The Fall of Greece: May 2011

Looking at the most recent OECD economic indicators, Greece makes by far the weakest showing in all the Eurozone as it continues to plod through tremendously difficult economic times.

Industrial production remains in severe contraction territory, consumer confidence has fallen off a cliff, business confidence is clearly depressed and the leading index is turning down fast dropping 0.51% since April and 6.54% below the level seen in May 2010.

For June (more timely data), consumer confidence declined a whopping 0.59% from May and dropped 1.23% below the level seen in June 2010 while business confidence declined 0.49% from May remaining 0.49% above the level seen in June 2010.

Industrial production remains epically weak plunging 1.21% between February and March 2011 (less timely data) remaining near the lowest levels seen since the late 1990s.

OECD Composite Leading Indicators: May 2011

Note... be sure to bookmark the OECD Dashboard for a real-time view of all the OECD composite indices.

The Organization for Economic Co-Operation and Development (OECD) publishes a wealth of data tracking the fundamental economic dynamics of the world’s largest economies.

The OECD leading indicator, industrial production, business confidence and consumer confidence series all disclose important and timely clues to the state of each respective economy or group of economies.

The latest monthly results indicate that economic conditions in the global economy generally weakened with the total leading index declining 0.23% since April but climbing 0.80% above the level seen in May 2010 while a more timely indicator of business confidence weakened notably.

Total Business confidence plunged 0.60% since May (more timely data) but still remaining 0.25% above the level seen in June 2010.

Total Consumer confidence increased with the total index climbing 0.14% since May (more timely data) but remaining a slight 0.01% below the level seen in June 2010.

Envisioning Employment: Employment Situation June 2011

Today’s Employment Situation Report showed that in June, net nonfarm payrolls increased only slightly rising just 18,000 from May while private nonfarm payrolls added a just 57,000 and the unemployment rate edged up to 9.2% over the same period.

Net private sector jobs increased just 0.05% since last month climbing 1.58% above the level seen a year ago but but remained a whopping 5.75% below the peak level of employment seen in December 2007.

Full Time Workers Fully Under Pressure: June 2011

Today’s employment situation report showed that the full time unemployment rate increased to 9.8% of the civilian workforce remaining 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 June 2011

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

Today's employment situation report showed that conditions for the long term unemployed worsened notably in June while remaining epically distressed by historic standards.

Workers unemployed 27 weeks or more jumped to 6.28 million or 44.4% of all unemployed workers while the median number of weeks unemployed increased to 22.5 weeks and the average stay on unemployment surged to 39.9 weeks, a new high for the series.

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 June 2011

Today’s Employment Situation report showed that in June “total unemployment” including all marginally attached workers jumped notably climbing to 16.2% from the prior month's level of 15.8% while the traditionally reported unemployment rate rose to 9.2%.

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.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims July 07 2011

Today’s jobless claims report showed a decline to both initial and continued unemployment claims as a rising trend is called into question for initial claims.

Seasonally adjusted “initial” unemployment declined by a notable 14,000 to 418,000 claims from last week’s revised 432,000 claims while seasonally adjusted “continued” claims declined by 43,000 resulting in an “insured” unemployment rate of 2.9%.

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 3.84 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.25 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.35 million people on state and federal unemployment rolls.

ADP National Employment Report: June 2011

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. strengthened in June as private employers added 157,000 jobs in the month bringing the total employment level 1.45% above the level seen in June 2010.

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 while the job recovery had been anemic throughout most of 2010, more recently the trend had been picking up momentum.

Although the level of jobs is still far below the peak seen in late 2007 and still near the lows seen during the worst period of the "dot-com" recession, the bottom looks to be clearly defined and the trend is looking comparable to past recoveries.

Perusing the rest of the data in the ADP dataset you can see the the economy is currently showing the most growth for small to mid-sized service providing jobs with goods-producing jobs remaining near trough levels.

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

ISM Non-Manufacturing Report on Business: June 2011

Today, the Institute for Supply Management released their latest Non-Manufacturing Report on Business indicating that service related economic activity continued to pull back a bit throughout June.

At 53.4 the business activity index weakened for the fourth consecutive month dropping 0.37% since May and sliding 6.64% below the level seen a year earlier.

Like the ISM Manufacturing index released earlier this month, the non-manufacturing sector respondents are raising some concern over sluggish growth:

"Business is still up, although some softening seen over last month." (Wholesale Trade)

"Orders are remaining steady, and outlook for this year is positive." (Professional, Scientific & Technical Services)

"Economic activity continues to be sluggish." (Management of Companies & Support Services)

"Have yet to see a real spark that ignites new and invigorated business — still seems lethargic and mired in recession-related preventative moves, and no one sees a real improvement ahead." (Public Administration)

"Commodities coming down in price, which should help stabilize inflation." (Retail Trade)

Reading Rates: MBA Application Survey – July 06 2011

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 as well as the volume of 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 jumped a whopping 23 basis points to 4.69% since last week while the purchase application volume increased 4.8% and the refinance application volume declined 9.2% over the same period.

