Category: employment

Economics Update

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It looks like the divergence between new and existing home sales is distressed sales
H/t The Mess That Greenspan Made

New unemployment claim numbers are out, and they posted a surprise gain, rising 15K, to 627K, as opposed to the predicted drop to 600K, while continuing claims rose slightly, and the 4 week moving average was basically unchanged.

We also have the revised figures for the 1st quarter GDP, which fell at a 5.5% annual rate, a slight upward revision from the 5.7% estimate last month.

Meanwhile, yesterday’s Fed statement appears to have fears of increasing interest rates, so 2-Year Treasuries rose, meaning that the yield fell.

Additionally, the Fed announced that it is extending its emergency facilities from October to February, so the sh&^pile for cash has at least 5 more months life.

The jobs numbers served to drive the dollar up as investors looked for safe havens, and oil rose on more reports of Nigerian unrest.

Economics Update

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Last week, I mentioned that some of the declines in continuing unemployment claims might be the result of benefits exhaustion.

Well now we have the chart pr0n to show it, and I’m now wondering how many of the people dropping off the rolls are actually getting work.

Still, we are seeing some signs of improving business confidence, this time it’s German business confidence, which is up for the 3rd straight month.

I tend to prefer less ephemeral statistics though, such as commercial real estate prices (down 8.6% from April and down 25% year over year) and the fact that rail and truck traffic are still trending down.

We are also seeing some more signs of a reduced appetite for risk, with the dollar strengthening.

In energy, both crude oil and retail gasoline fell, largely on good inventories and concerns about a jobless “recovery”.

Note that this is the first time that gasoline has fallen in 54 days.

Economics Update

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Well, I’ve missed a point on jobless claim numbers, which came out today, and showed increasing initial jobless claims, from 605,000 to 608,000, still into what Atrios calls “holy crap” territory, but that continuing claims fell from 6.74 million to 6.69 million.

I generally find continuing claims to be a better metric, but, as Susie Madrak notes, continuing claims do not count people whose benefits have been exhausted.

I’m not sure how to account for this in the data, but it is a factor.

On the other hand, we do have some unequivocally good news in the April vehicle miles driven statistics from the DOT for the first time in 20 months, which could be an indicator of a recovery, though gas prices nationally are about a buck cheaper, which may also be goosing the driving numbers.

We also have the index of leading economic indicators rising, a good sign, though the Philadelphia Fed’s Business Outlook Survey improved significantly, though it still shows contraction, so it’s an positive 2nd derivative.

It also looks like yesterday’s report of declining mortgage bond yields did predict today’s report of falling mortgage rates, with the 30 year fixed rate dropping 21 basis points (0.21%) to 5.38%, which should relieve some of the pressure on housing.

Still, with Midtown Manhattan office rents falling, down 28% year over year (!), the other show in real estate, the commercial side, is clearly dropping.

A note on the recent rise in interest rates, the real yield (interest -inflation) on 10 year treasuries is at a 15 year high, over 5%, which indicates that that inflation fears might be overblown.

The energy and currency markets have viewed today’s news as generally positive though, with oil rising, though Nigerian unrest contributed to this, and the dollar falling.

Economics Update

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We had the latest jobless report come out, and it’s another mixed bag, with the initial claims falling by 24K to 601,000, and the 4 week moving average fell to 621,750, but continuing claims rose again to another record, 6.82 million.

We also have mixed news on retail sales, with a ½% increase month over month, but a 10.8% decrease year over year, and a lot of the increase was driven by more expensive retail gasoline, which, by the way, was up again today, to $2.632/gal.

And real estate is not looking good, with foreclosures hitting the 3rd highest on record, and
mortgage rates rising sharply, to nearly 6%.

Additionally we have, despite the recent stock rally, Americans’ wealth falling $1.3 so far in 2009.

Additionally, international trade is still in the doldrums, with China’s exports in may down 26.4% year over year.

On the brighter side, Treasury yields fell, indicating that the upward pressure on interest rates may be abating.

In any case, it looks like oil will continue heading up, a prices closing at $72.68/bbl, though it was above $73 earlier in the day, largely on the IEA’s upwardly revised estimates of world demand.

In currency, the dollar fells on what were seen to be positive jobs and sales data, which reduced safe-haven demand.

