by Calculated Risk on 12/03/2010 08:18:00 PM

From National Federation of Independent Business (NFIB) chief economist William Dunkelberg: Small Business Job Creation Positive in November

“In November, small business owners reported net new job creation. It wasn’t much, an average per firm increase of .01 workers, up from 0.0 in October. Seasonally adjusted, 14 percent of owners reported increasing employment at their firms by an average of 3.4 workers, the highest reading since December 2007 (the peak of the last expansion according to the National Bureau of Economic Research). On the down side, 16 percent reported reducing employment, an average of 3.2 workers. Bottom line, job creation was positive in November.
...
[P]lans to create jobs gained three points, rising to a net 4 percent of all owners, the best reading in almost two years (this after a four point improvement in job creation plans in October, a solid trend that promises a pickup in the pace of job creation).

Not much, but a step in the right direction.

Earlier employment posts:
• November Employment Report: 39,000 Jobs, 9.8% Unemployment Rate
• Employment Summary and Part Time Workers, Unemployed over 26 Weeks
• Seasonal Retail Hiring: Retailers remain cautious
• Graphics Gallery for Employment

by Calculated Risk on 12/03/2010 03:53:00 PM

Earlier employment posts:
• November Employment Report: 39,000 Jobs, 9.8% Unemployment Rate
• Employment Summary and Part Time Workers, Unemployed over 26 Weeks
• Seasonal Retail Hiring: Retailers remain cautious
• Graphics Gallery for Employment

The November ISM Non-manufacturing index was at 55.0%, up from 54.3% in October - and slightly above expectations of 54.7%. The employment index showed expansion in November at 52.7%, up from 50.9% in October. Note: Above 50 indicates expansion, below 50 contraction.

Click on graph for larger image in new window.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

From the Institute for Supply Management: October 2010 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in November for the 11th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. "The NMI (Non-Manufacturing Index) registered 55 percent in November, 0.7 percentage point higher than the 54.3 percent registered in October, and indicating continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index decreased 1.4 percentage points to 57 percent, reflecting growth for the 12th consecutive month but at a slower rate than in October. The New Orders Index increased 1 percentage point to 57.7 percent, and the Employment Index increased 1.8 percentage points to 52.7 percent, indicating growth in employment for the third consecutive month and the fifth time in the last seven months. The Prices Index decreased 5.1 percentage points to 63.2 percent, indicating that prices increased slower in November. According to the NMI, 10 non-manufacturing industries reported growth in November. Respondents' comments mostly reflect cautious optimism. There is a degree of uncertainty that still remains for some industries and companies."
emphasis added

A little bit of positive economic news as opposed to the weak employment report.
.

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

According to the BLS employment report - and combining October and November - retailers hired seasonal workers at above the pace of last year, but well below the pre-crisis levels.

Click on graph for larger image.

Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year (not seasonally adjusted).

This really shows the collapse in retail hiring in 2008 and modest rebound in 2009.

Retailers hired 433 thousand workers (NSA) net in October and November. This is above the 367 hired last year in October and November, but well below the pre-crisis average of close to 550 thousand for the same two months.

Note: this is NSA (Not Seasonally Adjusted), retailers employed 28 thousand fewer workers in November than October seasonally adjusted.

This suggests retailers are still cautious about the holiday season.

Earlier employment posts:
• November Employment Report: 39,000 Jobs, 9.8% Unemployment Rate
• Employment Summary and Part Time Workers, Unemployed over 26 Weeks
• Graphics Gallery for Employment

by Calculated Risk on 12/03/2010 10:04:00 AM

Here are a few more graphs based on the weak employment report ...

Percent Job Losses During Recessions

Click on graph for larger image.

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

In the previous post, the graph showed the job losses aligned at the bottom.

The dotted line shows payroll employment excluding temporary Census workers.

This is by far the worst post WWII employment recession.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed over the month at 9.0 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) declined slightly to 8.972 million in November. This has been around 9 million since August 2009 - a very high level.

These workers are included in the alternate measure of labor underutilization (U-6) that was steady at 17.0% in November. The high for U-6 was 17.4% in October 2009. Still very grim.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 6.313 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 6.206 million in October. It appears the number of long term unemployed has peaked, however the level is extremely high - and the increases over the last two months is very concerning.