Given that we are nearing at the end of the Feds QE2 intervention, it will be interesting to see how long rates trend in the next few months.

In any event, the purchase application volume remains near the lowest level seen in well over a decade while refinance activity continues to bounce around a bit.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

No Mercy

Oh Mercy… the Treasury is on the “loan modification” bandwagon again and in all likeliness the outcome of this program will be about as unsuccessful as prior attempts by the feds to stave off foreclosure for hundreds of thousands of ill suited "homeowners".

It’s important to recognize the impact that these programs are having on the nation’s housing markets, mucking up the market clearing process by gumming up the works with red tape, paper trails and needless lawsuits and expense.

It’s a near perfect example of the federal government’s exceptional ability to traumatize an entire market in the attempt to benefit a few participants who would be better off just left alone.

Many HAMP recipients report that they are furious with the banks and claim that they are being bullied around.

Yet… the fact remains that they needed modifications in order to stay in “their” homes so forgive me if I seem a bit callous to their plight.

All things being equal, recipients of mortgage modifications would have likely done better to face reality and recognize that they made a serious financial error with their housing “investment” and move on.

A brisk “creative destruction” phase is no doubt more beneficial to the overall market than the lengthy “uninspired construction” that the feds have whipped up.

Yet, the feds march on with failed policy after failed policy hoping that somehow their good intentions can erase the mistakes made by a generation of rubes and speculators but never fully recognizing that their actions net out to an utter loss for the system as a whole.

On The Stamp: Food Stamp Participation April 2011

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 April, an additional 60,586 new recipients were added to the food stamps program, an increase of 10.38% on a year-over-year basis, while household participation increased 12.70%.

Individual participation as a ratio of the overall civilian non-institutional population has increased 9.66% over the same period.

Participation continues to increase with nominal benefit costs climbing a lofty 10.38% on a year-over-year basis to $5.95 billion for the month.

Constuction Spending: May 2011

Today, the U.S. Census Bureau released their May read of construction spending showing near-cycle low levels of spending for residential construction while indicating a slight improvement for non-residential spending.

On a month-to-month basis, total residential spending declined 2.1% from April falling 9.09% below the level seen in May 2010 and a whopping 66.15% below the peak level seen in 2006 while single family construction spending declined 0.27% since April falling 11.99% since May 2010 and whopping 77.64% below it's peak in 2006.

Non-residential construction spending increased 1.16% since April but declined 7.12% since May 2010 and a whopping 41.76% 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.

ISM Manufacturing Report on Business: June 2011

Today, the Institute for Supply Management released their latest Report on Business for the manufacturing sector indicating that economic activity continued to expand in June and at a faster pace than in May while most other measures strengthened.

At 55.3 the purchasing manager’s composite index (PMI) declined a whopping 11.42% since April and increased 3.36% above the level seen a year earlier.

Some respondents indicated increasing pressure on prices as higher energy prices stocked inflationary forces as well as weak economic trends and Japan earthquake related disruptions:

"We continue to see inflation, though at a reduced rate [compared] to earlier months." (Chemical Products)

"Slight slowdown in overall business in both domestic and international markets, although still above 2010 at the same time." (Electrical Equipment, Appliances & Components)

"The earthquake and related issues in Japan have caused shortages of some automotive equipment, negatively impacting global automotive production." (Fabricated Metal Products)

"Sales continue to be stronger than expected across both retail and industrial channels. Material costs are definitely rising and will force increases to end-use customers." (Paper Products)

"High commodity prices continue to be worrisome." (Food, Beverage & Tobacco Products)

"Business is still up and down, with no real upside potential for us until the housing market rebounds." (Furniture & Related Products)

"Customers are still being cautious with their buying. Certain plastics and metal prices continue to rise." (Machinery)

University of Michigan Survey of Consumers June 2011 (Final)

Today's early release of the Reuters/University of Michigan Survey of Consumers for June indicated a worsening of consumer sentiment with a reading of 71.5 falling 5.92% below the level seen last year while one year inflation expectations declined to 3.8%.

The Index of Consumer Expectations (a component of the Index of Leading Economic Indicators) declined to 64.8, and the Current Economic Conditions Index rose to 82.

It's important to recognize that while consumer sentiment is higher than the panic laden trough level seen in late 2008, the current sentiment level is still far lower than any level seen during the 2001 tech recession and roughly equivalent to the worst seen during the early 1990s and second dip 1982 recessions.