by Calculated Risk on 7/06/2011 09:05:00 PM

From CNBC: June Jobs Data to Show 125,000 Added: Hatzius

"Clearly the economy weakened over the last few months so some deceleration makes sense," [Goldman Sachs chief U.S. economist Jan Hatzius] said, but the May figure [54,000 jobs added] was "below what other indicators of labor market activity would suggest."

The June report, he said, will "provide a correction to that picture," although he said adding 125,000 jobs is "still not particularly strong."

The consensus forecast, according to Bloomberg, is for an increase of 110,000 payroll jobs in June.

CR Note: The labor indicators are mixed. Initial weekly unemployment claims have been fairly weak (above 400,000 per week all month), and the small business survey suggested June was a "bust". However the ISM employment indexes showed faster expansion in June.

The ISM manufacturing employment index increased to 59.9%, up from 58.2% in May, and the ISM non-manufacturing index increased slightly to 54.1%. Based on a historical correlation between the ISM indexes and the BLS employment report, these readings would suggest close to 200,000 payroll jobs added for private services and manufacturing in June (that seems high, but it is probably one of the indicators that Hatzius is looking at).

by Calculated Risk on 7/06/2011 05:13:00 PM

In February, the settlement was rumored to be $20 billion.

Then in May the settlement was rumored to be $5 Billion.

Now the NY Post is reporting $60 billion!

From the NY Post: AGs, banks near $60B deal on foreclosures

America's biggest mortgage servicers are closing in on a deal with federal and state officials to settle some of the thorniest foreclosure fiasco problems -- including the robo-signing issue, The Post has learned.

The proposed settlement with the Department of Justice and 50 state attorneys general, once thought to be in the neighborhood of $20 billion, could range as high as $60 billion and include a provision for principal reduction, sources close to the discussions said.

But what does "$60 billion" really mean? If the final number is in the $60 billion range, it will probably include already completed principal reductions and modifications. If so, the headline number would be meaningless.

Update: From Barclays Capital analysts via the WSJ: Here’s How a $60B Foreclosuregate Settlement Might Get Divided (ht sum luk)

by Calculated Risk on 7/06/2011 01:58:00 PM

From National Federation of Independent Business (NFIB): NFIB Jobs Statement: June is a Bust, but July Looks Hopeful (link fixed)

“New jobs are not to be found on Main Street. For small firms, reported job losses per firm declined sharply in June as did the net percent of firms that increased employment over the last 3 months." [said NFIB Chief economist William C. Dunkelberg]
...
"Over the next three months, 11 percent plan to increase employment (down 2 points), and 7 percent plan to reduce their workforce (down 1 point), yielding a seasonally adjusted net 3 percent of owners planning to create new jobs, a 4 point gain from May. So, going forward, the job picture is a bit brighter than June’s actual dismal performance."

Click on graph for larger image in graph gallery.

This graph shows the net hiring plans for the next three months.

Hiring plans increased in June and this is the highest level since February.

Note: 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.

by Calculated Risk on 7/06/2011 01:07:00 PM

Just a data post ...

Last night I posted on the new GSE conforming limits and I combined two FHFA spreadsheets to show the change by city. Here is the spreadsheet with the current loan limits and the new loan limits (sorted by largest change in limit).

As Tom Lawler noted back in April, effective Oct 1st "the conforming loan limit will revert back to those established under the Housing and Economic Recovery Act (HERA) of 2008. That act upped the conforming loan limit in many parts of the country, but the HERA hike was trumped by the Economic Stimulus Act (ESA) of 2008 and the Continuing Appropriations Act of 2011."

Here is the source data from the FHFA:
1) Spreadsheet: Maximum Loan Limits for Loans Originated between 10/1/2010 and 9/30/2011 (Same as Limits for 1/1/10-9/30/10 Originations)
2) Spreadsheet: Maximum Loan Limits that Apply to Loans Acquired in Calendar Year 2011 and Originated after 9/30/2011 or Prior to 7/1/2007

by Calculated Risk on 7/06/2011 10:00:00 AM

The June ISM Non-manufacturing index was at 53.3%, down from 54.6% in May. The employment index increased in June to 54.1%, up from 54.0% in May. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: June 2011 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in June for the 19th 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 registered 53.3 percent in June, 1.3 percentage points lower than the 54.6 percent registered in May, and indicating continued growth at a slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 0.2 percentage point to 53.4 percent, reflecting growth for the 23rd consecutive month, but at a slightly slower rate than in May. The New Orders Index decreased by 3.2 percentage points to 53.6 percent. The Employment Index increased 0.1 percentage point to 54.1 percent, indicating growth in employment for the 10th consecutive month and at a slightly faster rate than in May. The Prices Index decreased 8.7 percentage points to 60.9 percent, indicating that prices increased at a slower rate in June when compared to May. According to the NMI, 15 non-manufacturing industries reported growth in June. Respondents' comments are mixed about the business climate and vary by industry and company. The most prominent concern remains about the volatility of prices."emphasis added

Click on graph for larger image in graph gallery.

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

This was below the consensus forecast of 54.0%.

by Calculated Risk on 7/06/2011 07:52:00 AM

The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 9.2 percent from the previous week. The Refinance Index has decreased for 3 consecutive weeks, reaching its lowest level since May 6, 2011. The seasonally adjusted Purchase Index increased 4.8 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69 percent from 4.46 percent, with points decreasing to 0.90 from 1.19 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the highest 30-year rate recorded in the survey since the middle of May 2011.

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

Click on graph for larger image in graph gallery.

