Mid-Cycle Meltdown!: Jobless Claims July 02 2009

Today, the Department of Labor released their latest read of Joblessness showing seasonally adjusted “initial” unemployment claims declined 16,000 to 614,000 from last week’s upwardly revised 630,000 claims while “continued” claims decreased 53,000 resulting in an “insured” unemployment rate of 5.0%.

It’s important to note that the two most significant periods for job cuts on a non-seasonally adjusted basis is January 15 and July 15 so as July and clearer visibility on H2 quickly approaches it will be interesting to see how initial jobless claims fares.

Also, the continuing claims series is presenting the clearest picture of what is likely to be one of the most problematic aspects of this period of economic crisis namely how to make an immense and growing number of highly specialized (college educated) service/professional service workers productive again.

It’s obvious now that we have reached the first real test of our majority services-based economy.

Unlike the “tech-wreck” of 2000-2002, our current downturn is very broad, leaving no sector and virtually no corner of the country untouched.

With millions of college educated workers now on the market incomes will clearly suffer but moreover, it will be soon all too clear that our prior bubble economy significantly overproduced service workers (particularly professional service workers) for which current employment opportunities will be scant resulting in continued and fundamental vicious-cycle effects.

The following chart shows the recent trend in initial non-seasonally adjusted initial jobless claims with the year-over-year percent change acting as a rough equivalent of a seasonally adjustment.

Historically, unemployment claims both “initial” and “continued” (ongoing claims) are a good leading indicator of the unemployment rate and inevitably the overall state of the economy.

I have added a chart to the lineup which shows “population adjusted” continued claims (ratio of unemployment claims to the non-institutional population) and the unemployment rate since 1967.

Adjusting for the general increase in population tames the continued claims spike down a bit but as you can see, the pattern is still indicating that recession has arrived.

The following chart (click for larger version) shows “initial” and “continued” claims, averaged monthly, overlaid with U.S. recessions since 1967 and from 2000.

NOTE: The charts below plot a “monthly” average NOT a 4 week moving average so the latest monthly results should be considered preliminary until the complete monthly results are settled by the fourth week of each following month.

As you can see, acceleration to claims generally precedes recessions.


Also, acceleration and deceleration of unemployment claims has generally preceded comparable movements to the unemployment rate by 3 – 8 months (click for larger version).


In the above charts you can see, especially for the last three post-recession periods, that there has generally been a steep decline in unemployment claims and the unemployment rate followed by a “flattening” period of employment and subsequently followed by even further declines to unemployment as growth accelerated.

This flattening period demarks the “mid-cycle slowdown” where for various reasons growth has generally slowed but then resumed with even stronger growth.

Until late 2007, one could make the case (as Fed chief Ben Bernanke surly did) that we were again experiencing simply a mid-cycle slowdown but now those hopes are long gone.

Adding a little more data shows that in the early 2000s we experienced a period of economic growth unlike the past several post-recession periods.

Look at the following chart (click for larger version) showing “initial” and “continued” unemployment claims, the ratio of non-farm payrolls to non-institutional population and single family building permits since 1967.

The most notable feature of the post-“dot com” recession era that is, unlike other recent post-recession eras, job growth has been very weak, not succeeding to reach trend growth as had minimally accomplished in the past.

Another feature is that housing was apparently buffeted by the response to the last recession, preventing it from fully correcting thus postponing the full and far more severe downturn to today.

It is now completely clear that the potential “mid-cycle” slowdown that appeared to be shaping up in late 2007, had been traded for a less severe downturn in the aftermath of the “dot-com” recession, and now has we have fully entered, instead, a mid-cycle meltdown.

On The Margin: Total Unemployment June 2009

Today’s Employment Situation report showed that in June “total unemployment” continued its ascent and now stands at 16.5% of the civilian population or 38.88 million people.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit qualification of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

Below is a chart (click for larger version) showing the “total” unemployment rate versus the “traditional” unemployment rate along with the year-over-year percent change to the “total” unemployment rate.

