by Calculated Risk on 10/06/2011 08:30:00 AM

The DOL reports:

In the week ending October 1, the advance figure for seasonally adjusted initial claims was 401,000, an increase of 6,000 from the previous week's revised figure of 395,000. The 4-week moving average was 414,000, a decrease of 4,000 from the previous week's revised average of 418,000.

The following graph shows the 4-week moving average of weekly claims since January 2000 (there is a longer term graph in graph gallery).

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 declined this week to 414,000.

This is the lowest level for the 4-week average of weekly claims since August, and this was below the consensus forecast of 410,000. Still elevated, but some improvement.

by Calculated Risk on 10/06/2011 12:04:00 AM

Reis reported that the apartment vacancy rate (82 markets) fell to 5.6% in Q3 from 6.0% in Q2. The vacancy rate was at 7.1% in Q2 2010 and peaked at 8.0% at the end of 2009.

From the WSJ: Landlords Push Up Apartment Rents

The vacancy rate for the third quarter, which wraps up the prime leasing season, fell to 5.6% from 7.1% a year earlier. That is the lowest since 2006.

The increased demand follows several years that saw little new apartment development. About 8,200 units came online during the third quarter, one of the lowest quarterly figures since Reis began tracking the data in 1999.
...
Average effective apartment rents, the amount paid after discounting, rose to $1,004 nationwide in the third quarter, up 2.4% from a year earlier ... In the third quarter, 36,000 net units were filled, down from 42,000 in the second quarter.

Click on graph for larger image in graph gallery.

This graph shows the apartment vacancy rate starting in 2005.

Reis is just for large cities, but this decline in vacancy rates is happening just about everywhere.

A few key points we've been discussing:
• Apartment vacancy rates are falling fast.

• A record low number of multi-family units will be completed this year (2011). Only 8,200 apartments came on the market in Q3 (in the Reis survey area).

• Multi-family starts are increasing, and that is helping both GDP and employment growth this year. These new starts will not be completed until 2012 or 2013, so vacancy rates will probably continue to decline.

Earlier:
• Reis: Office Vacancy Rate declines slightly in Q3 to 17.4%
• ADP: Private Employment increased 91,000 in September
• ISM Non-Manufacturing Index indicates expansion in September
• Europe Update: New Stress Tests and Bank Recapitalisation
• Employment Situation Preview: Another Weak Report

by Calculated Risk on 10/05/2011 08:58:00 PM

A rare open thread for discussion - and a few articles on the passing of Steve Jobs ...

• From the LA Times: Steve Jobs: More than a turnaround artist

• From the NY Times: Steve Jobs, Apple’s Visionary, Dies at 56

• From the WSJ: Apple's Steve Jobs Is Dead

• From CNBC: Apple Says Former CEO Steve Jobs Has Passed Away

Earlier:
• Reis: Office Vacancy Rate declines slightly in Q3 to 17.4%
• ADP: Private Employment increased 91,000 in September
• ISM Non-Manufacturing Index indicates expansion in September
• Europe Update: New Stress Tests and Bank Recapitalisation
• Employment Situation Preview: Another Weak Report

by Calculated Risk on 10/05/2011 03:50:00 PM

This sounds like EU policymakers are getting ready for either larger haircuts for private Greek debt holders or a default. And is sounds like they are preparing to force the banks to recapitalize. These tests are going to have be conducted pretty quickly ...

• From the Financial Times: EU banks face new ‘Greek’ stress test

European Union finance ministers have asked the bloc’s leading bank regulator to test the strength of Europe’s banks on the assumption of a big writedown on Greek sovereign debt.

The move, a tacit admission that the European Banking Authority’s two previous rounds of bank stress tests were not sufficiently robust, came as Angela Merkel ... said she was prepared to recapitalise her country’s banks if necessary.
excerpt with permission

The article says Merkel would like to discuss an EU-wide bank support plan at the next EU summit in two weeks.

• From the WSJ: IMF Floats Bond-Buying Proposal in Europe

The International Monetary Fund could create a special financing tool to buy bonds in private markets as a way to help stem the euro zone's debt crisis, a senior IMF official said Wednesday.
...
Such a plan could aid countries such as Spain and Italy, which face rising costs for financing in capital markets.

