On The Stamp: Food Stamp Participation September 2010

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is continuing to rise.

In fact, household participation has been climbing so steadily that it has far surpassed the last peak set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that in September, an additional 521,428 new recipients were added to the food stamps program, an increase of 15.42% on a year-over-year basis, while household participation increased 18.27%.

Individual participation as a ratio of the overall civilian non-institutional population has increased 14.45% over the same period.

These results confirm that participation is continuing it's explosive climb, likely as a result of the jump in total unemployment, driving the nominal benefit costs up an lofty 16.30% on a year-over-year basis to $5,741,336,112 for the month.

Beveridge Curve Balancing Act: October 2010

Looking deeper at today’s Job Openings and Labor Turnover report you can see that while the unemployment rate is showing notable initial signs of establishing a peak, the job openings rate is showing an equal but opposite troughing dynamic.

Further, the latest data indicates that job hires are occurring at a rate of 3.6% of total employment while total job separations occurs at a rate of 3.5%.

So, currently job hires are slightly outpacing separations thus resulting in, more or less, a stagnant job market and more evidence that the unemployment rate may stay elevated for some time.

It's important to note that today's data is very preliminary and volatile and that a more sustained and sustained spread between the rate of hires and separations would be required to make a significant dent in our current structurally weak job market.

Economic Jolt: Job Openings and Labor Turnover October 2010

Today, the Bureau of Labor Statistics released their latest monthly read of job availability and labor turnover (JOLT) showing that private non-farm job “openings” jumped 13.88% since September rising 39.88% above the level seen in October 2009 while job “hires” declined 0.61% since September but remained 6.51% above the level seen in October 2009 and job “layoffs and discharges” dropped 0.25% since September and dropping 17.86% below the level seen last year.



It’s important to understand that job “quits” are included as a component of the “separations” data series as “quitting” is a valid means of workers “separating” from employers but their inclusion tends to create an overall procyclical trend in what would otherwise be logically thought of as a countercyclical process (i.e. downturn leads to increase in separations not decrease).

Ticking Prime Bomb!: Fannie Mae Monthly Summary October 2010

The Latest release of the Fannie Mae Monthly Summary for October indicated that for data through September, total serious single family delinquency continued to declined.

Although this is a notable development particularly in light of the fact that Fannie Mae’s serious delinquency had been rising for over two years, more data is needed before any conclusions can be drawn as to the trend going forward.

In September, 3.45% of non-credit enhanced loans went seriously delinquent while the level was 10.66% of credit enhanced loans resulting in an overall total single family delinquency of 4.56%.

The following charts (click for larger ultra-dynamic and surf-able chart) show 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.

Double Entendre: Light Vehicle Sales October 2010

While many of the latest auto manufacturer reports on recent auto sales appear fairly positive, looking at latest release of the Department of Commerce light vehicle sales series you can see that for the better part of the last decade auto sales have been terrible, stuck in a perpetual declining trend since the late 90s with the current level of sales last seen way back in early 1983.

With the tightening consumer credit conditions, structurally high unemployment and a decade long disappointing sales trend, recent auto sales results offer an interesting data-point but essentially paints a stark picture of significant economic weakness.

ADP vs. BLS Who Do You Trust?: November 2010

Comparing the private nonfarm payroll estimate from ADP, a national staffing and business services firm, to the BLS results, you can see that an unusual divergence has shaped up over the last year.

These two series paint starkly different pictures of the supposed “recovery”.

While the ADP series indicated a similar decline and bottoming period to that seen in the BLS estimate, the trends for both series since early 2010 have been very different.

The ADP series indicates and extremely weak recovery, so much so that it hardly looks like a recovery at all.

So who is right, the administration/BLS with their “V”-shaped “recovery” or ADP’s assessment showing an anemic and faltering economy?

Looking at the chart (click for full-screen dynamic version) you can see that these two series have never been this far out of whack.

Envisioning Employment: Employment Situation November 2010

Today’s Employment Situation Report showed that in November, net nonfarm payrolls increased by a mere 39,000 and private nonfarm payrolls added just 75,000 while the unemployment rate inched up to 9.8%.

It's important to note that private sector job creation increased just 0.05% since last month remaining a whopping 6.31% below the peak level of employment seen in December 2007 though, on a year-over-year basis, private jobs showed a notable increase of 1.02%.

Full Time Workers Fully Under Pressure: November 2010

Today’s employment situation report showed that the full time unemployment rate increased to 10.7% of the civilian workforce remaining very near the highest rate seen in 41 years.

The Bureau of Labor Statistics considers full time workers to be those “who have expressed a desire to work full time (35 hours or more per week) or are on layoff from full-time jobs”.

Full time jobless workers currently account for roughly 88.5% of all unemployed workers.

Recovery-less Recovery: Unemployment Duration November 2010

Be sure to bookmark the "Scary Unemployment Dashboard"... it's live.

Today's employment situation report showed that conditions for the long term unemployed weakened slightly in November while remaining epically distressed by historic standards.

