by Calculated Risk on 4/10/2012 10:20:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings in February was 3.5 million, little changed from January. Although the number of job openings remained below the 4.3 million openings when the recession began in December 2007, the number of job openings has increased 46 percent since the end of the recession in June 2009.
...
In February, the hires rate was essentially unchanged at 3.3 percent
for total nonfarm. ... The quits rate can serve as a measure of workers’ willingness or ability to change jobs. In February, the quits rate was little changed for total nonfarm, total private, and government. The
number of quits rose to 2.1 million in February from 1.8 million at the end of the recession in June 2009, although it remained below the 2.9 million recorded when the recession began in December 2007.

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.

This is a new series and only started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for February, the most recent employment report was for March.

Click on graph for larger image.

Notice that hires (dark blue) and total separations (red and light 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.

Jobs openings increased slightly in February, and the number of job openings (yellow) has generally been trending up, and are up about 16% year-over-year compared to February 2011.

Quits increased in February, and quits are now up about 9% year-over-year and quits are now at the highest level since 2008. 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

by Calculated Risk on 4/10/2012 09:33:00 AM

UPDATE: Here are DeMarco's Remarks as Prepared for Delivery (with table and figures)
Some key comments on "strategic modifiers":

As I have noted the NPV results alone are not the sole basis for the decision on whether the Enterprises should pursue principal forgiveness. One factor that needs to be considered is the borrower incentive effects. That means, will some percentage of borrowers who are current on their loans, be encouraged to either claim a hardship or actually go delinquent to capture the benefits of principal forgiveness?

This is a particular concern for the Enterprises because unlike other mortgage market participants that can pick and choose where principal forgiveness makes sense, the Enterprises must develop the program to be implemented by more than one thousand seller/servicers. In addition, the Enterprises will have to publicly announce this program and borrower awareness of the possibility of receiving a principal reduction modification will be heightened among Enterprise borrowers. So as opposed to more targeted individual efforts, or the current opacity of the HAMP process, there is a greater possibility that borrower incentive effects would take place on an Enterprise-wide principal forgiveness program.

It is difficult to model these borrower incentive effects with any precision. What we can do is give a sense of how many current borrowers would have to become “strategic modifiers” for the NPV economic benefit provided by the HAMP triple PRA incentives to be eliminated. In this context, a “strategic modifier” would be a borrower that either claims a financial hardship or misses two consecutive mortgage payments in order to attempt to qualify for HAMP and a principal forgiveness modification.

Here is the webcast for the Speech by FHFA acting director Edward DeMarco: "Addressing the Weak Housing Market: Is Principal Reduction the Answer?" at the The Brookings Institution, 1775 Massachusetts Ave., NW Washington, DC.

Following the speech, there will be a discussion including
Moderator: Ted Gayer, Brookings Co-Director, Economic Studies

Mark Fleming, Chief Economist, CoreLogic

Paul Nikodem, Executive Director, Head of Mortgage Credit Research, Nomura Securities International

Anthony B. Sanders, Professor, George Mason University

Andrew Jakabovics, Senior Director, Policy Development and Research, Enterprise Community Partners, Inc.

by Calculated Risk on 4/10/2012 08:39:00 AM

From the National Federation of Independent Business (NFIB): After Six Months of Increases, Small-Business Optimism Drops For Main Street, No New Jobs in the Months to Come

After six months of gains, the Small-Business Optimism Index fell by almost 2 points in March, settling at 92.5. After a promising start to the year, nine of ten index components dropped last month, most notably hiring plans and expected real sales growth each taking a significant dive, in spite of owners reporting the largest increase in new jobs per firm in a year.
...
Job creation in March was the bright spot in this month’s Index; the net change in employment per firm seasonally adjusted was 0.22, far above January’s “0” reading.
...
A lack of sales remains a problem for owners with 22 percent reporting “poor sales” as their top business problem.

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.

Click on graph for larger image.

This graph shows the small business optimism index since 1986. The index declined to 92.5 in March from 94.3 in February. This is slightly above the 91.9 reported in March 2011.

This index remains low - probably due to a combination of sluggish growth, and the high concentration of real estate related companies in the index. And the single most important problem remains "poor sales".

by Calculated Risk on 4/09/2012 07:40:00 PM

From Fed Chairman Ben Bernanke: Fostering Financial Stability. A few excerpts on shadow banking:

I've outlined a number of ongoing efforts, both domestic and international, to bring the shadow banking system into the sunlight, so to speak, and to impose tougher standards on systemically important financial firms. But even as we make progress on known vulnerabilities, we must be mindful that our financial system is constantly evolving, and that unanticipated risks to stability will develop over time. Indeed, an inevitable side effect of new regulations is that the system will adapt in ways that push risk-taking from more-regulated to less-regulated areas, increasing the need for careful monitoring and supervision of the system as a whole.
...
Unfortunately, data on the shadow banking sector, by its nature, can be more difficult to obtain. Thus, we have to be more creative to monitor risk in this important area. We look at broad indicators of risk to the financial system, such as measures of risk premiums, asset valuations, and market functioning. We try to gauge the risk of runs by looking at indicators of leverage (both on and off balance sheet) and tracking short-term wholesale funding markets, especially for evidence of maturity mismatches between assets and liabilities. We are also developing new sources of information to improve the monitoring of leverage. For example, in 2010, we began a quarterly survey on dealer financing (the Senior Credit Officer Opinion Survey on Dealer Financing Terms) that collects information on the leverage that dealers provide to financial market participants in the repo and over-the-counter derivatives markets. In addition, we are working with other agencies to create a comprehensive set of regulatory data on hedge funds and private equity firms.

And his conclusion:

In the decades prior to the financial crisis, financial stability policy tended to be overshadowed by monetary policy, which had come to be viewed as the principal function of central banks. In the aftermath of the crisis, however, financial stability policy has taken on greater prominence and is now generally considered to stand on an equal footing with monetary policy as a critical responsibility of central banks. We have spent decades building and refining the infrastructure for conducting monetary policy. And although we have done much in a short time to improve our understanding of systemic risk and to incorporate a macroprudential perspective into supervision, our framework for conducting financial stability policy is not yet at the same level. Continuing to develop an effective set of macroprudential policy indicators and tools, while pursuing essential reforms to the financial system, is critical to preserving financial stability and supporting the U.S. economy.

Before the crisis, oversight and financial stability were not emphasized. Now the regulators are paying attention; hopefully, even after financial conditions finally recovers, regulators will remain vigilant (but I expect they will become complacent again).

by Calculated Risk on 4/09/2012 04:31:00 PM

High gasoline and oil prices are a downside risk for the economy. So far - as Professor Hamilton noted in the previous post - prices haven't been too "disruptive". With Memorial Day still a month and a half away (May 28th), and it seems a little early to call the peak in gasoline prices for the spring ...

From Ronald White at the LA Times: Gasoline prices may have finally peaked for now

[T]he uncertainty over whether prices have peaked comes from the fact that 15 of the 23 states with the most expensive gasoline are still higher than they were at this time last week. Still, there was some guarded optimism among analysts.

"Gasoline prices in the hardest-hit areas have finally shown signs of relief with prices falling now in Chicago as they have for a few weeks in California," said Patrick DeHaan, senior petroleum analyst for GasBuddy.com. "We may see an earlier peak than we have in prior years."

From the Chicago Sun-Times: Gasoline prices in Chicago area fall double digits from record highs

In the Chicago area, the average price of unleaded regular gas Monday was $4.34 a gallon, down 17 cents from the record high of $4.506 reached March 27 and down 11 cents from April 2, according to AAA, Wright Express and the Oil Price Information Service.

In the city of Chicago, the average price was down 8 cents from a week earlier at $4.57 a gallon and down 11 cents from the record high of $4.678, also reached on March 27.

Note: The graph shows oil prices for WTI; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 4/09/2012 01:27:00 PM

Professor Hamilton reviews the current situation at Econbrowser: Current economic conditions

An excerpt on the impact oil and gasoline prices:

One of the big concerns of many analysts was that rising oil prices of the last 5 months might significantly slow down economic growth. My view is that the main mechanism by which oil prices can sometimes have a disproportionately disruptive effect on the economy is if they result in sudden shifts in the patterns of spending. One typical channel is a plunge in sales of the larger vehicles manufactured in the U.S., which then leads to further losses of income and jobs in the auto sector. But the evidence suggests that an oil price increase that just reverses a previous oil price decrease-- and that is basically what we've experienced so far in 2012-- is not nearly as disruptive as if the price were rocketing into uncharted territory. One reason for this is that recent consumers' vehicle purchase plans were already taking into account the possibility that $4 gas could soon return.

See Hamilton's post for much more on oil.

Hamilton concludes: "the economy undeniably continues to grow, the rate of that growth continues to disappoint".

by Calculated Risk on 4/09/2012 09:14:00 AM

Notes: The timing of different house prices indexes can be a little confusing. LPS uses January closings - other indexes usually report sales recorded in a month, and there is frequently a lag between closings and recording - so this is closer to what other indexes report for February (without the weighting of several months).

From LPS: LPS Home Price Index Shows U.S. Home Price Decline of 0.9 Percent in January; Early Data Suggests Slowing Likely in February, to 0.3 Percent Drop

LPS ...that starting with this month’s report, results are based on an updated view that more accurately tracks price changes for non-distressed homes. In addition to foreclosure price data the LPS HPI now accounts for the impact of short sale on estimates of normal market prices.

