RSS Feed by Calculated Risk on 6/06/2011 11:34:00 AM
Monday, June 06, 2011
Housing Starts and the Unemployment Rate
An update by request: The following graph shows single family housing starts (through April) and the unemployment rate (inverted) through May. Note: there are many other factors impacting unemployment, but housing is a key sector.
You can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn't hold.
Click on graph for larger image in graph gallery.
Housing starts (blue) increased a little in 2009 with the homebuyer tax credit - and have declined recently, but mostly starts have moved sideways for the last two and a half years. This is one of the reasons the unemployment rate has stayed elevated compared to previous recoveries.
This is what I expected when I first posted the above graph almost two years ago. I wrote:
[T]here is still far too much existing home inventory, a sharp bounce back in housing starts is unlikely, so I think ... a rapid decline in unemployment is also unlikely.Usually near the end of a recession, residential investment (RI) picks up as the Fed lowers interest rates. This leads to job creation and also household formation - and that leads to even more demand for housing units - and more jobs, and more households - a virtuous cycle that usually helps the economy recover.
However this time, with the huge overhang of existing housing units, this key sector hasn't been participating.
The good news is residential investment should increase modestly in 2011, mostly from multi-family and home improvement, and that will help push down the unemployment rate. But I still think the labor market recovery will be sluggish until the excess housing supply is absorbed.
Survey: Small Business Hiring plans turn negative
by Calculated Risk on 6/06/2011 08:48:00 AM
The National Federation of Independent Business (NFIB) will release their April survey on Tuesday, June 14th. Here is a pre-release of the employment results from NFIB: NFIB Jobs Statement: On Main Street, Job Creation is Collapsing
“After solid job gains early in the year, progress has slowed to a trickle ... meaningful job creation on Main Street has collapsed.
...
[I]ndications of minimal future growth include the fact that in the next three months, 13 percent plan to increase employment (down 3 points), and 8 percent plan to reduce their workforce (up 2 points). That yields a seasonally adjusted net negative 1 percent of owners planning to create new jobs, a 3 point loss from April.
...
“Overall, reports of job reductions have returned to historically normal levels. However, the percent of owners hiring has not recovered to levels historically observed after two years of expansion. With one in four owners still reporting ‘weak sales’ as their No. 1 business problem, there is little need to add employees ...
Click on graph for larger image in graph gallery.This graph shows the net hiring plans for the next three months.
Hiring plans declined in May and are slightly negative.
Small businesses have a larger percentage of real estate and retail related companies than the overall economy. With the high percentage of real estate (including small construction companies), I expect small business hiring to remain sluggish for some time.
Note that job reductions have fallen to "historically normal levels", but there is little job creation.
Sunday, June 05, 2011
More details on Greek Debt Restructuring
by Calculated Risk on 6/05/2011 05:51:00 PM
We could call it a "soft" restructuring. Or just call it a "default" ...
From the WSJ: Greek Debt Plan Gains Support
Support among European governments is building for ... probably ... what would be the first default of a euro-zone nation in the common currency's history.We will see tomorrow if this plan is seen as a positive for short term debt - the Greek 2 year bond yields fell sharply on Friday to 22.8%. Here are the links for bond yields for several countries (source: Bloomberg):
...
Under the proposed plan, the 17 euro-zone governments would ask Greece's creditors to exchange their soon-to-mature debt for debt with a longer maturity, a process that could begin as early as July after finance ministers approve the new Greek aid package at their meeting June 20 ... A German finance ministry paper ... proposes a seven-year extension on maturing debt.
| Greece | 2 Year | 5 Year | 10 Year |
| Portugal | 2 Year | 5 Year | 10 Year |
| Ireland | 2 Year | 5 Year | 10 Year |
| Spain | 2 Year | 5 Year | 10 Year |
| Italy | 2 Year | 5 Year | 10 Year |
| Belgium | 2 Year | 5 Year | 10 Year |
| France | 2 Year | 5 Year | 10 Year |
| Germany | 2 Year | 5 Year | 10 Year |
Earlier ...
• Summary for Week Ending June 3rd
• Schedule for Week of June 5th
Comparing Payroll Job Growth in 2011 to 2010
by Calculated Risk on 6/05/2011 01:58:00 PM
Although payroll job growth slowed sharply in May, with only 54,000 net jobs added, job growth this year is well ahead of 2010. Note: I'll have an update to my economic outlook later.
The first table below shows payroll job growth in 2010 and 2011 through May (excluding Census hires in 2010). The third column is total payroll growth for 2010.
