by Calculated Risk on 12/02/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Nov. 27, the advance figure for seasonally adjusted initial claims was 436,000, an increase of 26,000 from the previous week's revised figure of 410,000. The 4-week moving average was 431,000, a decrease of 5,750 from the previous week's revised average of 436,750.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since January 2000.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 5,750 to 431,000.

This is the lowest level for the 4-week moving average since August 2008. The level is still high, but the decline in the 4-week average is good news.

by Calculated Risk on 12/01/2010 11:26:00 PM

• The Federal Reserve released details of borrowing by financial firms, and others during the financial crisis. Here are some articles:

From the NY Times: Fed Papers Show Breadth of Emergency Measures

From Bloomberg: Fed Names Recipients of $3.3 Trillion of Aid During U.S. Financial Crisis

From Bloomberg: European Banks Dominated Use of Fed’s Commercial Paper Program

• ADP reported Private Employment increased by 93,000 in November, the largest gain in three years and well above expectations of 68,000 private sector jobs.

• U.S. Light Vehicle Sales were at 12.26 million SAAR in November

• The ISM Manufacturing Index decreased slightly to 56.6 in November.

• European bond yields declined. The Ireland 10-year bond yield fell to 8.94% from 9.36% yesterday. The yield on Portugal 10-year bonds fell to 6.65% from just over 7%, and the yield of Spain's 10-year bonds declined to 5.29% from 5.5%.

• The Asian markets are up all green tonight (up about 1% to 2%)

• Here are the graph galleries for auto sales, ISM index, and construction spending.

Best to all.

by Calculated Risk on 12/01/2010 08:13:00 PM

Usually Michael Pettis writes about China and economics. Today he wrote about Europe and politics: The rough politics of European adjustment. This is a lengthy piece, and here are a few excerpts:

I am now going to veer off into a very different realm, that of politics. I don’t in any sense pretend to be an expert on the subject, but one of the things that surprises me is that as far as I know (perhaps because I am looking in the wrong places) and in spite of very clear historical precedent, very few analysts, even the greatest euro-skeptics, are wondering about of the changes in electoral politics that are likely to take place in Europe over the next few years as a consequence of the euro adjustment.
...
Political radicalism in these countries will rise inexorably as a consequence of rising class conflict. As Keynes pointed out as far back as 1922, the process of adjusting the currency and debt will primarily be one of assigning the costs to different economic groups, and this is never an easy or conflict-free exercise. Of course the less stable a government becomes as a consequence of this adjustment, the more likely it is to prefer very short-term solutions.
...
[T]he distribution of these costs is not determined by economic theory but rather by political interests. That is why I said last week that political radicalism in Europe will almost certainly rise and the process of governing will become increasingly unstable. It is through the political process that the costs of adjustment will be assigned to the different groups, and when the costs are likely to be so high, the squabbling over the assignment of those costs is likely to be quite brutal.
...
I am not suggesting that politics will get nearly as crazy or as radicalized as they did in the 1930s. There are much more robust mechanisms today for transferring and sharing adjustment costs, and I assume (hope) we learned enough from the 1930s to recognize that asking one side or the other to pay the full cost is not likely to be good for anyone. But it is hard to imagine that the kinds of disruptive political sectarianism that we saw in some European countries as recently as 20 or 30 years ago cannot revive.

P.S. I appreciate the mention, but he meant Naked Capitalism.

by Calculated Risk on 12/01/2010 03:56:00 PM

Based on an estimate from Autodata Corp, light vehicle sales were at a 12.26 million SAAR in November. That is up 13.2% from November 2009, and up slightly from the October 2010 sales rate.

Click on graph for larger image in new window.

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for November (red, light vehicle sales of 12.26 million SAAR from Autodata Corp).

This is the highest sales rate since September 2008, excluding Cash-for-clunkers in August 2009.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate. The current sales rate is still near the bottom of the '90/'91 recession - when there were fewer registered drivers and a smaller population.

This was above most forecasts of around 12.0 million SAAR.

by Calculated Risk on 12/01/2010 02:05:00 PM

• Fed's Beige Book showed the "economy continued to improve":

Reports from the twelve Federal Reserve Districts indicate that the economy continued to improve, on balance, during the reporting period from early/mid-October to mid-November.
...
Manufacturing activity continued to expand in almost all Districts, with relatively strong growth seen in metal fabrication and the automotive industries.
...
Housing markets remain depressed, with several Districts reporting further weakening during the past six weeks.

• In a research note today, "A Brighter US Economic Outlook", Goldman Sachs upped their 2011 real GDP forecast (this is the first time their outlook is above consensus in five years):

We have raised our sights for 2011, calling for real GDP growth to average 2.7% for the year versus 2.0% previously. We expect growth to pick up further in 2012—to 3.6% on average for the year—though judgments that far out are clearly tentative. ... Although our revised outlook implies a meaningful drop in the jobless rate, it will remain high by historical standards, ending 2012 at about 8½%.

