by Calculated Risk on 11/12/2011 08:11:00 AM

The drama in Europe continues to overshadow the U.S. economic situation and the European financial crisis continues to pose the greatest downside risk to the U.S. economy. See from the NY Times: Europe’s Woes Pose New Peril to Recovery in the U.S.

In the U.S., this was a light week for economic data. Initial weekly unemployment claims fell to 390,000, and the trade deficit was smaller than expected. Consumer sentiment improved, and the NFIB small business confidence index increased - although both are at very low levels.

With regards to the impact on the U.S. from the European financial crisis, the Fed’s October Senior Loan Officer Opinion Survey on Bank Lending Practices showed “considerable” tightening on lending to European banks, and some tightening to European firms, but the survey showed no tightening in the U.S. (so little spillover - at least so far).

Also the incoming data suggests Q3 GDP will be revised down a little (the trade deficit was lower than expected, but inventory growth was weaker).

Here is a summary in graphs:

• Trade Deficit declines in September as Exports increase

The trade deficit was below the consensus forecast of $46.3 billion and the deficit for August was revised down.

Click on graph for larger image.

Exports increased in September, and imports have been mostly moving sideways for the last five months (seasonally adjusted). Exports are well above the pre-recession peak and up 16% compared to September 2010; imports have stalled recently and are up about 12% compared to September 2010.

The second graph shows the U.S. trade deficit, with and without petroleum, through September.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil averaged $101.02 per barrel in September, and import oil prices have been declining slowly from $108.70 per barrel in May. The trade deficit with China declined slightly to $28 billion.

Imports have been moving sideways for the last several months - partially due to slightly lower oil prices. However the trade deficit with China continues to be a significant issue. Exports are still trending up.

• CoreLogic: House Price Index declined 1.1% in September

From CoreLogic: CoreLogic® September Home Price Index Shows Second Consecutive Month-Over-Month and Year-Over-Year Decline "CoreLogic ... September Home Price Index (HPI®) which shows that home prices in the U.S. decreased 1.1 percent on a month-over-month basis, the second consecutive monthly decline."

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was down 1.1% in September, and is down 4.1% over the last year, and off 31.2% from the peak - and up 3.6% from the March 2011 low.

Some of this decrease is seasonal (the CoreLogic index is NSA). Month-to-month prices changes will probably remain negative through February or March 2012 - the normal seasonal pattern. It is likely that there will be new post-bubble lows for this index late this year or early in 2012.

All House Price Graphs
• BLS: Job Openings increased in September

From the BLS: Job Openings and Labor Turnover Summary "The number of job openings in September was 3.4 million, up from 3.1 million in August."

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Notice that hires (dark blue) and total separations (red and blue columns stacked) are pretty close each month. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

In general, the number of job openings (yellow) has been trending up, and are up about 22% year-over-year compared to September 2010.

Quits increased in September, and have been trending up - and quits are now up about 11% year-over-year. These are voluntary separations and more quits might indicate some improvement in the labor market. (see light blue columns at bottom of graph for trend for "quits").

All current employment graphs
• Ceridian-UCLA: Diesel Fuel index increased 1.1% in October

This is the UCLA Anderson Forecast and Ceridian Corporation index using real-time diesel fuel consumption data: Pulse of Commerce Index Increased 1.1 Percent in October, Offsetting the 1.0 Percent Decline in September

This index declined sharply in late summer and this small rebound only offsets some of the recent decline.

Note: This index does appear to track Industrial Production over time (with plenty of noise).

All current Transportation graphs
• Weekly Initial Unemployment Claims decline to 390,000

The DOL reports: "In the week ending November 5, the advance figure for seasonally adjusted initial claims was 390,000, a decrease of 10,000 from the previous week's revised figure of 400,000. The 4-week moving average was 400,000, a decrease of 5,250 from the previous week's revised average of 405,250."

This graph shows the 4-week moving average of weekly claims since January 2000. The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week to 400,000.

This is the lowest level for the 4 week average since April - although this is still elevated.

All current Employment Graphs
• NFIB: Small Business Optimism Index increases slightly in October

From the National Federation of Independent Business (NFIB): Small Business Confidence Has Minor Uptick"NFIB’s Small-Business Optimism Index gained 1.3 points, nudging the Index up to 90.2. This is below the year-to-date average of 91.1, only slightly better than the average since January 2009 of 89.1."

This graph shows the small business optimism index since 1986. The index increased to 90.2 in October from 88.9 in September. This is the second increase in a row after declining for six consecutive months.

The optimism index declined sharply in August due to the debt ceiling debate and only rebounded modestly in September and October. This index has been slow to recover - probably due to a combination of sluggish growth, and the high concentration of real estate related companies in the index.

• Consumer Sentiment increased in November

The preliminary November Reuters / University of Michigan consumer sentiment index increased to 64.2, up from the October reading of 60.9, and up from 55.7 in August.

However sentiment is still very weak, although above the consensus forecast of 61.5.

• Other Economic Stories ...
• The Federal Reserve October 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices
• From RealtyTrac: U.S. Foreclosure Activity Hits 7-Month High in October
• Lawler: SF REO Inventories at Fannie, Freddie, PLS, and a “Guess” at FHA
• Fannie, Freddie and FHA REO Inventory declines in Q3