by Calculated Risk on 8/08/2010 05:15:00 PM

Professor Hamilton reviews the data last week: Current economic conditions. Unfortunately he is even more "discouraged":

Last week's new economics data were a mixed bag. But on balance I'd have to say I'm more discouraged than when the week began.
...
The Aruoba-Diebold-Scotti Business Conditions Index, which does not use hours, and does not adjust the monthly employment changes for the effects of temporary Census hiring, is certainly discouraged. In fact, the combined effect of last week's increase in new claims for unemployment insurance plus the weak employment report pushed the ADS dangerously close to the -0.8 value that historically would often mean that a new recession could be starting. The most recent inference of that series, however, can be heavily influenced by the latest data, and it would be a mistake to make too much out of the most very recent values.

But it would also be a mistake to say that everything is going just fine.

by Calculated Risk on 8/08/2010 10:55:00 AM

The key economic report this week will be July retail sales to be released on Friday. The FOMC statement on Tuesday will also be closely watched.

Sometime this week the July rail traffic report, from the Association of American Railroads (AAR), and the July Ceridian-UCLA Pulse of Commerce Index (based on diesel fuel consumption) will probably both be released. Both showed transportation weakness in June.

On Tuesday, the National Association of Independent Business (NFIB) will release the small business optimism survey for July. Also on Tuesday, the BLS will release the Q2 Productivity and Costs report, and the Census Bureau will release the Monthly Wholesale Trade: Sales and Inventories for June.

The Federal Reserve’s Federal Open Market Committee (FOMC) will meet on Tuesday, and the FOMC statement will be released at around 2:15 PM ET. This will be closely scrutinized for a discussion of the economic slowdown since the last meeting on June 23rd – especially considering the two weak employment reports in the interim – and to see if the FOMC will slightly ease monetary policy. There has been some discussion that the Fed might announce they are reinvesting maturing mortgage backed securities (MBS) into either new MBS or Treasury securities.

Jon Hilsenrath discusses this possibility in the WSJ: Jobs Report Intensifies Fed Debate

A key item on the agenda is likely to be whether the Fed should tweak its strategy for managing its $1.1-trillion portfolio of mortgage backed securities so holdings don't shrink in the months ahead.
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The divisive question for the Fed is what message they would be sending if they alter their reinvestment strategy. Fed officials are acutely aware that if they start reinvesting proceeds from maturing mortgage bonds -- as they now do for maturing Treasury debt -- many investors will think they are laying the groundwork for a more dramatic move of large scale purchases of new bonds ...

On Wednesday, the MBA will release the mortgage purchase applications index. Also on Wednesday, the June Trade Balance report will be released at 8:30 AM by the Census Bureau. The consensus is for the U.S. trade deficit to increase slightly to $42.5 billion (from $42.3 billion in May). This might lead to further adjustments for Q2 GDP.

Also on Wednesday the Job Openings and Labor Turnover Survey (JOLTS) for June will be released at 10 AM by the BLS. This report has been showing very little turnover in the labor market and few job openings.

On Thursday, the initial weekly unemployment claims will be released. Consensus is for a decline to 460K from 479K last week.

On Friday, the Consumer Price Index for July will be released at 8:30 AM. This is expected to show a 0.2% increase in prices. Also on Friday July retail sales will be released at 8:30 AM. The consensus is for an increase of 0.5% from the June rate, and 0.2% increase ex-autos. Also the preliminary August Reuter's/University of Michigan's Consumer sentiment index will be released at 9:55 AM, and June Business inventories will be released at 10 AM.

And of course the FDIC will probably have another busy Friday afternoon ...

And a summary of last week:

July Employment Report: 12K Jobs ex-Census, 9.5% Unemployment Rate

Total nonfarm payroll declined by 131,000 in July.
The number of temporary decennial Census worker declined by 143,000.
So the total nonfarm ex-Census is -143,000 minus -131,000 = +12,000¹.

¹For an explanation, see: Employment Report: Why the different payroll numbers?

Click on graph for larger image.

This graph shows the job losses from the start of the employment recession, in percentage terms.

The dotted line shows the impact of Census hiring. In July, there were 196,000 temporary 2010 Census workers on the payroll. The number of Census workers will continue to decline - and the gap between the solid and dashed red lines will be gone in a few months.

Read more »

by Calculated Risk on 8/08/2010 07:15:00 AM

From Theo Francis at footnoted.com: Jingle mail in Jersey from Hyatt Hotels ... (ht NorkaWest)

If you’re in Princeton, New Jersey, anytime soon, swing by the Hyatt Regency Princeton. With the Hyatt Hotels (H) quarterly report filed yesterday, it has become a symbol of the financial crisis ... one of Hyatt’s subsidiaries “did not have sufficient cash flow to meet interest payment requirements under its mortgage loan” on the property, in this case a 347-room hotel with a restaurant, bar and comedy club, just a mile from the famous university.
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“When hotel cash flow became insufficient to service the loan,” the company said in the filing, “HHC notified the lender that it would not provide assistance.” In other words, Hyatt decided to walk away — the equivalent of “jingle mail,” ... In Hyatt’s case, the company “and the lender agreed in principal to effect a deed in lieu of foreclosure transaction.”

Some people are still mailing in the keys!

by Calculated Risk on 8/07/2010 07:35:00 PM

An update by request ...

Click on graph for larger image.

This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

Note: The BLS reports 15+ weeks, so the 15 to 26 weeks number was calculated.

In July 2010, the number of unemployed for 27 weeks or more declined slightly to 6.572 million (seasonally adjusted) from 6.751 million in June. It is possible that the number of long term unemployed has peaked, but it is still very difficult for these people to find a job - and this is a very serious employment issue.

The less than 5 weeks category increased in July and is now at the highest level since January - and that is concerning.

Note: Even though these numbers are all seasonally adjusted, they can't be added together to calculate the unemployment rate.

Employment posts yesterday (with many graphs):

July Employment Report: 12K Jobs ex-Census, 9.5% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

Employment-Population Ratio, Part Time Workers, Unemployed over 26 Weeks

Employment Report: Temporary Help and Diffusion Index

by Calculated Risk on 8/07/2010 03:24:00 PM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for August 6, 2010.

Changes and comments from surferdude808:

The Federal Reserve was active this week issuing several Written Agreements and two Prompt Corrective Action Orders. Five state member banks were added to the Unofficial Problem Bank List this week. The additions are New Peoples Bank, Inc., Honaker, VA ($868 million); CapitalBank, Greenwood, SC ($745 million Ticker: CPBK); Premier Bank, Dubuque, IA ($292 million); Oregon Pacific Bank, Florence, OR ($164 million Ticker: ORPB); and Progress Bank of Florida, Tampa, FL ($119 million). Progress Bank of Florida has the dubious distinction of receiving a simultaneous Prompt Corrective Action Order with an enforcement action, which is a first during this crisis.

The Federal Reserve also issued a Prompt Corrective Action Order against Community First Bank - Chicago ($60 million). The OTS converted the Supervisory Agreement against Home Federal Bank of Hollywood to a Cease & Desist Order this week. The other changes are two removals -- the failed Ravenswood Bank ($301 million) and Charter West National Bank, which had its Supervisory Agreement terminated by the OCC.

The Unofficial Problem Bank List had a net change of three additions and finishes the week at 811 institutions with aggregate assets of $416.5 billion.

Click on graph for larger image in new window.

This graph shows the number of banks on the unofficial list. The number of institutions has more than doubled since we started the list in early August 2009 - even with all the bank failures (failures are removed from the list). The number of assets is up 50 percent over the last year.

On August 7, 2009, we listed 389 institutions with $276 billion in assets, and now the list has 811 institutions and $416.5 billion in assets.

The four red dots are the number of banks on the official problem bank list as announced in the FDIC quarterly banking profile for Q2 2009 through Q1 2010. The dots are lagged one month because of the delay in announcing formal actions. The FDIC Q2 2010 Quarterly Banking Profile will be released in a two weeks.

The unofficial count is close, but is slightly lower than the official count - probably mostly due to timing issues - so I expect the FDIC to list around 840 to 870 institutions at the end of Q2.

by Calculated Risk on 8/07/2010 11:41:00 AM

From the National Multi Housing Council (NMHC): Widespread Improvement Continues for Apartment Industry, According to NMHC Quarterly Survey of Market Conditions

The Market Tightness Index, which measures changes in occupancy rates and/or rents, rose from 81 to 83. Fully 69 percent of respondents said markets were tighter (meaning lower vacancies and/or higher rents). This was the sixth straight quarter in which this measure has risen, and is the highest figure since July 2006.
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“Demand for apartment residences has substantially increased thanks to modest improvements in the jobs market and the continuing decline in homeownership rates. ... Going forward, the near-term outlook for the apartment industry is likely to be tied to the pace of job growth,” [said NMHC Chief Economist Mark Obrinsky]

Click on graph for larger image in new window.

This graph shows the quarterly Apartment Tightness Index.

The index has increased for six straight quarters, but only has indicated tighter market conditions for the last two quarters (from very weak conditions).

A reading above 50 suggests the vacancy rate is falling. Based on limited historical data, I think this index will lead reported apartment rents by about 6 months to 1 year.

Also this data is a survey of large apartment owners only. The data released in late July from the Census Bureau showed the rental vacancy rate was steady in Q2 for all rental units in all areas.

A final note: The results of this survey are a little surprising, but it does suggest the rental market might have bottomed - at least for now. I've heard from a couple of sources that effective rents have risen slightly over the first half of 2010 at some large apartment complexes. Just something to be aware of ... (I've posted about this before).