Notice that the “total” unemployment rate has been skyrocketing as of late showing a 63.37% year-over-year increase and reaching the highest level seen since the government began tracking the many measures of marginalized workers while the spread between the “traditional” and “total” unemployment rates stands at 7%.

The chart below (click for larger) calculates the spread between the “total” unemployment rate and the “traditional” unemployment rate.

Envisioning Employment: Employment Situation June 2009

Today’s Employment Situation Report continued to reflect a severely contracting recessionary economy with the unemployment rate increasing to 9.5% while the Establishment survey showed another notable decline of 467,000 non-farm jobs over the same period.

As I had noted in a prior post, we are quickly approaching the second seasonal unemployment spike for the year (mid-January and mid-July are the typical unemployment spikes) that, in all likeliness, will bring a notable degree of re-acceleration to unemployment.

With the latest news just littered with poor earnings reports and announcements of job cuts and layoffs cutting across all regions and most industries, the recessionary job loss trend now appears to be following a far more severe trend than seen during our prior two recessions.

The following chart combines both the “residential building” and “residential specialty trade contractors” into one payroll series and then plotting the data since 2002.

Notice that, in aggregate, these payrolls, having peaked in February 2006 and declined 30.21% or 1,043,000 jobs since then, appear to be headed lower.

Also note that independently, “residential building” has lost 31.45% of its payrolls or 321,600 jobs since it peaked during September 2006 and that “residential specialty trade contractors” have lost 29.88% of its payrolls or 729,100 jobs since it peaked during February 2006.

Next, let’s take a look a slightly broader set of industry sectors that have been directly impacted both by the housing boom and now the bust (click for larger chart).

Note that I carefully selected sectors that showed either an obvious expansion-to-contraction trend OR a flattening-to-contraction trend and that ALL sectors have both a historical and logical relationship to residential housing as well as recent industry press releases disclosing declining profits as a result of the housing bust.

As you can see, sectors that are now being directly impacted by the current housing decline are numerous and cut across many levels of the job market from construction and materials to manufacturing and finally to retail.

Combining these series into an aggregate of payrolls “directly impacted” by the housing boom and bust cycle and plotting it, along with the S&P/Case-Shiller Composite Home Price Index (click on chart below for larger version) since 1997 provides some pretty solid evidence that a relationship exists.

To expand the analysis a bit look at the following chart that shows percent change on year-over-year basis to BOTH the “directly impacted” payrolls sectors and ALL private non-farm payroll overlaid with the S&P/Case-Shiller Composite Home Price Index.

To get a sense of the relative intensity of the pullback to the “directly impacted” payrolls by plotting both the percentage of overall private non-farm payrolls that the “directly impacted” aggregate represents as well as the contributions it is making to the rate of change of the underlying total private non-farm payrolls.

Notice that at its peak the “directly impacted” payrolls represented over 6.7% (now 6.12%) of Total Private Non-Farm Payrolls and now contracted to a far more significant degree than that seen during the entire course of the 2001-2003 contraction.

Plotting the ratio of overall and private non-farm payroll as well as the payroll of various business sectors to overall non-institutional population (above 16 years old and not in jail or “juvee”), the last eight years seem to pose more questions than answers.

The payroll-population ratio concept simply provides a mechanism for better isolating the changes to payroll rosters by calculating the percentage of population that is employed in a given sector at any given time.

In the following chart (click for larger version) you can see the ratio of overall non-farm payroll and private non-farm payroll to non-institutional population from 1948 overlaid with all U.S. recessions in that period.

As you can see, there is a fairly strong correlation to declining percent of population employed in non-farm and private non-farm endeavors and recession with particularly good peak-trough alignment for all recessions prior to 1990.

During the 2001 recession (and to a far lesser extent in 1990), although there where large declines to the ratio during the official recession period, the economy seemed to be able resume growth while the ratio continued to slide or stayed well below the peak of the prior expansion.

