by Calculated Risk on 11/05/2011 08:13:00 AM

The drama in Europe continues to overshadow the U.S. economic situation. Greece was the main topic this week, but Italy is a greater concern. I'll post some updates on Sunday.

The October employment report was the key economic story in the U.S. last week. There were only 80,000 jobs added in October. This included 104,000 private sector jobs added, and 24,000 government jobs lost. However the change in total employment was revised up for August and September. "The change in total nonfarm payroll employment for August was revised from +57,000 to +104,000, and the change for September was revised from +103,000 to +158,000."

Still sluggish employment growth.

The household survey showed an increase of 277,000 jobs in October. This increase in the household survey pushed the unemployment rate down slightly, even as more people participated in the workforce (labor force increased by 181,000). The unemployment rate declined to 9.0%, and the participation rate was unchanged at 64.2%. The employment population ratio also increased to 58.4% from 58.3%. This is the third straight monthly increase in the employment population ratio from the low in July at 58.1%.

Through the first ten months of 2011, the economy has added 1.256 million total non-farm jobs or just 125 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.47 million fewer payroll jobs than at the beginning of the 2007 recession.

At this pace (125 thousand jobs added per month) it will take over 4 years just to get back to the number of jobs in 2007 - and that doesn't account for population growth.

The economy has added 1.529 million private sector jobs this year, or about 153 thousand per month. There are a total of 13.9 million Americans unemployed and 5.9 million have been unemployed for more than 6 months. Overall this was another weak employment report and suggests sluggish economic growth.

The FOMC met this week with no policy changes. After the FOMC statement was released, Fed Chairman Ben Bernanke held a press briefing (video here, transcript here). Perhaps the key comment was:

"[T]he outlook remains unsatisfactory over the next few years and we'll continue to ask ourselves whether or not additional stimulus or additional actions can provide a better outcome and that's certainly something that is--remains on the table and we'll continue to evaluate as we go forward."

That suggests that the Fed will act if the outlook doesn't improve soon as compared to their current forecast. Their current forecast is already pretty dismal - clearly "unsatisfactory".

Also Bernanke almost pleaded for a little fiscal help from Congress:

"I think it would be helpful if we could get assistance from some other parts of the government to work with us to help create more jobs."

The U.S. economic data was mostly soft - suggesting sluggish growth. The ISM Manufacturing and service indexes indicated slower expansion in October. The Chicago PMI declined in October, the Dallas Fed manufacturing survey showed sluggish expansion, and the restaurant performance index was barely positive.

One bright spot was auto sales in October. According to an advance estimate for Autodata Corp, light vehicle sales were at a 13.26 million SAAR in October. That is the highest level this year (barely above the 13.24 million SAAR in February).

Sluggish growth continues.

All NEW Employment graph gallery (fast, no scripting)
Here is a summary in graphs:

• October Employment Report: 80,000 Jobs, 9.0% Unemployment Rate

Click on graph for larger image.

The BLS reported:

Nonfarm payroll employment continued to trend up in October (+80,000), and the unemployment rate was little changed at 9.0 percent, the U.S. Bureau of Labor Statistics reported today.

This graph shows the job losses from the start of the employment recession, in percentage terms. The dotted line is ex-Census hiring. The red line is moving slowly upwards.

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

The unemployment rate declined to 9.0% (red line). The Labor Force Participation Rate was unchanged 64.2% in October (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, although some of the decline is due to the aging population.

The Employment-Population ratio increased to 58.4% in October (black line).

The third employment graph is the same as the first, except this graph is aligned at maximum job losses.

In terms of lost payroll jobs, the 2007 recession was by far the worst since WWII.

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) decreased by 374,000 to 8.9 million in October.

The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) decreased to 8.896 million in October from 9.27 million in September. This just reverses some of the increase last month.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 16.2% in October from 16.5% in September.

According to the BLS employment report, retailers hired seasonal workers at close to the pre-crisis pace in October.

Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. This graph that shows the historical net retail jobs added for October, November and December by year.