Although job growth is sluggish relative to the slack in the labor market (with the unemployment rate at 9.1%), 2011 is clearly better than 2010 through May.
| Payroll Jobs Added (000s) | |||
|---|---|---|---|
| 2010 through May1 | 2011 through May | Total for 2010 | |
| Total Payroll | 304 | 783 | 955 |
| Private Sector | 358 | 908 | 1,173 |
One of the reasons for the improvement this year is construction. Yes - construction!
For the first time since 2005, residential construction employment will probably be positive in 2011. Just eliminating the drag will help. Also residential investment will probably make a positive contribution to GDP growth for the first time since 2005 - mostly because of an increase in multi-family construction and home improvement. So this is a little bit of good news ... even though most of the recent economic news has been disappointing.
| Annual Change in Construction Payroll jobs (000s) | |||
|---|---|---|---|
| Year | Total Construction Jobs | Residential | Non-Residential |
| 2002 | -85 | 88 | -173 |
| 2003 | 127 | 161 | -34 |
| 2004 | 290 | 230 | 60 |
| 2005 | 416 | 268 | 148 |
| 2006 | 152 | -62 | 214 |
| 2007 | -198 | -273 | 75 |
| 2008 | -787 | -510 | -277 |
| 2009 | -1,053 | -431 | -622 |
| 2010 | -149 | -113 | -36 |
| May-11 | 31 | 22 | 9 |
Earlier ...
• Summary for Week Ending June 3rd
• Schedule for Week of June 5th
Hotels: Occupancy Rate continues to recover after weak April and early May
by Calculated Risk on 6/05/2011 09:07:00 AM
Here is the weekly update on hotels from HotelNewsNow.com: STR: US performance for week ending 28 May
In year-over-year comparisons, occupancy rose 4.9 percent to 64.2 percent, average daily rate increased 3.8 percent to US$100.93, and revenue per available room finished the week up 8.9 percent to US$64.81.Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.
Click on graph for larger image in graph gallery.This graph shows the seasonal pattern for the hotel occupancy rate using a four week average for the occupancy rate.
Back in March the four week average was almost back to 2008 levels, but then hotels hit a soft patch. Over the last couple of weeks, the occupancy rate has increased again - and the four week average is now back close to 2008 levels again - and is even close to normal just as the summer travel season is about to begin.
However, ADR and RevPAR are still well below the pre-recession levels. ADR is about 7% below the level of the same week in 2008.
Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com
Earlier ...
• Summary for Week Ending June 3rd
• Schedule for Week of June 5th
Saturday, June 04, 2011
Schedule for Week of June 5th
by Calculated Risk on 6/04/2011 08:19:00 PM
Earlier: Summary for Week Ending June 3rd
The key economic release this week will be the trade balance report on Thursday. Fed Chairman Ben Bernanke will speak on Tuesday. The Fed's Beige Book, to be released on Wednesday, should provide some discussion of the recent economic weakness.
No scheduled releases. NY Fed President Dudley and Philly Fed President Plosser both speak later in the day.
10:00 AM: Job Openings and Labor Turnover Survey for April from the BLS.
Click on graph for larger image in graph gallery.This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.
In general job openings (yellow) have been trending up - and are up 16% from March 2010. However the overall turnover remains low.
3:00 PM: Consumer Credit for April. The consensus is for a $5.0 billion increase in consumer credit.
3:45 PM: Fed Chairman Ben Bernanke, "The U.S. Economic Outlook", At the International Monetary Conference, Atlanta, Georgia
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last several months suggesting weak home sales through mid-year (not counting all cash purchases).
9:00 AM: Ceridian-UCLA Pulse of Commerce Index™ This is the diesel fuel index for May (a measure of transportation).
2:00 PM: Fed's Beige Book. This is an informal review by the Federal Reserve Banks of current economic conditions.
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a decrease to 419,000 from 422,000 last week.
8:30 AM: Trade Balance report for April from the Census Bureau. This graph shows the monthly U.S. exports and imports in dollars through March 2011.
Oil prices were up in April, but import volumes were probably down. Also imports from Japan were probably down. The consensus is for the U.S. trade deficit to be around $48.9 billion, up from $48.2 billion in March.
10:00 AM: Monthly Wholesale Trade: Sales and Inventories for April. The consensus is for a 1.0% increase in inventories.
12:00 PM: Q1 Flow of Funds Accounts from the Federal Reserve.
12:10 PM: Fed Vice Chair Janet Yellen, "Housing Market Developments and Their Effects on Low- and Moderate-Income Neighborhoods", Cleveland, Ohio
8:30 AM: Import and Export Prices for May. The consensus is a for a 0.7% decrease in import prices.
Best wishes to All!
