by Calculated Risk on 8/05/2011 08:30:00 AM

From MarketWatch: U.S. economy gained 117,000 jobs in July

The U.S. economy added 117,000 jobs in July and an even larger 154,000 in the private sector while the unemployment rate fell to 9.1% from 9.2%, partly because 193,000 people dropped out of the labor force, according to the latest government data. Job gains in May and June were also revised up by a combined 56,000, the Labor Department reported Friday. Average hourly wages rose 10 cents, or 0.4%, to $23.13. The workweek was unchanged at 34.3 hours.

Click on graph for larger image in graph gallery.

This graph shows the unemployment rate.

The unemployment rate decreased to 9.1%.

Note: The BLS website crashed - I'll add the Participation rate and Employment to population ratio soon.

This graph shows the job losses from the start of the employment recession, in percentage terms aligned at the start of the recession. The dotted line is ex-Census hiring.

The current employment recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only the early '80s recession with a peak of 10.8 percent was worse).

This was still weak, but better than expectations for payroll jobs, and the unemployment rate. The 154,000 private sector jobs - and 56,000 in upward revisions to May and June are improvements. I'll have much more soon ...

by Calculated Risk on 8/04/2011 08:58:00 PM

Tomorrow the BLS will release the July Employment Situation Summary at 8:30 AM ET. Bloomberg is showing the consensus is for an increase of 75,000 payroll jobs in July, and for the unemployment rate to hold steady at 9.2%.

I've seen estimates all over the place, including hearing a few whispers of a negative headline number. This isn't surprising since the economic data for July was weak - especially over the last couple of weeks as companies and individuals prepared for a possible U.S. government default.

However the BLS survey reference week includes the 12th of the month (the 2nd full week of July), and that was before the economy froze up due to the D.C. debate, and also before the European crisis really flared up again. So even with the downbeat economic reports, it is possible that the headline number could be at or above consensus.

No wonder people are uncertain! Here is a summary of recent data:

• The ADP employment report (private sector only) showed an increase of 114,000 payroll jobs in July. Of course, in June, ADP initially reported an increase of 157,000 jobs and the BLS only reported a gain of 57,000 private sector jobs (and only 18,000 total jobs including government layoffs). The ADP uses the same reference week as the BLS. Also note that government payrolls have been shrinking by about 30,000 each month.

• Initial weekly unemployment claims averaged about 412,000 per week in July, down slightly from the 427,000 average in June. Not great, but an improvement.

• The ISM manufacturing employment index decreased to 53.5%, down from 59.9% in June, and the ISM non-manufacturing index decreased to 52.5% in July from 54.1%. Based on a historical correlation between the ISM indexes and the BLS employment report, these readings would suggest close to 100,000 private payroll jobs added for services and manufacturing in July (similar to the ADP report).

• The final July Reuters / University of Michigan consumer sentiment index decreased to 63.7 from 71.5 in June. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. This might have been impacted by the debt ceiling debate, but in general this would suggest a weak labor market.

• And on the unemployment rate from Gallup: Gallup Finds Unemployment Unchanged in July

U.S. unemployment, as measured by Gallup without seasonal adjustment, is at 8.8% at the end of July, showing essentially no change from June 2011 (8.7%) or July a year ago (8.9%).

NOTE: The Gallup poll results are Not Seasonally Adjusted (NSA), so use with caution. Usually the NSA unemployment rate increases in July, so this would suggest little change in the unemployment rate.

My guess is that payroll growth was positive in July, but I'll take the "under" on the consensus based on the weak economic news.

by Calculated Risk on 8/04/2011 05:57:00 PM

LPS Applied Analytics released their June Mortgage Performance data. From LPS:

The June Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE: LPS) shows that, while still down 16.4 percent from the start of the year, foreclosure starts increased by more than 10 percent in June 2011. Delinquencies were also up, but incrementally, showing a 2.4 percent increase over May. As of the end of June, 4.1 million loans were either 90+ days delinquent or in foreclosure, representing a 12.8 percent increase since June 2010.

Foreclosure timelines continue their upward trajectory, with the average loan in foreclosure having been delinquent for a record 587 days. More than 40 percent of 90+-day delinquencies have not made a payment in more than a year. For loans in foreclosure, 35 percent have been delinquent for more than two years.

Looking at the differences between judicial and non-judicial foreclosure states, the LPS data shows that the foreclosure pipeline ratio – that is, the number of loans either 90+ days delinquent or in foreclosure divided by the six-month average of foreclosure sales – is more than three times as high for judicial foreclosure states. Additionally, the slowdown associated with foreclosure moratoria has been almost exclusively felt in judicial states.

According to LPS, 8.15% of mortgages were delinquent in June, up from 7.96% in May, and down from 9.55% in June 2010.

LPS reports that 4.12% of mortgages were in the foreclosure process, up slightly from 4.11% in May, and up from 3.66% in June 2010. This gives a total of 12.27% delinquent or in foreclosure. It breaks down as:

• 2.38 million loans less than 90 days delinquent.
• 1.91 million loans 90+ days delinquent.
• 2.17 million loans in foreclosure process.

For a total of 6.45 million loans delinquent or in foreclosure in June.

Click on graph for larger image in graph gallery.

This graph shows the total delinquent and in-foreclosure rates since 1995.

The total delinquent rate has fallen to 8.15% from the peak in January 2010 of 10.97%. A normal rate is probably in the 4% to 5% range, so there is a long long ways to go.

However the in-foreclosure rate at 4.12% is barely below the peak rate of 4.21% in March 2011. There are still a large number of loans in this category (about 2.17 million) - and the average loan in foreclosure has been delinquent for a record 587 days!

