by Calculated Risk on 4/19/2011 10:00:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were generally little changed in March. Thirty four states recorded unemployment rate decreases, seven states registered rate increases, and nine states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today.
...
Nevada continued to register the highest unemployment rate among the states, 13.2 percent in March. The states with the next highest rates were California, 12.0 percent, Florida, 11.1 percent, and Rhode Island, 11.0 percent. North Dakota reported the lowest jobless rate, 3.6 percent, followed by Nebraska and South Dakota, 4.2 and 4.9 percent, respectively.

The following graph shows the current unemployment rate for each state (red), and the max during the recession (blue). If there is no blue, the state is currently at the maximum during the recession.

Click on graph for larger image in graph gallery.

The states are ranked by the highest current unemployment rate.

The auto states - led by Michigan - seem to have seen the most improvement (blue area).

Two states are still at the recession maximum (no improvement): Idaho and Louisiana.

by Calculated Risk on 4/19/2011 08:30:00 AM

Click on graph for larger image in graph gallery.

Total housing starts were at 549 thousand (SAAR) in March, up 7.2% from the revised February rate of 512 thousand (revised up from 479 thousand).

Single-family starts increased 7.7% to 422 thousand in March (February was revised up to 392 thousand from 375 thousand).

The second graph shows total and single unit starts since 1968. This shows the huge collapse following the housing bubble, and that housing starts have mostly been moving sideways for over two years - with slight ups and downs due to the home buyer tax credit.

Here is the Census Bureau report on housing Permits, Starts and Completions.

Housing Starts:
Privately-owned housing starts in March were at a seasonally adjusted annual rate of 549,000. This is 7.2 percent (±18.0%)* above the revised February estimate of 512,000, but is 13.4 percent (±9.1%) below the March 2010 rate of 634,000.

Single-family housing starts in March were at a rate of 422,000; this is 7.7 percent (±15.0%)* above the revised February figure of 392,000. The March rate for units in buildings with five units or more was 117,000.

Building Permits:
Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 594,000. This is 11.2 percent (±2.6%) above the revised February rate of 534,000, but is 13.3 percent (±1.3%) below the March 2010 estimate of 685,000.

Single-family authorizations in March were at a rate of 405,000; this is 5.7 percent (±1.1%) above the revised February figure of 383,000. Authorizations of units in buildings with five units or more were at a rate of 173,000 in March.

This was above expectations of 525 thousand starts, and there was probably some weather related bounce back in March.

I expect starts to stay low until more of the excess inventory of existing homes is absorbed. I'll have more on starts later.

by Calculated Risk on 4/18/2011 10:46:00 PM

Jim the Realtor is having a contest to predict the price of an REO in San Diego. This house is in the Rancho Santa Fe Covenant, 5,835 sq ft and listed for $785,400 ... you'll see why:

Here is Jim's post Covenant Giveaway (put prediction in his comments).

by Calculated Risk on 4/18/2011 05:59:00 PM

Landon Thomas at the NY Times discusses how a possible restructuring might work: Talk of Greek Debt Restructuring Just Won't Die

One option that has attracted some attention, though, is a plan that would ask bond holders to trade in their current paper for debt with lower rates and longer maturities.

Such a proposal, which was successfully deployed by Uruguay in 2003, would, in theory, minimize banking losses and extend debt payments further into the future, easing Greece’s financing burden in the near term.

Last week, in a Bloomberg article, German Finance Minister Wolfgang Schaeuble was quoted concerning a report due in June on Greek debt sustainability:

“We will have to do something” if the review by the International Monetary Fund and European authorities in June raises doubts about Greece’s “debt sustainability,” Schaeuble was quoted as saying. “Then, further measures will have to be taken.”

It seems unlikely that anything will happen until after the report is released in June.

The yield on Greece ten year bonds jumped to 14.5% today and the two year yield is now up to 20.3%. The curve is inverted because investors expect to wake up one morning and own longer maturity debt at lower rates. This possibility hits the price of the 2 year bond more than the 10 year.

by Calculated Risk on 4/18/2011 02:54:00 PM

The BLS will release the Regional and State Employment and Unemployment report for March tomorrow ... here is a little good news from Nevada (highest state unemployment rate in the U.S.)

