by Calculated Risk on 11/30/2013 01:11:00 PM

This will be a very busy week for economic data with several key reports including the November employment report on Friday, New Home sales for September and October on Wednesday, and the 2nd estimate of Q3 GDP on Thursday.

Other key reports include the ISM manufacturing index on Monday, November vehicle sales on Tuesday, the ISM service index on Wednesday, and the October trade deficit report on Wednesday.

----- Monday, December 2nd -----
9:00 AM ET: The Markit US PMI Manufacturing Index for November.  The consensus is for an increase to 54.2 from 51.8 in October.

10:00 AM ET: ISM Manufacturing Index for November. The consensus is for a decrease to 55.5 from 56.4 in October.

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

The ISM manufacturing index indicated expansion in October at 56.4%. The employment index was at 53.2%, and the new orders index was at 60.6%.

10:00 AM: Construction Spending for September and October. The consensus is for a 0.5% increase in September, and a further 0.5% increase in October construction spending.

----- Tuesday, December 3rd -----
>All day: Light vehicle sales for November. The consensus is for light vehicle sales to increase to 15.7 million SAAR in November (Seasonally Adjusted Annual Rate) from 15.2 million SAAR in October.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the October sales rate.

----- Wednesday, December 4th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for November. This report is for private payrolls only (no government). The consensus is for 185,000 payroll jobs added in November, up from 130,000 in October.  

8:30 AM: Trade Balance report for October from the Census Bureau.

Imports increased and exports decreased slightly in September.

The consensus is for the U.S. trade deficit to decrease to $40.2 billion in October from $41.8 billion in September.

10:00 AM: New Home Sales for September and October from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the August sales rate.

The consensus is for an increase in sales to 425 thousand Seasonally Adjusted Annual Rate (SAAR) in October from 421 thousand in August. 

10:00 AM: ISM non-Manufacturing Index for November. The consensus is for a reading of 55.5, up from 55.4 in October. Note: Above 50 indicates expansion, below 50 contraction.

10:00 AM: Trulia Price Rent Monitors for November. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, December 5th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 322 thousand from 316 thousand last week.

8:30 AM: Q3 GDP (second estimate). This is the second estimate of Q3 GDP from the BEA. The consensus is that real GDP increased 3.1% annualized in Q3, revised up from the advance estimate of 2.8%.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for October. The consensus is for a 1.2% decrease in October orders.

----- Friday, December 6th -----
8:30 AM: Employment Report for November. The consensus is for an increase of 180,000 non-farm payroll jobs in November, down from the 204,000 non-farm payroll jobs added in October.

The consensus is for the unemployment rate to decrease to 7.2% in November from 7.3% in October.  A key will be if the participation rate increases too, reversing the sharp decline last month.

The following graph shows the percentage of payroll jobs lost during post WWII recessions through October.

The economy has added 7.8 million private sector jobs since employment bottomed in February 2010 (7.2 million total jobs added including all the public sector layoffs).

There are still almost 1.0 million fewer private sector jobs now than when the recession started in 2007.

8:30 AM ET: Personal Income and Outlays for October. The consensus is for a 0.3% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.1%.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (preliminary for December). The consensus is for a reading of 75.5, up from 75.1 in November.

3:00 PM: Consumer Credit for October from the Federal Reserve. The consensus is for credit to increase $15.0 billion in October.

by Calculated Risk on 11/30/2013 09:20:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for November 29, 2013.

Changes and comments from surferdude808:

The FDIC released details of its enforcement action activity through October 2013. For the week, there were nine removals that lower the Unofficial Problem Bank List to 645 with assets of $221.2 billion. At the end of November last year, the list held 856 institutions with assets of $326.4 billion. For the month, the list declined from 670 to 645 after one failure, six unassisted mergers, and 18 action terminations. It was the first month that an institution was not added to the list since its first publication in August 2009.