This graph provided by LPS Applied Analytics shows the days delinquent for the loans in foreclosure.

About 35% of those 2.17 million loans in the foreclosure process have not made a payment in over 2 years. Another 34% have not made a payment in over a year (but less than 2 years). That is around 1.5 million properties.

Many of these long term in-foreclosure properties are in judicial states.

The third graph shows foreclosure sales by the previous month's delinquency bucket.

Foreclosure sales are down compared to last year, regardless of time in delinquency - although sales are slowly picking up. Also the servicers are foreclosing a lower percentage of long term in-foreclosure properties - these long term in-foreclosure properties are just hanging over the housing market (mostly in judicial states like Florida).

by Calculated Risk on 8/04/2011 04:15:00 PM

From the WSJ: Dow Tumbles 500 Points, Putting It in Red for Year

The Dow slid 512.61 points, or 4.3%, to 11383.83, erasing all its gains for 2011.
...
The Standard & Poor's 500-stock index fell 60.26 points, or 4.8%, to 1200.08, putting it in correction territory, having fallen more than 10% since May. The Nasdaq Composite slumped 136.68 points, or 5.1%, to 2556.39, also in the red for the year.

The Chicago Board Options Exchange's Volatility Index, known as the fear gauge, broke the 30 level for the first time since March 16, up 30% at 30.48.

Here is a table of the largest one day declines (in percentage terms) for the S&P 500 since January 1950. There were quite a few large down days in 2008 and early 2009 ...

Largest S&P 500 One Day Percentage Declines since 1950
	Date	Percent Decline	Close	Previous Close	Six Months Later
1	10/19/1987	-20.5%	224.84	282.70	15.3%
2	10/15/2008	-9.0%	907.84	998.01	-4.7%
3	12/1/2008	-8.9%	816.21	896.24	15.7%
4	9/29/2008	-8.8%	1,106.42	1,213.27	-28.8%
5	10/26/1987	-8.3%	227.67	248.22	15.3%
6	10/9/2008	-7.6%	909.92	984.94	-5.9%
7	10/27/1997	-6.9%	876.99	941.64	23.7%
8	8/31/1998	-6.8%	957.28	1,027.14	28.0%
9	1/8/1988	-6.8%	243.40	261.07	11.7%
10	11/20/2008	-6.7%	752.44	806.58	17.9%
11	5/28/1962	-6.7%	55.50	59.47	10.6%
12	9/26/1955	-6.6%	42.61	45.63	14.1%
13	10/13/1989	-6.1%	333.65	355.39	3.2%
14	11/19/2008	-6.1%	806.58	859.12	10.1%
15	10/22/2008	-6.1%	896.78	955.05	-5.0%
16	4/14/2000	-5.8%	1,356.56	1,440.51	-2.0%
17	10/7/2008	-5.7%	996.23	1,056.89	-18.1%
18	6/26/1950	-5.4%	18.11	19.14	10.0%
19	1/20/2009	-5.3%	805.22	850.12	18.1%
20	11/5/2008	-5.3%	952.77	1,005.75	-4.8%
21	11/12/2008	-5.2%	852.30	898.95	4.8%
22	10/16/1987	-5.2%	282.70	298.08	-8.1%
23	11/6/2008	-5.0%	904.88	952.77	2.7%
24	9/17/2001	-4.9%	1,038.77	1,092.54	12.2%
25	2/10/2009	-4.9%	827.16	869.89	21.8%
26	9/11/1986	-4.8%	235.18	247.06	23.4%
27	8/4/2011	-4.8%	1,200.08	1,260.34	---
28	9/17/2008	-4.7%	1,156.39	1,213.60	-31.3%
29	9/15/2008	-4.7%	1,192.70	1,251.70	-36.8%
30	3/2/2009	-4.7%	700.82	735.09	47.1%
31	2/17/2009	-4.6%	789.17	826.84	27.2%
32	4/14/1988	-4.4%	259.75	271.58	7.0%
33	3/12/2001	-4.3%	1,180.16	1,233.42	-8.0%
34	4/20/2009	-4.3%	832.39	869.60	31.7%
35	3/5/2009	-4.3%	682.55	712.87	46.2%
36	11/30/1987	-4.2%	230.30	240.34	10.0%
37	11/14/2008	-4.2%	873.29	911.29	4.2%
38	9/3/2002	-4.2%	878.02	916.07	-6.4%
39	10/2/2008	-4.0%	1,114.28	1,161.06	-25.1%
40	10/25/1982	-4.0%	133.32	138.83	20.3%

by Calculated Risk on 8/04/2011 01:02:00 PM

Admitting the obvious ... from the WSJ: Letter from the President of the European Commission José Manuel Barroso

Developments in the sovereign bond markets of Italy, Spain and other euro area Member States are a cause of deep concern ... they reflect a growing scepticism among investors about the systemic capacity of the euro area to respond to the evolving crisis.
...
The 21st of July bold decisions on the Greek package and the increased flexibility of the EFSF (precautionary use, recapitalisation of banks and intervention in secondary bond markets), are not having their intended effect on the markets.
...
[I]t is clear that we are no longer managing a crisis just in the euro-area periphery. ... We need also to consider how to further improve the effectiveness of both the EFSF and the ESM in order to address the current contagion.
...
I would like to call on you to accelerate the approval procedures for the
implementation of these decisions so as to make the EFSF enhancements operational very soon.

Here is a graph of the 10 year spread (Italy to Germany) from Bloomberg. And for Spain to Germany. The Italian spread is at a record 389.5, the Spanish spread is at are record 398.5. The race is on ...

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