by Calculated Risk on 1/01/2012 08:11:00 AM

Earlier this week I noted that vehicle miles driven had declined in October. Most of the decline is probably due to high gasoline prices and the sluggish economy, but reader Dave sent me this article by Lisa Hymas: Driving has lost its cool for young Americans

In 2008, just 31 percent of American 16-year-olds had their driver's licenses, down from 46 percent in 1983, according to a new study in the journal Traffic Injury Prevention. The numbers were down for 18-year-olds too, from 80 percent in 1983 to 65 percent in 2008, and the percentage of twenty- and thirtysomethings with driver's licenses fell as well. And even those with driver's licenses are trying to drive less; a new survey by car-sharing company Zipcar found that more than half of drivers under the age of 44 are making efforts to reduce the time they spend packed like lemmings into shiny metal boxes.

The decline in driving by younger Americans is fed by many factors: the high cost of gas and insurance at a time of economic insecurity; tighter restrictions on teen drivers in many states; and roads that are more congested than ever, making driving less fun than ever.

But the impact of the internet is big too. "It is possible that the availability of virtual contact through electronic means reduces the need for actual contact among young people," says Michael Sivak, research professor at the University of Michigan Transportation Research Institute and coauthor of the study on driver's licenses. "Furthermore, some young people feel that driving interferes with texting and other electronic communication."

"American youth have fallen out of love with automobiles" because of the rising cost of driving and the fact that they are "living their lives online," says Wall Street Journal auto columnist Dan Neil.

Cruising is out. Facebook is in!

Earlier:
• Summary for Week Ending December 30th
• Schedule for Week of Jan 1, 2012

by Calculated Risk on 12/31/2011 08:30:00 PM

A cartoon from Eric G. Lewis

My New Year's resolution: Get lost in the mountains for a few weekends this year.

Happy New Year to all!

Earlier:
• Summary for Week Ending December 30th
• Schedule for Week of Jan 1, 2012

by Calculated Risk on 12/31/2011 01:06:00 PM

Earlier:
• Summary for Week Ending December 30th

Happy New Year! The key report for this week will be the December employment report to be released on Friday, Jan 6th. Other key reports include the ISM manufacturing index on Tuesday, vehicle sales on Wednesday, and the ISM non-manufacturing (service) index on Thursday.

Note: Reis is expected to release their Q4 Office, Mall and Apartment vacancy rate reports this week. Last quarter Reis reported falling vacancy rates for apartments, rising vacancy rates for regional malls, and a slight decline in the office vacancy rate.

----- Monday, Jan 2nd -----
All US markets will be closed in observance of the New Year's holiday.

----- Tuesday, Jan 3rd -----
10:00 AM: Construction Spending for November. The consensus is for a 0.5% increase in construction spending.

10:00 AM ET: ISM Manufacturing Index for December.

Here is a long term graph of the ISM manufacturing index. The consensus is for a slight increase to 53.2 from 52.7 in November.

2:00 PM: FOMC Minutes, Meeting of December 13, 2010.

----- Wednesday, Jan 4th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been especially weak all year, although this doesn't include cash buyers.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for November. The consensus is for a 1.9% decline in orders.

All day: Light vehicle sales for December. Light vehicle sales are expected to be unchanged at 13.6 million (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the November sales rate.

Growth in auto sales should make a strong positive contribution to Q4 GDP. Sales in Q3 averaged 12.45 million SAAR, and so far (October and November) sales have averaged 13.42 million SAAR in Q4, an increase of 7.6% over Q3.

Edmunds is forecasting:

[A] projected Seasonally Adjusted Annual Rate (SAAR) of 13.4 million units, forecasts Edmunds.com ... The sales pace is a slight dip from the 13.6 million SAAR recorded last month.

And TrueCar is forecasting:

The December 2011 forecast translates into a Seasonally Adjusted Annualized Rate (SAAR) of 13.5 million new car sales

----- Thursday, Jan 5th -----
8:15 AM: The ADP Employment Report for December. This report is for private payrolls only (no government). The consensus is for 160,000 payroll jobs added in November, down from the 206,000 reported in November.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a decline to 375,000 from 381,000 last week. Last week was the lowest level for the 4-week average of weekly claims since mid-2008.

10:00 AM: ISM non-Manufacturing Index for December. The consensus is for an increase to 53.4 from 52.0 in November. Note: Above 50 indicates expansion, below 50 contraction.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

----- Friday, Jan 6th -----
8:30 AM: Employment Report for December. The consensus is for an increase of 150,000 non-farm payroll jobs in December, up from the 120,000 jobs added in November.

The consensus is for the unemployment rate to increase slightly to 8.7% in December from 8.6% in November.

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

Through the first eleven months of 2011, the economy has added 1.448 million total non-farm jobs or just 131 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.2 million fewer payroll jobs than at the beginning of the 2007 recession. The economy has added 1.711 million private sector jobs this year, or about 156 thousand per month.

by Calculated Risk on 12/31/2011 09:00:00 AM

This was a light holiday week in the US. The data was mixed, although generally better than expected. Beating low expectations has been a recent theme.

