by Calculated Risk on 11/27/2011 05:57:00 PM

The two key downside risks to the U.S. economy are contagion from the European financial crisis and more rapid fiscal tightening. On fiscal tightening, there have been several recent reports suggesting that some sort of deal will be reached an the extension of the payroll tax cut.

From the LA Times: Parties look to payroll tax deal after collapse of deficit talks

The Obama administration has asked Congress to extend payroll tax cuts set to expire at the end of the year, and also to renew unemployment benefits. The tax-cut extension could cost the Treasury an estimated $112 billion, but if it lapses American workers will see an immediate tax increase on Jan. 1 that would cost a typical family $1,000 per year.
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Economists warn that a failure to extend the payroll tax cut and unemployment benefits could cut the economy’s weak growth almost in half next year.

It seems likely that some sort of deal will be reached to extend both the payroll tax cut and emergency unemployment benefits, but there will be some politics first.

Earlier:
• Summary for Week Ending Nov 25th
• Schedule for Week of Nov 27th

by Calculated Risk on 11/27/2011 02:14:00 PM

From Tim Duy at Fed Watch: Europe Scrambles for Solutions. Some excerpts:

Monday morning is fast approaching, and European leaders are scrambling to come up with something credible to float ahead of the market opening. Recall that we ended last week with the S&P downgrade of Belgium, and policymakers would like to have something on the table in response. Most significant is that policymakers now realize that changing the Lisbon Treaty to enshrine fiscal discipline is a far too lengthy process to serve as an effective counterweight to emerging the sovereign debt crisis.
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The risk here is that market participants read the bilateral agreements as they emerge as an invitation to attack those nations not yet signed up to the plan.
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Note also that although these ideas are bandied about in terms of "greater fiscal integration," I don't think we are seeing much mention of fiscal transfers, just mechanisms to enforce budget discipline. This is certainly a framework for a two-speed Europe.

In other news, someone is floating rumors that the IMF is preparing a massive lending program for Italy. From Bloomberg:

The International Monetary Fund is preparing a 600-billion euro ($794 billion) loan for Italy in case the country’s debt crisis worsens, La Stampa said.

The money would give Italy’s Prime Minister Mario Monti 12 to 18 months to implement his reforms without having to refinance the country’s existing debt, the Italian daily reported, without saying where it got the information. Monti could draw on the money if his planned austerity measures fail to stop speculation on Italian debt, La Stampa said.

Details are unclear. Ed Harrison at Credit Writedowns has a translation of a German version of the story that mentions the possibility of ECB funding of the bailout, with an IMF guarantee.

by Calculated Risk on 11/27/2011 09:52:00 AM

With all the "Black Friday" reports, it is important to remember that retail sales are only a small portion of consumer spending.

According to the Bureau of Economic Analysis (BEA), of the $10.8 trillion in personal consumption expenditures in Q3 (seasonally adjusted annual rate), about 34% was spent on goods. From Suzi Khimm at the Wonkblog: Why a Black Friday frenzy doesn’t mean jobs are coming back

Consumer spending on goods is starting to rebound, but spending on services — a key driver of job growth — is lagging significantly farther behind.

And from MarketWatch: Black Friday posts big retail-sales gains vs. 2010

U.S. retailers posted sizable "Black Friday" gains vs. 2010's day-after-Thanksgiving sales results, according to data released Saturday. Store sales, according to Chicago-based ShopperTrak, rose 7%, as shoppers spent $11.4 billion, up nearly $1 billion from a year ago ...

Earlier:
• Summary for Week Ending Nov 25th
• Schedule for Week of Nov 27th

by Calculated Risk on 11/26/2011 06:37:00 PM

As we all know the markets are moving faster than the policymakers in Europe. So it appears the policymakers are going to try to implement a fiscal union quicker.

But will that help? Will it bring private investors back into the bond market? Probably not, but some people think it might allow the ECB to take more aggressive action.

Oh well, the new key date is Friday December 9th.