• From the WSJ: ECB Chief's Legacy Under Fire

Many economists expect the ECB to keep interest rates on hold at Thursday's meeting, despite signs that the euro-zone economy is stagnating and may even slide into recession later this year. ... Mr. Trichet is expected Thursday to unveil new stimulus measures aimed at protecting European banks from short-term funding pressures.

The Greek 2 year yield is up to 66%. The Greek 1 year yield is at 140%. (Obviously expecting a large haircut)

The Portuguese 2 year yield is down to 17.5% and the Irish 2 year yield is at 7.1%.

The Spanish 10 year yield is at 5.1% and the Italian 10 year yield is at 5.5%.

by Calculated Risk on 10/05/2011 01:29:00 PM

On Friday the BLS will release the September Employment Situation Summary at 8:30 AM ET. Bloomberg is showing the consensus is for an increase of 65,000 payroll jobs in September, and for the unemployment rate to increase to 9.2% from 9.1% in August.

Overall the economic data for September was fairly weak, though mostly better than in August. The BLS reported zero jobs added in August, so "better" doesn't mean much. Of course, the Verizon labor dispute subtracted 45,000 payroll jobs in August, and these jobs will be added back in the September report. So better means more than 45,000.

Here is a summary of recent data:

• The ADP employment report showed an increase of 91,000 private sector payroll jobs in September. Unfortunately ADP hasn't been very useful in predicting the BLS report. Also note that government payrolls have been shrinking by about 35,000 on average per month this year. Also the ADP doesn't include the Verizon labor dispute, so this suggests around 91,000 private nonfarm payroll jobs added, plus 45,000 from Verizon, minus 35,000 government workers - or around 101,000 total jobs added in September.

• The ISM manufacturing employment index increased to 53.8% from 51.8% in August. Based on a historical correlation between the ISM index and the BLS employment report for manufacturing, this reading suggests an increase of 2,000 private payroll jobs for manufacturing in September. This is consistent with the regional Fed manufacturing surveys showing some hiring in September.

However, the ISM non-manufacturing employment index decreased 2.9 percentage points to 48.7 percent. According to ISM this means contraction, but a historical correlation suggests this indicates some hiring.

Click on graph for larger image in graph gallery.

This scatter graph compares the ISM non-manufacturing employment index (x-axis) and the BLS report for private service employment (as a percent change per month). This suggests private service employment growth of around 27,000 in September (not including Verizon).

So the ISM surveys suggests 27,000 service jobs added, 2,000 manufacturing jobs added, plus the 45,000 Verizon workers, minus 35,000 government jobs - or about 39,000 jobs added in September.

• Initial weekly unemployment claims averaged about 417,000 per week in September, up from the 411,000 average in August.

However, claims were elevated during the BLS reference week (includes the 12th of the month). For the middle two weeks of September, claims averaged 430,000 per week - suggesting some increase in layoffs mid-month.

• The final September Reuters / University of Michigan consumer sentiment index increased to 59.4 from 55.7 in August. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. This was probably impacted by the debt ceiling debate (it usually take 2 to 4 months from sentiment to recover from an "event"). In in general this low level would suggest a weak labor market.

• And on the unemployment rate from Gallup: Gallup Finds U.S. Underemployment Stuck at 18.5% in Mid-Sept.

Unemployment, as measured by Gallup without seasonal adjustment, is 8.8% in mid-September -- down from 9.1% at the end of August and the same as it was at the end of July. However, the apparent improvement in unemployment from August to mid-September may merely reflect normal seasonal hiring patterns and not be an indication that the employment situation is improving. On the other hand, current unemployment is considerably better than the 9.4% of a year ago.

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

There always seems to be some randomness to the employment report, but my guess is it will be in the 40,000 to 100,000 range. There were some clear negatives this month - weekly claims were elevated during the reference period, consumer sentiment was very low, and the ISM non-manufacturing employment index declined below 50. Still I'll take the over on the consensus (above 65,000), mostly because of the 45,000 jobs added from Verizon. Caveat: my track record when I take the under has been very good - but recently I've been mostly wrong when I've taken the over!