FDIC terminated actions against First State Financial, Inc., Pineville, KY ($363 million); EvaBank, Eva, AL ($321 million); First Bank, Clewiston, FL ($243 million); Commerce Bank, Geneva, MN ($155 million); Farmers Exchange Bank, Louisville, AL ($135 million); American Heartland Bank and Trust, Sugar Grove, IL ($110 million); Security First Bank, Fresno, CA ($98 million Ticker: SFRK); and Integrity First Bank, Wausau, WI ($78 million). The other removal was The Wilton Bank, Wilton, CT ($75 million Ticker: WIBW), which found a merger partner.

Earlier in the week, the FDIC released third quarter industry results including figures of 515 institutions with assets of $174 billion on the Official Problem Bank List. The difference between the official and unofficial lists narrowed to 130 institutions and $47.2 billion of assets from 148 institutions and $58.6 billion of assets last quarter. For five quarters during 2009 and 2010, the official list had a higher count and more assets but subsequently the official list has declined at a faster pace. We anticipated the institution count difference could narrow to around 120. Still, the narrowing by 18 was the second most since the first quarter of 2013.

by Calculated Risk on 11/29/2013 08:49:00 PM

A month ago I asked Will the Fed "Taper" in December? Although the consensus is the Fed will wait until 2014 to start to taper asset purchases, December is still possible.

From a month ago:

There are many key releases right at the beginning of December, and we know the Fed is "data dependent".  So here is what the FOMC would like to see to start tapering: 1) the unemployment rate fall to 7.2% in the November report, 2) Employment up about 2.2 million year-over-year in November, 3) inflation increasing toward 2% target, and 4) some sort of fiscal agreement by Dec 13th.  All possible.

• The unemployment rate criteria should probably be expanded - not only would the Fed like to see the unemployment rate decline in November, they'd like to see the participation rate increase (the participation rate declined sharply in October to 62.8% from 63.2% in September, and I suspect the Fed will like to see some of that reversed in the November report). The unemployment report will be released next Friday, and the consensus is the unemployment rate will decline to 7.2%.

• Following the solid October employment report, it will be pretty easy for total employment to be up 2.2 million year-over-year in November (employment was up 2.33 million year-over-year in October).  The Fed will probably be looking for November job growth in line with the consensus of 180 thousand.

• Inflation is probably the key right now.  Core PCE was up 1.2% year-over-year in September, and the Fed would like to see this increasing towards their 2.0% target.   PCE prices for October will be released next Friday, and the consensus is for core PCE prices to only be up 1.1% year-over-year.  Low inflation might stop the Fed from tapering in December.

• Some sort of fiscal agreement looks likely now since Congress is playing "small ball". Of course you never know with Congress.

Right now the key is inflation.

by Calculated Risk on 11/29/2013 03:24:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in October to 2.48% from 2.55% in September. The serious delinquency rate is down from 3.35% in October 2012, and this is the lowest level since December 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Earlier this week, Freddie Mac reported that the Single-Family serious delinquency rate declined in October to 2.48% from 2.58% in September. Freddie's rate is down from 3.31% in October 2012, and this is the lowest level since March 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.87 percentage points over the last year, and at that pace the serious delinquency rate will be under 1% in less than 2 years. Note: The "normal" serious delinquency rate is under 1%.

Maybe serious delinquencies will be back to normal in late 2015 or 2016.

by Calculated Risk on 11/29/2013 01:37:00 PM

From the NY Times: Euro Zone Inflation Rises to 0.9% as Jobless Rate Dips to 12.1%

Unemployment in the 17 countries of the euro zone dropped to 12.1 percent in October from 12.2 percent the previous month, according to official figures. While that was certainly decent news for the 61,000 fewer people who are jobless, unemployment remains near a record high.

At the same time, inflation in the euro zone rose to 0.9 percent in November from a year earlier, up from 0.7 percent in October, according to Eurostat, the European Union’s statistics office. The inflation rate is still well below the European Central Bank’s target rate of below but close to 2 percent, and short of the level required to convince many economists that the euro zone is safe from deflation, a persistent and broad decline of prices that is a typical feature of economic depression.

