: G20 drops support for fiscal stimulus
Finance ministers from the world’s leading economies ripped up their support for fiscal stimulus on Saturday ...And from the G20 communiqué:
The communiqué of the meeting made it clear that the G20 no longer thought that expansionary fiscal policy was sustainable or effective in fostering an economic recovery because investors were no longer confident about some countries’ public finances.
Excerpts with permission
The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability, differentiated for and tailored to national circumstances. Those countries with serious fiscal challenges need to accelerate the pace of consolidation.And from Paul Krugman: Lost Decade, Here We Come
It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US.
...
The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered — specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound.
...
Utter folly posing as wisdom. Incredible.
Saturday, June 05, 2010
Daily Show: The Spilling Fields
by Calculated Risk on 6/05/2010 10:28:00 PM
Since we all need a laugh - Jon Stewart has a suggestion for how to use a vacant McMansion ... Here is the link at the Daily Show
| The Daily Show With Jon Stewart | Mon - Thurs 11p / 10c |
| The Spilling Fields - To Shell and Back | |
Fannie Mae's Duncan: Home-building industry to be tested until early 2013
by Calculated Risk on 6/05/2010 05:46:00 PM
Some comments from Fannie Mae chief economist Douglas Duncan ...
From Greta Guest at Freep.com:
Douglas Duncan, chief economist for Fannie Mae, said he expects the home-building industry to be tested until early 2013 before demand will catch up with the large supply of houses on the market.And from Elizabeth Razzi at the WaPo: Is bulldozer the best option for some boom-time housing?
He said the combination of current inventory of unsold homes plus the foreclosures not yet for sale has elevated supply by roughly 2 million houses over normal levels.
He said that housing starts would be below normal levels until that inventory is absorbed.
Said Duncan: "Some of that shadow investment could have to be torn down. It was not economically viable when it was put in place." ... Duncan said people could find that the cost of sustaining their lifestyle in some developments--including high transportation costs to far-away jobs--is greater than the cost of the home. That would wipe out demand.And I posted this comment yesterday via Kathleen Howley and Daniel Taub at Bloomberg: Fannie Mae’s Duncan Says Homebuyer Tax Credit Shifted Demand
...
The idea is being discussed by economists, but Duncan said he doesn't know of any policymakers who are considering it. "It's un-American to think about tearing down housing," he said. "But we have a long history of ghost towns."
“Temporary tax credits change behavior temporarily. It’s simply shifted demand forward. ... It actually created some price appreciation that’s not supportable long term.” [said Douglas Duncan, Fannie Mae chief economist]