From Cy Ryan at the Las Vegas Sun: Las Vegas jobless rate dips to 13.3 percent in March

Employment in the Las Vegas area increased by more than 10,000 jobs in March -- the first increase in 38 months.
...
The state Department of Employment, Training and Rehabilitation reported today the Nevada jobless rate fell to 13.2 percent, down from 13.6 percent in February [peaked at 14.9% in 2010]. There were 1,114,400 Nevadans with jobs, an increase of more than 10,000 from a month earlier.

”Nevada's labor markets showed signs of life in March, hinting what may be the beginnings of an economic recovery,” says Bill Anderson, chief economist of the department.

It will not be all good news tomorrow. California lost jobs in March, although this follows a record increase in jobs added in February - and the California unemployment rate declined in March. From Alana Semuels at the LA Times: California employers cut a net 11,600 jobs in March

The state lost a net 11,600 jobs in March after adding a record 84,600 in February, and the unemployment rate fell to 12% from 12.1%.

by Calculated Risk on 4/18/2011 11:50:00 AM

As everyone knows, S&P issued a "negative outlook" on U.S. debt this morning. Although S&P has made plenty of recent rating mistakes, this is a reminder that there is work to do in the U.S.

Here is the approach an effective manager would take to analyzing the deficit.

The first step would be to divide up the deficit into several components and calculate the NPV (net present value) of each component. I'd divide the deficit into 1) cyclical portion, 2) General Fund ex-healthcare, 3) healthcare (Medicare and Medicaid), and 4) Social Security Insurance. This is nothing new - I've been pointing this out since I started the blog in 2005!

The cyclical deficit is due to the severe recession (and was predictable in 2005). As a result of the recession tax revenues declined, and there was more spending (both stimulus and automatic safety net expenditures). The good news is the cyclical deficit will decline as the economy slowly recovers. The bad news is recoveries following housing/credit bubbles and a financial crisis are usually sluggish and choppy. This is the portion of the deficit that gets the most attention, but from a long run perspective it is the least significant.

The General Fund ex-healthcare deficit is the most immediate problem. I've been writing about this for years. Back in 2006, Professor Samwick (who served as Chief Economist on the Staff of President Bush's Council of Economic Advisers) wrote: First Things First

CR writes:

Everyone should agree that the most immediate fiscal problem is the structural General Fund deficit. Excluding future health care costs, the structural deficit is around 4% to 4.5% of GDP. This serious problem has been caused almost exclusively by Bush's policies. And imagine if the economy slows next year, as many people expect, adding a cyclical deficit on top of the huge Bush structural deficit.

So isn't it reasonable to suggest that Mr. Bush and the GOP fix the structural deficit first, before addressing other long-term issues? Of course.

CR is correct in his diagnosis of the immediacy and the size of the problems of the General Fund deficit. As I have discussed in earlier posts ... the appropriate target for the General Fund deficit is for it to average to zero over a business cycle. A corollary to that is that the General Fund should be in surplus during the non-recessionary parts of that business cycle. (A slightly weaker target that I would also accept is that the Debt/GDP ratio not trend upward over time.)

In five years, nothing has changed. This structural deficit is still the most pressing problem.

Some politicians refuse to even address this issue, apparently because of a "no tax" pledge. This is silly and juvenile. Besides many of these politicians supported the policies that created the structural deficit, because they thought we were going to have surpluses forever. Since the forecasts for "surpluses forever" were inaccurate, reversing those policies should be a priority. There is no way to balance the General Fund ex-healthcare without gutting defense spending or reversing those earlier policies.

After this is resolved, the next step would be to address the long run healthcare issues. And the last step should be to address any Social Security shortfall.

As an experienced manager, I know that people will avoid the difficult choices and try to fix the wrong problems first. But an important role of management is to focus people on the more immediate and serious problem. And that is:

1) General Fund ex-healthcare, and
2) Healthcare.

So if we are serious about the deficit, we need to start by finally addressing the General Fund ex-healthcare structural deficit issue.