RSS Feed by Calculated Risk on 8/06/2010 07:05:00 PM
Friday, August 06, 2010
Bank Failure #109: Ravenswood Bank, Chicago, Illinois
Earlier employment posts today (with many graphs):
Quoth the Raven, nevermore!
One can only hope.
by Soylent Green is People
From the FDIC: Northbrook Bank and Trust Company, Northbrook, Illinois, Assumes All of the Deposits of Ravenswood Bank, Chicago, Illinois
As of June 30, 2010, Ravenswood Bank had approximately $264.6 million in total assets and $269.5 million in total deposits.
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $68.1 million. ... Ravenswood Bank is the 109th FDIC-insured institution to fail in the nation this year, and the thirteenth in Illinois. The last FDIC-insured institution closed in the state was Arcola Homestead Savings Bank, Arcola, on June 4, 2010.
Employment Report: Temporary Help and Diffusion Index
by Calculated Risk on 8/06/2010 04:09:00 PM
This post is a little more technical ...
Earlier employment posts today (with many graphs):
Temporary Help
From the BLS report:
The number of jobs in temporary help services showed little movement (-6,000) over the month.The following graph was used early this year as the basis for several optimistic employment forecasts (I disagreed).
Click on graph for larger image in new window.This graph is a little complicated. The red line is the three month average change in temporary help services (left axis). This is shifted four months into the future.
The blue line (right axis) is the three month average change in total employment (excluding temporary help services).
Unfortunately the data on temporary help services only goes back to 1990, but it does appear that temporary help leads employment by about four months.
The thinking was that before companies hire permanent employees following a recession, employers first increase the hours worked of current employees and also hire temporary employees. After the number of temporary workers increased sharply late last year, some people thought this might be signaling the beginning of a strong employment recovery.
I was skeptical and joked that "We're all temporary now!" As this graph shows, the hoped for surge in overall hiring didn't happen. There are a number of reasons why employment growth is sluggish following the credit bust - mostly related to excess capacity in many sectors, and the excess supply of houses (usually new residential investment is one of the key sectors for employment at the beginning of a recovery).
This will be my last post with this graph.
Note: the temporary hiring for the Census is excluded from this graph.
Diffusion Index
The BLS diffusion index for total private employment was steady at 55.6 in July. For manufacturing, the diffusion index is at 50.0; down from 53.0 in June, and down sharply from 65.9 in May.Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS. From the BLS:
Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.The increase in the diffusion index earlier this year was one of the clear positives in the monthly employment reports. The decrease in the diffusion index over the last few months (falling to 50% for manufacturing in July), is disappointing.
Consumer Credit Declines in June
by Calculated Risk on 8/06/2010 03:05:00 PM
The Federal Reserve reports:
Consumer credit decreased at an annual rate of 3-1/4 percent in the second quarter. Revolving credit decreased at an annual rate of 9-1/2 percent, and nonrevolving credit was about unchanged. In June, consumer credit decreased at an annual rate of 3/4 percent, revolving credit decreased at an annual rate of 6-1/2 percent, and nonrevolving credit increased at an annual rate of 2-1/2 percent..
Click on graph for larger image in new window.This graph shows the increase in consumer credit since 1978. The amounts are nominal (not inflation adjusted).
Revolving credit (credit card debt) is off 15.3% from the peak. Non-revolving debt (auto, furniture, and other loans) is off 1.0% from the peak. Note: Consumer credit does not include real estate debt.
FHA Refinance of Borrowers in Negative Equity Positions
by Calculated Risk on 8/06/2010 01:23:00 PM
This is the introduction of the program originally announced back in March.
From the FHA: FHA Launches Short Refi Opportunity for Underwater Homeowners
In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today provided details on the adjustment to its refinance program which was announced earlier this year that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth. Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain 'underwater' non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.The FHA insured first is less than current appraised value, and the FHA is not involved in any principal reduction (that is the responsibility of the lender).
The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth - or 'underwater' - because their local markets saw large declines in home values.
...
Today, FHA published a mortgagee letter to provide guidance to lenders on how to implement this new enhancement. Participation in FHA's refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500. The property must be the homeowner's primary residence. And the borrower's existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower's combined loan-to-value ratio to no greater than 115%.
In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent.
Note: this has nothing to do with that nonsense rumor yesterday about a government principal reduction program. This was previously announced in March.
Employment Report: Why the different payroll numbers?
by Calculated Risk on 8/06/2010 12:00:00 PM
Technical Update: A few readers have asked if I'm mixing SA and NSA data. Usually that is not appropriate, but I checked with the BLS, and in this special situation it is correct. I even submitted it as a question when the BLS had their first live chat back in March:
9:34 Michele Walker (BLS-CES) -___________________________________________________
Submitted via email from Bill: Hi. The headline payroll number is seasonally adjusted, and the hiring for the 2010 Census is NSA. How would you suggest adjusting for the 2010 Census hiring to determine the underlying trend (not counting the snow storms!)?
Thanks for your question Bill.
There is an adjustment made for the 2010 Census. Before seasonally adjusting the estimates, BLS makes a special modification so that the Census workers do not influence the calculation of the seasonal factors. Specifically, BLS subtracts the Census workers from the not-seasonally adjusted estimates before running seasonal adjustment using X-12. After the estimates have been seasonally adjusted, BLS adds the Census workers to the seasonally adjusted totals. Therefore, to determine the underlying trend of the total nonfarm (TNF) employment estimates (minus the Census workers), simply subtract the Census employment from the seasonally adjusted TNF estimate.
Original Post:
Once again there is some confusion about which payroll number to report.
Basically the media is confusing people. I explained this last month: Employment Report: Which payroll number to use?
The headline payroll number for July was minus 131,000.
The number of temporary decennial Census jobs lost was 143,000.
To be consistent with previous employment reports (and remove the decennial Census), the headline number should be reported as 12,000 ex-Census. That is consistent with non-Census reports.
Instead most media reports have been using the private hiring number of 71,000 apparently because of the complicated math (subtracting -143,000 from -131,000). Private hiring is important too, but leaves out changes in government payroll and is not consistent.
I've posted all the numbers, but I've led with the headline number ex-Census - and that is especially important now since state and local governments are under pressure.
Note: early this year I announced my intention to lead with the headline number ex-Census during the period of significant decennial Census employment changes. I thought everyone would lead it this way ... oh well ... at least the decennial Census will be over soon.
Earlier employment posts today:
