by Calculated Risk on 9/20/2011 04:48:00 PM

From Bloomberg: Greece Loan Talks Resume After ‘Productive’ First Meeting

Greek Prime Minister George Papandreou’s government held a second round of talks with its main creditors today ... call started at 9 p.m. Greek time [2 PM ET].

Papandreou will chair a Cabinet meeting at 11:30 a.m. Athens time tomorrow to discuss the content of the talks with the so-called troika team, which comprises the European Union, European Central Bank and International Monetary Fund.

There should be an announcement later tonight or tomorrow morning.

The Greek 2 year yield was up to 64.2%. The Greek 1 year yield is at 130%.

The Portuguese 2 year yield is up to 17.3% and the Irish 2 year yield was down to 9.3%.

The Italian 10 year yield was up to 5.7% following the downgrade.

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 9/20/2011 01:41:00 PM

Since it takes over a year on average to complete multi-family projects - and multi-family starts were at a record low last year - it makes sense that there will be a record low, or near record low, number of multi-family completions this year.

The following graph shows the lag between multi-family starts and completions using a 12 month rolling total.

The blue line is for multifamily starts and the red line is for multifamily completions. Since multifamily starts collapsed in 2009, completions collapsed in 2010.

Click on graph for larger image in graph gallery.

The rolling 12 month total for starts (blue line) is now above the rolling 12 month for completions (red line), and they are heading in opposite directions (although completions ticked up a little in August).

It is important to note that even with a strong increase in multi-family construction, it is 1) from a very low level, and 2) multi-family is a small part of residential investment (RI). Still this is bright spot for construction.

Housing Starts and the Unemployment Rate

The following graph shows single family housing starts (through August) and the unemployment rate (inverted) through August. Note: there are many other factors impacting unemployment, but housing is a key sector.

You can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn't hold.

Housing starts have moved sideways for the last two and a half years and this is one of the reasons the unemployment rate has stayed elevated.

With the huge overhang of existing housing units, this key sector hasn't been participating in the recovery. This is what I expected when I first posted the above graph over two years ago!

The good news is residential investment in multi-family and home improvement is increasing modestly, but construction job growth will remain sluggish until the excess housing supply is absorbed.

Earlier:
• Housing Starts decline in August

by Calculated Risk on 9/20/2011 11:15:00 AM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for August 2011. In the past month, the indexes increased in 26 states, decreased in 17, and remained unchanged in seven for a one-month diffusion index of 18. Over the past three months, the indexes increased in 33 states, decreased in 16, and remained unchanged in one (Maryland) for a three-month diffusion index of 34.

Note: These are coincident indexes constructed from state employment data. From the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In August, 30 states had increasing activity, the lowest number since January 2010. Looking back at previous recessions, the current level is close to when the U.S. entered recession - however it is important to remember that August was an especially weak month due to the debt ceiling debate.

In February, 47 states showed increasing activity.

Here is a map of the three month change in the Philly Fed state coincident indicators. Several states have turned red again. This map was all red during the worst of the recession, and all green not long ago.

Earlier:
• Housing Starts decline in August

by Calculated Risk on 9/20/2011 08:30:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in August were at a seasonally adjusted annual rate of 571,000. This is 5.0 percent (±10 6%)* below the revised July estimate of 601,000 and is 5.8 percent (±12.0%)* below the August 2010 rate of 606,000.

Single-family housing starts in August were at a rate of 417,000; this is 1.4 percent (±10.3%)* below the revised July figure of 423,000. The August rate for units in buildings with five units or more was 148,000.

Building Permits:
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 620,000. This is 3.2 percent (±1.0%) above the revised July rate of 601,000 and is 7.8 percent (±1.4%) above the August 2010 estimate of 575,000.

Single-family authorizations in August were at a rate of 413,000; this is 2.5 percent (±0.9%) above the revised July figure of 403,000. Authorizations of units in buildings with five units or more were at a rate of 178,000 in August.

Click on graph for larger image in graph gallery.

Total housing starts were at 571 thousand (SAAR) in August, down 5.0% from the revised July rate of 601 thousand (revised from 604).

Single-family starts declined 1.4% to 417 thousand in August.

The second graph shows total and single unit starts since 1968.

This shows the huge collapse following the housing bubble, and that housing starts have been mostly moving sideways for about two years and a half years - with slight ups and downs due to the home buyer tax credit.

Multi-family starts are increasing in 2011 - although from a very low level. This was below expectations of 592 thousand starts in August, but permits increased in August suggesting a slight increase for starts in September.

Still "moving sideways".

by Calculated Risk on 9/19/2011 09:10:00 PM

From the WSJ: Greece Strikes Optimistic Note on Aid Talks

Greece said it had "a productive and substantive discussion" with its official creditors on Monday ... and a Greek finance ministry official said an agreement was close. ... A Greek official said an announcement was likely on Wednesday.
...
"We will publish this week decisions on the restructuring of public bodies," [Finance Minister Evangelos Venizelos] told a business conference Monday. "In light of the new budget, it is clear that our emphasis will be on the spending side."

From Bloomberg: Italy Rating Lowered by S&P, Outlook ‘Negative’

Italy’s credit rating was cut by Standard & Poor’s on concern that weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro-region’s second-largest debt burden.

The rating was lowered to A from A+, with a negative outlook, S&P said in a statement.