by Calculated Risk on 2/11/2012 08:05:00 AM

This was a light week for economic data; however there were two significant economic developments: 1) the long awaited mortgage servicer settlement agreement was announced, and 2) there was some progress with the Greek debt discussions – although there is more drama ahead.

A key economic question is the impact of the settlement on delinquencies and foreclosure activity, and by extension, on housing and the economy. This settlement should lead to both more modifications and more foreclosures, and for a decline in the number of seriously delinquent mortgages. It isn't clear how many more REOs will be on the market this year, but I don't expect a flood of REOs as happened in late 2008 and early 2009.

The data was mixed last week. The trade deficit was higher than expected, consumer confidence fell a little more than expected, but initial weekly unemployment claims fell again – and the four week average declined to the lowest level since May 2008.

Next week will be busy!

Here is a summary in graphs:

• Trade Deficit increased in December to $48.8 Billion

The trade deficit was slightly above the consensus forecast of $48.5 billion.

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through November 2011. Both exports and imports increased in December. Imports stalled in the middle of 2011, but increased towards the end of the year (seasonally adjusted). Exports are well above the pre-recession peak and up 9% compared to December 2010; imports are up about 11% compared to December 2010.

The second graph shows the U.S. trade deficit, with and without petroleum, through December.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil averaged $104.13 per barrel in December. The trade deficit with China declined to $23 billion, but hit an annual record in 2011.

Exports to eurozone countries increased slightly in December after declining sharply in November.

All Trade Graphs
• Weekly Initial Unemployment Claims decline to 358,000

Here is a long term graph of weekly claims:

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week to 366,250.

The 4-week moving average is at the lowest level since May 2008.

All current Employment Graphs
• BLS: Job Openings increased in December

From the BLS: Job Openings and Labor Turnover Summary

There were 3.4 million job openings on the last business day of December, up from 3.1 million in November, the U.S. Bureau of Labor Statistics reported today.
...
Although the number of job openings remained below the 4.4 million openings when the recession began in December 2007, the number of job openings has increased 39 percent since the end of the recession in June 2009.

This graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in December, and the number of job openings (yellow) has generally been trending up, and are up about 15% year-over-year compared to December 2010.

Quits declined slightly in December, but have mostly been trending up - quits are now up about 5% year-over-year. These are voluntary separations and more quits might indicate some improvement in the labor market. (see light blue columns at bottom of graph for trend for "quits").

All current employment graphs
• Consumer Sentiment declines in February to 72.5

The preliminary Reuters / University of Michigan consumer sentiment index for February declined to 72.5, down from the January reading of 75.0.

Overall sentiment is still fairly weak, although sentiment has rebounded from the decline last summer. This was below the consensus forecast of a decline to 74.3.

• Other Economic Stories ...
• Hotels: RevPAR increases 8.7% compared to same week in 2011
• MBA: Refinance activity increases as mortgage rates fall to record low
• Goldman: No Labor Force Participation Rebound in Sight
• Housing: The Two Bottoms

by Calculated Risk on 2/10/2012 11:13:00 PM

For insomniacs, here is the 51 page Memorandum of Understanding on Specific Economic Policy Conditionality between Greece and the troika.

Enjoy.

by Calculated Risk on 2/10/2012 06:21:00 PM

Knoxville Bank K.O.
Forest Lake Friday failure
A quickening pace.
by Soylent Green is People
From the FDIC: Barrington Bank & Trust Company, National Association, Barrington, Illinois, Assumes All of the Deposits of Charter National Bank and Trust, Hoffman Estates, Illinois

As of December 31, 2011, Charter National Bank and Trust had approximately $93.9 million in total assets and $89.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $17.4 million. ... Charter National Bank and Trust is the eighth FDIC-insured institution to fail in the nation this year, and the first in Illinois

From the FDIC: First Merchants Bank, National Association, Muncie, Indiana, Assumes All of the Deposits of SCB Bank, Shelbyville, Indiana

As of December 31, 2011, SCB Bank had approximately $182.6 million in total assets and $171.6 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $33.9 million. ... SCB Bank is the ninth FDIC-insured institution to fail in the nation this year, and the first in Indiana.

It is Friday.

The pace of closures has slowed. At this point in 2010 and 2011, there were 16 and 14 failures already, respectively.

by Calculated Risk on 2/10/2012 03:52:00 PM

Update: from CNBC: Greek Cabinet Approves Reform Bill; Parliament Expected to Vote on Sunday

From the NY Times: Greece Plunged Into Political Turmoil Over Austerity Measures

Political turmoil deepened here Friday as Prime Minister Lucas Papademos threatened to eject from his fragile interim coalition government any ministers who objected to the country’s new austerity deal with

“It goes without saying that whoever disagrees and does not vote for the new program cannot stay in the government,” he said in a televised speech to his cabinet following the resignation of several ministers and their deputies.
...
According to local news media outlets, Mr. Papademos plans to announce a reshuffled cabinet on Monday, putting in doubt a parliamentary vote on the new measures that was scheduled for Sunday.

From the Athens News: Parties delay crisis meetings, but Venizelos meets minister

Pasok and New Democracy pushed crisis meetings at their parties back by a day to Saturday, as the coalition government grappled with cabinet resignations and a fierce backlash against minimum wage cuts and other new austerity measures.
...
The finance minister got a hostile reception in Brussels on Thursday, when top eurozone officials told Greece to finalize austerity measures, provide written commitments from the three coalition parties, and push the new measures through parliament before the 130bn deal is approved.

by Calculated Risk on 2/10/2012 12:30:00 PM

Here is the transcript of Fed Chairman Ben Bernanke's speech at the National Association of Homebuilders International Builders' Show, Orlando, Florida: "Housing Markets in Transition". The speech is being streamed live at www.nahb.org/Bernanke

Excerpt:

One way to understand conditions in the housing market is to focus on the balance of supply and demand. For the past few years, the actual and potential supply of single-family homes has greatly exceeded the effective demand. The elevated number of homes that are currently vacant instead of owner occupied reflects the imbalance. According to the most recent estimate, about 1-3/4 million homes are currently unoccupied and for sale. While this figure has declined slightly during the past few years, it is nonetheless up dramatically from the first half of the 2000s, when readings of about 1-1/4 million vacant homes were the norm. Of course, housing conditions vary by region, and vacancy rates in some locations are substantially higher than the national average....

Moreover, a very large number of additional homes are poised to come on the owner-occupied market. In each of the past few years, roughly 2 million homes have entered the foreclosure process, and many of these homes have been put up for sale, crowding out much of the need for new building. Looking ahead, the relatively high rate of foreclosures is likely to continue for a while, putting additional homes on the market and dislocating families and disrupting communities in the process.

At the same time, a number of factors are constraining demand. Household formation has been down, particularly among young adults. High unemployment and uncertain job prospects may have reduced the willingness of some households to commit to homeownership. Availability of mortgage credit is an important constraint, to which I will return later. Additionally, housing may no longer be viewed as the secure investment it once was thought to be, given uncertainty about future home prices and the economy more generally.

Not surprisingly, the large imbalance of supply and demand has been reflected in a drop in home values of historic proportions. ...

To recap, the housing sector continues to suffer from serious imbalances--a marked excess supply for owner-occupied housing accompanied by a stronger rental markets. The narrative of the housing market over the next several years will revolve around the resolution of those imbalances.