by Calculated Risk on 7/05/2011 02:18:00 PM

Bloomberg reports that Moody's downgrades Portugal to Ba2 with a negative outlook.

This is a reminder that the financial crisis in Europe doesn't stop with Greece.

by Calculated Risk on 7/05/2011 11:09:00 AM

From the American Bankruptcy Institute: Consumer Bankruptcy Filings Down 8 Percent Through the First Half of 2011

U.S. consumer bankruptcy filings totaled 709,303 nationwide during the first six months of 2011 (Jan. 1-June 30), an 8 percent decrease from the 770,117 total consumer filings during the same period a year ago, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). The overall June consumer filing total of 119,768 represented a 5 percent decrease from the 126,270 filings recorded in June 2010.

Click on graph for larger image in graph gallery.

This graph shows the non-business bankruptcy filings by quarter using monthly data from the ABI and previous quarterly data from USCourts.gov.

Note: The spike in 2005 was due to the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". (a good example of Orwellian named legislation).

It is possible that consumer bankruptcy filings peaked in 2010, but they will probably stay elevated for some time.

by Calculated Risk on 7/05/2011 08:45:00 AM

From Bloomberg: Trichet May Save Face With S&P, Fitch Greece Moves: Euro Credit

Standard & Poor’s and Fitch Ratings may enable European Central Bank President Jean-Claude Trichet to support a private investor rollover of Greek debt by saying a default rating would be partial and temporary.

Many observers think the ECB will back down and still accept Greek government bonds as collateral.

By saying the default is temporary - and if at least one rating agency keeps the Greek government bonds above a default rating (even if the rating agency lowers Greece's issuer rating to “restricted default”) - this could give the ECB wiggle room to keep accepting Greek government bonds as collateral.

The policymakers appear to have a couple of months to find a solution. The yield for Greek 2 year bonds are up to 27% this morning, and the 10 year yield is at 16.5%. Portuguese and Irish 10 year yields are at (11.6% for Ireland, 11% for Portugal).

by Calculated Risk on 7/04/2011 08:28:00 PM

Weekend:
• Summary for Week Ending July 1st
• Unofficial Problem Bank list at 1,003 Institutions and State Stress Level
• Schedule for Week of July 3rd

The key report for this week will be the June employment situation report to be released on Friday.

The following table summarizes some of the grim labor statistics and compares the current situation (May 2011) with the employment situation when the recession started (December 2007).

Since December 2007, the U.S. working age civilian population has increased by 6.157 million people - however the number of people saying the are in the labor force has actually declined.

Total nonfarm payrolls are still 6.94 million below the December 2007 level, and private payrolls are 6.69 million lower.

Some of the decline in the labor force participation is due to an aging population, but these numbers suggest the U.S. needs 6.94 million jobs, plus some percent of the increase in the labor force, to get back to the 2007 employment situation.

On unemployment, perhaps the most staggering number is the 6.2 million workers who have been unemployed for 27 weeks or more.

Recoveries following a housing/credit bubble and financial crisis are usually sluggish - so these numbers are not a surprise - but this is a reminder that the top priorities for policymakers remains jobs, jobs and jobs.

Employment Statistics (Thousands or Percent)1
	May-11	Dec-07	Change
Civilian noninstitutional population (16 and over)	239,313	233,156	6,157
Civilian labor force	153,693	153,936	-243
Total nonfarm Payroll	131,043	137,983	-6,940
Private Payroll	108,916	115,606	-6,690
Unemployment Rate	9.1%	5.0%	4.1%
Unemployed	13,914	7,664	6,250
Part-Time for Economic Reasons	8,548	4,638	3,910
Marginally Attached to Labor Force2	2,206	1,395	811
Discouraged Workers2	822	363	459
U-6 Unemployment rate3	15.8%	8.8%	7.0%
Unemployed for 27 Weeks & over	6,200	1,327	4,873

¹ The payroll numbers are from the Current Employment Statistics (establishment survey), and the remaining numbers are from the Current Population Survey (household survey).
² BLS: "Discouraged workers are a subset of persons marginally attached to the labor force. The marginally attached are those persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months, but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, discouraged workers were not currently looking for work specifically because they believed no jobs were available for them or there were none for which they would qualify."
³ BLS: "Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers"

by Calculated Risk on 7/04/2011 03:43:00 PM

Happy 4th of July!

Just thinking out loud (and enjoying the day) ...

All year I've been forecasting an increase in multi-family starts - and that is already happening.  Multi-family starts are on a 156,000 annual pace over the first 5 months of 2011 compared to 115,700 starts for all of 2010.  Historical this is a low level, but this is a nice increase over last year.

Now I'm starting to wonder if we will see a little increase in new home sales and single family housing starts in the 2nd half of 2011 on a seasonally adjusted (SA) basis.

On a Not Seasonally Adjusted (NSA) basis, home sales and starts will probably decline in the 2nd half of 2011 (compared to the first half), but there is a strong seasonal pattern for new home sales and single family starts. The "strong" season for new home sales usually runs from March through July, and for starts from April through September or October.

We already know there was a weak homebuying season and the homebuilders are depressed. But I suspect sales (and starts) will not decline as much as usual in the 2nd half of 2011, and that would mean an increase in sales on a seasonally adjusted basis.

I'm not looking for a strong increase in sales - and we sure don't want the homebuilders starting a bunch of speculative homes - but we might see a little pickup seasonally adjusted. In 2nd half of 2010, new home sales were at a record low 140 thousand homes (Q3 and Q4), and I suspect this year will be stronger. Just a gut feeling at this point ... I'll try to add some supporting data over the next few weeks.

Weekend:
• Summary for Week Ending July 1st
• Unofficial Problem Bank list at 1,003 Institutions and State Stress Level
• Schedule for Week of July 3rd

by Calculated Risk on 7/04/2011 08:47:00 AM

From the WSJ: S&P: Greece Debt Plan Is a Default

Standard & Poor's Corp. said Monday that a leading proposal for easing repayment terms on Greece's sovereign debt would amount to a default under the ratings firm's criteria ... The European Central Bank has maintained that it won't accept bonds with a default rating as collateral. Hence, averting a selective default rating is crucial to ensure that banks holding Greek bonds aren't shut out from the ECB's liquidity operations for the few days that the country's bonds would be rated selective default.
...
A spokesman for the European Commission said euro-zone governments designing a second bailout for Greece intend to avoid a selective default and expect to have "clarity" on the outlines of the package by the July 11 meeting of finance ministers.

From Bloomberg: EU Rescue Effort May Prompt S&P Default Rating on Greece

“It is our view that each of the two financing options described in the Federation Bancaire Francaise proposal would likely amount to a default,” S&P said in the statement. “But, once either option is implemented, we would assign a new issuer credit rating to Greece after a short time reflecting our forward-looking view of Greece’s sovereign credit risk.”
...
Even if S&P or other rating companies determined that the rollover plan constituted a default, the ruling wouldn’t necessarily trigger credit swaps insuring Greek debt. That decision may be made by the determinations committee of the International Swaps & Derivatives Association.

It appears the euro-zone has some time to figure this out - or for someone to blink. The next meeting is July 11th, but it appears they don't have to have a deal until mid-September.

The yield for Greek 2 year bonds is down to 25.9%, and the 10 year yield is at 16.4%. Portuguese and Irish 10 year yields are at (11.6% for Ireland, 10.9% for Portugal).