Here is the unemployment data from Eurostat:

Eurostat estimates that 26.654 million men and women in the EU-28, of whom 19.298 million were in the euro area (EA-17), were unemployed in October 2013. Compared with September 2013, the number of persons unemployed decreased by 75 000 in the EU-28 and by 61 000 in the euro area. Compared with October 2012, unemployment rose by 512 000 in the EU-28 and by 615 000 in the euro area.

The euro area seasonally-adjusted unemployment rate was 12.1% in October 2013, down from 12.2% in September; it was 11.7% in October 2012. The EU-28 unemployment rate was 10.9 % in October 2013, stable compared with September; it was 10.7 % in October 2012.

This was the first decline in the unemployment rate since 2011, but the situation is still very grim, especially in Greece (27.3%) and Spain (26.7%).

by Calculated Risk on 11/29/2013 10:41:00 AM

From the WSJ: Narrow Budget Agreement Comes Into View

Negotiators in Congress are moving toward a narrow agreement on this year's federal budget that ... modestly reduce the roughly $100 billion in across-the-board spending cuts, known as sequestration, that will hit in January.
...
To replace the sequester cuts, officials close to the talks said, lawmakers are looking at increasing airport-security fees, cutting costs in federal-employee retirement programs and drawing on revenue from the auction of broadband spectrum. Democrats also want to count savings from program changes in a farm bill, which is being negotiated in a separate process, to offset sequester cuts, but Republicans say those savings should go to general deficit reduction.

The budget conference committee is scheduled to present any agreement on December 13th, and then vote on the spending bill by January 15th.  It appears a "small ball" agreement is likely.

by Calculated Risk on 11/28/2013 08:14:00 PM

This was released this week by the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for October 2013. In the past month, the indexes increased in 44 states, decreased in four states, and remained stable in two, for a one-month diffusion index of 80. Over the past three months, the indexes increased in 45 states and decreased in five, for a three-month diffusion index of 80.

Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In October, 45 states had increasing activity(including minor increases). This measure has been and up down over the last few years ...


Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and all green at times during the recovery.

There are a few states with three month declining activity, but most of the map is green.

by Calculated Risk on 11/28/2013 10:47:00 AM

From Neil Irwin at the WaPo looked for a few positives again this year: Five economic trends to be thankful for. Some excerpts a few comments:

1) Falling gasoline prices. ... The average national price of a gallon of gas has fallen from $3.67 in July to $3.29 as of Tuesday, a 10 percent drop in Americans' fuel costs.

CR Note: This is a trend we've been falling.  See this graph from gasbuddy.com.

2) Fewer layoffs. The job market isn't great overall, with unemployment still high. But one key measure of the labor market has shown major progress in 2013. The number of people filing new claims for unemployment insurance benefits was a mere 316,000 last week, and over the last four weeks has averaged 332,000. That's below the 340,000 of December 2007, the month the recession began, and far, far below the high of 670,000 the last week of March 2009.

CR Note: Here is a graph of initial weekly unemployment claims.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 331,750.

Some of the recent volatility in weekly claims was due to processing problems in California (now resolved).

The level of weekly claims suggests an improving labor market.

3) Home prices are rising. ... In the year that ended in September, prices rose 13.3 percent in 20 major metro areas, according to the S&P/Case-Shiller home price index. This translates into higher wealth levels among Americans, leaving them the confidence to spend more money. And it that fewer people are underwater on their mortgages, or owing more than their homes are worth.

CR Note: This has been a real positive for homeowners - but a negative for potential home buyers.

4) More job openings. Hiring has been slow to rebound, but employers are increasingly reporting that they have jobs open. There were 3.91 million job openings in September, the Labor Department said in its Job Openings and Labor Turnover Survey. That was the highest since May 2008 and returns the number of jobs available to early 2005 levels (though the population was smaller then). The story through this slow, halting jobs recovery has been about employers failing to hire; this data suggest things are starting to thaw.

CR Note: Here is a graph of the data Irwin is mentioning on job openings.

Jobs openings increased in September to 3.913 million from 3.844 million in August.  The number of job openings (yellow) is up 8.6% year-over-year compared to September 2012 and openings are at the highest level since early 2008.