The four week average of purchase activity is at about 1997 levels - and mostly moving sideways. Of course there is a very high percentage of cash buyers right now, but this suggests weak existing home sales through the next month or two.

by Calculated Risk on 7/06/2011 01:32:00 AM

From Reuters: Sluggish economy slows US office market rebound

The U.S. office vacancy rate stood at 17.5 percent at the end of the second quarter, according to Reis. The rate was the same as the first quarter, when vacancies posted the first decline in nearly four years.
...
The average asking rent rose 0.2 percent to $27.72 per square foot, according to Reis. Factoring in months of free rent and other concessions landlords offer to attract tenants, the so-called effective rent also rose 0.2 percent in the second quarter, to $22.25 per square feet.

Click on graph for larger image in graph gallery.

This graph shows the office vacancy rate starting in 1991.

Reis is reporting the vacancy rate was at 17.5% in Q2 2011, the same rate as in Q1, and up from 17.4% in Q2 2010. It appears the office vacancy rate might have peaked - and is now moving sideways. It will be a good sign when the vacancy rate starts falling.

Reis should release the Mall and Apartment vacancy rates over the next few days.

by Calculated Risk on 7/05/2011 11:14:00 PM

Back in April, economist Tom Lawler previewed the coming changes to the GSE conforming loan limits on October 1st: FHFA: Where the Conforming Loan Limit Might Fall on October 1

The FHFA has now released the new limits.

Here is a Spreadsheet with the current loan limits and the new loan limits (sorted by largest change in limit).

The largest changes were for Monterey, CA (decrease of $246,750), Monroe, FL (-$200,750) and Puerto Rico (-$189,250). Maui, HI will see a decrease of $163,250 and San Diego, CA a decrease of $151,250.

From Nick Timiraos and Alan Zibel at the WSJ: Sellers Brace for New Mortgage Caps

As an emergency measure three years ago, Congress raised to as high as $729,750 the maximum loan amount that Fannie Mae, Freddie Mac and federal agencies could guarantee. ... Now those limits are set to decline modestly in hundreds of counties across the U.S. as the government attempts to reduce its outsized footprint in the mortgage market and create room for private investors to compete.

Had the lower limits been in place last year, Fannie and Freddie would have backed 50,000 fewer loans, according to the Federal Housing Finance Agency. The bulk of the affected loans —about 60%— are in California, with another 20% in Massachusetts, New York and New Jersey.

This will not have a significant impact on the housing market. Remember there are about 5 million home sales per year - so even if all these homes fell through, the impact would be very small.

As Tom Lawler wrote in April:

Letting the conforming loan limits go down on October 1st is not a big deal from the standpoint of the housing market, and the new limits would still leave the VAST bulk of home sales transactions eligible for GSE acquisition. However, it is a “big deal” in terms of it being the first (though very small) step to reduce the government’s/GSE’s “footprint” in the US mortgage market.

by Calculated Risk on 7/05/2011 06:57:00 PM

From Ronald White at the LA Times: Gas prices aren't likely to drop much more this summer

California's average price fell 4.5 cents a gallon in the last week ... Prices have dropped an average of 46.3 cents a gallon since May 2, the [Energy Department's Energy Information Administration ]said.

Nationally, the price rose an average of 0.5 cent to $3.579 a gallon, largely because of continuing problems with refineries in the Midwest ... The national average peaked at $3.965 a gallon on May 9.

The gasbuddy.com data shows a similar decline (graph below).

This price decline is good news, but it just takes us back close to the March levels - when it appeared gasoline prices were already a drag on economic activity. That is when Personal Consumption Expenditure (PCE) growth slowed, and consumer sentiment fell sharply.

Still this is better than $4 per gallon ...

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 7/05/2011 03:20:00 PM

There are a few interesting pieces of data in this article ...

From Jon Lansner at the O.C. Register: 1st gain in O.C. construction jobs in 4 years

The number of Orange County construction workers in May was 200 jobs higher than a year ago. That’s no hiring spree but it’s the first year-over-year gain since December 2006.
...
This is not the only sign of stability in Orange County construction. Local builders pulled 935 building permits in May. That’s up fourfold in a year — and the most for a May in nine years, according to figures from the Construction Industry Research Board.

Cypress Village, an Irvine Co. apartment complex in northern Irvine, accounted for nearly three-fourths of the total permits issued in May and pushed multi-family permits to a 22-year high for May. But it wasn’t all rentals. May’s 250 single-family building permits were the most for that type of Orange County housing in a May in four years.

One of my predictions for 2011 was that residential construction employment would increase nationally for the first time since 2005. This table below shows the annual change in construction jobs (total, residential and non-residential) and through May for 2011.

	Annual Change in Payroll jobs (000s)
Year	Total Construction Jobs	Residential Construction Jobs	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	-1053	-431	-622
2010	-149	-113	-36
Through May 2011	31	22	9

Not much - but it is a start.

Click on graph for larger image in graph gallery.

This graph shows the number of construction payroll jobs (blue line), and the number of construction jobs as a percent of total non-farm payroll jobs (red line).

Construction employment is down 2.197 million jobs from the peak in April 2006, but up 31 thousand jobs so far this year (through May).

Unfortunately this graph is a combination of both residential and non-residential construction employment. The BLS only started breaking out residential construction employment fairly recently (residential building employees in 1985, and residential specialty trade contractors in 2001). Usually residential investment (and residential construction) lead the economy out of recession, and non-residential construction usually lags the economy. Because this graph is a blend, it masks the usual pickup in residential construction following previous recessions. Of course residential investment didn't lead the economy this time because of the huge overhang of existing housing units.

Also note the pickup in single family permits mentioned in Lansner's article (that fits with my thoughts yesterday).

I think this employment change - from layoffs to some small employment increases - is a kind of a big story.