by Calculated Risk on 2/05/2010 08:30:00 AM

From the BLS:

The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000), the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.

Click on graph for larger image.

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 20,000 in January. The economy has lost almost 4.0 million jobs over the last year, and 8.42 million jobs since the beginning of the current employment recession. (note: job losses were 7.2 million before benchmark revision).

The unemployment rate declined to 9.7 percent. (I'll have more on that soon)

The second graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).

For the current recession, employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early '80s recession with a peak of 10.8 percent was worse).

I'll have much more soon ...

by Calculated Risk on 2/05/2010 01:13:00 AM

Just a late night update. The U.S. futures are up ...

Futures from CNBC indicate the Dow up 40 and the S&P 500 up 4. All that will change with the employment report!

And here are the Bloomberg Futures.

The Asian markets are all down, with the Nikkei off 2.6% and the Hang Seng off 2.9%.

Best to all.

by Calculated Risk on 2/04/2010 07:42:00 PM

Short sales are a hot topic, and Jillayne Schlicke has an interesting post: Predatory Short Sale Negotiators

I received a call the other day from a consumer who was in the process of purchasing a short sale home. The homeowner has defaulted on her mortgage and the trustee sale auction has been postponed a few times now that this buyer’s firm offer has finally reached the lender’s loss mitigation decision-maker. Once the offer was accepted by the seller, the homebuyer was surprised to learn that there’s a third party involved, a “Short Sale Negotiator” who is charging an additional $9,000 fee on top of the real estate commissions paid to both the agent for the seller and the agent for the buyer. The Short Sale Negotiator is demanding that the homebuyer sign an agreement that the homebuyer will be responsible for paying the $9,000 fee. The homebuyer emailed me asking what I thought of this additional fee and could I offer some advice.

Jillayne walks us through the details of this deal and the regulations regarding a "short sales negotiator", as an example, in Washington, the "negotiator" has to be a "licensed real estate agent ... a licensed loan originator or otherwise exempt from licensing such as an attorney".

There is value to the buyer in having someone with experience negotiate with the banks. If the listing and selling agents don't have the necessary experience and contacts, using another agent (or lawyer) to negotiate the deal makes sense. However I'd suggest the agents pay for the "negotiator" since negotiating the deal is usually part of the agent's responsibilities.

If the agents won't pay, Jillayne suggests: "Ask for the negotiator’s [fee] to be put on the HUD I Settlement Statement as a seller’s closing cost. There’s a chance the lender will pay it." If not, the buyer has to decide if the house is worth the additional fee. But one thing is clear - no fee should be paid outside of the settlement statement so that all parties are aware of all the details.

by Calculated Risk on 2/04/2010 04:50:00 PM

Since there is some interest in the stock market, here is a different graph from Doug ...

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner). His comments:

This chart is an offshoot of my Four Bad Bears. It shifts the point of alignment from the pre-bear highs to the bear bottom in the Oil Crisis and Tech Crash, the first major low in the 1929 Dow, and the March 9th closing low for our current Financial Crisis.

As the chart illustrates, the S&P 500 lows in 1974 and 2002 marked the beginnings of sustained recoveries. The Dow low in 1929 failed 11 months later.

Here is the same chart adjusted for inflation.

The second graph shows the S&P 500 since 1990.

The dashed line is the closing price today. The S&P 500 was first at this level in March 1998; almost 12 years ago.

The market is off 7.6% from the recent peak - still not a "correction", but we almost had our Dow 10K hats on (the Dow dipped under 10,000, but closed at 10,002)!

The S&P 500 is up 57% from the bottom in 2009 (387 points), and still off 32% from the peak (502 points below the max).

by Calculated Risk on 2/04/2010 03:22:00 PM

The BLS will release the January employment report tomorrow morning, and the consensus forecast is for a small net gain in payroll jobs in January, on a seasonally adjusted (SA) basis, and the unemployment rate flat at 10.0%.

A few points on the employment report:

1) the annual benchmark revision for March 2009 will be released as part of the report. The preliminary estimate was for 824,000 more jobs lost than the original reports (my graphs will include the revisions),

2) January is heavily adjusted for seasonal factors - even in good years there are around 2.5 million payroll jobs lost in January. The SA number is the one to follow.

3) The ISM Manufacturing report suggested some small job gains in the manufacturing sector.

ISM's Employment Index registered 53.3 percent in January, which is 3.1 percentage points higher than the seasonally adjusted 50.2 percent reported in December. This is the second month of growth in manufacturing employment, and the highest reading since April 2006.

4) The ISM non-Manufacturing report suggested more job losses in the service sectors.

Employment activity in the non-manufacturing sector contracted in January for the 25th consecutive month. ISM's Non-Manufacturing Employment Index for January registered 44.6 percent.

5) The ADP report showed private sector job losses of 22 thousand in January. Recently ADP has usually indicated more job losses than the BLS, but that isn't always true. Also the ADP report mix was inverted from ISM, with ADP showing job growth in the service sector and job losses in manufacturing:

Nonfarm private employment decreased 22,000 from December 2009 to January 2010 on a seasonally adjusted basis ... January’s ADP Report estimates nonfarm private employment in the service-providing sector increased by 38,000, the second consecutive monthly increase. However, this employment growth was not enough to offset continued losses in the goods-producing sector.