This is an interesting situation in that, although increases in population have been steady and could have replenished the literal number of jobs lost during the downdraft of 2000-2003, the 2000s expansion of payrolls was not strong (jobless recovery).

The following chart (click for larger version), on the other hand, the payroll ratio related to construction has remained above even the peak set in the 90s expansion but has dropped significantly below trend.

Ticking Prime Bomb!: Fannie Mae Monthly Summary May 2009

Decades from now the summer of 2008 will likely be remembered to mark the turning point where legislative blundering took an otherwise serious financial crisis and molested it into an epic financial collapse.

By fully assuming the liabilities of Fannie Mae and Freddie Mac, the two colossal and corrupt (and conduit of corruptness funneling junk Countrywide Financial loans onto the implied balance sheet of the federal government) government sponsored enterprises, the federal government, led by Treasury Secretary Paulson and Federal Reserve Chairman Ben Bernanke, has thrust taxpayers into an abyss of insolvency with one mighty shove.

Given the sheer size of these government sponsored companies, with loan guarantee obligations recently estimated by Federal Reserve Bank of St. Louis President William Poole of totaling $4.47 Trillion (That’s TRILLION with a capital T… for perspective ALL U.S. government debt held by the public totals roughly $4.87 Trillion) this legislative reversal making certain the “implied” government guarantee is reckless to say the least.

The following chart (click for larger ultra-dynamic and surf-able chart) shows what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.

It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers and that should they report the delinquent results as a percentage of the unpaid principle balance, things might likely look a lot worse.

Finally, the following chart (click for larger ultra-dynamic and surf-able chart) shows the relative movements of Fannie Mae’s credit and non-credit enhanced (insured and non-insured) “Seriously Delinquent” loans.

Pending Home Sales: May 2009

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for May showing a 6.7% year-over-year increase in pending home sales nationally but a surprisingly weak 0.7% year-over-year decline in pending sales seen in the heavily foreclosure laden markets of the west region.

Meanwhile, the NARs chief economist Lawrence Yun continues to setup the context by which the NAR (or specifically RPAC, their political action committee…) lobbies congress more lenient (and likely fraudulent) rules governing the home appraisal process.

“Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

The following chart shows the national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Look at the May seasonally adjusted pending home sales results and draw your own conclusion:

• Nationally the index increased 6.7% as compared to May 2008.
• The Northeast region increased 6.8% as compared to May 2008.
• The Midwest region increased 11.4% as compared to May 2008.
• The South region increased 7.9% as compared to May 2008.
• The West region increased 0.8% as compared to May 2008.

Construction Spending: May 2009

Today, the U.S. Census Bureau released their May read of construction spending again demonstrating the significant extent to which private residential construction is contracting particularly for single family structures which appears to have worsened significantly in recent months while non-residential spending continues to show weakness.

With the tremendous weakening trend continuing, total residential construction spending fell 33.91% as compared to May 2008 and a whopping 64.48% from the peak set in March 2006.

Worse off though was private single family residential construction spending which declined 54.06% as compared to May 2008 and a truly grotesque 80.37% from the peak set in February 2006.

Non-residential construction spending, currently accounting for just under half of all private construction spending, posted another year-over-year decline (note: the Census Bureau recently revised the last few years of non-res data erasing many of the recent months YOY increases) of 3.25%.

The following charts (click for larger versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year and peak percent change to each since 1994 and 2000 – 2005.

Beantown Bust: Boston CSI and RPX April 2009

Subtitle: Spring Bounce is Underway… Or More Precisely … Over!

The S&P/Case-Shiller (CSI) Home Price index together with the Radar Logic (RPX) for Boston represent the most accurate indicators of the true price movement for both single family homes and the entire residential real estate market as a whole (singles, multi and condos).

