by Calculated Risk on 7/04/2011 08:28:00 PM

Weekend:
• Summary for Week Ending July 1st
• Unofficial Problem Bank list at 1,003 Institutions and State Stress Level
• Schedule for Week of July 3rd

The key report for this week will be the June employment situation report to be released on Friday.

The following table summarizes some of the grim labor statistics and compares the current situation (May 2011) with the employment situation when the recession started (December 2007).

Since December 2007, the U.S. working age civilian population has increased by 6.157 million people - however the number of people saying the are in the labor force has actually declined.

Total nonfarm payrolls are still 6.94 million below the December 2007 level, and private payrolls are 6.69 million lower.

Some of the decline in the labor force participation is due to an aging population, but these numbers suggest the U.S. needs 6.94 million jobs, plus some percent of the increase in the labor force, to get back to the 2007 employment situation.

On unemployment, perhaps the most staggering number is the 6.2 million workers who have been unemployed for 27 weeks or more.

Recoveries following a housing/credit bubble and financial crisis are usually sluggish - so these numbers are not a surprise - but this is a reminder that the top priorities for policymakers remains jobs, jobs and jobs.

Employment Statistics (Thousands or Percent)1
	May-11	Dec-07	Change
Civilian noninstitutional population (16 and over)	239,313	233,156	6,157
Civilian labor force	153,693	153,936	-243
Total nonfarm Payroll	131,043	137,983	-6,940
Private Payroll	108,916	115,606	-6,690
Unemployment Rate	9.1%	5.0%	4.1%
Unemployed	13,914	7,664	6,250
Part-Time for Economic Reasons	8,548	4,638	3,910
Marginally Attached to Labor Force2	2,206	1,395	811
Discouraged Workers2	822	363	459
U-6 Unemployment rate3	15.8%	8.8%	7.0%
Unemployed for 27 Weeks & over	6,200	1,327	4,873

¹ The payroll numbers are from the Current Employment Statistics (establishment survey), and the remaining numbers are from the Current Population Survey (household survey).
² BLS: "Discouraged workers are a subset of persons marginally attached to the labor force. The marginally attached are those persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months, but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, discouraged workers were not currently looking for work specifically because they believed no jobs were available for them or there were none for which they would qualify."
³ BLS: "Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers"

by Calculated Risk on 7/04/2011 03:43:00 PM

Happy 4th of July!

Just thinking out loud (and enjoying the day) ...

All year I've been forecasting an increase in multi-family starts - and that is already happening.  Multi-family starts are on a 156,000 annual pace over the first 5 months of 2011 compared to 115,700 starts for all of 2010.  Historical this is a low level, but this is a nice increase over last year.

Now I'm starting to wonder if we will see a little increase in new home sales and single family housing starts in the 2nd half of 2011 on a seasonally adjusted (SA) basis.

On a Not Seasonally Adjusted (NSA) basis, home sales and starts will probably decline in the 2nd half of 2011 (compared to the first half), but there is a strong seasonal pattern for new home sales and single family starts. The "strong" season for new home sales usually runs from March through July, and for starts from April through September or October.

We already know there was a weak homebuying season and the homebuilders are depressed. But I suspect sales (and starts) will not decline as much as usual in the 2nd half of 2011, and that would mean an increase in sales on a seasonally adjusted basis.

I'm not looking for a strong increase in sales - and we sure don't want the homebuilders starting a bunch of speculative homes - but we might see a little pickup seasonally adjusted. In 2nd half of 2010, new home sales were at a record low 140 thousand homes (Q3 and Q4), and I suspect this year will be stronger. Just a gut feeling at this point ... I'll try to add some supporting data over the next few weeks.

