Yes, that’s number 217 of the things that I never expected to say, but when I read that Angela Merkel’s governing coalition is looking to put statutory limits on executive pay, that is what I thought. When the conservatives in government argue that, in addition to encouraging bad behavior, “that growing wage disparities “pose a threat” to social cohesion,” I wonder why our policies are run by John Galt wannabes.
Category: employment
Economics Update
Scary Pic of the Day: Upcoming Mortgage Resets Courtesy of Dr. Housingbubble
ADP employment services has released its monthly report, and job cuts are way up with 697,000 jobs lost in February as compared to 614,000 jobs lost in January.
Note that the initial January figure was only 522,000, the the final February figures may very look even worse.
We also have the Institute for Supply Management February non-manufacturing numbers, and they are down from January’s already anemic figures, and the Federal Reserve’s business survey reporting “weaker conditions or declines” in 10 of the 12 regions.
In China, however, the purchasing managers’ index rose in February, to 49, which still shows contraction, but only barely, as 50 is neutral.
In real estate, we have mortgage demand falling last week, largely because borrowers are waiting to see what the Obama mortgage rescue plan is.
In commercial real estate, we have a secondary indicator, with office furniture sales falling sharply.
It’s no wonder that FDIC Chair Sheila Bair is warning that its insurance fund could be insolvent by years end.
Bank failures, ignoring the biggest ones, is on a pace to close 100 banks this year, as compared to the 27 in 2008 or the 3 in 2007.
We are seeing a spike in consumer bankruptcy filings, up 29% year over year in February.
The Chinese economic news drove oil higher, and bad economic news in Japan drove the dollar up.
Economics Update
Yeah, I know, I don’t normally do the stock market indices, but the Dow fell to below 7000 today, and closed at 6,763.29, a 12 year low, and you can be sure that this spooks both the markets, and the regulators.
More significant is the fact that personal savings in the US are way up, and as the graph from Calculated Risk shows.
It’s been over a decade since personal savings were that high, and while generally this would be a good thing™, right now the fact that people are deleveraging means that the economy is driven even further down.
It makes sense personally, but in the aggregate, it makes things worse.
Interestingly enough, even with the increase in savings, consumer spending rose in January by 0.6%, which was unexpected, as did incomes, bu 0.4%, which was also a surprise.
I think that it is a one month thing, though it might be the “Obama Effect,” making people more willing to spend now that a Bush and His Evil Minions™ are no longer running things, but in either case the effect is small, and unless we see increases for the next few months, things won’t get better.
We also saw the Institute for Supply Management’s manufacturing index rise to 35.8 from 35.6, beating expectations of a fall to 33.8, but note that this means merely that it’s contracting slightly less implosively than it would otherwise: any number below 50 is a contraction, and this makes 13 straight months of contraction.
The full link to the ISM monthly report is here, and it should be noted that their employment index is at all time (since 1947) low.
In real estate, construction dropped to a 4½ year low.
Meanwhile, the AIG bailout, and the concerns that it raises has driven oil down on concerns of more turmoil in the banking system, and has driven the dollar up in a flight to safety.
Economics Update
Well, the revised GDP numbers are in for Q4 of 2008, and they are a horror-show, with GDP declining 6.2%, when the initial numbers had been -3.8%.
With numbers like this it’s no wonder that the FDIC is reporting that the banking industry posted an aggregate net loss for a quarter for the first time since 1990.
If we are expecting real estate to rebound any time soon and save us, I wouldn’t hold my breath with condo developers trying auctions to move properties, and And apartment buyers walking away from deposits….Six and seven figure deposits….in Manhattan.
I would also note that the consumer does not appear to be their either, with the finally tally for the Consumer Confidence Index falling to a 29 year low.
With numbers like this, it’s no surprise that S&P is considering downgrading the ratings on $140 billion of prime jumbo mortgage CDOs, and non-prime mortgage origination hit a 17-year low last year.