On the conference call, Goldman highlighted several downside risks: Spillover from Europe, falling housing prices and possible premature fiscal tightening.

Note: I took the "over" during the weekend: The recent improvement in economic news . This forecast is still for sluggish growth and the unemployment rate is unacceptably high.

• Barry Eichengreen writes a scathing review of the Irish "rescue". Reprinted at the Irish Economy blog: Ireland’s Reparations Burden

The Irish “program” solves exactly nothing – it simply kicks the can down the road. ... This is not politically sustainable, as anyone who remembers Germany’s own experience with World War I reparations should know. A populist backlash is inevitable.

• The Federal Reserve released details of borrowing by financial firms, and others during the financial crisis.

by Calculated Risk on 12/01/2010 12:31:00 PM

Note: The real key is the seasonally adjusted annual sales rate (SAAR) compared to the last few months, not the year-over-year comparison provided by the automakers.

From MarketWatch: GM posts 11% jump in Nov. U.S. car sales

From MarketWatch: Ford Nov. U.S. sales jump 24%

From MarketWatch: Chrysler U.S. November sales rise 17%

Once all the reports are released, I'll post a graph of the estimated total November light vehicle sales (SAAR) - usually around 4 PM ET. Most estimates are for a decrease to 12.0 million SAAR in November from the 12.21 million SAAR in October.

by Calculated Risk on 12/01/2010 11:00:00 AM

The Census Bureau reported overall construction spending increased in October compared to September.

[C]onstruction spending during October 2010 was estimated at a seasonally adjusted annual rate of $802.3 billion, 0.7 percent (±1.4%)* above the revised September estimate of $797.1 billion.

Private construction spending also increased in October:

Spending on private construction was at a seasonally adjusted annual rate of $481.8 billion, 0.8 percent (±1.1%)* above the revised September estimate of $477.8 billion.

Click on graph for larger image in new window.

This graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending increased in October; private non-residential construction spending is still declining. Residential spending is 66% below the peak early 2006, and non-residential spending is 39% below the peak in January 2008.

Residential investment (RI) will probably be a minimal drag on Q4 GDP growth (or even make a slight positive contribution), and even though the recovery in RI will be sluggish, I expect RI will make a positive contribution to GDP growth in 2011. Non-residential investment will probably bottom sometime next year, but stay depressed for some time.

by Calculated Risk on 12/01/2010 10:00:00 AM

PMI at 56.6% in November, down slightly from 56.9% in October. The consensus was for a decrease to 56.5%.

From the Institute for Supply Management: November 2010 Manufacturing ISM Report On Business®

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew during November, with both new orders and production continuing to expand. With the PMI at 56.6 percent, November's rate of growth is the second fastest in the last six months. Exports and imports continue to support expansion in the sector. Prices moderated slightly during the month, but comments from the respondents express concerns with regard to pricing pressures. The list of commodities in short supply increased, though short supply items are not yet posing significant problems. Manufacturing continues to benefit from the recovery in autos, but those industries reliant upon housing continue to struggle."

Click on graph for larger image in new window.

Here is a long term graph of the ISM manufacturing index.

In addition to the PMI, the ISM's new orders index was down to 56.6 from 58.9 in October.

The employment index decreased to 57.5 from 57.7 in October.

This was in line with the regional Fed manufacturing surveys.

by Calculated Risk on 12/01/2010 08:15:00 AM

ADP reports:

Private-sector employment increased by 93,000 from October to November on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from September to October was revised up from the previously reported increase of 43,000 to an increase of 82,000.

This month’s ADP National Employment Report shows an acceleration of employment and suggests the nation’s employment situation is brightening somewhat. November’s gain in private-sector employment is the largest in three years. This is the tenth consecutive month of gains, which have averaged 47,000 during that period. Nevertheless, employment gains of this magnitude are not sufficient to lower the unemployment rate, which likely will remain above 9% for all of 2011.

Note: ADP is private nonfarm employment only (no government jobs).

The consensus was for ADP to show an increase of about 68,000 private sector jobs in November, so this was above consensus.

The BLS reports on Friday, and the consensus is for an increase of 145,000 payroll jobs in November, on a seasonally adjusted (SA) basis and for the unemployment rate to stay steady at 9.6%.

by Calculated Risk on 12/01/2010 07:27:00 AM

The MBA reports: Refinance Activity Continues to Decline as Rates Rise in Latest MBA Weekly Survey

The Refinance Index decreased 21.6 percent from the previous week. This is the third weekly decrease for the Refinance Index which reached its lowest level since June 2010. The seasonally adjusted Purchase Index increased 1.1 percent from one week earlier and is at its highest level since the beginning of May 2010.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.56 percent from 4.50 percent, with points increasing to 0.96 from 0.87 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

Even with the increase in applications (seasonally adjusted), the four-week moving average of the purchase index is about 19% below the levels of April 2010 and suggests weak existing home sales through the end of the year.