by Calculated Risk on 2/07/2015 01:09:00 PM

The key economic report this week is January retail sales on Thursday.

----- Monday, February 9th -----
At 10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

----- Tuesday, February 10th -----
7:30 AM ET: NFIB Small Business Optimism Index for January.

Early: Trulia Price Rent Monitors for January. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

10:00 AM: Job Openings and Labor Turnover Survey for December from the BLS.

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

Jobs openings increased in November to 4.972 million from 4.830 million in October.

The number of job openings (yellow) were up 21% year-over-year compared to November 2013, and Quits were up 7% year-over-year.

----- Wednesday, February 11th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

----- Thursday, February 12th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 285 thousand from 278 thousand.

8:30 AM ET: Retail sales for January will be released.

This graph shows retail sales since 1992 through December 2014. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). On a monthly basis, retail sales decreased 0.9% from November to December (seasonally adjusted), and sales were up 3.2% from December 2013.

The consensus is for retail sales to decrease 0.5% in January, and to decrease 0.5% ex-autos.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for December.  The consensus is for a 0.2% increase in inventories.

----- Friday, February 13th -----
10:00 AM: University of Michigan's Consumer sentiment index (preliminary for February). The consensus is for a reading of 98.5, up from 98.1 in January.

by Calculated Risk on 2/07/2015 08:11:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Feb 7, 2015.

Changes and comments from surferdude808:

One subtraction from the Unofficial Problem Bank List this week that leaves the list at 387 institutions with assets of $121.4 billion. A year ago, the list held 588 institutions with assets of $195.1 billion.

Thanks to reader for catching an action termination against Pacific Mercantile Bank, Costa Mesa, CA ($1.1 billion). The other alternation to this list this week was a name change for Worthington Federal Bank, Huntsville, AL ($130 million) to American Bank of Huntsville.

by Calculated Risk on 2/06/2015 07:56:00 PM

First, from Jon Hilsenrath at the WSJ: Jobs Report Means Fed Could Still Raise Rates in June

Two important milestones now loom for the Fed. First, Fed Chairwoman Janet Yellen is due to deliver her semiannual testimony to Congress later this month. She’ll use that to update lawmakers and the public on the economic outlook.

Second, Fed officials will decide at their March meeting whether to change or drop the language in their policy statement pledging to “be patient” in deciding when to raise their benchmark short-term interest rate from zero.

And from Tim Duy: Upbeat Jobs Report

... I don't think Yellen intended to imply that "patient" always means two meetings. Perhaps I just have too many memories about "considerable time" first meaning six months and then not. Plus, the Fed is aware of its past history, and in 2004 "patient" turned to "moderate" just one meeting before the hike. But it was technically the second meeting after "patient" was dropped, so is that two meetings? Also, as we saw with the "considerable" to "patient" transition, the Fed has its own unique way of wordsmithing that can deliver something for everyone. And finally, Yellen has the press conference to redefine her interpretation of "patient." But maybe I am wrong. In any event, I am not taking a fixed stand on what "patient" means until the press conference.

Bottom Line: The US economy has very real momentum on its side at the moment. It is more resilient to shocks than commonly assumed. This isn't 2011. June is still on the table.

CR Note: My understand was "patient" meant at least two meetings, perhaps more. So removing "patient" at the next meeting would mean June is possible.

by Calculated Risk on 2/06/2015 03:41:00 PM

A long note from housing economist Tom Lawler:

While accurate and timely data on the size of the single-family rental market are not available, virtually all surveys suggest that the size of the single-family rental market surged from the end of 2007 through the end of last year. Below are some stats on the renter share of either the occupied single-family housing market (detached and attached, ACS and AHS) or the one-unit housing market (AHS, which includes manufactured housing, and is derived from detailed tables not shown in the press release).

While comparisons of these surveys with decennial Census results suggest that none of the surveys provide a particularly good “snapshot” of the overall US housing market, the fact that all surveys point to a sharp increase in the size of the SF rental market is quite consistent with anecdotal and other regional reports.