Summary

Perhaps the worst news was the jump in the unemployment rate to 9.8% without an increase in the participation rate. If the participation rate had increased, at least that would mean people were becoming more confident and rejoining the labor force. Instead the Labor Force Participation Rate was flat at 64.5% and this is a very low level. Note: This is the percentage of the working age population in the labor force (here is the graph in the galleries of the participation rate).

Most of the underlying details of the employment report were weak. The positives included small upward revisions to the September and October payroll reports, a slight increase in average hourly earnings, and a slight decline in part time workers.

The negatives include the unemployment rate increasing to 9.8%, few payroll jobs added (only 39,000 jobs), the decline in the employment-population ratio, the steady participation rate at a very low level, and the increase in workers unemployed for over 26 weeks.

• Earlier Employment post: November Employment Report: 39,000 Jobs, 9.8% Unemployment Rate

by Calculated Risk on 12/03/2010 08:30:00 AM

From the BLS:

The unemployment rate edged up to 9.8 percent in November, and nonfarm payroll employment was little changed (+39,000), the U.S. Bureau of Labor Statistics reported today.

The following graph shows the employment population ratio, the participation rate, and the unemployment rate.

Click on graph for larger image.

The unemployment rate increased to 9.8% (red line).

The Employment-Population ratio declined to 58.2% in November matching the cycle low set in 2009 (black line).

The Labor Force Participation Rate was steady at 64.5% in November (blue line). This is the percentage of the working age population in the labor force. The participation rate is well below the 66% to 67% rate that was normal over the last 20 years.

The second graph shows the job losses from the start of the employment recession, in percentage terms aligned at maximum job losses.

The dotted line is ex-Census hiring. The two lines have joined since the decennial Census is over.

For the current employment recession, employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only the early '80s recession with a peak of 10.8 percent was worse).

This is a very disappointing employment report and far below expectations. I'll have much more soon ...

by Calculated Risk on 12/02/2010 11:50:00 PM

From HotelNewsNow.com: STR: Upscale segment reports strong weekly gains

Overall, the industry’s occupancy increased 7.0% to 43.6%, ADR was up 2.9% to US$87.53, and RevPAR ended the week up 10.1% to US$38.16.

The following graph shows the four week moving average for the occupancy rate by week for 2008, 2009 and 2010 (and a median for 2000 through 2007).

Click on graph for larger image in new window.

Notes: the scale doesn't start at zero to better show the change. The graph shows the 4-week average, not the weekly occupancy rate.

On a 4-week basis, occupancy is up 8.2% compared to last year and 4.2% below the median for 2000 through 2007.

Note: For the first time this year, RevPAR (revenue per available room) was up compared to the same week two years ago (in 2008).

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 12/02/2010 06:33:00 PM

Here is a look at European bond spreads from the Atlanta Fed weekly Financial Highlights released today (graph as of Dec 1st):

Click on graph for larger image in new window.

From the Atlanta Fed:

Led by Ireland, peripheral European bond spreads (over German bonds) have risen considerably in the past few weeks.

Since the November FOMC meeting, the 10-year Irish-to-German bond spread has risen by 142 basis points (bps) (from 6.32% to 4.90%), through November 29; spreads on Spanish debt are up 83 bps and 62 bps on Greek debt.

Maybe the Atlanta Fed should add Belgium.

The spreads narrowed sharply today after ECB President Jean-Claude Trichet announced the ECB will extend special liquidity measures until at least April 12th - and continue the Securities Market Program (bond buying of euro-zone debt).

by Calculated Risk on 12/02/2010 03:15:00 PM

An important article from Catherine Rampell at the NY Times: Persistence of Long-Term Unemployment Tests U.S.. A short excerpt:

New data from the Labor Department, provided to The New York Times, shows that people out of work fewer than five weeks are more than three times as likely to find a job in the coming month than people who have been out of work for over a year, with a re-employment rate of 30.7 percent versus 8.7 percent, respectively.