Real estate, and hence banking, is in a sad enough condition that the FDIC has instituted a temporary emergency rate hike in order to bolster its reserves.
More generally, we have The Institute for Supply Management’s Chicago Purchasers’ Index showing continued contraction. It rose to 34.2 from 33.3, but anything under 50 means contraction, and the 30s are significant contraction.
The fact that GE cut its dividend to 10 cents from 31 cents indicates that no one is doing well here.
The same is going on overseas, with most of eastern Europe in dire straits, getting emergency loans totaling about $31 billion, and Japanese factory output falling, and new jobs drying up.
Economics Update
So, the new unemployment numbers are out, and once again, they are brutal, with adjusted initial claims hitting 667,000, up 36,000 from last week, and the less noisy 4-week moving average hit 639,000, up 19,000, while the continuing claims are at 5,112,000.
As Calculated Risk notes, the 4-week moving average is the highest since 1982, and the continuing claims are the highest ever recorded, though both are somewhat better when normalized against total workforce size. (Graph at CR)
We also saw durable goods orders fall to a 6 year low, and new-home sales fell in January, the lowest number since records started to be kept in 1963.
We also have banks cratering with the FDIC list of problem banks up 50% in Q4 of 2008.
BTW, it’s hitting the export driven economies of Asia even harder, with Singapore’s Q4 GDP falling at a 16.4% annual rate.
We also have oil down following the announcement of production cuts by the UAE, and the dollar is down, for reasons that are not entirely clear to me.
I’m Speechless (Scummy Bank Edition)
It appears that a number of states have moved to debit cards for unemployment applications, and the banks that have been contracted the service are nickel and diming the recipients with fees (see also here).
Even better, the banks in question are TARP recipients.
I will note that the banks are already making millions in interest on the “float” on the accounts sitting there, and if you call to complain, they charge you for that too.
Quoting Bruce Cockburn, If I had a rocket launcher, some son-of-a-bitch would die.”
Economics Update
Well, we have another Asian economy cratering in Q4 of 2008, with Taiwan’s GDP shrinking at an 8.36 annual rate. Unsurprisingly, they are now predicting a contraction for 2009.
This is “post Berlin Wall coming down shock-treatment elderly begging in streets” numbers.
In the US, producer prices posted a large gain, 0.8%, or about a 9½% inflation rate. I’m not certain if this is good or bad news, as the concern right now is deflation, but the impetus for the jump seems to be massive cash infusions from the Fed and the Treasury, which implies that we may be tiptoeing toward Zimbabwe.
Still, the jobless report was brutal, with initial claims remaining at 627,000, and continuing claims jumping to 4.99 million, the highest number ever.
I wouldn’t expect manufacturing or building to be a part of a recovery any time soon though, as the Philadelphia Fed’s Business Outlook Survey hit a record low, as did the Architecture Billings Index (ABI).
Note that the ABI typically presages construction activity 9-12 months ahead.
Additionally, I think that we are near seeing some of the non AIG insurance giants failing, with the first indicator being that Prudential Financial Inc. being excluded from the Federal Reserve’s commercial paper program, because Fitch Ratings downgraded them.
Note that Prudential Financial Inc. is the parent of Prudential Insurance, and that the insurance division can still use the “Commercial Paper Funding Facility,” for a while, at least.
The dollar fell a bit today, largely on reduced concerns about the smaller nations in the Euro zone going completely broke.
In energy, oil rose, though it is still well below $40/bbl, because of a surprise drop in inventory.
About Fracking Time
I’m shocked, shocked to find that gambling is going on here!
I am not surprised that H1B visas are being used to undercut wages of citizens and green card holders, but I am shocked that we are seeing raids and indictments on employers who engage in this practice.
Even more surprising is the fact that the prosecutors appear to be unloading some big guns against these folks:
The arrests were carried out by federal, state and local agents working in Iowa, California, Massachusetts, Texas, Pennsylvania, Kentucky and New Jersey. The government’s action “is the result of an extensive, ongoing investigation into suspected H-1B visa fraud, mail fraud and conspiracy,” said Matthew Whitaker, the U.S. attorney for the Southern District of Iowa, in a statement. The investigation was dubbed Operation Pacific Vision.