The Conference Board reported an increase in consumer confidence, the Chicago purchasing managers' index was essentially unchanged (better than expected), and pending home sales increased.

Initial weekly unemployment claims increased somewhat, but the 4-week average is at the lowest level since mid-2008. And Case-Shiller reported house prices are at new post-bubble lows (seasonally adjusted).

Here is a summary of last week in graphs:

• Case Shiller: House Prices fall to new post-bubble low in October

From S&P: The Fourth Quarter Starts with Broad-based Declines in Home Prices According to the S&P/Case-Shiller Home Price Indices

Data through October 2011, released today by S&P Indices for its S&P/Case-Shiller1 Home Price Indices ... showed decreases of 1.1% and 1.2% for the 10- and 20-City Composites in October vs. September. Nineteen of the 20 cities covered by the indices also saw home prices decrease over the month. The 10- and 20-City Composites posted annual returns of -3.0% and -3.4% versus October 2010, respectively.

Click on graph for larger image.

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

The Composite 10 index is off 32.9% from the peak, and down 0.5% in October (SA). The Composite 10 is at a new post bubble low (Seasonally adjusted), but still above the low NSA.

The Composite 20 index is off 33.0% from the peak, and down 0.6% in October (SA). The Composite 20 is also at a new post-bubble low.

This graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Prices increased (SA) in 4 of the 20 Case-Shiller cities in October seasonally adjusted (only one city increased NSA). Prices in Las Vegas are off 61.3% from the peak, and prices in Dallas only off 8.8% from the peak.

The NSA indexes are only about 2% above the March 2011 lows - and these indexes will hit new lows in the next few months since prices are falling again. Using the SA data, the Case-Shiller indexes are now at new post-bubble lows!

• Real House Prices and House Price-to-Rent

This graph shows the quarterly Case-Shiller National Index SA (through Q3 2011), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through October) in nominal terms (as reported).

In nominal terms, the Case-Shiller National index (SA) is back to Q4 2002 levels, the Case-Shiller Composite 20 Index (SA) is back to March 2003 levels, and the CoreLogic index is back to May 2003.

Here are the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to Q1 1999 levels, the Composite 20 index is back to April 2000, and the CoreLogic index back to March 2000.

In real terms, all appreciation in the '00s is gone.

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller Composite 20 and CoreLogic House Price Index.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Composite 20 index is back to March 2000 levels, and the CoreLogic index is back to May 2000.

In real terms - and as a price-to-rent ratio - prices are mostly back to 2000 levels and will probably be back to 1999 levels in the next few months.

• Regional Fed Surveys and ISM Manufacturing Index

The regional surveys provide a hint about the ISM manufacturing index - and the regional surveys were mixed in December although they showed some improvement in the aggregate.

From the Kansas City Fed: Tenth District Manufacturing Activity Eased Slightly

From the Dallas Fed: Texas Manufacturing Activity Edges Down

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index.

The New York and Philly Fed surveys are averaged together (dashed green, through December), and five Fed surveys are averaged (blue, through December) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through November (right axis).

The ISM index for December will be released Tuesday, Jan 3rd and the regional surveys suggest another reading in the low to mid 50s for December.

• Weekly Initial Unemployment Claims increase to 381,000

This graph shows the 4-week moving average of weekly claims since January 2000.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week to 375,000.

This is the lowest level for the 4-week average since June 2008.

• Other Economic Stories ...
• Chicago PMI: The overall index declined slightly to 62.5 in December from 62.6 in November. "EMPLOYMENT erased November's deceleration; ORDER BACKLOGS expanded to its highest level since April 2011"
• From the NAR: Pending Home Sales Highest in a Year-and-a-Half
• Fannie Mae and Freddie Mac Serious Delinquency Rates: Slight increase for Freddie in November
• Restaurant Performance Index increased in November
• Hotels: Occupancy Rate back to pre-recession levels

by Calculated Risk on 12/30/2011 07:30:00 PM

And another reminder that Europe will remain on the front pages in 2012:

From Bloomberg: Merkel Says She’ll ’Do Everything’ to Save Euro

German Chancellor Angela Merkel said she expects turbulence in 2012 as she does “everything” to save the euro amid the Europe’s sovereign debt crisis.

“The path to overcoming this won’t be without setbacks but at the end of this path Europe will emerge stronger from the crisis than before” ... “Today, you can trust that I will do everything to strengthen the euro,” Merkel said. “This will only succeed if Europe learns from the mistakes of the past. One of these is that a common currency can only be successful if we cooperate more than in the past in Europe.”

Meanwhile, more the Telegraph: 'Euro will be stable' claim is ridiculed

[German finance minister] Wolfgang Schauble said he was confident that the currency union will survive and the political measures will underpin the shattered eurozone economies. "We will be far enough along in the next 12 months that we will have banished the dangers of contagion and stabilised the eurozone," he told newspaper Handelsblatt.

Unfortunately Schauble has consistently been wrong, and believes the answer is always more austerity.