by Calculated Risk on 8/14/2010 10:54:00 PM

Since I didn't post an inflation graph when CPI was released, here is one for a Saturday night:

Click on graph for larger image in new window.

This graph shows three measure of inflation, Core CPI, Median CPI (from the Cleveland Fed), and 16% trimmed CPI (also from Cleveland Fed).

They all show that inflation has been falling, and that measured inflation is up less than 1% year-over-year. Core CPI, median CPI, and the 16% trimmed mean CPI were all up 0.1% in July.

Note: The Cleveland Fed has a discussion of a number of measures of inflation: Measuring Inflation

by Calculated Risk on 8/14/2010 05:21:00 PM

This morning, in the "Negative News Flow" post, I noted that the unemployment rate will probably start ticking up again soon.

Here are a few reasons why I think the unemployment rate will increase (some overlap):

1) The main reason is the general slowing economy. There is a general relationship between GDP and the unemployment rate (see Okun's Law), and since I expect a 2nd half slowdown (from a sluggish 1st half), I also expect few payroll jobs to be added in the 2nd half - and that suggests the unemployment rate will rise.

2) With the end of the housing tax credit, I expect residential construction employment to decline further over the next few months.

3) The 4-week average for initial weekly unemployment claims has increased recently. This is the highest level since February.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since January 2000.

The four-week average of weekly unemployment claims increased this week by 14,250 to 473,500.

The dashed line on the graph is the current 4-week average. This is the highest level since February and suggests weakness in the labor market.

4) Few teens joined the labor force this summer. Perversely this low level of teen participation appeared to push down the seasonally adjusted unemployment rate. If this did impact the unemployment rate (it isn't clear), the impact will be unwound over the next couple of months.

5) The Labor Force Participation Rate decreased from 65.0% in May to 64.6% in July. This was a key reason the unemployment rate decline to 9.5% in June from 9.7% in May.

Some of this decline in the participation rate might be related to the expiration of the Federal unemployment benefits - some people whose benefits expired, and were unable to move on to the next tier, might have just given up. Note: this isn't an argument against unemployment benefits!

Just over a week ago the qualification dates for the various tiers of Federal unemployment benefits have been extended through November 30th. This extension was also made retroactive to June 2nd. Some people who have given up might rejoin the labor force to collect additional benefits. If this happens, the participation rate might increase in August - and that will probably push up the unemployment rate.

by Calculated Risk on 8/14/2010 01:25:00 PM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for August 13, 2010.

Changes and comments from surferdude808:

The Unofficial Problem Bank List finishes the week at 813 institutions with aggregate assets of $417.8 billion.

The sole removal is the failed Palos Bank and Trust Company ($496 million).

There are four additions this week -- The Brand Banking Company, Lawrenceville, GA ($1.2 billion); Broadway Federal Bank, f.s.b, Los Angeles, CA ($530 million Ticker: BYFC); Liberty Savings Bank, FSB, Whiting, IN ($82 million); and Home Savings Bank, Jefferson, MO ($31 million).

The other change to report is a Prompt Corrective Action Order issued by the Federal Reserve against Paramount Bank ($283 million).

We anticipate the OCC will release its enforcement actions for July 2010 next Friday.

Note: The FDIC Q2 2010 Quarterly Banking Profile will be released the week of August 22nd.

by Calculated Risk on 8/14/2010 08:55:00 AM

Although not unexpected, the news flow is about to take a more negative tone starting with the existing home sales report on August 23rd. We've been discussing this for some time ... and I'd like to highlight just a few pieces of forthcoming data:

The existing home sales report will show that sales collapsed in July (this is showing up in all the regional reports).

The existing home months-of-supply will jump to double digits.

House prices are probably falling again, although this might not show up in the repeat sales indexes until September or October (this data is released with a lag).

On August 27th, the second estimate of Q2 GDP will be released. This will probably show a significant downward revision from the preliminary estimate of 2.4% annualized growth. The downward revision is due to lower construction spending than the BEA initially estimated, less contribution from inventory adjustments, and the June surge in exports.

The unemployment rate will probably start ticking up again soon (or the participation rate will fall further).

Just something to be aware of ...

by Calculated Risk on 8/13/2010 09:53:00 PM

This is a followup to my earlier post today on LA port traffic in July ...

From Ronald White at the LA Times: Ports wary of stunted holiday rush

The bad news for the ports of Los Angeles and Long Beach — part of a supply-chain infrastructure that employs dockworkers, truck drivers, railroad employees, warehouse and distribution center staffs and logistics experts — the big bump in holiday-season cargo jobs may not come this year.

Consumers remain very cautious about the safety of their own jobs, and retailers are paying attention to those signals, experts said.

"Retailers are monitoring demand very closely and hoping to see increases in employment and other areas that will boost consumer confidence," said Jonathan Gold, vice president for supply chain and customs policy for the National Retail Federation.

This is something to watch over the next few months. Exports have already slowed, and it is possible that import growth will slow too.