by Calculated Risk on 4/10/2014 06:29:00 PM

First an error ...

From the NY Times: Tax Revenue Soars, Decreasing Deficit, U.S. says

Over all, the deficit is expected to equal 4.1 percent of gross domestic product in 2014, down from nearly 10 percent in 2009, during the depths of the recession.

Actually in February the CBO projected the deficit to be 3.0% of GDP in fiscal 2014 (4.1% was for fiscal 2013). Next week the CBO will update their projections, and I expect the deficit projection for 2014 to be revised down again.

NY Times:

The deficits in the next few years are expected to stay at 2 to 3 percent of gross domestic product, before widening sharply again toward the end of the decade.

It depends on what "widening sharply" means, but the CBO is projecting 3.4% in 2019 and 3.7% in 2020.

And this is a key point:

“It is the fastest four-year reduction in deficits since the demobilization after World War II,” [said Ernie Tedeschi, head of fiscal analysis at ISI], “but it has come in the middle of an economy that is not yet healed from the worst recession since the Great Depression.”

The economy would probably be better off (more employment, faster GDP growth) if the deficit hadn't been reduced so quickly.

by Calculated Risk on 4/10/2014 04:25:00 PM

This is a follow-up to a previous post: A Closer Look at Post-2007 Labor Force Participation Trends

From Melinda Pitts, John Robertson, and Ellyn Terry at Marcoblog: Reasons for the Decline in Prime-Age Labor Force Participation. They focus on prime working-age population (25 to 54 years old).  They discuss a number of topics with several graphs. Here is their conclusion:

The health of the labor market clearly affects the decision of prime-age individuals to enroll in school or training, apply for disability insurance, or stay home and take care of family. Discouragement over job prospects rose during the Great Recession, causing many unemployed people to drop out of the labor force. The rise in the number of prime-age marginally attached workers reflects this trend and can account for some of the decline in participation between 2007 and 2009.

But most of the postrecession rise in prime-age nonparticipation is from the people who say they don't currently want a job. How much does that increase reflect trends established well before the recession, and how much can be attributed to the recession and slow recovery? It's hard to say with much certainty. For example, participation by prime-age men has been on a secular decline for decades, but the pace accelerated after 2007—see here for more discussion.

Undoubtedly, some people will reenter the labor market as it strengthens further, especially those who left to undertake additional training. But for others, the prospect of not finding a satisfactory job will cause them to continue to stay out of the labor market. The increased incidence of disability reported among prime-age individuals suggests permanent detachment from the labor market and will put continued downward pressure on participation if the trend continues. The Bureau of Labor Statistics projects that the prime-age participation rate will stabilize around its 2013 level. Given all the contradictory factors in play, we think this projection should have a pretty wide confidence interval around it.

CR note: I think this is an important graph ...

Click on graph for larger image.

This graph shows the population distribution of the 25 to 54 age group over time. In 2013, the largest group is the tail end of the "boomers" - and this is a key reason why disability has increased in the prime working-age population.    This also probably explains the slight pickup in retirement for prime-age workers.

A very interesting post.

by Calculated Risk on 4/10/2014 12:26:00 PM

From Freddie Mac today: Fixed Mortgage Rates Tick Down

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving down slightly as we head into the spring homebuying season. ...

30-year fixed-rate mortgage (FRM) averaged 4.34 percent with an average 0.7 point for the week ending April 10, 2014, down from last week when it averaged 4.41 percent. A year ago at this time, the 30-year FRM averaged 3.43 percent.

15-year FRM this week averaged 3.38 percent with an average 0.6 point, down from last week when it averaged 3.47 percent. A year ago at this time, the 15-year FRM averaged 2.65 percent.

Click on graph for larger image.

This graph shows the 30 and 15 year fixed rate mortgage interest rate from the Freddie Mac Primary Mortgage Market Survey®. 

After increasing last June, mortgage rates have mostly moved sideways for the last 9 or 10 months.

by Calculated Risk on 4/10/2014 10:16:00 AM

From Trulia chief economist Jed Kolko: Home Prices and Population Growth: Cities vs. Suburbs

Despite declining investor purchases and more inventory coming onto the market, asking home prices continued to rise at the start of the spring housing season. Month-over-month, asking prices rose 1.2% nationally in March 2014, seasonally adjusted. Quarter-over-quarter, asking prices rose 2.9% in March 2014, seasonally adjusted, reflecting three straight months of solid month-over-month gains.

Year-over-year, asking prices are up 10% nationally and up in 97 of the 100 largest metros. Albany, NY, Hartford, CT, and New Haven, CT, are the only three large metros where prices fell year-over-year, albeit slightly.
...
In March, rents rose 3.9% year-over-year nationally. Rent increases were higher for apartments (4.4% year-over-year) than for single-family homes (1.9% year-over-year).
emphasis added

In November 2013, year-over-year asking prices were up 12.2%. In December, the year-over-year increase in asking home prices slowed slightly to 11.9%. In January, the year-over-year increase was 11.4%, in February, the increase was 10.4% - and now the increase is 10.0%.

This suggests prices are still increasing, but at a slightly slower pace.

Note: These asking prices are SA (Seasonally Adjusted) - and adjusted for the mix of homes - and this suggests further house price increases, but at a slower rate, over the next few months on a seasonally adjusted basis.

by Calculated Risk on 4/10/2014 08:35:00 AM

The DOL reports:

In the week ending April 5, the advance figure for seasonally adjusted initial claims was 300,000, a decrease of 32,000 from the previous week's revised level. The last time intial claims were this low was May 12, 2007 when they were 297,000. The previous week's level was revised up by 6,000 from 326,000 to 332,000. The 4-week moving average was 316,250, a decrease of 4,750 from the previous week's revised average.

The previous week was revised up from 326,000.

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

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 316,250.

This was lower than the consensus forecast of 320,000.  The 4-week average is close to normal levels during an expansion.