by Calculated Risk on 5/10/2011 07:30:00 AM

From National Federation of Independent Business (NFIB): Small-Business Optimism Index Dips for Second Consecutive Month in April

The Small Business Optimism Index fell 0.7 points in April to 91.2, not much but still a disappointing outcome following the March decline. After last month’s larger decline, this month is more akin to an “after shock”.
Thankfully, the labor market components did not decline further, although
net job creation weakened. Also, fewer reported adverse profit trends and
reports of positive sales trends were still less frequent than reports of
quarterly declines, but the best reading since December 2007, the peak of
the last expansion.
...
Twenty-five (25) percent of the owners reported that weak sales continued to be their top business problem

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.

Click on graph for larger image in graph gallery.

The first graph shows the small business optimism index since 1986. The index decreased to 91.2 in April from 91.9 in March.

This has been trending up, although optimism has declined for two consecutive months now.

This graph shows the net hiring plans for the next three months.

Hiring plans were unchanged in April. According to NFIB: “The outlook for future employment growth remains unchanged from March: Only 16 percent plan to increase employment, and 6 percent plan to reduce their workforce, yielding a seasonally adjusted net 2 percent of owners planning to create new jobs in the next three months."

Weak sales is still the top business problem with 25 percent of the owners reporting that weak sales continued to be their top business problem in April. In good times, owners usually report taxes and regulation as their biggest problems.

The recovery continues to be sluggish for this index, probably partially because of the high concentration of real estate related companies. Most of the decline was due to "soft" components, especially future expectations.

by Calculated Risk on 5/09/2011 08:22:00 PM

• From MarketWatch: CME hikes oil, gasoline margin requirements (ht jb)

The requirement for a new position in benchmark New York Mercantile Exchange crude contracts rises to $8,438 from $6,750 previously, with margins also higher for contracts in benchmark Brent crude, gasoline and other products.

• From the FDIC: FDIC Announces Chairman Bair's Official Departure Date

The Federal Deposit Insurance Corporation (FDIC) today announced Chairman Sheila C. Bair's official departure will be effective July 8th, 2011.

• From the WSJ: Greek Woes Fuel Fresh Fears
• From the NY Times: Greece Pushes Plan to Raise Cash With Big Sales

No islands or beaches are up for sale, despite the persistent, usually snide suggestions from abroad that have riled many Greeks.

Earlier:
• New York Fed's Q1 Report on Household Debt and Credit "Shows Signs of Healing in Consumer Credit Markets Since Last Quarter"
• AAR: Rail Traffic "mixed" in April
• Zillow on Negative Equity: 28.4% of all single-family homes with mortgages are "underwater"

by Calculated Risk on 5/09/2011 06:02:00 PM

By request, here is an update to a graph I posted over a year ago on construction employment. Last year the outlook for construction employment was grim. This year will be a little better - but not much.

Click on graph for larger image in graph gallery.

This graph shows the number of construction payroll jobs (blue line), and the number of construction jobs as a percent of total non-farm payroll jobs (red line).

Construction employment is down 2.2 million jobs from the peak in April 2006, but up 26 thousand jobs so far this year.

Unfortunately this graph is a combination of both residential and non-residential construction employment. The BLS only started breaking out residential construction employment fairly recently (residential building employees in 1985, and residential specialty trade contractors in 2001). Usually residential investment (and residential construction) lead the economy out of recession, and non-residential construction usually lags the economy. Because this graph is a blend, it masks the usually pickup in residential construction for previous recessions. Of course residential investment didn't lead the economy this time because of the huge overhang of existing housing units.

This table below shows the annual change in construction jobs (total, residential and non-residential).

	Annual Change in Payroll jobs (000s)
Year	Total Construction Jobs	Residential Construction Jobs	Non-Residential
2002	-85	88	-173
2003	127	161	-34
2004	290	230	60
2005	416	268	148
2006	152	-62	214
2007	-198	-273	75
2008	-787	-510	-277
2009	-1053	-431	-622
2010	-149	-113	-36
Through April 2011	26	7	19

In 2011, for the first time since 2005, I expect residential construction employment to increase - mostly because of multi-family construction. I also expect residential investment to make a small positive contribution to GDP growth this year - also for the first time since 2005.

by Calculated Risk on 5/09/2011 02:25:00 PM

The Association of American Railroads (AAR) reports carload traffic in April 2011 decreased 0.2 percent compared with the same month last year, and intermodal traffic (using intermodal or shipping containers) increased 9 percent compared with April 2010.

“April’s carload decline is the first year-over-year monthly decline since February 2010,” said AAR Senior Vice President John Gray. “April 2010 was a relatively strong month and therefore a difficult comparison, and coal traffic was down for the first time since July 2010. April’s carload decline was offset by continued intermodal growth. Rail traffic deserves a close watch over the next several months because it’s a useful gauge of the strength of the economy.”

Click on graph for larger image in graph gallery.

This graph shows U.S. average weekly rail carloads (NSA).