Likewise, previous economic studies, many based on Europe’s job market struggles, have shown that people who become disconnected from the work force have more trouble getting hired, probably because of some combination of stigma, discouragement and deterioration of their skills.

This is why it is critical to help the unemployed. Rampell writes:

Direct employment programs — like the public works projects of the New Deal era and World War II — might be the fastest way to put people back to work, economists say. But those raise concerns of crowding out businesses and displacing other workers. Besides, such proposals, which smack of socialism to some, seem politically unfeasible at the moment.

If structured correctly - in an environment with a 9.6% unemployment rate - the "crowding out" would be minimal. As far as the politics - well, I support a direct hiring program - and I have no expectation of it happening.

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

The BLS will release the November Employment Report at 8:30 AM tomorrow. The consensus is for an increase of 145,000 payroll jobs in November, and for the unemployment rate to stay steady at 9.6%. Note: Bloomberg is listing the consensus as 168,000 payroll jobs, and an increase in the unemployment rate to 9.7%.

Most of the recent employment related reports have been slightly above expectations:

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

• The ISM manufacturing employment index decreased slightly to 57.5 from 57.7 in October. This still suggests some hiring in manufacturing (the ADP report showed manufacturing employment increased by 16,000 in November). Most of the regional Fed manufacturing surveys also showed an increase in employment in November.

• Weekly initial unemployment claims were down significantly from October.

Click on graph for larger image in new window.

The average over the last 4 weeks was 431,000 initial claims per week.

For October the average was 456,500. Although still elevated, this suggests some pickup in hiring compared to October.


• The Reuters/University of Michigan consumer sentiment index increased to 71.6 from 67.7 in October.

This graph shows the consumer sentiment index.

There is some correlation between consumer sentiment and employment, and although this increase in sentiment was minor (and sentiment is still low), this does suggest some improvement.

• As I mentioned last month, the decennial Census hiring and layoffs can be ignored. As of October, there were only 1 thousand temporary census workers remaining on the payroll.

• The unemployment rate is dependent on both job creation and the participation rate.

Usually the participation rate - the percent of the civilian population in the labor force - falls when the job market is weak. And a decline in the participation rate puts downward pressure on the unemployment rate (and the opposite is true when the participation rate increases).

Right now the participation rate is very low at 64.5%, and a further decline would be considered very bad employment news (even if the unemployment rate declined slightly). An increase in the participation rate (due to more confidence), could lead to an increase in the unemployment rate even as hiring improves.

This graph shows the recent sharp decline in the participation rate (blue), and also the unemployment rate and the employment-population ratio. The participation rate had mostly been above 66% since the late '80s, and had been over 67% in the late '90s.

The participation rate probably increased in November, and this might have pushed the unemployment rate up to 9.7%.

For much more on the participation rate, see:
• Labor Force Participation Rate: What will happen?
• Labor Force Participation Trends, Over 55 Age Groups

Note: I think the participation rate will move back towards 66% over the next few years, even with an aging population.

• In October the seasonally adjusted unemployment rate was 9.644% unrounded (reported as 9.6%), so it won't take much of an increase to reach 9.7% for November.

• Bottom line: I think hiring improved in November (I'll take the over again on jobs), but the unemployment rate might have increased too (depending on the participation rate).

by Calculated Risk on 12/02/2010 10:00:00 AM

From the NAR:
Strong Rebound in Pending Home Sales

The Pending Home Sales Index,* a forward-looking indicator, rose 10.4 percent to 89.3 based on contracts signed in October from 80.9 in September. The index remains 20.5 percent below a surge to a cyclical peak of 112.4 in October 2009 ... The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

This suggests existing home sales in November and December will be somewhat higher than in October.

This also suggests months-of-supply will fall below double digits in November and December, but will remain elevated putting downward pressure on house prices.

Note: in the calculation of months-of-supply, the NAR uses the seasonally adjusted sales rate, but they do not seasonally adjust inventory. Since inventory declines every November and December, the months-of-supply would decline even if the sales rate stayed steady. Since it appears sales will increase slightly (based on pending home sales), and inventory will seasonally decline, the months-of-supply will fall. For more, see: Housing Supply: What do all the numbers mean?