From the WSJ: Euro Zone Weighs Plan to Speed Fiscal Integration

Euro-zone countries are weighing a new plan to accelerate the integration of their fiscal policies ... Under the proposed plan, national governments would seal bilateral agreements that wouldn't take as long as a cumbersome change to European Union treaties ... The pact that euro members are considering could be announced before the EU summit on Dec. 9 ... Some German and French officials fear that an EU treaty change could take far too long.
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A new, binding fiscal regime would not be enough to justify the creation of collective euro-zone bonds, German officials say. But it might be enough to justify ECB action to stabilize bond markets

Earlier:
• Summary for Week Ending Nov 25th
• Schedule for Week of Nov 27th

by Calculated Risk on 11/26/2011 01:31:00 PM

Earlier:
• Summary for Week Ending Nov 25th

The key report this week will be the employment situation report for November on Friday. Other key reports include the November ISM manufacturing index on Thursday, auto sales also on Thursday, and two important housing reports to be released early in the week: New Home sales on Monday and Case-Shiller house prices on Tuesday.

----- Monday, Nov 28th -----
10:00 AM ET: New Home Sales for October from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the current sales rate.

The consensus is for a slight decrease in sales to 310 thousand Seasonally Adjusted Annual Rate (SAAR) in October from 313 thousand in September.

10:00 AM: NY Fed Q3 Report on Household Debt and Credit

10:30 AM: Dallas Fed Manufacturing Survey for November. The index showed some expansion in October with a reading of 4.1. This is the last of the regional Fed manufacturing surveys for November, and the results have been mixed - but generally better than in October.

----- Tuesday, Nov 29th -----
9:00 AM: S&P/Case-Shiller House Price Index for September. Although this is the September report, it is really a 3 month average of July, August and September.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The consensus is for a 3.0% year-over-year decrease in prices in September, or mostly flat to slightly down from August. The CoreLogic index showed a 1.1% decrease in September (NSA).

10:00 AM: Conference Board's consumer confidence index for November. The consensus is for an increase to 44.2 from 39.8 last month.

10:00 AM: FHFA House Price Index for September 2011. This is based on GSE repeat sales and is not as closely followed as Case-Shiller (or CoreLogic). However the quarterly FHFA expanded series house price index makes use of "additional sales price information from external data sources" and might be followed more closely in the future.

11:30 AM: Federal Reserve Vice Chair Janet Yellen speaks at the Federal Reserve Bank of San Francisco, San Francisco, Calif. "The Global Economic Recovery".

----- Wednesday, Nov 30th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been especially weak since early August, although this doesn't include cash buyers.

8:15 AM: The ADP Employment Report for November. This report is for private payrolls only (no government). The consensus is for 130,000 payroll jobs added in November, up from the 110,000 reported in October.

9:45 AM: Chicago Purchasing Managers Index for November. The consensus is for a slight increase to 58.5 from 58.4 in October.

10:00 AM: Pending Home Sales Index for October. The consensus is for a 1.2% increase in the index.

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts

----- Thursday, Dec 1st -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a slight decrease to 390,000 from 393,000 last week. The 4-week average has recently declined to below 400,000.

10:00 AM: Construction Spending for October. The consensus is for a 0.3% increase in construction spending.

10:00 AM ET: ISM Manufacturing Index for November. The consensus is for a slight increase to 51.7 from 50.8 in October.

All day: Light vehicle sales for November. Light vehicle sales are expected to increase to 13.4 million (Seasonally Adjusted Annual Rate), from 13.2 million in October.

----- Friday, Dec 2nd -----
8:30 AM: Employment Report for November.

The consensus is for an increase of 112,000 non-farm payroll jobs in November, up from the 80,000 jobs added in October.

This graph shows the net payroll jobs per month (excluding temporary Census jobs) since the beginning of the recession. The consensus forecast for November is in blue.

The consensus is for the unemployment rate to remain at 9.0% in November.

This second employment graph shows the percentage of payroll jobs lost during post WWII recessions through October.

Through the first ten months of 2011, the economy has added 1.256 million total non-farm jobs or just 125 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.47 million fewer payroll jobs than at the beginning of the 2007 recession. The economy has added 1.529 million private sector jobs this year, or about 153 thousand per month.