For April, both the CSI and RPX showed the typical spring bounce in price movement with a month-to-month increase of 0.43% to the CSI and a 7.06% gain on the RPX while on a year-over-year basis the CSI declined 7.71% while the RPX dropped 10.82% over the same period.

Further, both reports indicate that area home prices have suffered significant peak declines with the Boston CSI showing a decline of 19.73% since the peak set in September 2005 while the Boston RPX shows a 29.47% price decline since its peak of June 2005.

It’s important to note that while the spring bounce is just now showing up in the data, the data is two months old.

This means currently we are near or at the seasonal peak for pricing for 2009 and soon the overarching declining trend will resume.

Typically, prices will reach the peak in June and remain close to peak (over or under) for July but as August nears (when the typical 45 day schedule puts closings beyond the start of the school year as well as just general vacation activity impact house buying activity) so too does slumping pricing and a resumption of the overarching declining trend.

In all likeliness, this year will be no different.

Looking at the seasonally adjusted data its easy to see that Boston is far from any real change in the overall declining trend.

Click on the following ultra-cool zoom-able dynamic chart showing the three seaonally adjusted price tiers S&P provides for Boston as well as the 12 month moving average of the Boston area "sale pair counts" a near-organic single family home sales series also provided by S&P.

The most obvious difference between the 90s housing bust and today is that during the 90s the home price decline occurred mostly in-line with the larger macroeconomic decline.

Today though, all of the home price decline seen prior to mid-2008 occurred within a backdrop of an (more or less) expanding economy.

Now that the economy has firmly taken a turn for the worse (particularly our local Boston area economy), home prices will suffer to the greatest degree seen in this cycle.

The following two charts compares the Boston CSI to the Massachusetts unemployment rate during the 90s bust and today.

Notice how early we are in the unemployment cycle today… there is lots more pain to go.


Recently S&P introduced a new line of data series that specifically track condominium prices in five select markets including Boston which showed that in April Boston condo prices declined 5.45% on a year-over-year basis and 15.42% on a peak decline basis (see chart below).

In all likelihood the still low consumer confidence and substantial increases in unemployment will work to place significant downward pressure on property prices, particularly condo prices, for the foreseeable future.

To better illustrate the drop-off in home prices and the potential length and depth of the current housing decline, I have compared BOTH the normalized price movement, annual and peak percentage changes to the Boston CSI home price index from the 80s-90s housing bust to today’s bust.

Notice that with today’s release, Boston has now exceeded the number of months of annual declines seen in the 90s bust as well as fallen further on a peak percentage basis.



The “normalized” chart compares the normalized Boston price index from the peak of the 80s-90s bust to the peak of today’s bust.

Notice that during the 80s-90s bust prices took roughly 46 months (3.8 years) to bottom out.

The “annual” chart compares the percentage change, on a year-over-year basis, to the Boston CSI from the last positive value through the decline to the first positive value at the end of the decline.
In this way, this chart captures only the months that showed monthly “annual declines”.

The “peak” chart compares the percentage change, comparing monthly Boston index values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.

In this way, this chart captures ALL months of the downturn from the peak to trough to peak again.

As you can see the last downturn lasted 105 months (almost 9 years) peak to peak including 34 months of annual price declines during the heart of the downturn.

The final chart shows that the Boston housing market has been, in a sense, declining steadily since early 2001 when annual home price appreciation peaked and the intensity of the housing expansion began to wane (click on following chart for larger version).

It appears that that the main thrust of the housing expansion occurred “in-line” with the wider economic expansion that was fueled primarily by the dot-com bubble and that since the dot-com bust, the housing market has never been quite the same.

A Tale of Seven Cities... and Some Condos

Yesterday’s S&P/Case-Shiller housing market data revealed some notable differences in the trends from one metro market to the next.

It’s important to recognize that while our current national residential real estate decline is truly historic and unprecedented, a near simultaneous decline of one or more major metro markets is not.

