by Calculated Risk on 12/23/2010 10:00:00 AM

The Census Bureau reports New Home Sales in November were at a seasonally adjusted annual rate (SAAR) of 290 thousand. This is up from a revised 275 thousand in October.

Click on graph for larger image in new window.

The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted or annualized).

Note the Red columns for 2010. In November 2010, 21 thousand new homes were sold (NSA). This is a new record low for November.

The previous record low for the month of November was 26 thousand in 1966 and 2009; the record high was 86 thousand in November 2005.

The second graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Sales of new single-family houses in November 2010 were at a seasonally adjusted annual rate of 290,000 ... This is 5.5 percent (±16.2%)* above the revised October rate of 275,000, but is 21.2 percent (±13.3%) below the November 2009 estimate of 368,000

And another long term graph - this one for New Home Months of Supply.

Months of supply decreased to 8.2 in November from 8.8 in October. The all time record was 12.4 months of supply in January 2009. This is still high (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of November was 197,000. This represents a supply of 8.2 months at the current sales rate.

The final graph shows new home inventory.

The 290 thousand annual sales rate for November is just above the all time record low in August (274 thousand). This was the weakest November on record and below the consensus forecast of 300 thousand.

This was another very weak report.

by Calculated Risk on 12/23/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Dec. 18, the advance figure for seasonally adjusted initial claims was 420,000, a decrease of 3,000 from the previous week's revised figure of 423,000. The 4-week moving average was 426,000, an increase of 2,500 from the previous week's revised average of 423,500.

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 increased this week by 3,000 to 426,000.

In general the four-week moving average has been declining ... and that is good news.

by Calculated Risk on 12/22/2010 10:33:00 PM

Two stories on Prichard, Ala ...

From the NY Times: Alabama Town’s Failed Pension Is a Warning

Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.

And from the WSJ: Chapter 9 Weighed in Pension Woes

Prichard proposed capping benefits to current retirees at about $200 a month, down from monthly payments of as much as $3,000. "That's not a hair cut, that's a scalping," said Larry Voit, who represented a group of 40 retired city workers in Prichard, population 27,500.

Prichard's pension was in far worse shape than most public plans, but the outcome in Prichard could serve as a guide for other plans ...

Earlier:
• November Existing Home Sales: 4.68 million SAAR, 9.5 months of supply
• Existing Home Inventory increases 5.4% Year-over-Year

by Calculated Risk on 12/22/2010 06:58:00 PM

Paula Span writes an excellent piece about older workers in the NY Times: Toil and Trouble

“There are some pretty striking changes going on,” said John Rother, AARP executive vice president for policy.

I’ll say. Sifting through the data from the Bureau of Labor Statistics, AARP analysts found that the number of workers ages 75 and older (meaning they’re employed or seeking employment) has grown to about 1.3 million in 2009, from just under half a million in 1989. That’s still a small sliver of the population over age 75, just 7.3 percent, but a big jump from the 1989 labor force participation rate of 4.3 percent.

Paula Span notes that this trend has been going on for some time, and can't just be blamed on necessity.

Click on graph for larger image in graph gallery.

This graph is from my posts on Labor Force Participation Rate: What will happen? and Labor Force Participation Trends, Over 55 Age Groups

The graph shows the participation rate for several over 55 age groups. The red line is the '55 and over' total seasonally adjusted. All of the other age groups are Not Seasonally Adjusted (NSA).

The participation rate is trending up for all older age groups.

Unfortunately Span concluded:

So to that Wisconsin reader who grumped, “Too many older people (professors, Morley Safer, etc.) continue to work for selfish reasons, thereby taking jobs from the young and unemployed” — I’m afraid you ain’t seen nothin’ yet.

That is a classic lump of labor fallacy. This is a common error people make with immigration - that immigrants displace other workers, when in fact immigration increases the size of the economy. I suspect we will see more and more of this age related "lump of labor" fallacy. The number of jobs in the economy is not fixed, and people staying in the work force just means the economy will be larger.

by Calculated Risk on 12/22/2010 04:20:00 PM

Over the weekend I posted some questions for next year: Ten Economic Questions for 2011. I'll try to add some predictions, or at least some thoughts for each question - working backwards - before the end of year.

Remember, I have no crystal ball and I'm sure many people will disagree, especially about inflation. There are some people who have been predicting an imminent sharp rise in inflation for almost 2 years (it is always just around the corner). And many people argue that the standard inflation measures don't capture what they are actually seeing. I understand - each household has their own inflation measure, but we need to use some sort of aggregate measure.

Here was the question ...

9) Inflation: With all the slack in the system, will the U.S. inflation rate stay below target? Will there be any spillover from rising inflation rates in China and elsewhere?

First lets look at the current situation. Over the last 12 months, several key measures of inflation have shown small increases: CPI (Consumer Price Index) rose 1.1%, the median CPI increased 0.5%, the trimmed-mean CPI increased 0.8%, core CPI (less food and energy) increased 0.8%, and core PCE prices increased 1.2% (Q3 2009 to Q3 2010).

Click on graph for larger image in graph gallery.

This graph shows core CPI, median CPI and trimmed-mean CPI on a year-over-year basis.

They all show that inflation has been falling, and that measured inflation is up less than 1% year-over-year.

This makes sense because of the slack in the system (unemployment rate, capacity utilization, residential vacancy rates and more). Also inflation expectation measures are not indicating a significant increase in inflation.

It does appear that residential vacancy rates are now falling (from high levels), and rents appear to have bottomed, but it doesn't appear that rents will be rising rapidly any time soon.

For more on inflation, and a discussion of inflation measures, see Dr. Dave Altig's post today: An inflation (or lack thereof) chart show. Altig concludes:

I believe this is basically the bottom line: whether we look at headline inflation (straight-up, component-by-component, or in terms of the long-run trend), core inflation measures (of virtually any sensible variety), or inflation expectations (survey or market based), there is little a hint of building inflationary pressure.

I agree with Dr. Altig. My view is:
• I think the inflation rate (by these measures) will stay below the Fed's 2% target throughout 2011 (I'll guess close to 1%).
• I think rising prices in China, and rising commodity prices (like oil at $90 per barrel), will cause little spillover into U.S. inflation in 2011.

Ten Questions:
• Question #1 for 2011: House Prices
• Question #2 for 2011: Residential Investment
• Question #3 for 2011: Delinquencies and Distressed house sales
• Question #4 for 2011: U.S. Economic Growth
• Question #5 for 2011: Employment
• Question #6 for 2011: Unemployment Rate
• Question #7 for 2011: State and Local Governments
• Question #8 for 2011: Europe and the Euro
• Question #9 for 2011: Inflation
• Question #10 for 2011: Monetary Policy