Workers unemployed 27 weeks or more increased to 6.313 million or 41.9% of all unemployed workers while the median number of weeks unemployed increased to 21.60 weeks and the average stay on unemployment went flat at 33.8 weeks.

Looking at the charts below (click for super interactive versions) you can see that today’s sorry situation far exceeds even the conditions seen during the double-dip recessionary period of the early 1980s, long considered by economists to be the worst period of unemployment since the Great Depression.

On The Margin: Total Unemployment November 2010

Today’s Employment Situation report showed that in November “total unemployment” including all marginally attached workers went flat at 17% while the traditionally reported unemployment rate inched up to 9.8%.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit definition 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.

Pending Home Sales: October 2010

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for October showing a notable jump with the seasonally adjusted national index increasing 10.4% since September but falling a whopping 20.5% below the level seen in October 2009.

On a non-seasonally adjusted basis, the national index increased 9.2% since September but remained 22.4% below the level seen in October 2009, nearly the single largest annual decline on record for this cycle.

It's fairly clear from these results that one of the untended consequence of the government's intrusion into the housing market has been to shift home sales from the future into the period preceding the tax gimmick expiration leaving the future with less potential demand.

Meanwhile, the NARs chief economist Lawrence Yun suggests that suggests that the "solid double-digit" gain is a welcome sign that the nation's housing markets are in a "recovery" phase while emphasizing the importance of returning to more "normal" underwriting standards.

"It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels. The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011 ... More importantly, a return to more normal loan underwriting standards and removal of unnecessary underwriting fees for very low risk borrowers is needed and could quickly help in the housing and economic recovery"

It's important to note that what NAR believes is "normal" for underwriting standards is likely a far cry from what any truly prudent market participant or regulator might consider it to be.

Yun may long for a return to the bubble days of zero-down, no-doc, piggy-back and sub-prime but the markets likely cannot take anymore of that type of abusive punishment and speculation.

While more transactions are always better for the Realtor bottom line, the holders of the housing assets need only sensible, thorough and soundly underwritten transactions.

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).

Extended Unemployment: Initial, Continued and Extended Unemployment Claims December 02 2010

Today’s jobless claims report showed a notable increase to both initial and continued unemployment claims as a declining trend shaped up for initial claims and traditional continued claims continued to trend down.

Seasonally adjusted “initial” unemployment increased by 26,000 to 436,000 claims from last week’s revised 410,000 claims while “continued” claims increased by 53,000 resulting in an “insured” unemployment rate of 3.4%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 4.90 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.87 million people that are currently counted as receiving traditional continued unemployment benefits, there are 8.77 million people on state and federal unemployment rolls.

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.

The following chart 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.

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

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

Constuction Spending: October 2010

Today, the U.S. Census Bureau released their October read of construction spending showing near-cycle low levels of spending for residential construction with an apparent continued slowing trend while indicating a continued and notable decline for non-residential spending.

With this months release it's plain to see that residential construction spending is trending similarly to other measures of performance for the residential housing markets reverting back down to the the worst levels seen in early 2009.

In fact, total residential construction spending is down nominally to the levels seen in 1995 while single family spending is hovering just above the series low at a level likely first seen sometime in the 1970s or 1980s.

On a month-to-month basis total residential spending increased 2.5% from September but dropped 15.54% below the level seen in October 2009 and a whopping 66.05% below the peak level seen in 2006 while single family construction spending dropped a 1.17% since September, declining 5.06% since October 2009 and whopping 77.54% below it's peak in 2006.

Also, non-residential spending declined 0.65% since September, dropping 24.68% since October 2009 and a whopping 40.85% below the peak level reached in October 2008.

The following charts (click for larger dynamic 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, month-to-month and peak percent change to each since 1994 and 2000 – 2005.

ADP National Employment Report: November 2010

Today, private staffing and business services firm ADP released the latest installment of their National Employment Report indicating that the situation for private employment in the U.S. improved slightly in November as private employers added 93,000 jobs in the month bringing the total employment level 0.23% above the level seen in November 2009.

Looking at the chart (click for full-screen dynamic version) showing ADP’s total private nonfarm payrolls since 2001 as well as the year-over-year and month-to-month percent change, you can see that the so-called “recovery” has been anemic.

Perusing the rest of the data in the ADP dataset it’s obvious that our economy faces some significant headwinds coming from the job market with continually collapsing construction payrolls and feeble trends in goods producing and service-producing payrolls.

Look for Friday’s BLS Employment Situation Report to likely show somewhat similar trends.

Reading Rates: MBA Application Survey – December 01 2010

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 increased since the last week to climbing 6 basis points to 4.56% while the purchase application volume increased 1.1% and the refinance application volume declined a whopping 21.6% over the same period.

It's important to note that with the final expiration of the governments massive housing tax credit subsidy, home purchase activity has been trending down precipitously despite continued declining interest rates.

The purchase application volume remains near the lowest level seen in well over a decade.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages as well as one year ARMs since 2006 (click for larger dynamic full-screen version).

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