During the 1980s/1990s boom and bust both West Coast and East Coast metro markets experienced the boom and bust cycle but while metros on the east coast, such as Boston, shook off the decline, cleared and started to climb somewhat by 1993 with the period between late 1996 and early 1997 marking the point where many markets recovered their nominal pre-bust peak levels, west coast metros generally continued to decline well into the mid-90s.

West coast metros such as San Francisco lumbered along and didn’t breach their pre-bust nominal peak level until well into 1998 in-line with the wider economic boom of the dot-com era.

Today, as in the 1990s, we see significant differences from one metro market to the next the only difference this time around is both the extent of the boom and bust and the fact that this cyclical shock has touched every market, not just a select few.

In the dynamic Blytic charts below I have arranged the three price tiers as well as a 12 month simple moving average of the “sale pair counts” for each of a selection of seven of the twenty metro markets that S&P tracks.

Notice that while some markets are showing an up-trend in sales, most are still experiencing significant price declines.

Also, metros such as New York and Atlanta appear to only now be tipping into the level of decline seen during 2007 and 2008 in some of the bubbliest markets of Phoenix, Miami and San Francisco.

Further, notice that while the nation’s major condo markets held fairly steady though 2008, they are now declining to a comparable extent to the single family markets.

Reading Rates: MBA Application Survey – July 01 2009

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages, 1 year ARMs as well as application volume for both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage declined slightly dropping 10 basis points since last week to 5.34% while the purchase application volume declined 4.5% and the refinance application volume plunged 29.96% compared to last week’s results.

It’s important to recognize that while the Federal Reserve’s “quantitative easing” measures held down rates for a time and spurred a notable boom in refinance activity, the energy appears to have come to a close.

Even with historically low lending rates both refinance and purchase application volume look to be headed back to the lows of the fall of 2008 and an overall declining trend.

The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since November 2006.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).


The following charts show the Purchase Index, Refinance Index and Market Composite Index since November 2006 (click for larger versions).

S&P/Case-Shiller: April 2009

Today’s release of the S&P/Case-Shiller home price indices for April 2009 show continued deterioration in many regional markets while some of the most seasonal markets experienced the typical spring bounce resulting in a moderate decline to the composite indices.

April brought a significant seasonal deceleration of the month-to-month price slide with the 10-city index dropping just 0.67% and the 20-city index dropping 0.56% since March (… that’s about twice as bad as 2007 but half as bad as 2008)

It’s important to recognize that the inherent seasonality of many of the component markets brings upward momentum to prices during the spring selling season be it an up-market or down.

Even a cursory glance at the charts below should result in the firm understanding that what we are experiencing today is unprecedented.

Thirty four months into the decline and the bottom to the home price slide is nowhere in sight.

The most optimistic argument one could make at the moment is that the pace of the decline is currently slower than it was a few months ago.

That should come as little comfort though considering that this decline will more than likely continue for another two to three years.

It’s important to consider that the 90s housing bust took roughly 50 months to reach the bottom in prices but as you can see from the charts below, our current housing bust literally dwarfs the 90s era tumult.

Further, the 90s housing recovery played out against the backdrop of a truly unique period of growth in the wider economy fueled primarily by novel and ubiquitous technological change (cell phones, internet, personal computers, telecommunications, etc).

In all likelihood, our current decline will play out at least as long as the 90s era (more than likely far longer) with a full recovery measured not in years but in decades.

The 10-city composite index declined 18.01% as compared to April 2008 while the 20-city composite declined 18.12% over the same period.

Topping the list of regional peak decliners were Phoenix at -54.07%, Las Vegas at -52.13%, Miami at -48.10%, San Francisco at -45.75%, Detroit at -44.97%, San Diego at -42.31%, Los Angeles at -41.82%, Tampa at -41.03%, Minneapolis at -36.52%, Washington DC at -33.37%, Chicago at -27.46%, Seattle at -22.50%, Atlanta at -22.80%, Seattle at -22.32%, Portland at -21.26%, New York at -21.08%, Cleveland at -20.58% and Boston at -19.73%.