Retailers hired 141.5 thousand workers (NSA) net in October. This is about the same level as in 2003 through 2006 and the same as in 2010. Note: this is NSA (Not Seasonally Adjusted). This suggests retailers are somewhat optimistic about the holiday season.

This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

Only one category increased in October: The 6 to 14 weeks. This is due to the increase in short term unemployment in August and September. A little bit of recent good news is that short term unemployment (less than 5 weeks) has declined.

The the long term unemployed declined to 3.8% of the labor force - the number (and percent) of long term unemployed remains very high.

All NEW Employment graph gallery (fast, no scripting)
• U.S. Light Vehicle Sales at 13.26 million SAAR in October, Highest since Aug 2009

Based on an estimate from Autodata Corp, light vehicle sales were at a 13.26 million SAAR in October. That is up 9.2% from October 2010, and up 1.7% from the sales rate last month (13.04 million SAAR in Sept 2011). This was just above the February sales and the highest sales rate since August 2009 ("Cash-for-clunkers")

This was slightly above the consensus forecast of 13.2 million SAAR.

Growth in auto sales should make a positive contribution to Q4 GDP. Sales in Q3 averaged 12.45 million SAAR, and if November and December are at the October rate, sales will be up 6.5% in Q4 over Q3.

• ISM Manufacturing index indicates slower expansion in October

PMI was at 50.8%% in October, down from 51.6% in September. The employment index was at 53.5%, down from 53.8%, and new orders index was at 52.4%, up from 49.6%.

From the Institute for Supply Management: October 2011 Manufacturing ISM Report On Business®

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

This was below expectations of 52.0%, and suggests manufacturing expanded at a slightly slower rate in October than in September.

• LPS: Foreclosure timelines increase, Mortgage delinquency rate declines slightly in September

From LPS Applied Analytics: LPS' Mortgage Monitor Report Shows Significant Difference in Inventories, Timelines Between Judicial and Non-Judicial States

According to LPS, 8.09% of mortgages were delinquent in September, down from 8.13% in August, and down from 9.27% in September 2010.


LPS reports that 4.18% of mortgages were in the foreclosure process, up from 4.11% in August, and up from 3.84% in September 2010. This gives a total of 12.27% delinquent or in foreclosure. It breaks down as:

• 2.36 million loans less than 90 days delinquent.
• 1.84 million loans 90+ days delinquent.
• 2.17 million loans in foreclosure process.

For a total of 6.37 million loans delinquent or in foreclosure in September.

The total delinquent rate has fallen to 8.09% from the peak in January 2010 of 10.97%. A normal rate is probably in the 4% to 5% range, so there is a long long ways to go.

However the in-foreclosure rate at 4.18% is barely below the peak rate of 4.21% in March 2011. There are still a large number of loans in this category (about 2.17 million) - and, for judicial states, the average loan in foreclosure has been delinquent for 761 days (six months less for non-judicial states).

• Construction Spending increased slightly in September

The Census Bureau reported that overall construction spending increased in September:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during September 2011 was estimated at a seasonally adjusted annual rate of $787.2 billion, 0.2 percent (±1.8%)* above the revised August estimate of $786.0 billion. The September figure is 1.3 percent (±1.9%)* below the September 2010 estimate of $797.3 billion.

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

Private residential spending is 66% below the peak in early 2006, and non-residential spending is 34% below the peak in January 2008.

Public construction spending is now 12% below the peak in March 2009.


• ISM Non-Manufacturing Index indicates expansion in October

The October ISM Non-manufacturing index was at 52.9%, down slightly from 53.0% in September. The employment index increased in October to 53.3%, up from 48.7% in September. From the Institute for Supply Management: October 2011 Non-Manufacturing ISM Report On Business®

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

This was slightly below the consensus forecast of 53.0% and indicates slightly slower expansion in October than in September. The employment index indicated expansion in October following contraction in September.