Renter Share of Occupied One-Unit Properties
Single Family (ex Mfg Housing)			One-Unit Structures (SF plus Mfg. Housing)
	ACS	AHS		HVS
2007 (avg)	15.0%	14.1%	Q4/2007	14.1%
2010 (avg)	16.8%	N/A	Q4/2010	16.5%
2013 (avg)	18.6%	17.5%	Q4/2013	18.1%
			Q4/2014	18.8%

In terms of decennial Census data, in 2010 Census eliminated the “long form,” which in previous Censuses had supplied more detailed information on (among many things) the characteristics of the occupied and vacant housing stock. As such, tables on the “standard” Census website for housing tenure (owner/renter) by units in structure are not available.

In one of the reports from Census providing estimation results from the 2010 Census Coverage Measurement program (#2010-G-02), however, Census does provide estimates of occupied units by tenure and units in structure. Below are two tables: the first shows “official” decennial Census results for total, occupied, and vacant single-family units (attached and detached) by tenure from Census 2000 and Census 2010, and the second shows “updated” single-family estimates for these two years based on post-Census research results.

Occupied and Vacant Single-Family Housing Units by Tenure (millions)
	Total	Owner-Occupied	Renter-Occupied	Vacant	Renter Share of Occupied SF Units
4/1/2000	76.3	60.1	10.6	5.6	15.0%
4/1/2010	89.0	65.6	15.2	8.1	18.8%
Change	12.7	5.5	4.6	2.5	3.8%
"Adjusted" Results Based on Post-Census Research
	Total	Owner-Occupied	Renter-Occupied	Vacant	Renter Share of Occupied SF Units
4/1/2000	77.0	60.5	10.7	5.8	15.0%
4/1/2010	90.0	65.9	15.3	8.6	18.8%
Change	13.0	5.4	4.6	2.8	3.8%

Focusing on the bottom table (which probably reflect the “most accurate” aggregate statistics), adjusted decennial results suggest that from April 2000 to April 2010 the total single-family housing stock increased by about 13.0 million units, but the number of owner-occupied SF housing units rose by just 5.4 million units; the number of renter-occupied SF housing units increased by 4.6 million units; and the number of vacant SF housing units increased by 2.8 million units. As a result, the renter share of occupied SF housing units jumped to 18.8% in 2010 from 15.0% in 2000.

Note that the Census 2010 data indicate that the renter share of the occupied SF housing stock was higher than other surveys (ACS and especially HVS) suggest.

If one to believe that the CHANGE in the renter share of the occupied SF housing stock since April 1, 2000 were similar to the change in that share as derived from the HVS, then (using other assumptions) the SF housing stock in the fourth quarter of 2014 would look something like that shown below.

Official Census Results
	Total	Owner-Occupied	Renter-Occupied	Vacant	Renter Share of Occupied SF Units
4/1/2000	76.3	60.1	10.6	5.6	15.0%
4/1/2010	89.0	65.6	15.2	8.1	18.8%
Change	12.7	5.5	4.6	2.5	3.8%
"Adjusted" Results Based on Post-Census Research
	Total	Owner-Occupied	Renter-Occupied	Vacant	Renter Share of Occupied SF Units
4/1/2000	77.0	60.5	10.7	5.8	15.0%
4/1/2010	90.0	65.9	15.3	8.6	18.8%
Change	13.0	5.4	4.6	2.8	3.8%
Q4/2014 Estimates based on Changes in HVS Results from Q2/2010 to Q4/2014
	Total	Owner-Occupied	Renter-Occupied	Vacant	Renter Share of Occupied SF Units
Q4/2014 (est)	91.2	65.6	17.9	7.7	21.4%
Change from 4/1/2010)	1.2	-0.4	2.5	-0.7	2.5%
Change from 4/1/2000	14.9	5.4	7.2	2.3	6.4%

There are two “issues” with the numbers at the bottom of this table. First, of course, they use HVS results, which are not the most reliable. Second, in April 2014 the HVS began “phasing in” a new sample based on the Master Address File compiled during Census 2010, with the “phase-in” beginning in April 2014 and ending in July 2015. Since a comparison between decennial Census results and the HVS for 2010 indicated that the HVS was overstating homeownership rates and vacancy rates, a comparison between Q4/2014 results and earlier periods may not be “appropriate.” Specifically, as the new sample is phased in, one would expect the HVS quarterly data to show larger increases in the number of renters than could have been the case using the old sample.

