by Calculated Risk on 7/06/2012 04:34:00 PM

Once again rail traffic was "mixed". This was mostly due to the year-over-year decline in coal traffic. Building related commodities were up such as lumber and crushed stone, gravel, sand. Lumber was up 11.4% from June 2011.

From the Association of American Railroads (AAR): AAR Reports Mixed Rail Traffic for June

The Association of American Railroads (AAR) today reported U.S. rail carloads originated in June 2012 totaled 1,140,271, down 1.3 percent compared with June 2011. Intermodal volume in June 2012 totaled 996,022 containers and trailers, up 49,168 units or 5.2 percent compared with June 2011. The June 2012 average weekly intermodal volume of 249,006 units is the highest average for any June on record and the third highest for any month, behind August and October 2006.
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“U.S. intermodal originations in 2012 through June are slightly ahead of 2006’s record pace, setting up the very real possibility that 2012 will be the highest-volume intermodal year ever for U.S. railroads,” said AAR Senior Vice President John T. Gray. “The recovery in intermodal traffic since the recession has been remarkable and is due in large part to railroads’ huge investments in their intermodal business that have improved rail intermodal’s reliability and efficiency.”

Click on graph for larger image.

This graph shows U.S. average weekly rail carloads (NSA).

U.S. rail carload traffic in June 2012 wasn’t as encouraging as intermodal traffic, but it was better than it’s been lately. U.S. freight railroads originated 1,140,271 carloads in June, an average of 285,068 carloads per month and down 1.3% from June 2011.

That’s the lowest percentage decline in five months, mainly because coal carloads weren’t as lousy as they have been. Coal carloads in June 2012 averaged 114,485 per week, the highest weekly average in four months and down just 6.2% from June 2011. Normally, a 6.2% year-over year decline is terrible, but compared to the 11% to 17% declines in the previous four months, it’s not so bad.

Grains are down due to fewer exports.

The second graph is for intermodal traffic (using intermodal or shipping containers):

Graphs reprinted with permission.

Intermodal traffic is now at peak levels.

U.S. railroads originated 996,022 intermodal containers and trailers in June 2012, up 5.2% (49,168 units) over June 2011 and an average of 249,006 units per week. That’s the highest average for any June in history and the third highest average for any month in history

The top months for intermodal are usually in the fall, and it looks like intermodal traffic will be at record levels this year.

Earlier on employment:
• June Employment Report: 80,000 Jobs, 8.2% Unemployment Rate
• Employment: Another Weak Report (more graphs)
• All Employment Graphs

by Calculated Risk on 7/06/2012 02:21:00 PM

Back in 2006, I predicted we'd see construction job losses in the seven figures. All through 2006 and into 2007, I was constantly asked: "Where are the construction job losses you predicted?"

And then it started ... and the BLS reported construction employment fell 2.27 million from peak to trough. No one asks that question any more.

There were several reasons why construction jobs didn't decline at the same time as housing starts. First, construction includes residential, commercial and other construction (like roads). Even after housing starts began to collapse, commercial real estate was still booming and workers shifted from residential to commercial (many commercial projects have long time frames - and many developers remained in denial). Also some construction workers are paid in cash (illegal immigrants), and these workers weren't counted on the BLS payrolls.

Now people are asking "Where are the construction jobs?"

Oh, Grasshopper ... the construction jobs are coming.

The graph below shows the number of total construction payroll jobs in the U.S. including both residential and non-residential since 1969 compared to housing starts. Unfortunately the BLS only started breaking out residential construction employment fairly recently (residential specialty trade contractors in 2001).

Right away we can see that construction employment isn't just tied to housing starts. There are other categories that have been generally increasing over the decades.

Click on graph for larger image.

Notice that housing starts collapsed in 2006, but construction employment didn't start falling until 2007 - and didn't collapse until 2008. Some people will look at the sub-categories for construction, but there are two problems: 1) construction workers shift between categories, and 2) the BLS hasn't been tracking these categories for very long.

Even though construction is down since the beginning of the year, and only increased by 2,000 jobs in June, construction employment appears to have bottomed, and should add to both GDP and employment growth in 2012.

Other construction indicators - housing starts, new home sales, construction spending, builder comments - are all improving (although public construction spending is decreasing), and construction employment will follow.

A little Kung Fu:

Young Caine: "Old man, how is it that you hear these things?"

Master Po: "Young man, how is it that you do not?"

The housing recovery is here. The construction jobs are coming.

Earlier on employment:
• June Employment Report: 80,000 Jobs, 8.2% Unemployment Rate
• Employment: Another Weak Report (more graphs)
• All Employment Graphs

by Calculated Risk on 7/06/2012 12:42:00 PM

Reis reported that the vacancy rate for regional malls declined slightly to 8.9% in Q2 from 9.0% in Q1. This is down from a cycle peak of 9.4% in Q3 of last year.

For Neighborhood and Community malls (strip malls), the vacancy rate declined to 10.8% in Q2, from 10.9% in Q1. For strip malls, the vacancy rate peaked at 11.0% in Q2 of last year.

Comments from Reis Senior Economist Ryan Severino:

[Strip mall] The national vacancy rate fell by 10 bps during the second quarter to 10.8%. This is the second consecutive quarterly decline in the vacancy rate after vacancies had generally been rising between the second quarter of 2005 and the fourth quarter of 2011. Although demand for space remains weak, new construction remains moored at such low levels that even weak demand is sufficient to push vacancy rates downward. Only 572,000 SF of neighborhood and community center space were delivered during the quarter. That is the second-lowest quarterly figure on record since Reis began publishing quarterly data in 1999 and a fairly substantial decline from the already scant 1.554 million SF that were delivered during the first quarter.