• Other Economic Stories ...
• Chicago PMI at 58.4, down from 60.4 in September
• Dallas Fed Manufacturing Survey shows sluggish expansion
• Restaurant Performance Index increased in September
• ADP: Private Employment increased 110,000 in October
• HVS: Q3 Homeownership and Vacancy Rates

by Calculated Risk on 11/04/2011 09:30:00 PM

A couple of forecast upgrades:

Merrill Lynch: "An improvement in domestic demand and inventory rebuilding has led us to revise Q4 GDP growth to 3.0% from 2.3%"

Goldman Sachs: "We have revised up our Q4 GDP forecast to 2.0% (quarter-over-quarter annualized) from 1.0% previously. The revision primarily reflects an upgrade to consumer spending, which showed solid momentum at the end of the third quarter."

It is important to remember that this is still sluggish growth, and not enough to reduce the unemployment rate. And there are significant downside risks from the European financial crisis and U.S. fiscal tightening in 2012.

Here are the earlier employment posts (with graphs):
• October Employment Report: 80,000 Jobs, 9.0% Unemployment Rate
• Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
• Seasonal Retail Hiring, Duration of Unemployment, Unemployment by Education and Diffusion Indexes
• NEW Employment graph gallery (fast, no scripting)

by Calculated Risk on 11/04/2011 07:11:00 PM

American banks
No E.U. to bail them out.
We are not Sparta!
by Soylent Green is People
From the FDIC: Purdum State Bank, Purdum, Nebraska, Assumes All of the Deposits of Mid City Bank, Inc., Omaha, Nebraska

As of September 30, 2011, Mid City Bank, Inc. had approximately $106.1 million in total assets and $105.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $12.7 million. ... Mid City Bank, Inc. is the 86th FDIC-insured institution to fail in the nation this year, and the first in Nebraska.

From the FDIC: Cache Valley Bank, Logan, Utah, Assumes Deposits of SunFirst Bank, Saint George, Utah

As of September 30, 2011, SunFirst Bank had approximately $198.1 million in total assets and $169.1 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $49.7 million. ... SunFirst Bank is the 87th FDIC-insured institution to fail in the nation this year, and the first in Utah

It is Friday!

by Calculated Risk on 11/04/2011 06:34:00 PM

UPDATE via Athens News: 00.56am The voting has finished. Unconfirmed results on Twitter: Yes 153, No 143. Papandreou has won.

From Reuters: Greek Leaders Strike Deal for a New Government

Greek Prime Minister George Papandreou has struck a deal to stand down and let Finance Minister Evangelos Venizelos form a coalition government ... They said Venizelos had won the backing of leaders of some smaller parties to support the coalition, which would also aim to avert an immediate Greek bankruptcy, before calling early elections in a few months.

And a comment from Venizelos via the Athens News: Live news blog – November 4

Finance Minister Evangelos Venizelos giving a speech. Says country needs effective government. Has just said that interim government should stay in power until February, then elections.

Here are the earlier employment posts (with graphs):
• October Employment Report: 80,000 Jobs, 9.0% Unemployment Rate
• Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
• Seasonal Retail Hiring, Duration of Unemployment, Unemployment by Education and Diffusion Indexes
• NEW Employment graph gallery (fast, no scripting)

by Calculated Risk on 11/04/2011 05:41:00 PM

A couple of resources:

From the Athens News: Live news blog – November 4 Most recent at top ...

11.40pm "I don't care if I'm not re-eelected."

11.39pm Papandreou: "It's time for cooperation." In June, I tried to set up govt of national cooperation.

11.37pm Mentions more achievements: methadone programme, fast track on developments, surge in tourist numbers, suspending dodgy doctors who take bribes, etc

Also mentioned football!

11.35pm Is reading out a list of things he would do if crossparty agreement can be achieved.

11.33pm Papandreou says all parties should support October 27 agreement.

11.32pm If elections took place, parliament would be out of action for weeks. Would be unable to vote on 2012 budget.

11.30pm Has now turned to subject of elections: he is against elections.