(emphasis mine)
So we are seeing both arrests and felony indictments.
It appears that the investigation centers on the borker (temp firm) Vision Systems, who placed people in high cost areas like New Jersey, but used the prevailing wage of its headquarters in Iowa.
It’s a start. Better would be an H1B application fee high enough that it would remove the economic incentive.
Economics Update
Well, the obvious lede here is the weekly initial jobless claims, which dropped 8000 to 623,000, still well within OMFG territory, and the four-week moving average, which is to my mine a better and less noisy metric, jumped from 583,500 to 607,500, while continuing claims rose to 4.81 million…..Ouch.
We have some more numbers for the real estate bloodbath too, with the NAR reporting that median home prices declined in Q4 of 2008 by 12.4% as compared to Q4 of 2007.
Foreclosures fell in January, but this is largely because the GSEs have put a temporary moratorium.
More telling is the fact that foreclosures and short sales accounted for 45% of sales in Q4.
Mortgage rates are down this week to 5.16%, which is still above the 4 and change percent from last month, so I do not expect this to do much to the market.
We do have a bright spot, with , it was +1% over December as opposed to the expected -.8%, but look as the chart on the right shows, it’s still very grim.
It’s worth noting that some of the increase is because retail gasoline prices have been trending higher (bottom chart), which along with increased spending for food and for clothing, were largely responsible for the increase.
In currency, the Yen and the dollar strengthened as investors fled to their relative safety, and in energy, oil fell below $34/bbl on high inventories and low demand.
Economics Update
I’m not going to be writing about Geithner’s bank bailout plan here, it needs it’s own post, but I have some graph pr0n, a little update from last night’s Pelosi scary employment graph courtesy of Justin Fox (top) and William Polley.
The first goes back 6 recessions, and the 2nd covers all of the recessions since WWII, which makes a bit busy, but they are at least as scary as last night’s graph.
On to the update:
It appears that the Asian economies are melt down down, with Japan’s economy is deteriorating in a way that has not been seen in 50 years, China’s exports falling by double digits, the Taiwan dollar and Malaysian Ringgit falling, and the IMF predicting a 4% contraction in the South Korean economy in 2009.
Meanwhile, there is a report that Russia is attempting to restructure its debts, which is a polite way of saying that they are threatening to default.
Meanwhile, Geithner’s plan, and the Senate’s approval of a stimulus, does appear to be having an effect on the markets, with oil falling, which indicates that the oil traders do not expect to see a rapid economic turn around, and the dollar rising, on the same information.
In this case it appears to be cross purposes, but I think that the reason that the dollar is up is because people realize that the bailout makes US investments more attractive, albeit at taxpayer expense, but that is another post.
Nancy Pelosi Just Scared the Hell Out of Me
So Nancy Pelosi, or actually her staffer Karina, shows us what 3.6 million jobs lost looks like.
It’s falling off a cliff, with no signs of bottoming.
We’ve lost 3.6 million jobs, as opposed to 1.6 in the early 1990s recession, and 2.7 million jobs following the dotbomb bust.
Economics Update
So we have the new, official jobs report, Oh My God!!!
The unemployment rate went up to 7.6%, and 598,000 jobs were cut, the most since 1974, and it happened across all sectors.
Barry Ritholtz looks at the number in more detail, and finds (excerpting):
- Total job losses since the recession started in December 2007: 3.6 million;
- Over the past 12 months, the number of unemployed persons has increased by 4.1 million;
- For the first time since records began in 1939, there were three consecutive months of 500k + job losses;
- Household survey showed a record 1.24 million job plunge (Since data began in 1950)
- The employment-population ratio fell to 60.5%, down from 62.7% at the beginning of the recession, — the lowest rate since 1986.
