by Calculated Risk on 8/06/2010 09:50:00 AM

Here are a few more graphs based on the employment report ...

Percent Job Losses During Recessions, aligned at Bottom

Longer. Deeper. And flat at the bottom. Unfortunately that describes the 2007 employment recession.

Click on graph for larger image.

This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at the bottom of the recession (Both the 1991 and 2001 recessions were flat at the bottom, so the choice was a little arbitrary).

The dotted line shows the impact of Census hiring. In July, there were 196,000 temporary 2010 Census workers on the payroll. The number of Census workers will continue to decline - and the gap between the solid and dashed red lines will be gone in a few months.

Employment-Population Ratio

The Employment-Population ratio decreased to 58.4% in July from 58.5% in June. This had been increasing after plunging since the start of the recession, and the recovery in the Employment-Population ratio was considered a good sign - but the ratio has now decreased for three consecutive months.

This graph shows the employment-population ratio; this is the ratio of employed Americans to the adult population.

Note: the graph doesn't start at zero to better show the change.

The Labor Force Participation Rate decreased to 64.6% from 64.7% in June. This is the percentage of the working age population in the labor force. This decline is very disappointing, and the rate is well below the 66% to 67% rate that was normal over the last 20 years.

The reason the unemployment rate was steady at 9.5% was because people left the workforce - and that is not good news. As the employment picture improves, people will return to the labor force, and that will put upward pressure on the unemployment rate.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged over the month at 8.5 million but has declined by 623,000 since April. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) was at 8.53 million in July. This small decline was a little bit of good news.

The all time record of 9.24 million was set in October 2009.

These workers are included in the alternate measure of labor underutilization (U-6) that was steady at 16.5% in July.

Unemployed over 26 Weeks

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 are 6.,572 million workers who have been unemployed for more than 26 weeks and still want a job. This is 4.3% of the civilian workforce, just below the record set last month. (note: records started in 1948). The number of long term unemployed might have peaked ... perhaps because people are giving up.

Summary

The underlying details of the employment report were mixed. The positives: a slgiht increase in hours worked and in hourly wages, and the slight decreases in part time workers (for economic reasons) and in the long term unemployed.

The negatives include the weak hiring of only 12,000 ex-Census, the declines in the participation rate and employment-population rate, and the significant downward revision to the June employment report.

Overall this was a weak report.

Earlier employment post today:

July Employment Report: 12K Jobs ex-Census, 9.5% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

by Calculated Risk on 8/06/2010 08:30:00 AM

From the BLS:

Total nonfarm payroll employment declined by 131,000 in July, and the unemployment rate was unchanged at 9.5 percent, the U.S. Bureau of Labor Statistics reported today. Federal government employment fell, as 143,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment edged up by 71,000.

Census 2010 hiring decreased 143,000 in July. Non-farm payroll employment increased 12,000 in July ex-Census. Also June was revised down sharply to 267,000 221,000 jobs lost (revised from 125,000 jobs lost).

Click on graph for larger image.

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 131 thousand in July. The economy has lost 52 thousand jobs over the last year, and 7.7 million jobs since the recession started in December 2007.

Ex-Census hiring, the economy added 12,000 jobs in July. The unemployment rate was steady at 9.5 percent.

The second graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).

The dotted line is ex-Census hiring. The two lines will rejoin later this year when the Census hiring is unwound.

For the current employment recession, employment peaked in December 2007, and this recession is 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 is a very weak report, especially considering the downward revision to June. The participation rate declined again, and that is why the unemployment rate was steady - and that is bad news. I'll have much more soon ...

Update: there is much more in the next post: Employment-Population Ratio, Part Time Workers, Unemployed over 26 Weeks

by Calculated Risk on 8/05/2010 11:29:00 PM

Here is an auction at the court house steps in San Diego. Jim submitted an offer on this house as a short sale at $600K. The bank never responded, and it sold for less at auction ...

by Calculated Risk on 8/05/2010 07:55:00 PM

Fannie Mae reported: "a net loss of $1.2 billion in the second quarter of 2010, compared to a net loss of $11.5 billion in the first quarter of the year." and the FHFA requested another $1.5 billion from Treasury.

On house prices, Fannie Mae "expects home prices to decline slightly for the balance of 2010 and into 2011 before stabilizing, and that home sales will be basically flat for all of 2010."

Click on graph for larger image in new window.

Fannie Mae reported that their REO inventory more than doubled since Q2 2009, from 62,615 to 129,310 in Q2 2010.

REO: Real Estate Owned.

See page 11 of the 2010 Second Quarter Credit Supplement (ht jb)

This graph shows the rapid increase in REO.

From Fannie Mae 10-Q (page 9):

During the second quarter of 2010, we acquired approximately 69,000 foreclosed single-family properties, up from approximately 62,000 during the first quarter of 2010, and we disposed of approximately 50,000 single-family properties. The carrying value of the single-family REO we held as of June 30, 2010 was $13.0 billion, and we expect our REO inventory to continue to increase significantly throughout 2010.

Freddie Mac and the FHA together have about the same number of REOs as Fannie Mae. When that data is released, I'll put up a chart of all three.

Also this does not include REO held by other lenders and private-label RMBS.

by Calculated Risk on 8/05/2010 05:11:00 PM

My view is that the real GDP growth rate will slow in the 2nd half, and I've posted a list of the reasons over the last few months:

1) less Federal stimulus spending in the 2nd half of 2010,
2) the end of the inventory correction,
3) more household saving leading to slower growth in personal consumption expenditures,
4) another downturn in housing (lower prices, less residential investment),
5) slowdown in China and Europe and
6) cutbacks at the state and local level.

Note: The first half real GDP growth rate was reported as just over 3% annualized (before revisions).

There have been some updates:

The qualification dates for the various tiers of Federal unemployment benefits have been extended through Nov. 30. This was also made retroactive to June 2nd.

The Senate approved a $26 billion aid to the states package today. This will be approved by the house and signed into law shortly. This bill will reduce the cutbacks at the state and local level - although more cutbacks are still coming.

The personal saving rate was revised up sharply in the annual revision to the GDP report. In June, the personal saving rate was reported at 6.4%. My view has been that the saving rate would rise to around 8% or so as households slowly repaired their balance sheets (there is nothing magical about 8%). During a period with a rising saving rate, household consumption grows slower than income - and that acts as a drag on consumption. Although I expect the saving rate to rise further, most of the drag from a rising saving rate appears to be behind us.

Although I thought the inventory correction was mostly over at the end of Q1, it appeared that inventory adjustment contributed 1.05 percentage points to Q2 GDP growth (annualized real rate). The Manufacturers’ Shipments, Inventories, and Orders report for June suggests this initial estimate was too high. As Phil Izzo at the WSJ noted earlier this week, this means a downward revision to Q2 GDP of about 0.5% (there will be other data released that might lead to revisions up or down). I still expect little contribution from inventory adjustments - and maybe even a drag - in the 2nd half of 2010.

Overall I still expect growth to slow in the 2nd half of 2010, but this lessens some of the expected drag or pushes it out to Q4 or 2011.