Economics Update

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I think that the lede for today is the fact that two of the most prominent indicators of consumer distress, consumer credit card delinquency and consumer bankruptcy filings are up 11% and 37% year over year respectively.

These “green shoots” are all about the bankers, not about the real economy, or real people.

What’s more, indicators of the economy that are independent of investment banking, things like, the American Trucking Association Tonnage Index and the AAR’s reports on rail volume (same link), continue their downward trend.

The so-called “green shoots” are things like the Conference Board’s Employment Trends Index, which improved for the first time in 16 months:

The Conference Board Employment Trends Index (ETI)™ saw a small uptick in May. The index now stands at 89.9, increasing 0.2 percent from the revised April figure of 89.7, and down 20 percent from a year ago.

So, a 1 months uptick of less than 0.3% is a promising sign (100=1996), even though it’s still down 29% year over year, and 1996 was a great year only by the standards of the Bush economy.

Meanwhile, in international finance, downgraded the Celtic Kitten, Ireland from AA+ to AA, because Ireland, the Baltics, and much of the rest of the new EU members have experienced growth driven more by speculative flows rather than real economic development.

In energy, retail gasoline was up again this week, that’s about 27% in the past month and a half, to $2.613/gal, though oil was down slightly, largely on a stronger dollar.

Economics Update

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Unemployment Rates, Actuals vs. Geithner’s “Stress Tests”, courtesy Calculated Risk

Today, we get the unemployment rate (U3). It rose from 8.9% to 9.4%, a ½% rise.

Ouch.

By way of context, you can look at the BLS alternate measures table, and U6, which is probably closest to the figures used during the depression, though it still under counts relative to the older metric, rose from 15.8% to 16.4%.

Ugly number.

Of course, the press is reporting that the decrease in non-farm payrolls was less than expected, -345,000 as opposed to their projection of something in the -500K range.

Additionally, part of the increase in unemployment is workers becoming undiscouraged and actively looking for work, though the U6 number indicates that there was still an upward revision despite that.

Still, it appears that bondholders are betting on a recovery, they are bidding up the rates on treasuries, which is also driving up mortgage rates.

There is an argument between economists as to whether this is inflation concerns, or whether people have simply stopped fleeing headlong to the safety of US Government securities.

I’m with the latter school, but you can decide for yourselves.

As to where the economy is headed, I’d bet with the insiders and banks and such, and
insider sales as reported to the SEC are going up, implying that they are expecting worse for their firms.

Still, the jobs report drove both the dollar and oil up today.

Economics Update

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We have good news on the jobs front, with both new and continuing claims claims falling this week.

Continuing claims fell by 15K to 6,740,000, the first time that they have fallen since January 3.

We also have the rather Dickensian named Challenger Gray & Christmas reporting that corporate layoff plans fell in May.

Meanwhile, the consumer economy continues in the doldrums, with MasterCard announcing that consumer spending continues to fall, though not as quickly as earlier in the year, and the retail chain’s monthly sales reports missing expectations, though the 800 pound evil gorilla in the room, Wal Mart, has stopped reporting monthly sales figures.

Mortgage rates are continuing their climb, with the rate for a 30 year fixed mortgage hitting a 6 month high.

On the other side of the pond, both the European Central Bank and the Bank of England left their benchmark rates unchanged, which drove the dollar down, because there had been some expectation of a rate cut priced in.

Meanwhile, in energy, Goldman-Sachs predicted higher oil prices later this year, which, along with the employment data, pushed the price of oil up.

Economics Update

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Well, the ADP payroll estimate is out, and they are estimating a drop of 532,000 in non-farm payrolls, which is better than last month, but is still in major league suckage territory.

The Institute for Supply Management’s index of non-manufacturing businesses is in the same boat, which covers the services sector, is still declining, but not quite as badly.

So, things are getting worse less quickly, not getting better.

Meanwhile in the junction of banking and real estate, S&P has downgraded 59 prime Residential Mortgage Backed Securities (RMBS) to D, which, according to the Wiki, means, “Bankruptcy or lasting inability to make payments most likely.”

With all this going on in mortgages, it is not surprising that we are seeing higher rates and fewer mortgage applications.

Well, at least we are not in Latvia, whose government was unable to sell debt today….That’s right, we aren’t talking about paying more interest than anticipated, no one would buy their debt.