Despite the second consecutive quarterly vacancy decline, Reis is not yet convinced that a recovery for shopping centers has commenced. Just as much of the recent improvement in the market is owed to limited increases in supply as the somewhat resurgent demand. New completions remain just above historically low levels. With supply growth once again falling back to such trivial levels, the modest demand we observed pushed vacancy down slightly. Two consecutive quarters of vacancy decline is a notable result, but nonetheless only represents the nascent stages of stabilization. With construction projected to remain at low levels, Reis expects vacancies to continue moving slowly downward in 2012 as demand for space outpaces new construction.
...
Regional malls posted another quarter of modest improvement, with national vacancies declining by 10 bps to 8.9%. This is the third consecutive quarter with a vacancy decline. Asking rents grew by 0.3%, marking the fifth consecutive quarter of rent increases. Although regional malls continue to perform better then neighborhood and community centers at this juncture, demand for space remains weak.

Click on graph for larger image.

This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). The regional mall data starts in 2000. Back in the '80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.

In the mid-'00s, mall investment picked up as mall builders followed the "roof tops" of the residential boom (more loose lending). This led to the vacancy rate moving higher even before the recession started. Then there was a sharp increase in the vacancy rate during the recession and financial crisis.

The yellow line shows mall investment as a percent of GDP. This isn't zero because this includes renovations and improvements. New mall investment has essentially stopped following the financial crisis.

The good news is, as Severino noted, "new [mall] completions remain just above historically low levels", and, with very little new supply, the vacancy rate will probably continue to decline slowly.

Mall vacancy data courtesy of Reis.

Earlier on employment:
• June Employment Report: 80,000 Jobs, 8.2% Unemployment Rate
• Employment: Another Weak Report (more graphs)
• All Employment Graphs

by Calculated Risk on 7/06/2012 10:54:00 AM

Another month, another disappointing employment report.

The economy has added 902,000 jobs over the first half of the year (952,000 private sector jobs). At this pace, the economy would add around 1.9 million private sector jobs in 2012; less than the 2.1 million added in 2011.

However job growth has really slowed over the last three months with only 225,000 payroll jobs added (a 900,000 annual pace), and only 274,000 private sector jobs (a 1.1 million annual pace). This is very sluggish employment growth.

The unemployment rate was unchanged at 8.2% in June The household survey showed a another increase in employment (128,000 jobs added), and since the participation rate was unchanged at 63.8%, that was just enough to keep with the increase in the labor force.

U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, increased slightly to 14.9%.

The bottom line is this was another disappointing employment report. Here are a few more graph ...

Employment-Population Ratio, 25 to 54 years old

Click on graph for larger image.

Since the participation rate has declined recently due to cyclical (recession) and demographic (aging population) reasons, an important graph is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the employment-population ratio for this group was trending up as women joined the labor force. The ratio has been mostly moving sideways since the early '90s, with ups and downs related to the business cycle.

This ratio should probably move back to or above 80% as the economy recovers. So far the ratio has only increased slightly from a low of 74.7% to 75.6% in June (this was down slightly in June.)

Percent Job Losses During Recessions


This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at maximum job losses.

In the earlier post, the graph showed the job losses aligned at the start of the employment recession.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 8.2 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of part time workers increased in June to 8.21 millon.

These workers are included in the alternate measure of labor underutilization (U-6) that increased in June to 14.9%, up from 14.8% in May.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 5.37 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 5.41 million in May. This is generally trending down, but very slowly. Long term unemployment remains one of the key labor problems in the US.

State and Local Government

So far in 2012 - through June - state and local government have lost 20,000 jobs (3,000 jobs were added in June). In the first six months of 2011, state and local governments lost 133,000 payroll jobs - and 230,000 for the year. So the layoffs have slowed.

This graph shows total state and government payroll employment since January 2007. State and local governments lost 129,000 jobs in 2009, 262,000 in 2010, and 230,000 in 2011.

Note: Some of the stimulus spending from the American Recovery and Reinvestment Act probably kept state and local employment from declining faster in 2009.

Of course the Federal government is still losing workers (52,000 over the last 12 months and another 7,000 in June alone), but it looks like state and local government employment losses might be ending (or at least slowing sharply).

Overall this was another weak report.
All Employment Graphs

by Calculated Risk on 7/06/2012 08:30:00 AM

From the BLS:

Nonfarm payroll employment continued to edge up in June (+80,000), and the unemployment rate was unchanged at 8.2 percent, the U.S. Bureau of Labor Statistics reported today.
...
Both the civilian labor force participation rate and the employment-population ratio were unchanged in June at 63.8 and 58.6 percent, respectively.
...
The change in total nonfarm payroll employment for April was revised from +77,000 to +68,000, and the change for May was revised from +69,000 to +77,000.

Click on graph for larger image.

This was another weak month, and the revisions for the previous two months were offsetting.

This was below expectations of 90,000 payroll jobs added.

The second graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate was unchanged at 8.2% (red line).

The Labor Force Participation Rate was unchanged at 63.8% in June (blue line). This is the percentage of the working age population in the labor force.

The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although most of the recent decline is due to demographics.

The Employment-Population ratio was unchanged at 58.6% in June (black line).

The third graph shows the job losses from the start of the employment recession, in percentage terms. The dotted line is ex-Census hiring.

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

This was weaker payroll growth than expected (expected was 90,000). More later ...