by Calculated Risk on 10/07/2010 01:33:00 PM

From Dallas Fed President Richard Fisher: To Ease or Not to Ease? What Next for the Fed?

I am afraid that despite recent speculation in the press and among market pundits, we did little at that meeting to settle the debate as to whether the Committee might actually engage in further monetary accommodation, or what has become known in the parlance of Wall Street as “QE2,” a second round of quantitative easing. It would be marked by an expansion of our balance sheet beyond its current footings of $2.3 trillion through the purchase of additional Treasuries or other securities. To be sure, some in the marketplace―including those with the most to gain financially―read the tea leaves of the statement as indicating a bias toward further asset purchases, executed either in small increments or in a “shock-and-awe” format entailing large buy-ins, leaving open only the question of when.

Since the FOMC meeting, a handful of my colleagues have fanned further speculation about QE2 by signaling their personal positions on the matter quite openly in recent speeches and interviews in the major newspapers. Hence the headline in yesterday’s Wall Street Journal, “Central Banks Open Spigot,” a declaration that surely gave the ghosts of central bankers past the shivers and sent a tingle down the spine of gold bugs from Bemidji to Beijing.
...
There is a great deal of legitimate debate still to take place within the FOMC on the subject of quantitative easing and the pros and cons and costs and benefits of further monetary accommodation. Whatever we might do, if anything, must be consistent with long-term price stability and not add to the nightmare of confusing signals already being sent to job creators.

What will we likely decide at the next FOMC meeting? ... “You’ll find out soon enough.”

Fisher suggests the debate on QE2 isn't over (he opposes QE2). However he is not a voting member of the FOMC this year (an alternate). He is always fun to read - but barring some upside surprise, I think QE2 will be announced on November 3rd.

by Calculated Risk on 10/07/2010 08:41:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Oct. 2, the advance figure for seasonally adjusted initial claims was 445,000, a decrease of 11,000 from the previous week's revised figure of 456,000. The 4-week moving average was 455,750, a decrease of 3,000 from the previous week's revised average of 458,750.

Click on graph for larger image in new window.

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

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 3,000 to 455,750.

The 4-week moving average has been moving sideways at an elevated level since last December - and that suggests a weak job market.

by Calculated Risk on 10/07/2010 02:13:00 AM

Click on graph for larger image in new window.

From Reuters: U.S. mall vacancy rate dips for first time in 3 years

The national vacancy rate for large regional malls fell to 8.8 percent in the third quarter from 9.0 percent in the second ... Asking rents were unchanged at $38.72 per square foot after declining for seven straight quarters ... At the strip malls ... vacancy was 10.9 percent.

"While retail properties were offered a reprieve from massive deterioration, it is too early to say that the market has bottomed," said Victor Calanog, Reis director of research.

Many retailers have long-term leases that expire soon. The weak U.S. economy may prompt retail tenants not to renew, pushing up vacancy again, he said.

At regional malls, the record vacancy rate was 9.0% in Q2 2010 (Reis started tracking regional malls in 2000). The record vacancy rate for strip malls was in 1990 at 11.1%.

by Calculated Risk on 10/06/2010 06:59:00 PM

From MarketWatch: Roubini: 40% chance of double-dip recession

There is a 40% probability of a double-dip recession, but you don't need one for the global economy to feel like it is in a deep, continuing recession, said Nouriel Roubini ... "You don't need another Lehman story, you don't need a major loss," said Roubini at an American Enterprise Institute event. "You can have death by a thousand cuts."

I'm not sure how you assign precise odds (yesterday Goldman Sachs put the odds at about 25% to 30%), but I think the most likely outcome is sluggish growth. And that means the economy will remain susceptible to shocks.

And, as Roubini noted, it doesn't matter if the economy is technically in a recession - it will feel like a recession to millions of Americans as long as jobs are scarce and incomes are under pressure.

by Calculated Risk on 10/06/2010 03:30:00 PM

Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year and a forecast for 2010.

Click on graph for larger image in new window.

This really shows the collapse in retail hiring in 2008 and the weak recovery in 2009. This also shows how the season has changed over time - back in the '80s, retailers hired mostly in December. Now the peak month is November, and many retailers start hiring seasonal workers in October.

From Stephanie Clifford and Catherine Rampell at the NY Times: Dim Outlook for Holiday Jobs

As the economy sputters, prospects are dimming for unemployed workers who were banking on a seasonal retail job to carry them through the holidays. ...

The recruiting firm Challenger, Gray & Christmas, forecasts that retailers will add up to 600,000 jobs in October, November and December, compared with a net gain of 501,400 holiday jobs over the same three months in 2009.
...
Challenger Gray expects that companies may wait to hire until November or December — once they have a feel for how much consumers are willing to spend.

Last year - looking at the graph - retailers held back on hiring in October and waited until November (as Challenger Gray expects to happen again this year). The increase to 600,000 is significant, but still below the levels of 1992 through 2007 - except for the recession year of 2001.

This hiring will be watched closely, and I suspect seasonal hiring will be stronger than in 2009, but well below the 700+ thousand jobs in 2004 through 2007.

Note: Clifford and Rampell also note that the supply chain for retailers is long - and many retailers placed orders earlier this year when the outlook seemed brighter to some (not to those paying attention!).

While retailers are just now making plans for Christmas hiring, they had to make plans for Christmas merchandise months ago, and that lag might create some inventory problems.

Last year the retailers ran lean on inventory, but if this year is slow, there will be plenty of discounting.