- Unemployment rate: 16-year high (1992);
- The 3.5 million job loss since January 2008 is the largest 12-month decline since the government started compiling those figures in 1939;
- U-6 Marginally attached and involuntary part-time workers: 13.9% last month — up almost five percent;
- The employment-to-population ratio was the lowest since 1986.
Except for the jobs report, it’s a slow news day, which is kind of like saying, “Apart from that Mrs Lincoln, how did you enjoy the play?
Then again, I expect at least one bank closing shortly after I shut down for Shabbos, because Friday is bank regulator seizure day (cue Prince Spaghetti Day ad).
The good news is that it looks like the SEC and Treasury are denying any plans of suspending mark to market.
Going back to mark to model would be like pouring gasoline on a the bonfire of the fraudulent.
One odd thing here is that the Federal Reserve appears to be walking away from expanding its Term Asset-Backed Securities Lending Facility (TALF) program, a sh%$ pile for cash givaway lending program, to include consumer credit derived instruments.
Not sure what is going on here, but it would seem to me that this might be one of the better ways to throw money at the problem.
Meanwhile, oil fell on the jobs reports, and the dollar was mixed, up against the Yen, down vs the Euro, and flat vs. the Sterling.
Economics Update
Our economy just had one of those days when you wonder why you get out of bet.
First, we have initial unemployment claims spiking to the highest number since October, 1982, 626,000. The consensus estimate had been 580,000.
The more reliable, and less noisy, 4 week moving average was up too, from 543,250 to 582,250, and continuing claims hit 4,788,000, another new record.
In manufacturing, December new factory orders fall 3.9%, well above the estimate of 3 %, and in rental real estate, the MIT commercial property price index posted a record drop, 10% in Q4 of 2008.
In international high finance, the Bank of England its benchmark rate by 50 basis points (½%), to 1%, which breaks last month’s record…..Considering that the BoE has been around since 1694, that’s a long record.
Across the channel in Euro land, the European Central Bank has left its benchmark unchanged, though I think that this is less from optimism than from the inflation-hawk nature of the ECB’s charter, and the fear of the zero rate destroying their ability to manage the economy with monetary means.
Meanwhile, mortgage interest rates have continued their increase, with the 30 year fixed being reported at 5.25%.
With the rate cuts in England, and the ECB still signaling future rate cuts, the dollar was up today.
The dismal job numbers drove oil down.
Economics Update
Well, the ADP Monthly Survey estimates that 522,000 jobs were lost in January, and while the Institute of Supply Management’s non-manufacturing index rose, it’s still below 50, 42.9, which means more contraction on the way.
These aren’t official government figures, but those figures, due out Friday, are expected to be grim:
In its report on Friday, the Labor Department is expected to show 525,000 jobs were lost throughout the economy in January and the jobless rate is expected to rise to 7.5 percent.
Meanwhile, the dollar is up on expectation of further Euro zone rate cuts, and oil was down 46¢, continuing its love affair with the $40/bbl price.
The Devil is in the Details
Because Obama’s plan to limit executive pay to $500K to TARP recipients will sink or swim on the loopholes.
Larry Summers’ suggestion that, “Executive compensation above a specified threshold amount be paid in restricted stock or similar form that cannot be liquidated or sold until the government has been repaid,” is one such loophole, because if the restricted stock has dividends, it’s back to the races.
One of the things that needs to be understood is that Wall Street’s excessive salary structure is not just a symptom of the current banking problem, it’s one of the causes, because the excessive leverage and incompetent risk taking made year over year results so remunerative that it encouraged byzantinely complex instruments.
As a note, it’s actually not the executives who will get hit hardest by this:
“That is pretty draconian — $500,000 is not a lot of money, particularly if there is no bonus,” said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. “And you know these companies that are in trouble are not going to pay much of an annual dividend.”
Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.
(emphasis mine)
It’s the “compensation consulting firms”, whose business model is to get paid lots of money from CEOs and Boards of Directors to recommend high salaries to those very same CEOs and Boards of Directors, who lose the most.