Also Quits were mostly unchanged in September and are up about 18% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

5) Debt burdens keep on falling. The ratio of Americans' income going to meet debt obligations has plummeted in recent years, as consumers have both reduced debt burdens (by paying them down and in some cases defaulting) and benefited from lower interest rates. The debt service ratio was only 9.89 percent in the second quarter, hovering near an all-time low of 9.84 percent from late 2012 (the data go back to 1980). That ratio was 13.5 percent in the third quarter of 2007, before the crisis.

CR Note: This graph based on data from the Fed shows the debt service ratio (DSR) for both renters and homeowners (red), and the homeowner financial obligations ratio for mortgages (blue) and consumer debt (yellow).

The overall Debt Service Ratio is just above the record low set in Q4 2012 thanks to very low interest rates. The homeowner's financial obligation ratio for consumer debt is back to levels last seen in early 1995.

Also the homeowner's financial obligation ratio for mortgages (blue) is at a new record low.  This ratio increased rapidly during the housing bubble, and continued to increase until 2008. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined to an all time low.

Happy Thanksgiving!  

by Calculated Risk on 11/27/2013 06:08:00 PM

The Case-Shiller house price indexes for September were released Tuesday. Zillow has started forecasting Case-Shiller a month early - and I like to check the Zillow forecasts since they have been pretty close.   It looks like another very strong month ...

From Zillow: Zillow Predicts October Case-Shiller Will Show Still More Inflated Appreciation

The Case-Shiller data for September came out [Tuesday], and based on this information and the October 2013 Zillow Home Value Index (ZHVI, released Nov. 26), we predict that next month’s Case-Shiller data (October 2013) will show that both the non-seasonally adjusted (NSA) 20-City Composite Home Price Index and the NSA 10-City Composite Home Price Index increased 13.9 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from August to September will be 1 percent for both the 20-City Composite and the 10-City Composite Home Price Indices (SA). All forecasts are shown in the table below. Officially, the Case-Shiller Composite Home Price Indices for October will not be released until Tuesday, Dec. 31.
...
The Zillow Home Value index continues to show moderation in home value appreciation, with several of the largest metros showing month-over-month declines in October, as well as a fair amount of volatility in home value growth as the housing recovery continues. Case-Shiller indices have also shown slowdowns in monthly appreciation, but have not yet recorded monthly declines (at least not in their seasonally-adjusted monthly numbers). Even when the Case-Shiller indices do begin to show monthly depreciation in some areas, they will continue to show an inflated picture of home prices, especially when considering year-over-year growth. The Case-Shiller indices are biased toward the large, coastal metros currently seeing enormous home value gains, and they include foreclosure resales. The inclusion of foreclosure resales disproportionately boosts the index when these properties sell again for much higher prices — not just because of market improvements, but also because the sales are no longer distressed.

The following table shows the Zillow forecast for the October Case-Shiller index.

Zillow October Forecast for Case-Shiller Index
		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	Oct 2012	158.66	156.72	146.03	144.26
Case-Shiller (last month)	Sept 2013	180.03	176.19	165.66	162.19
Zillow Forecast	YoY	13.9%	13.9%	13.9%	13.9%
	MoM	0.4%	1.0%	0.4%	1.0%
Zillow Forecasts1		180.7	178.2	166.3	164.1
Current Post Bubble Low		146.45	149.62	134.07	136.87
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Jan-12
Above Post Bubble Low		23.4%	19.1%	24.1%	19.9%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 11/27/2013 03:01:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate declined in October to 2.48% from 2.58% in September. Freddie's rate is down from 3.31% in October 2012, and this is the lowest level since March 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Note: Fannie Mae will report their Single-Family Serious Delinquency rate for October next week.

Click on graph for larger image

Although this indicates progress, the "normal" serious delinquency rate is under 1%. 

The serious delinquency rate has fallen from 3.31% in October 2013 - and at that rate of improvement, the serious delinquency rate will not be below 1% until mid-to-late 2015. 

Very few seriously delinquent loans cure with the owner making up back payments - most of the reduction in the serious delinquency rate is from foreclosures, short sales, and modifications.  Therefore I expect an above normal level of distressed sales for 2+ years (mostly in judicial states).