11.28pm With the referendum, he wanted to bypass Byzantium and go back to direct democracy Ancient Greece!
...
11.26pm Papandreou recounts some of his achievements. Mentions free radio, Open University, delegalising cannabis, allowing migrant children enter university, e-government etc

From the Telegraph: Debt crisis: live

by Calculated Risk on 11/04/2011 03:10:00 PM

The graph below shows the number of total construction payroll jobs in the U.S. including both residential and non-residential since 1969.

Construction employment declined by 20 thousand jobs in October, and is now down 2.2 million jobs from the peak in April 2006. However construction employment is up 27 thousand this year through the October BLS report.

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 specialty trade contractors in 2001).

Click on graph for larger image.

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.

Construction employment is mostly moving sideways, but at least it is not a drag on employment and GDP this year - and that helps.

This table below shows the annual change in construction jobs (total, residential and non-residential) and through October 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 October 2011	27	11	16

After five consecutive years of job losses for residential construction (and four years for total construction), it looks like construction employment will increase this year. However there will not be a strong increase in residential construction until the excess supply of housing is absorbed.

In addition residential investment has made a small positive contribution to GDP so far this year - for the first time since 2005.

Here are the earlier employment posts (with graphs):
• October Employment Report: 80,000 Jobs, 9.0% Unemployment Rate
• Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
• Seasonal Retail Hiring, Duration of Unemployment, Unemployment by Education and Diffusion Indexes
• NEW Employment graph gallery (fast, no scripting)

by Calculated Risk on 11/04/2011 12:21:00 PM

Here are the earlier employment posts (with graphs):
• October Employment Report: 80,000 Jobs, 9.0% Unemployment Rate
• Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
• NEW Employment graph gallery (fast, no scripting)

And a few more graphs ...

Seasonal Retail Hiring
According to the BLS employment report, retailers hired seasonal workers at close to the pre-crisis pace in October.

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.

This really shows the collapse in retail hiring in 2008, and the increases in 2009 and 2010.

Retailers hired 141.5 thousand workers (NSA) net in October. This is about the same level as in 2003 through 2006 and the same as in 2010. Note: this is NSA (Not Seasonally Adjusted).

This suggests retailers are somewhat optimistic about the holiday season.

Duration of Unemployment
This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

Only one category increased in October: The 6 to 14 weeks. This is due to the increase in short term unemployment in August and September. A little bit of recent good news is that short term unemployment (less than 5 weeks) has declined.

The the long term unemployed declined to 3.8% of the labor force - the number (and percent) of long term unemployed remains very high.

Unemployment by Education
This graph shows the unemployment rate by four levels of education (all groups are 25 years and older).

Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and it appears all four groups are generally trending down.

Although education matters for the unemployment rate, it doesn't appear to matter as far as finding new employment (all four categories are only gradually declining).

Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".

Diffusion Indexes
This is a little more technical. The BLS diffusion index for total private employment was at 60.7 in October, up from 56.7 in September. For manufacturing, the diffusion index increased to 51,9, up from 50 in September.

Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS. From the BLS:

Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.

It appears job growth is spread across more industries in October, and that is a little bit of good news.

We'd like to see the diffusion indexes consistently above 60 - and even in the 70s like in the '1990s.

by Calculated Risk on 11/04/2011 10:11:00 AM

This was a weak report, and the headline number was slightly below consensus forecasts. However some of the underlying data was a little more encouraging (with emphasis on "little").

There were only 80,000 jobs added in October. There were 104,000 private sector jobs added, and 24,000 government jobs lost.

However the change in total employment was revised up for August and September. "The change in total nonfarm payroll employment for August was revised from +57,000 to +104,000, and the change for September was revised from +103,000 to +158,000."

The household survey showed an increase of 277,000 jobs in October. This increase in the household survey pushed the unemployment rate down slightly, even as more people participated in the workforce (labor force increased by 181,000). The unemployment rate declined to 9.0%, and the participation rate was unchanged at 64.2%. The employment population ratio also increased to 58.4% from 58.3%. This is the third straight monthly increase in the employment population ratio from the low in July at 58.1%.