From AAR:

On a seasonally adjusted basis, total U.S. rail carloads fell 2.5% in April 2011 from March 2011, continuing the up-down-up-down trend of the past couple of years. As the chart shows, since the recession ended in mid-2009, the trend for seasonally adjusted U.S. carload traffic has clearly been upward, but over the past six months it’s been flat and over the past four months it’s actually been down a bit. Time will tell if the upward trend reappears.

As the first graph shows, rail carload traffic collapsed in November 2008, and now, almost 2 years into the recovery, carload traffic has only recovered about half way.

The second graph is for intermodal traffic (using intermodal or shipping containers):

The news is much better on the intermodal side. In April 2011, U.S. railroads originated 914,518 intermodal trailers and containers, up 9.0% (75,706 units) over April 2010 and up 24.6% (180,417 units) over April 2009. April 2011’s weekly average was 228,630 units, up from 209,703 in April 2010 and the second highest average for any April in history (behind only April 2006).

Seasonally adjusted U.S. rail intermodal traffic was up 1.2% in April 2011 from March 2011, the fifth straight monthly increase.
excerpts with permission

Intermodal traffic is close to old highs, but carload traffic is only about half way back to pre-recession levels.

by Calculated Risk on 5/09/2011 12:35:00 PM

Note: The most recent Negative Equity report from CoreLogic showed 11.1 million, or 23.1 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2010. With falling house prices, CoreLogic will probably show more homeowners have negative equity in Q1.

From Zillow: Negative equity reached a new high with 28.4 percent of all single-family homes with mortgages underwater

Negative equity reached a new high mark with 28.4 percent of single-family homeowners with mortgages underwater at the end of the first quarter, up from 27 percent in the fourth quarter of 2010. A homeowner is in negative equity when they owe more on their mortgage than their home is worth.
...
With substantial home value declines, as well as increasing negative equity and foreclosures, Zillow forecasts show it is unlikely that home values will reach a bottom in 2011. First quarter data has prompted Zillow to revise its forecast, now predicting a bottom in 2012, at the earliest.

The following table from Zillow shows negative equity percentages for the 25 largests MSAs. In a number of MSAs, more than half of single-family homes with mortgages have negative equity: Phoneix, Tampa, Atlanta, Riverside (CA), and Sacramento. Chicago, Minneapolis and Miami are all close. Las Vegas isn't included on this list, but according to CoreLogic, Nevada has the highest percentage of homes with negative equity.

Largest 25 Metropolitan Statistical Areas Covered by Zillow	Zillow Home Value Index
	Q1 2011	QoQ Change	YoY Change	Change From Peak	Negative Equity*
United States	$169,600	-3.0%	-8.2%	-29.5%	28.4%
New York, N.Y.	$346,600	-1.6%	-5.3%	-24.2%	17.1%
Los Angeles, Calif.	$386,400	-3.0%	-7.6%	-36.1%	21.0%
Chicago, Ill.	$167,900	-4.8%	-13.8%	-38.1%	45.7%
Dallas, Tex.	$125,400	-1.2%	-6.9%	-13.2%	n/a
Philadelphia, Pa.	$187,600	-3.2%	-10.3%	-20.5%	22.1%
Miami-Fort Lauderdale, Fla.	$137,300	-1.8%	-12.8%	-55.4%	47.7%
Washington, D.C.	$305,900	-1.5%	-7.0%	-30.3%	29.5%
Atlanta, Ga.	$121,100	-4.4%	-17.3%	-33.7%	55.7%
Detroit, Mich.	$70,600	-5.2%	-17.3%	-55.5%	36.3%
Boston, Mass.	$305,800	-2.6%	-5.3%	-23.2%	16.9%
San Francisco, Calif.	$467,000	-3.8%	-10.2%	-33.9%	25.7%
Phoenix, Ariz.	$126,100	-2.3%	-11.2%	-55.3%	68.4%
Riverside, Calif.	$185,800	-1.8%	-3.2%	-53.8%	50.7%
Seattle, Wash.	$259,200	-1.7%	-11.7%	-32.1%	34.4%
Minneapolis-St. Paul, Minn.	$159,000	-4.8%	-15.1%	-35.6%	46.2%
San Diego, Calif.	$347,500	-2.1%	-5.5%	-35.3%	26.0%
St. Louis, Mo.	$127,900	-4.0%	-9.6%	-18.7%	31.2%
Tampa, Fla.	$107,200	-3.8%	-10.9%	-50.6%	59.8%
Baltimore, Md.	$218,300	-2.5%	-9.8%	-27.5%	29.6%
Denver, Colo.	$192,300	-2.7%	-9.6%	-17.2%	41.0%
Pittsburgh, Pa.	$105,800	-0.2%	-0.1%	-5.1%	6.8%
Portland, Ore.	$203,300	-3.0%	-12.1%	-30.6%	35.9%
Cleveland, Ohio	$108,500	-3.9%	-9.1%	-24.7%	41.4%
Sacramento, Calif.	$207,400	-4.2%	-11.0%	-50.1%	51.2%
Orlando, Fla.	$115,700	-2.9%	-7.8%	-55.2%	n/a
*Negative equity refers to the % of single-family homes with mortgages.