Additionally, both of the broad composite indices showed significant declines slumping -33.56% for the 10-city national index and 32.61% for the 20-city national index on a peak comparison basis.

To better visualize the results use a Blytic.com search for "case shiller" or the PaperEconomy S&P/Case-Shiller/Futures Charting Tool as well as the PaperEconomy Home Value Calculator.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as compared to each metros respective price peak set between 2005 and 2007.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a year-over-year basis.

Additionally, in order to add some historical context to the perspective, I updated my “then and now” CSI charts that compare our current circumstances to the data seen during 90s housing decline.

To create the following annual charts I simply aligned the CSI data from the last month of positive year-over-year gains for both the current decline and the 90s housing bust and plotted the data with side-by-side columns (click for larger version).

What’s most interesting about this particular comparison is that it highlights both how young the current housing decline is and clearly shows that the latest bust has surpassed the prior bust in terms of intensity.

Looking at the actual index values normalized and compared from the respective peaks, you can see that we are still likely less than half of the way through the portion of the decline in which will be seen fairly significant annual declines (click the following chart for larger version).

The “peak” chart compares the percentage change, comparing monthly CSI values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.


In this way, this chart captures ALL months of the downturn from the peak to trough to peak again.

As you can see the last downturn lasted 97 months (over 8 years) peak to peak including roughly 43 months of annual price declines during the heart of the downturn.

More Pain, No Gain: S&P/Case-Shiller Preview for April 2009

As I had noted in a prior post, given their strong correlation, the home price indices provided daily by Radar Logic can be effectively used as a preview of the more popular monthly S&P/Case-Shiller home price indices.

The current Radar Logic data reported on residential real estate transactions (condos, multi and single family homes) that settled as late as April 27 appears to indicate that while price declines have decelerated for many of the hardest hit markets, most are likely only experiencing a momentary and typical seasonal bounce.

Further, the major east coast markets of New York and Washington DC show no sign of even a brief change in the trend with New York actually declining through the typically string spring selling season.

Miami is clearly continuing its historic price slide as the number of distressed sales climb and buyer sentiment relents under the weight of the recessionary conditions.



Phoenix, San Francisco and LA are showing a bounce in prices likely the result of dramatically lower prices, distressed properties and the recent gains in consumer confidence.




Seattle, Boston, Denver and Chicago are all experiencing the typical seasonal bounce with prices on course for a June-July (reported data) peak and then a resumption of decline into the seasonal lows of winter.

Boston, Denver and Chicago all appear to be following the typical seasonal pattern of increasing prices during the high transaction months of the spring and early summer and price declines during the fall and winter but it is important to note for Chicago and Boston, prices are clearly trending lower.


Washington DC and New York continue to be a nearly perfect examples of a market that have broken down under the strain of the housing bust and wider economic turmoil showing consistent price declines throughout spring and summer months where normally strong seasonal sales patterns typically brings increasing prices.

Invention of Wealth… Eureka!

Nominal personal income is flat… personal interest income… slump … personal dividend income …. slump … personal income from receipts on assets…. Slump.

Personal income from transfer payments…. WILD BULL RUN!

How novel! … This way Americans can take the ups with the ups and the downs!

No sense is feeling the pinch of that downturn (even if the pinch is coming on the heels of a multi-decade speculative frenzy and consumption boom)… with the federal government around prosperity is not just a goal … its mandatory!

With $8000 homebuyer tax credits, unemployment benefit extensions, foreclosure mitigation efforts, government controlled mortgage lending rates, corporate bailouts and emergency facilities for just about every non-functioning credit market the Federal Reserve can prop-up it seems that everyone from Wall Street titans to the (…formerly) affluent and capable “upwardly mobile” Americans to the common man are sidling up for a suck from the teat.