Mean while, the news of reduced demand and a surge in inventory drove oil down, while the dismal economic news drove the dollar higher, as investor looked for safe havens.

My guess is that the trend in the dollar is down, and it will be firmly ensconced somewhere weaker than $1.50:€1.00 by year’s end

Economics Update

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Well, the Euros are not doing well with unemployment, hitting 9.2%, which is not as bad as it sounds, because the EU’s count is more accurate, and so generally excludes fewer people from the unemployment statistics, and because the social safety net is better there.

We have some good news in real estate, with pending existing home sales jumping, though the numbers are still awful, and large proportion of them are distressed sales.

Still, the most recent numbers on construction spending are grim, and you can see that it looks like non residential construction is due to start falling too.

Still the home sales number kept profit taking against oil to a minimum.

The dollar is getting interesting, as in the curse, “May you live in interesting times,” over the past few weeks. It hit another low for 2009:, and there is active talk about countries moving to some other currency, typically the Euro, Russia’s idea of some sort of “non western” reserve currency being a pipe dream.

U.S. Unemployment Now as High as Europe

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Actually the US unemployment rate is higher relative to Europe than the Center for Economic and Policy Research (CEPR) report suggests.

The Europeans have a far more relaxed count for the unemployed, counting, for example, full time students looking for part time work as unemployed, and the US counts active duty military as part of the civilian workforce,, which Europe does not, further lowering the US numbers relative to Europe.

When comparing apples to apples, the EU and US have been much closer in terms of unemployment rate, and right now, our unemployment rate is higher.

Additionally, the consequences of unemployment are far worse in the US with a threadbare social safety net which involves, among other things, things like a loss of healthcare.

Economics Update

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Initial and Continuing Claims, Courtesy of
Calculated Risk

So, the new unemployment claims numbers are out, and they are still bad, though a bit better, 623,000, down 13,000 from the last week, and the 4-week moving average fell 3K to 626,750.

That being said, the continuing claims were 6,788,000, up 110K, to yet another record, so layoffs may be slowing, but so is hiring.

My take: this is more businesses are running out of people to lay off than it is the economy improving.

On the other side of the pacific, Japanese retail sales rose, but the consensus is that this is a temporary blip, not a trend.

Reinforcing my “dead cat bounce” view is the fact that durable goods orders remain near a 13 year low. (There is also some very bad financial journalism around this story, which I will get to separately)

Meanwhile, in real estate new home sales rose even as prices continued their fall, and if you look at the sales there is a huge portion which are distressed properties, short sales or foreclosures.

It’s why we are seeing more stories about how there are No “move-up” buyers, selling their old house and upgrading.

There is very little equity for such a move currently, and with mortgage rates continuing their upward path, and delinquencies and foreclosures rising sharply, they broke another record in first quarter, I don’t see any signs of a real rebound in the sector.

Meanwhile, I wonder how much the relaxation of the credit crunch involves the rest of our economy. The metrics involving inter-bank lending show signs of a thaw, but US commercial paper fell to its lowest level in 8 years.

This is largely non-bank lending, and it’s absolutely comatose.

Menqhile in currency and energy, the dollar dropped, and the Yen dropped more/a>, on the (not really that) good durable goods numbers and unemployment figures, while oil was up on OPEC’s announcement of no production boosts.

Economics Update

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The Economic Downturn and Contemporary Art Sales, courtesy of Felix Salmon

Well, Thursday is jobless claims day, and weekly initial jobless claims fell by 12,000, to 631,000, and the 4 week moving average fell to 628,500 from 632,000, but continuing claims hit yet another new record, hitting the number of the beast, 6.66 million.

Meanwhile, more GDP data from more countries has come out, and it is almost uniformly grim.

Additionally, the Philadelphia Fed manufacturing index is showing further contraction, though it did rise, from -24.4 to -22.6.

Of course, the press is touting the fact that the April leading economic indicators rose, but this is a volatile index, and is not supposed to mean anything until you have 3 straight months up or down.

Meanwhile, Treasuries fell, and yields rose, on reports that the Fed will be buying less of them, and on an announcement that the government would be selling an additional $162 billion of them next week.

Basically, it’s inflation concerns, which also drove the dollar to a 4 month low.

Oil rose, largely on profit taking from yesterday’s high.