It sure beats working for a living.
Scary Picture of the Day
Jess Bachman give us this chart explaining the current unemployment rate.
Zoinks!
He’s an impoverished graphic designer with some neat posters for sale.
Economics Update
Well, the jobless numbers are out, and they are not pretty with initial claims running at 588,000,continuing claims rising 159,000 to 4.776 million, which is the highest number recorded since the 1967, when they started collecting the data, and the 4 week moving average rose by 24,250 to 542,500.
Additionally durable goods orders fell by 3.7% in 2008.
And if you are wondering if there is a segment of the banking industry that won’t need a bailout, stop wondering.
There isn’t a segment of the banking industry that is not in trouble, as regulators are not moving to inject capital into credit unions, which are traditionally the most conservative, and the safest of the bank like institutions.
The fact that new home sales have fallen to the lowest level ever recorded (recording started in 1963) probably has a lot to do with this.
Also, freight truck tonnage is cliff diving. (H/T Calculated Risk)
Meanwhile, the most healthy of the Big 3 (Big 2½) auto makers, Ford, just reported a larger-than-expected $5.9 billion loss in the last quarter.
In international finance New Zealand is aggressively dropping its benchmark interest rates too, with their central bank 150 basis points (1½%) to the record low of 3.5%.
About the only good news is that it appears that deflationary expectations are easing, as the spread between 10 year Treasury Inflation Protected Securities (TIPS)and 10 year nominal securities has risen about 1% for the first time since November 10.
Meanwhile, the dollar was mixed today, and oil fell on the housing news.
Economics Update
Consumer confidence just fell again, and hit an all time low, 37.7, the lowest number since the Conference Board started keeping records in 1967.
What with the Case-Shiller index showing a November home price drop of 18.2% year over year, and California home prices falling a staggering 42% year over year along with word of that there have been 519,895 job cuts announced since election day.
It’s all a major bummer.
We do have a report that Obama will direct his TARP funds toward consumers, as opposed to the corruption orgy under Bush and His Evil Minions™, which is good news, but it looks like Fannie Mae will need another $16 billion of that.
Meanwhile, Sweden, which handled its early 1990s banking crisis about as well as anyone, it was able to wrap up its intervention years ahead of schedule and with a profit, is looking at injecting cash into its banking system again.
Russia is looking at doing the same for its banks.
In any case, the lousy consumer confidence numbers have had the effect of driving oil down, and scaring people into fleeing to the safety of the dollar, which drove the buck up.
Lilly Ledbetter Fair Pay Act Passes House
Therw were some minor changes, so the law allowing a greater statute of limitations on ongoing pay discrimination has to go back through the house, but it appears headed to Obama’s desk in a matter of days.
As Kevin Drum notes, “All 56 voting Democrats supported the bill, and five Republicans joined in. Which ones? Arlen Specter plus all four of the women in the GOP caucus. Imagine that.“
Economics Update
The weekly new claims for unemployment jumped last week by 62,000 last week, to 589,000, the highest level since 1982, and more than predictions.
The 4 week average was flat, and continuing claims were worse than predictions too, at 4.607 million.
If that weren’t enough housing starts fell by 15.5% to 550,000, which, according to Calculated Risk,is, “by far the lowest level since the Census Bureau began tracking housing starts in 1959.”
Mortgage applications fell by 9.8% last week, because interest rates bumped by 0.37%, and most of the action right now is ReFi.
Over in Asia, the Bank of Japan is buying corporate bonds, because the credits markets have frozen there, and China’s economic growth fell to a 7 year low for the 4th quarter.
Meanwhile, it looks like the humongous loss phenomenon is moving from the banking giants to the regional banks, which may have a larger effect on business output, since they do a lot less of the high finance and a lot more lending to mom and pop businesses.
In commodities, steel production fell 1.2% in 2008, the first annual drop in a decade, while oil was up a few pennies today.
In currencies the dollar was down vs. the Euro and Yen, but up against the Pound…but then again, everything is up against the pound.