Even if one used the change in the HVS renter share of the one-unit market from Q2/2010 to Q1/2014, however, the data would suggest that there was a considerable increase in number of renter-occupied single-family homes since 2010.

Here are what might be considered “best guess” estimates of the single-family housing stock (detached and attached) for 2000, 2010, and the last quarter of 2014.

Occupied and Vacant Single-Family Housing Units by Tenure (millions)
	Total	Owner-Occupied	Renter-Occupied	Vacant	Renter Share of Occupied SF Units
4/1/2000	77.0	60.5	10.7	5.8	15.0%
4/1/2010	90.0	65.9	15.3	8.6	18.8%
Q4/2014 (est)	91.2	66.0	17.5	7.7	21.0%

Much of the discussion on the sharp increase in the size of the SF rental market over the past several years has focused on “institutional” investor purchases of “distressed” SF properties, though it is quite clear that the size of the SF rental market was increasing well before most institutional investors entered the market.

There has been much less talk, however, about the demand for SF rentals, and specifically why so many households have decided to rent SF homes. E.g., how many householders are renting SF homes not because they “want” to rent, but because (1) mortgage credit has been “tight;” (2) the householders’ credit is “impaired,” in many cases because they lost their previous home to foreclosure and/or a short sale; and/or (3) they were consistently outbid by “investors” and now have been priced out of the market? On the other hand, how many householders are renting because they don’t want to purchase a home, either because they don’t like the “investment” prospects – especially those who believe they may want to move over those next few years, given the high costs of buying and selling a home – or because they don’t like the “hassle” of or potential but unknown costs associated with homeownership, but who want the “lifestyle” associated with owning a SF home? During much of the last decades householders wanting to live in a SF home in many markets faced extremely limited supplies of SF homes for rent. That is much less true today in many markets across the country.

Whatever the reasons, the surge in the size of the SF rental market has helped “sop up” much of the “excess building” during the first seven years of the previous decade, with the vast bulk of that “excess being in the built-for-sale SF market.

If for various reasons – e.g., an easing in mortgage credit, improved prospects for better-paying jobs and/or changes in potential mobility, shifts in home price expectations, etc. – an increasing number of current renters decided they wanted to own a home, then what might happen is (1) vacancy rates on existing SF rentals might increase and rents soften; (2) an increasing number of SF rental properties might be put up for sale; and (3) the resulting rise in the demand to purchase homes would not fully need to be met with an increase in the construction of new SF homes. (Just sumpin’ to think about.)

On the next page is a table showing the renter-occupied share of SF detached homes as measured by the ACS for 2006 and for 2013 by state. (Note: previous tables showed the renter share of SF detached and attached homes, which is higher. I just had already constructed this table.) This share increased from 2006 to 2013 in every state save for North Dakota, and the share jumped by more than three percentage points in 24 states.

