by Calculated Risk on 7/25/2011 07:10:00 PM

UPDATE: President Obama Press Conference at 9PM ET.

From the WSJ: Europe Rates Resume Climb

By Monday afternoon, Spain's [Ten year] debt was being traded at a yield of 6%, or 3.24 percentage points above the rate on German bonds, seen as a risk-free investment. The rate represented an upswing from 5.7% last Thursday, just as news of the new bailout deal for Greece began to emerge. On July 18, the rate hit 6.3%.

Italy was paying 5.5%, up from 5.2% on Thursday, but down from 5.8% on July 18.

Yields moved higher today, but are still below the previous peaks. The Greek 2 year yield is up to 28.1% (was above 39%).

The Portuguese 2 year yield is down to 15.3% (was above 20%)

The Irish 2 year yield is up to 15.4% (was above 23%).

The Italian 2 year yield is up to 4.0%. And the Spanish 2 year yield is up to 4.2%.

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 7/25/2011 03:58:00 PM

This is more technical for analyst and reporters: On Friday the Census Bureau will release the Q2 Housing Vacancies and Homeownership. This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates. Unfortunately the report is based on a fairly small sample, and does not track the decennial Census data.

Economist Tom Lawler has pointed out the discrepancies in the homeownership rate before, and he points out that the vacancy rates are "silly" too.

From economist Tom Lawler: HVS Rental Vacancy Rate Silliness: The Case of Richmond, Virginia

In early 2009 the Richmond, Virginia press wrote numerous articles after quarterly HVS data on metro area rental vacancy rates “showed” that the rental vacancy rate in the Richmond, Virginia metro area in the fourth quarter of 2008 was 23.7%, the highest in the country. This shocked local real estate folks, including folks who tracked rental vacancy rates in apartment buildings in the area. The Central Virginia Apartment Association, e.g., found that the rental vacancy rate based on a survey of 52 multi-family properties in the Richmond, VA metro area was around 8% -- above a more “normal” 5%, but no where close to 23.7%. And while the HVS attempts to measure the overall rental vacancy rate (and not just MF apartments for rent), the data seemed “whacky.”

When I talked to Census folks back then, they said that there quarterly metro area vacancy rates were extremely volatile and had extremely high standard errors, and that folks should focus on annual data.

However, “annual average” data from the HVS showed MASSIVELY different rental vacancy rates in Richmond, Virginia than did the American Community Survey, which also produces estimates of the vacancy rate in the overall rental market.

Here are some annual data comparisons of the HVS rental vacancy rate and the American Community Survey (ACS) rental vacancy rate (which is also for the overall rental market) from 2006 through 2009, as well as the Census 2010 rental vacancy rate for April 1, 2010.

HVS Rental Vacancy Rates: The Case of Richmond, VA Metro Area
	HVS (annual average)	ACS (annual average)	Census 2010 (April 1)
2006	13.8%	8.1%
2007	16.3%	8.1%
2008	20.8%	9.1%
2009	18.5%	7.8%
2010	13.5%		8.8%

I am showing Richmond not because it is the most “outlandish,” but rather because the HVS data “mistakes” create huge confusion in the local press. Census analysts had no clue why the HVS data produced such outlandish estimates relative to the ACS – it could be massive sampling errors, significant non-sampling errors, or both.

There are several other MSAs where the HVS rental vacancy rates just look plain “silly.” Some Census analysts agree that the HVS MSA data aren’t reliable, and even that several state data aren’t reliable, but, well, er, the national data are probably “ok” – which they are not.

From CR: Media and Analysts: There are serious questions about this report. Here are some previous post by Lawler on the HVS:
• Census Bureau on Homeownership Rate: We've got “Some 'Splainin' to Do”
• Lawler: Census 2010 and the US Homeownership Rate
• Lawler: Census 2010 Demographic Profile: Highlights, Excess Housing Supply Estimate, and Comparison to HVS
• Lawler: The “Excess Supply of Housing” War
• Lawler: Census Releases Demographic Profile of 12 States and DC: Confirms Bias of HVS
• Lawler: Census 2010 and Excess Vacant Housing Units
• Lawler: On Census Housing Stock/Household Data
• Lawler: Housing Vacancy Survey appears to massively overstate number of vacant housing units
• Lawler: US Households: Why Researchers / Analysts are “Confused”

by Calculated Risk on 7/25/2011 01:49:00 PM

From James Surowiecki at the New Yorker: Smash the Ceiling

The truth is that the United States doesn’t need, and shouldn’t have, a debt ceiling. Every other democratic country, with the exception of Denmark, does fine without one. There’s no debt limit in the Constitution. And, if Congress really wants to hold down government debt, it already has a way to do so that doesn’t risk economic chaos—namely, the annual budgeting process. The only reason we need to lift the debt ceiling, after all, is to pay for spending that Congress has already authorized.
...
One argument you hear for having a debt ceiling is that it’s useful as what the political theorist Jon Elster calls a “precommitment device”—a way of keeping ourselves from acting recklessly in the future, like Ulysses protecting himself from the Sirens by having himself bound to the mast. As precommitment devices go, however, the debt limit is both too weak and too strong. It’s too weak because Congress can simply vote to lift it, as it has done more than seventy times in the past fifty years. But it’s too strong because its negative consequences (default, higher interest rates, financial turmoil) are disastrously out of proportion to the behavior it’s trying to regulate. For the U.S. to default now, when investors are happily lending it money at exceedingly reasonable rates, would be akin to shooting yourself in the head for failing to follow your diet.

The smart option: Eliminate the debt ceiling!

Note: Still no worries. The debt ceiling will be raised.

by Calculated Risk on 7/25/2011 10:30:00 AM

From the Dallas Fed: Texas Manufacturing Activity Picks Up

Texas factory activity expanded in July, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 5.6 to 10.8, suggesting output growth picked up this month.

The new orders index rose sharply from 6.4 in June to 16 in July. ... Labor market indicators reflected more hiring and longer workweeks. The employment index came in at 12.1, up from 5.3 in June. Twenty-two percent of manufacturers reported hiring new workers, the highest share this year. The hours worked index rose from 1.5 to 7.9.

There are two more regional manufacturing surveys that will be released this week (Richmond and Kansas City), and those surveys will probably show a slight improvement too.

by Calculated Risk on 7/25/2011 08:30:00 AM

No surprise (this is a composite index) ... from the Chicago Fed: Index shows economic growth again below average in June

The Chicago Fed National Activity Index increased to –0.46 in June from –0.55 in May; however, the index remained negative for the third consecutive month. Three of the four broad categories of indicators that make up the index improved in June, but only one made a positive contribution to the index.

The index’s three-month moving average, CFNAI-MA3, declined to –0.60 in June from –0.31 in May, remaining negative for a third consecutive month and reaching its lowest level since October 2009.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image in graph gallery.

According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

This index suggests the economy was still growing in June, but below trend.