Economics Update

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So, initial jobless claims rose 32,000 637,000 (seasonally adjusted) worse than expected, the four-week moving average rose by 6,000 to 630,500, and continuing claims rose by 202,000 to a record 6.56 million.

Meanwhile producer prices rose unexpectedly by 0.3%, indicating that, perhaps, the inflation genie is not as firmly in the bottle as one would hope.

Meanwhile, in real estate, office rents in London have fallen to 1991 levels, as a combination of overbuilding and the implosion of “The City”, the UK Wall Street have driven down rents.

We are seeing the same thing in retail space, with rents falling and concessions increasing, at such high profile locations as Rodeo Drive, 5th Avenue, Bond Street, and the Champs Elysees.

It’s no wonder then, that commercial and multi-residential mortgage loan originations have fallen sharply. (top pic)

Also, the HousingWire has a good picture on the surge in foreclosures that I noted yesterday. (bottom pic)

Neanwhile, energy and the dollar seem to be at odds with each other, with oil up today, it appears on the belief of a recovery, and the dollar also up, on economic insecurity.

Go figure.

Economics Update

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The US trade deficit rose in March, to 27.6 billion, on falling exports and the recent increases in oil prices.

Imports fell by $1.6 billion, but exports fell by $3 billion.

We will not be, as the Japanese did, exporting our way out of this trade deficit.

This is one reason why the American Express/CFO Research Services survey has 59% of CFOs seeing more layoffs.

Of course, the fact that nationwide, US home prices fell the most on record, 14% year over year, and the only markets where home sales are rising are where vultures are sweeping in to buy cheap foreclosure properties.

On the bright side, the National Federation of Independent Business’ monthly index of small business sentiment was up for the first time in 4 months.

It appears, however, that credit card company Advanta is not so optimistic. The company, which specializes in credit cards for small businesses, is shutting down its lending operations on June 10, after uncollectible debt exceeded 20%.

They are not shutting down, they are just shutting down all their credit lines, and just taking payments, which is awfully close to shutting down, so the credit cards just become so much plastic.

The deficit is not looking good either, with tax receipts so low that the federal government ran its first April deficit since 1983.

In energy, oil was up today, briefly breaking $60/bbl for the first time since November, before settling at $58.85/bbl.

This, along with banking changes and interest rate increases, is why the ruble is on a tear right now, and the US dollar fell to a 4 month low on comments by a number of experts that the recession is bottoming….Yeah….sure…

Economics Update

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So, the Bureau of Labor Statistics has its April employment report out, and non-farm payroll employment continued to decline in down 539,000, though this is a slower decline, and beat expectations though the unemployment rate rose to 0.4% to8.9%, a 25 year high.

Under the less restrictive, and to my mind more accurate U6, unemployment rose to 15.8%.

The picture (click for full size) shows the employment fall from peak compared with other recessions.

Meanwhile, wholesale inventories fell by 1.76%, more than the forecast of 1%, as retailers and manufacturers tried to adjust for reduced demand.

We also have some bad news in the financial industry, with Royal Bank of Scotland posting a loss after writing down risky assets, Commerzbank, Germany’s 2nd largest bank, reporting an €861 million loss, and our old friend AIG posted a loss of $4.5 billion. (AIG is the gift that keeps on giving.)

Meanwhile, all the optimism over the jobs report (Whee! !he 2nd derivative is positive!)has driven the dollar down and driven oil above $58.bbl.

Economics Update

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I think that we have some promising news here, though, eternal bear that I am, believe it to be a pause rather than the start of a turn around.

That being said, first time jobless claims fell, as did the less noisy 4 week moving average (see pic), which makes 4 weeks for the 4 week moving average, though continuing claims rose 56K to 6.351 million, indicating that this might more that businesses are running out of people to lay off than people are being rehired.

That being said, the fact that the April retail sales numbers beat expectations is just generally good news.

I’m not sure, however, how they managed to beat expectations, what with consumer credit dropping a record $11.1 billion in March, which indicates that the consumer is retrenching.

My guess is that this is an artifact of tax refunds.

In Europe, we have the Bank of England holding rates steady and the ECB cutting rates by 250 basis points (¼%), and both have expanded their programs of “quantitative easing” (printing money).

These actions were not particularly aggressive, which meant that the dollar Euro, because they are simply less likely to debase the currency as much as Uncle Ben (Bernanke).