Renter Share of Occupied SF Detached Homes, ACS
	2006	2013	Chg
Alabama	14.7%	18.1%	3.4%
Alaska	14.0%	16.0%	1.9%
Arizona	14.7%	22.8%	8.1%
Arkansas	18.6%	20.6%	2.0%
California	18.9%	24.1%	5.3%
Colorado	13.1%	16.9%	3.8%
Connecticut	6.6%	8.9%	2.3%
Delaware	7.4%	10.1%	2.7%
District of Columbia	12.7%	14.6%	1.9%
Florida	13.0%	18.4%	5.5%
Georgia	15.2%	20.5%	5.3%
Hawaii	23.4%	25.7%	2.3%
Idaho	15.0%	18.2%	3.2%
Illinois	9.8%	13.0%	3.3%
Indiana	12.3%	15.7%	3.4%
Iowa	12.1%	14.2%	2.0%
Kansas	15.1%	17.9%	2.8%
Kentucky	14.3%	17.6%	3.3%
Louisiana	17.1%	18.7%	1.6%
Maine	8.8%	11.8%	3.1%
Maryland	8.5%	10.5%	2.0%
Massachusetts	6.2%	7.4%	1.3%
Michigan	9.6%	14.1%	4.5%
Minnesota	6.2%	9.0%	2.8%
Mississippi	17.1%	20.5%	3.4%
Missouri	13.5%	16.9%	3.4%
Montana	15.9%	19.0%	3.2%
Nebraska	15.6%	17.1%	1.4%
Nevada	17.3%	27.4%	10.1%
New Hampshire	7.0%	8.6%	1.6%
New Jersey	6.6%	8.5%	1.9%
New Mexico	16.8%	19.3%	2.5%
New York	8.9%	10.4%	1.5%
North Carolina	17.0%	20.0%	3.0%
North Dakota	12.7%	11.1%	-1.6%
Ohio	11.8%	16.0%	4.2%
Oklahoma	18.6%	21.9%	3.3%
Oregon	15.6%	20.1%	4.5%
Pennsylvania	8.9%	10.9%	2.1%
Rhode Island	8.5%	10.4%	1.9%
South Carolina	16.1%	17.0%	0.9%
South Dakota	14.7%	15.6%	0.9%
Tennessee	14.6%	18.1%	3.5%
Texas	14.8%	18.0%	3.2%
Utah	9.8%	14.1%	4.3%
Vermont	10.0%	10.3%	0.3%
Virginia	12.9%	15.8%	2.9%
Washington	14.1%	17.9%	3.8%
West Virginia	14.4%	16.4%	2.0%
Wisconsin	8.2%	11.0%	2.7%
Wyoming	15.4%	16.4%	1.0%
US	13.1%	16.7%	3.6%

Click on graph for larger image.

by Calculated Risk on 2/06/2015 02:02:00 PM

By request, here is an update on an earlier post through the January employment report.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I'll just stick to the beginning of each term.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.  Reagan's 2nd term saw about the same job growth as during Carter's term.  Note: There was a severe recession at the beginning of Reagan's first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter's term (gas prices increased sharply and there was an oil embargo).

Term	Private Sector Jobs Added (000s)
Carter	9,041
Reagan 1	5,360
Reagan 2	9,357
GHW Bush	1,510
Clinton 1	10,885
Clinton 2	10,070
GW Bush 1	-844
GW Bush 2	381
Obama 1	2,018
Obama 2	5,5421
124 months into 2nd term: 11,084 pace.

¹Currently Obama's 2nd term is on pace to be the best ever.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). President George H.W. Bush only served one term, and President Obama is in the second year of his second term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (yellow) took office.

There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.

Click on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 844,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 463,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,955,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 2,018,000 more private sector jobs at the end of Mr. Obama's first term.  Twenty four months into Mr. Obama's second term, there are now 7,560,000 more private sector jobs than when he initially took office.

 A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 688,000 jobs). These job losses have mostly been at the state and local level, but more recently at the Federal level.  This has been a significant drag on overall employment.

And a table for public sector jobs. Public sector jobs declined the most during Obama's first term, and increased the most during Reagan's 2nd term.

Term	Public Sector Jobs Added (000s)
Carter	1,304
Reagan 1	-24
Reagan 2	1,438
GHW Bush	1,127
Clinton 1	692
Clinton 2	1,242
GW Bush 1	900
GW Bush 2	844
Obama 1	-702
Obama 2	141
124 months into 2nd term, 28 pace

Looking forward, I expect the economy to continue to expand for the next two years (at least), so I don't expect a sharp decline in private employment as happened at the end of Mr. Bush's 2nd term (In 2005 and 2006 I was warning of a coming recession due to the bursting of the housing bubble).

For the public sector, the cutbacks are clearly over at the state and local levels, and it appears cutbacks at the Federal level have slowed.  Right now I'm expecting some increase in public employment during Obama's 2nd term, but nothing like what happened during Reagan's second term.