by Calculated Risk on 7/08/2011 12:22:00 AM

From Reuters: US mall vacancies rise in 2nd quarter, rents flat

Preliminary figures by real estate research firm Reis show the vacancy rate at ... regional malls rose to 9.3 percent ... up from 9.1 percent in the first quarter.

The picture was even bleaker for U.S. strip malls where retailers gave up over half million more square feet than they rented. The vacancy rate at these local retail strips was 11 percent versus 10.9 percent in the first quarter, almost matching the 11.1 percent record set 20 years ago ...

Click on graph for larger image in graph gallery.

As noted in the article, some tenants are still leaving as their leases expire. This is especially grim for strip malls.

To summarize the vacancy reports: Apartment vacancy rates are falling fast, office vacancy rates are moving sideways, and malls are still get crushed.

Earlier on vacancy rates:
• Reis: Office Vacancy Rate flat in Q2 at 17.5 Percent
• Reis: Apartment Vacancy Rate falls to 6% in Q2

by Calculated Risk on 7/07/2011 06:13:00 PM

I haven't been following the debate about using Chained-CPI instead of CPI-W for the Cost of Living Adjustment (COLA). (ht Andre).

Menzie Chinn at Econbrowser wrote today: Chained CPI

Recent reports ([WSJ RTE] [Bloomberg] [The Hill]) indicate that under consideration as one approach to curtailing entitlement spending growth is to resort to Chained CPI, as opposed to the current official CPI series, which is based on a quasi-Laspeyres formula.

From the BLS: Frequently Asked Questions about the Chained Consumer Price Index for All Urban Consumers (C-CPI-U)

I haven't been following this, but chained CPI is a relatively new series (started in 2002), and measures inflation at a slightly lower rate than CPI or CPI-W - and over time this would add up both for Social Security payments and also for revenue (tax brackets would increase slower using chained CPI than using currently).

Click on graph for larger image in graph gallery.

The graph shows the year-over-year change in headline CPI, CPI-W, and chained CPI.

There isn't much difference on a year-over-year basis, but notice the blue line is mostly below the other two all the time. Those small differences add up over time as the following table shows.

This table shows the 10 year change in each measure (from May 2001 to May 2011) and the annualized change over that period. If we were using chained CPI instead of CPI-W over the last 10 years, Social Security benefits would be about 3.6% lower than they are now.

	10 Year Increase	Annualized
CPI (headline)	27.2%	2.43%
CPI-W	27.8%	2.49%
CPI (chained)	24.2%	2.19%

by Calculated Risk on 7/07/2011 02:09:00 PM

For a classic hockey stick formation, check on the 2 year yields for Portuguese and Irish bonds (table below). For Portugal, the 2 year yield is up to 17.5%, and for Ireland, the yield is 15.6%.

The yields for Italy and Spain are up too, and of special concern is the sharp increase in the Italian 10 year yield up to 5.2%.

From the ECB this morning: ECB announces change in eligibility of debt instruments issued or guaranteed by the Portuguese government

The Governing Council of the European Central Bank (ECB) has decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purposes of the Eurosystem’s credit operations in the case of marketable debt instruments issued or guaranteed by the Portuguese government. This suspension will be maintained until further notice.

The Portuguese government has approved an economic and financial adjustment programme, which has been negotiated with the European Commission, in liaison with the ECB, and the International Monetary Fund. The Governing Council has assessed the programme and considers it to be appropriate. This positive assessment and the strong commitment of the Portuguese government to fully implement the programme are the basis, also from a risk management perspective, for the suspension announced herewith.

The suspension applies to all outstanding and new marketable debt instruments issued or guaranteed by the Portuguese government.

I guess they are tired of the credit agency downgrades.

Here are the links for bond yields for several countries (source: Bloomberg):

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year

by Calculated Risk on 7/07/2011 10:50:00 AM

Tomorrow the BLS will release the June Employment Situation Summary at 8:30 AM ET. Bloomberg is showing the consensus is for an increase of 110,000 payroll jobs in June, and for the unemployment rate to hold steady at 9.1%.

Last month I argued the consensus for payroll jobs added seemed too high; this month I think the consensus is too low. Note: Recently I've mostly been correct when I've taken the "under" for payroll jobs, but only right about half the time when I've taken the "over" - so flip a coin!

Here is a summary of recent data:

• The ADP employment report (private sector only) showed an increase of 157,000 payroll jobs in June. This was well above the 36,000 reported for May, but still below the 198,000 per month average for the first four months of 2011.

• Initial weekly unemployment claims averaged about 425,000 per week in June, about the same as in December 2010, and January and May 2011. The BLS reported an average of just 90 thousand payroll jobs added during those three months.

• The ISM manufacturing employment index increased to 59.9%, up from 58.2% in May, and the ISM non-manufacturing index increased slightly to 54.1%. Based on a historical correlation between the ISM indexes and the BLS employment report, these readings would suggest close to 200,000 private payroll jobs added for services and manufacturing in June.

• The final June Reuters / University of Michigan consumer sentiment index decreased to 71.5 from the preliminary reading of 71.8. This is down from 74.3 in May.

This is frequently coincident with improvements in the labor market - but also strongly related to gasoline prices. Of course gasoline prices were falling in June - so this suggests weakness in the labor market.

• And on the unemployment rate from Gallup: Gallup Finds U.S. Unemployment at 8.7% in June

Unemployment, as measured by Gallup without seasonal adjustment, is at 8.7% at the end of June -- similar to the 8.9% in mid-June, but down from 9.2% at the end of May. It is also lower than it was during the same period a year ago.

NOTE: The Gallup poll results are Not Seasonally Adjusted (NSA), so use with caution. Usually the NSA unemployment rate increases in June as teenagers join the labor force looking for summer jobs. A decline in the NSA unemployment from May suggests a decline in the SA rate too.

These indicators are mixed. Initial weekly unemployment claims and consumer sentiment suggests a pretty weak payroll report, but the ADP and ISM reports suggest a little better report. And of course state and local governments are still reducing payrolls.

My guess is payroll growth will still be weak in June - as expected following a housing bubble and financial crisis - but I'll take the over on payroll jobs and the under on the unemployment rate.

by Calculated Risk on 7/07/2011 08:30:00 AM

The DOL reports:

In the week ending July 2, the advance figure for seasonally adjusted initial claims was 418,000, a decrease of 14,000 from the previous week's revised figure of 432,000. The 4-week moving average was 424,750, a decrease of 3,000 from the previous week's revised average of 427,750.

Special Factor: Minnesota has indicated that approximately 2,500 of their reported initial claims are a result of state employees filing due to the state government shutdown.

This is the 13th straight week with initial claims above 400,000, and the 4-week average is at about the same the level as in January.

The following graph shows the 4-week moving average of weekly claims for the last 40 years.

Click on graph for larger image in graph gallery.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased slightly this week to 424,750.

Weekly claims were below 400 thousand in March, and have increased back to just over 400 thousand for the last three months.