6) The initial weekly claims number this morning would suggest continuing job losses.

In the week ending Jan. 30, the advance figure for seasonally adjusted initial claims was 480,000, an increase of 8,000 from the previous week's revised figure of 472,000. The 4-week moving average was 468,750, an increase of 11,750 from the previous week ...

There other are factors too - like the weather (cold in early January), and Census Bureau hiring (probably minimal).

And finally, it is important to remember that the economy needs to add something close to 125,000 jobs per month just to keep up with the growth the working age population.

by Calculated Risk on 2/04/2010 12:25:00 PM

The good news for hotels is it appears the occupancy rate might be at or near the bottom. Of course - as I noted earlier - the bad news for hotels is the average daily rate (ADR) is still falling because the occupancy rate is so low. Therefore RevPAR (revenue per available room) is still falling.

From HotelNewsNow.com: Luxury leads chain scale segment increases in STR weekly numbers

Overall, in year-over-year measurements, the industry’s occupancy ended the week up 1.9 percent to 48.8 percent. Average daily rate dropped 5.6 percent to finish the week at US$94.92. Revenue per available room for the week fell 3.8 percent to finish at US$46.31.

Click on graph for larger image in new window.

The first graph shows the Year-over-year change in the occupancy rate using a 3 week average.

It is possible the occupancy rate has bottomed, but at a very low level.

The second graph shows the occupancy rate by week since 2000, and the rolling 52 week average occupancy rate.

Note: the scale doesn't start at zero to better show the change.

The graph shows the distinct seasonal pattern for the occupancy rate; higher in the summer because of leisure/vacation travel, and lower on certain holidays. Business travel will be the key over the next few months.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 2/04/2010 10:03:00 AM

From the Financial Times: Sovereign debt fears rattle investors

“The latest catalyst was [Wednesday’s] bond auction in Portugal which was scaled back and which has re-ignited fears that the likes of Portugal and Greece will not be able to fund their deficits without a bail out,” said Gavan Nolan, credit analyst at Markit.
excerpted with permission

From Bloomberg: Portugal, Spain Lead Worldwide Decline in Stocks; Dollar Gains

Stocks and bonds fell in Spain, Portugal and eastern Europe on concern governments will struggle to fund their budget deficits as spending cuts in Greece trigger labor strikes. ... “The focus is shifting toward Spain and Portugal, where the deficit-reduction plans have been far less ambitious than Greece,” said Kornelius Purps, a fixed-income strategist in Munich at UniCredit Markets & Investment Banking.

And from the WSJ: Greece, Portugal Woes Intensify

by Calculated Risk on 2/04/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Jan. 30, the advance figure for seasonally adjusted initial claims was 480,000, an increase of 8,000 from the previous week's revised figure of 472,000. The 4-week moving average was 468,750, an increase of 11,750 from the previous week's revised average of 457,000.
...
The advance number for seasonally adjusted insured unemployment during the week ending Jan. 23 was 4,602,000, an increase of 2,000 from the preceding week's revised level of 4,600,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims increased this week by 11,750 to 468,750.

This is the third weekly increase in a row for the four week average, and the average is now 28,000 above the low in early January. Both the level of claims, and the recent increase in the 4-week average, are concerning and suggest continued job losses.

by Calculated Risk on 2/04/2010 12:23:00 AM

Jon Stewart on Toyota (link here):

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Toyotathon of Death
www.thedailyshow.com
Daily Show Full Episodes Political Humor Health Care Crisis

by Calculated Risk on 2/03/2010 08:47:00 PM

Reuters is quoting President Obama:

"One of the challenges that we've got to address internationally is currency rates and how they match up to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price. That puts us at a huge competitive disadvantage."

Pimco's Paul McCulley listed this as one of the key issues for 2010:

The first issue is the peg between the Chinese yuan and the U.S. dollar, which essentially gives us a one-size-fits-all monetary policy in a very differentiated world. ...

And Professor Krugman wrote about this on Dec 31, 2009: Chinese New Year

China has become a major financial and trade power. But it doesn’t act like other big economies. Instead, it follows a mercantilist policy, keeping its trade surplus artificially high. And in today’s depressed world, that policy is, to put it bluntly, predatory.
...
My back-of-the-envelope calculations suggest that for the next couple of years Chinese mercantilism may end up reducing U.S. employment by around 1.4 million jobs.

And Larry Summers mentioned this at Davos, see Gideon Rachman's piece in the Financial Times: How the bottom fell out of 'old' Davos

Larry Summers ... pointed out that Paul Samuelson, a famous economist (and uncle of Mr Summers), had argued that the case for free trade might not apply when countries were trading with nations that were pursuing mercantilist policies. The reference to China did not need to be spelled out.
excerpted with permission

Getting the Chinese to revalue (or float) their currency is probably critical to the U.S. achieving Obama's ambitious SOTU goal of doubling U.S. exports in the next five years.