Weekend:
• Summary for Week Ending July 1st
• Unofficial Problem Bank list at 1,003 Institutions and State Stress Level
• Schedule for Week of July 3rd

by Calculated Risk on 7/04/2011 08:47:00 AM

From the WSJ: S&P: Greece Debt Plan Is a Default

Standard & Poor's Corp. said Monday that a leading proposal for easing repayment terms on Greece's sovereign debt would amount to a default under the ratings firm's criteria ... The European Central Bank has maintained that it won't accept bonds with a default rating as collateral. Hence, averting a selective default rating is crucial to ensure that banks holding Greek bonds aren't shut out from the ECB's liquidity operations for the few days that the country's bonds would be rated selective default.
...
A spokesman for the European Commission said euro-zone governments designing a second bailout for Greece intend to avoid a selective default and expect to have "clarity" on the outlines of the package by the July 11 meeting of finance ministers.

From Bloomberg: EU Rescue Effort May Prompt S&P Default Rating on Greece

“It is our view that each of the two financing options described in the Federation Bancaire Francaise proposal would likely amount to a default,” S&P said in the statement. “But, once either option is implemented, we would assign a new issuer credit rating to Greece after a short time reflecting our forward-looking view of Greece’s sovereign credit risk.”
...
Even if S&P or other rating companies determined that the rollover plan constituted a default, the ruling wouldn’t necessarily trigger credit swaps insuring Greek debt. That decision may be made by the determinations committee of the International Swaps & Derivatives Association.

It appears the euro-zone has some time to figure this out - or for someone to blink. The next meeting is July 11th, but it appears they don't have to have a deal until mid-September.

The yield for Greek 2 year bonds is down to 25.9%, and the 10 year yield is at 16.4%. Portuguese and Irish 10 year yields are at (11.6% for Ireland, 10.9% for Portugal).

by Calculated Risk on 7/03/2011 08:08:00 PM

I know everyone wants to know the next deadline for Greece.  It looks like mid-September.

From the WSJ: Greece Awaits Further Rescue

Euro-zone finance ministers ... decided they would agree by September on arrangements for a new bailout ... German Finance Minister Wolfgang Schäuble said after the teleconference that a new aid package for Greece could be approved by autumn, in time for the next expected quarterly tranche of EU/IMF aid.

The Greek finance ministry also said a deal was expected by mid-September.

That gives the finance ministers about 2 1/2 months to find a way for private creditors to participate - without the rating agencies calling it a default. This will heat up again soon enough.

Yesterday:
• Summary for Week Ending July 1st
• Unofficial Problem Bank list at 1,003 Institutions and State Stress Level
• Schedule for Week of July 3rd

by Calculated Risk on 7/03/2011 12:53:00 PM

An interesting story of revitalization ...

From the NY Times: The Young and Entrepreneurial move to Downtown Detroit-Pushing its Economic Recovery (ht Brian).

Recent census figures show that Detroit’s overall population shrank by 25 percent in the last 10 years. But another figure tells a different and more intriguing story: During the same time period, downtown Detroit experienced a 59 percent increase in the number of college-educated residents under the age of 35, nearly 30 percent more than two-thirds of the nation’s 51 largest cities.

These days the word “movement” is often heard to describe the influx of socially aware hipsters and artists now roaming the streets of Detroit. Not unlike Berlin, which was revitalized in the 1990s by young artists migrating there for the cheap studio space, Detroit may have this new generation of what city leaders are calling “creatives” to thank if it comes through its transition from a one-industry.

With these new residents have come the trappings of a thriving youth culture: trendy bars and restaurants that have brought pedestrians back to once-empty streets.
...
Part of the allure of Detroit lies in simple economics. Real estate is cheap by urban standards (Ms. Myles lives in a $900-a-month one-bedroom apartment with a garage), and the city is so eager to draw educated young residents that it is offering numerous subsidies to new arrivals. Ms. Myles, for instance, received $3,500 from her employer, which, like many companies in the city, is offering rent or purchasing subsidies to staff members who choose to live in the city.

This was in the "Fashion & Style" section, but it is really (hopefully) an economic story of renewal.

Yesterday:
• Summary for Week Ending July 1st
• Unofficial Problem Bank list at 1,003 Institutions and State Stress Level
• Schedule for Week of July 3rd