But, before you get all up in arms over the “transfer” portion of “transfer payments” one should first consider the extent of the money creation that has taken place in the last six months…

Yes… This is no mere “redistribution of wealth”… this is “invention of wealth”…

In this way the U.S. government (in an uncharacteristic stroke of efficiency) has cut out the middle man… no sense in promoting some fraudulent industry (like finance, mortgage, and real estate) just to tax and spread… simply print up all the dough and dole it out like monopoly money.

Is inflation on the horizon?

The government clearly has that as its foremost goal and the seeds are clearly in place but in any event, we are all a lot worse off for the multi-decade speculative manias and the government’s equally distorted and delusional response.

By the way… for those of you wondering… the image above of the sign proudly announcing a project funded by the “American Recovery and Reinvestment Act” was taken within the borders of Lincoln Massachusetts… one of America's most affluent communities...

Confidence Game: Consumer, CEO and Investor Confidence June 2009 (Early)

This post combines the latest results of the Rueters/University of Michigan Survey of Consumers, the Conference Board’s Index of CEO Confidence and the State Street Global Markets Index of Investor Confidence indicators into a combined presentation that will run twice monthly as preliminary data is firmed.

These three indicators should disclose a clear picture of the overall sense of confidence (or lack thereof) on the part of consumers, businesses and investors as the current recessionary period develops.

Today’s final release of the Reuters/University of Michigan Survey of Consumers for June showed a another bump up for consumer sentiment with a reading of 70.8 an increase of 25.53% above the level seen in June 2008.

The Index of Consumer Expectations (an important component of the Conference Board’s Index of Leading Economic Indicators) declined to 69.2 resting 40.65% above the result seen in June 2008.

As for the current circumstances, the Current Economic Conditions Index increased to 73.2 or 8.28% above the result seen in June 2008.

The latest quarterly results (Q1 2009) of The Conference Board’s CEO Confidence Index increased to a value of 30, but still remains near the lowest reading in the history of the index.

The May release of the State Street Global Markets Index of Investor Confidence indicated that confidence for North American institutional investors increased 9.6% since April while European confidence increased 7.5% and Asian investor confidence decreased 4.9% all resulting in an increase of 3.1% to the aggregate Global Investor Confidence Index which now rests 5.74% above the result seen last year.

It’s important to note that with the May release, State Street revised the entire series in an effort to “provide a better guide as to the level of risk tolerance”.

In the release they suggest that the only change that made was a re-basing of the series to 100 but the curve seems to reflect a change in the methodology too.

In any event, the current series appears to confirm that since 2000 the trend has been consistently down as investor’s sentiment and apparently “tolerance for risk” has continually eroded.

The chart below (click for larger version) shows the Global Investor Confidence aggregate index.

Commercial Cataclysm?: Moody’s/REAL Commercial Property Price Index April 2009

The latest results of the Moody’s/REAL Commercial Property Index strongly suggests that the nation’s commercial real estate markets are now firmly experiencing a tremendous downturn with prices plummeting a whopping 25.34% on a year-over-year basis and a stunning 29.48% since the peak set in October 2007.

The Moody’s/REAL CPPI data series is produced by the MIT/CRE but is noted to be “complimentary” to their alternative transaction based index (TBI) as it is published monthly and is formulated from a completely different dataset supplied by Real Capital Analytics, Inc.

Bull Trip!: GDP Report Q1 2009 (Final)

Today, the Bureau of Economic Analysis (BEA) released their third and final installment of the Q1 2009 GDP report showing a (revised) significant contraction with GDP declining at an annual rate of -5.5%.

Easily the most notable features of today’s report are the stunning declines to residential and non-residential as well as exports of both goods and services.

Fixed investment provided significant drags on growth with non-residential investment declining a whopping -37.3% and residential investment plunging -38.8% while exports of goods and services declined -30.6%.

Making a positive contribution to GDP were equally stunning declines to imports of goods and services slumping -36.4% (with and over 40% decline to the import of goods) as well as positive personal consumption expenditures increasing 1.4%.

The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).