U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, declined to 16.2% - and this is very high. The low for the year was 15.7% in March, and the high was 16.5% in September. U-6 was in the 8% range in 2007.

The average workweek was unchanged at 34.3 hours, and average hourly earnings increased slightly. "The average workweek for all employees on private nonfarm payrolls was unchanged at 34.3 hours in October... In October, average hourly earnings for all employees on private nonfarm payrolls increased by 5 cents, or 0.2 percent, to $23.19. ... Over the past 12 months, average hourly earnings have increased by 1.8 percent." This is sluggish earnings growth, and earnings are being impacted by the large number of unemployed and marginally employed workers.

Through the first ten months of 2011, the economy has added 1.256 million total non-farm jobs or just 125 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.47 million fewer payroll jobs than at the beginning of the 2007 recession. The economy has added 1.529 million private sector jobs this year, or about 153 thousand per month.

There are a total of 13.9 million Americans unemployed and 5.9 million have been unemployed for more than 6 months. Very grim.

Overall this was another weak employment report and suggests sluggish economic growth.

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 aligned at maximum job losses.

In the previous post, the graph showed the job losses aligned at the start of the employment recession.

In terms of lost payroll jobs, the 2007 recession was by far the worst since WWII.

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) decreased by 374,000 to 8.9 million in October.

The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) decreased to 8.896 million in October from 9.27 million in September. This just reverses some of the increase last month.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 16.2% in October from 16.5% in September.

Unemployed over 26 Weeks

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

According to the BLS, there are 5.876 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 6.242 million in September. This is still very high, but near the low for the year. Long term unemployment remains a serious problem.

• Earlier Employment post: October Employment Report: 80,000 Jobs, 9.0% Unemployment Rate

by Calculated Risk on 11/04/2011 08:30:00 AM

From the BLS:

Nonfarm payroll employment continued to trend up in October (+80,000), and the unemployment rate was little changed at 9.0 percent, the U.S. Bureau of Labor Statistics reported today.
...
The change in total nonfarm payroll employment for August was revised from +57,000 to +104,000, and the change for September was revised from +103,000 to +158,000.

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

Click on graph for larger image.

The unemployment rate declined to 9.0% (red line).

The Labor Force Participation Rate was unchanged 64.2% in October (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, although some of the decline is due to the aging population.

The Employment-Population ratio increased to 58.4% in October (black line).

Note: the household survey showed another strong gain in jobs, and that is why the unemployment rate could decline with few payroll jobs added - and the employment population ratio increase.

The second graph shows the job losses from the start of the employment recession, in percentage terms. The dotted line is ex-Census hiring.

The red line is moving slowly upwards - and I'll need to expand the graph soon.

This was still a weak report, and slightly below consensus. There were decent upwards revisions to the August and September reports. I'll have much more soon ...

by Calculated Risk on 11/03/2011 11:25:00 PM

The confidence vote in Greece is tomorrow ... and it seems the story keeps changing:

From the BBC: Greece PM Papandreou faces fresh call to resign

Greece's centre-right opposition has demanded Prime Minister George Papandreou resign, throwing into disarray plans for a unity government.

Opposition leader Antonis Samaras also called for snap elections before leading his MPs in a dramatic walkout of parliament.

Mr Papandreou's government faces a crucial confidence vote on Friday.

From the Athens News: Parties enter coalition talks

Prime Minister George Papandreou has proposed the formation of a coalition government by announcing that the planned referendum will no longer take place and that his party has entered into talks with New Democracy leader Antonis Samaras.
...
During an impassioned parliamentary speech, however, Samaras once again demanded general elections “within weeks” and said that the prime minister was mistaken if he believed he would co-govern with him.

The Asian markets are up tonight. The Nikkei is up 1.25%, the Hang Seng is up 3.0%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 is down about 4 points, and Dow futures are down about 40 points.

On the employment report tomorrow: Employment Situation Preview: Another Weak Report