The concerns about the US money supply are also finding their way into the US Treasuries market, with interest rates on the latest bond sales exceeding expectations, because investors are worried about monetarily driven inflation.

Still, reading the tea leaves on real estate, things are not going well, with delinquencies on dues to homeowners associations, which tend to foreshadow mortgage defaults, growing rapidly from 2.8% last June to 5.3% today.

Additionally, you have condo and apartment sales in Manhattan declining precipitously, with sales falling 48% year over year. (!)

The fact that mortgage rates are trending higher is not a help here.

In the world outside of real estate, the transportation based indicators are not showing any sign of recovery either, with Suez Canal April revenues falling 22.7% YoY.

Still, oil traders are betting on increased demand for oil, which translates into increased economic activity, and so crude rose today.

Economics Update

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Surprise, surprise, the press is noticing that foreclosures are no longer just some sort of phenomenon effecting poor people who got subprime loans:

Chuck Dayton put down a quarter of the $950,000 purchase price when he bought his house in Newport Beach, Calif., in 2004. He was making $500,000 a year with his drywall company and he expected home values to keep rising.

Then the mortgage market collapsed, new construction stopped and builders no longer needed his services. Dayton, 43, went into default four months ago because he couldn’t afford payments on the three-bedroom home, located within a block of the Pacific Ocean. He hopes his lender will agree to sell the seven-year-old house for less than he owes to avoid a foreclosure.

This is then followed by a a number of refis to take out equity, and a negative amortization loan.

A bubble market, with toxic products feeding the frenzy. No wonder Zillow dot com just completed a survey showing that ¼ of home owners are under water.

Even those who followed the old rules, 20% down and 30 year fixed, ended up buying into the appreciation story, with refinancing and exotic mortgages creeping into their home values.

And while fear fear has temporarily put a halt to the worst excesses, the declining job market, continues to mean that these people will stay under water.

The most recent reports, private ones from payroll check processor ADP, and the rather Dickensianly named outplacement firm Challenger, Gray & Christmas, don’t show a turnaround, though in a classic bit of journamalism, the fact that private sector employment fell by 491,000 is somehow good news.

Meanwhile in currency, the dollar weakened slightly, largely on uncertainty about both what the ECB will do the Euro rate, and the results of the banking stress test (more on that later).

In energy, both oil and natural gas were up, oil to a 5 month high, and the largest single day increase for natural gas in 2 months.

Economics Update

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Well, here’s a big surprise, credit card delinquencies are up.

Truth be told, this is a lagging indicator, seeing as how closely it is tied to unemployment.

I would note that so called “marginally attached workers,” which is workers who are still looking for work, but are no longer looking hard enough to be counted, has risen significantly, see pic.

Then again, remember the increase in construction spending I mentioned yesterday?

Private construction spending actually fell slightly in March so the increase I was stimulus spending.

Also, note that the Institute for Supply Management’s index of non- manufacturing businesses, basically a measure of activities in the services, fell in April, albeit at a slower pace than the past few months, so you can decide whether the glass is half full or half empty.

We have another retailer filing bankruptcy, this time Chapter 11 reorg,
Filene’s Basement.

Here’s one for nostalgia’s sake, another monoliner insurer has been downgraded, Fitch cuts Assured Guaranty from AAA to AA, which means that their insurance, which basically leases out their credit rating, is done.

We have more evidence of credit loosening though, with the
LIBOR falling below 1% for the first time ever for overnight interbank loans.

I’m not sure if this is confidence in banks, or confidence in government bailouts though.

In currency, the dollar gained vs the Euro, largely on the expectation of an ECB rate cut, which in turn is based on the largest drop in European producer prices in over 20 years.

Oil is down on reports of large inventories.

Economics Update

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To initial jobless claims fell to 631,000 this week, down 14,000 from the prior week, though continuing claims rose by 133,000 to 6.271 million, another new record.

More generally, both personal income and personal spending fell.

We also have the Institute for Supply Management’s Chicago Purchasers’ Index for April rising to 40.1, though this still indicates contraction, just slower contraction, as 50 is the neutral point.

Additionally, mortgage rates are essentially unchanged over the past week. remaining near historic lows.

The markets seem to be anticipating an improvement in the economy, which has pushed oil up and the dollar down, which I think means nothing, but the folks who run those predictive markets rather like.