The updated LPS HPI national average home price for transactions during January 2012 declined 0.9 percent to a price level not seen since March 2003.

LPS excludes both foreclosures and short sales from the index - so this is non-distressed properties only. From LPS:

Among the 26 MSAs for which LPS and the Bureau of Labor Statistics both provide data, average prices in January increased only in Washington, D.C.

Fourteen of these MSAs saw declines of more than 1.0%, and three, San Francisco, Cleveland and Chicago declined more than 1.5%.

Note: Based on early data, LPS expects to report prices fell 0.3% in February.

by Calculated Risk on 4/08/2012 10:31:00 PM

A couple of updates to the weekly schedule:
Monday: LPS House Price Index for January.

Tuesday, 9:30 AM ET: Speech by FHFA acting director Edward DeMarco: "Addressing the Weak Housing Market: Is Principal Reduction the Answer?" at the The Brookings Institution, 1775 Massachusetts Ave., NW Washington, DC.

The Spanish 10 year yield is up to 5.76%.

The Asian markets are red tonight. The Nikkei is down about 1.1%, the Shanghai Composite is down 0.6%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 futures are down 17, and Dow futures are down 140.

Oil: WTI futures are down to $101.99 and Brent is down to $122.38 per barrel.

Yesterday:
• Summary for Week Ending April 6th
• Schedule for Week of April 8th

by Calculated Risk on 4/08/2012 01:01:00 PM

On Friday I noted that Reis reported the mall vacancy rate declined slightly in Q1. The strip mall vacancy rate declined to 10.9% from 11.0% in Q4 2011, and the regional mall vacancy rate declined to 9.0% from 9.2% in Q4.

Here are a few more comments and a long term graph from Reis.

Comments from Reis Senior Economist Ryan Severino:

[Strip mall] Vacancies finally began to fall during the first quarter, declining by 10 bps. This is the first quarterly decline in the vacancy rate since the second quarter of 2005. In the periods leading up to the recession, excess building was to blame for the increase in vacancies. Since the advent of the recession, supply growth has been virtually nonexistent, but anemic demand drove vacancies upward.

Despite the first quarterly decline in vacancy since 2005, Reis is not yet convinced that a recovery for shopping centers has commenced. However, this says just as much about the limited increases in supply as it does about resurgent demand. New completions remain near historically low levels. With such low levels of supply growth, any semblance of healthy demand would have pushed vacancy rates downward in a more pronounced fashion. ... With construction projected to remain at low levels, Reis expects vacancies to begin moving downwards slowly in 2012 as demand for space slowly begins to return.
...
Regional malls posted relatively healthy results in the first quarter, with national vacancies declining by 20 bps to 9.0% This was the second consecutive quarter of vacancy declines. Asking rents grew by 0.2%, marking the third consecutive quarter of rent increases. Although regional malls are faring better then neighborhood and community centers at this juncture, this has as much to do with supply as demand. While demand for malls, particularly higher‐quality malls, is arguably stronger than demand for neighborhood and community center space, regional malls did not experience massive supply increases before the recession the way neighborhood and community centers did. In fact, the first new regional mall in the U.S. in six years opened during the first quarter of 2012.

The outlook for 2012 remains muddled. Although demand appears to be gathering strength, the developments are not uniformly positive. Best Buy recently announced that it was closing 50 big‐box stores, but opening 100 new, smaller Best Buy Mobile stores. Although the net effect is a reduction in occupied square footage, it will have a detrimental impact on power centers while benefitting other subtypes such as regional malls.

Click on graph for larger image.

This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). The regional mall data starts in 2000. Back in the '80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.

In the '00s, mall investment picked up as mall builders followed the "roof tops" of the residential boom (more loose lending). This led to a higher vacancy rate even before the recession, and then a sharp increase during the recession and financial crisis.

Mall investment has essentially stopped following the financial crisis.

The good news is, as Severino noted, mall "completions remain near historically low levels", and the vacancy rate will probably continue to decline slowly.

Mall vacancy data courtesy of Reis.

Yesterday:
• Summary for Week Ending April 6th
• Schedule for Week of April 8th

by Calculated Risk on 4/08/2012 09:09:00 AM

From Eric Wolff at the North County Times: 'This is crazy': Home ownership cheaper than renting

Monthly payments on a house are now cheaper than monthly rents on a similar house in most of North San Diego and Southwest Riverside counties, according to an analysis of county-supplied and Realtor data by the North County Times.

... prices for houses plummeted and interest rates fell below 4 percent, a 40-year low. The combination of factors has created a house market in North San Diego and Southwest Riverside county in which homeowners are getting a better deal than renters, at least after they've paid their down payment.

"I don't think this has ever happened before," said G.U. Krueger, a principal economist for HousingEcon.com. "It's a function of the huge housing price collapse which has left a lot of people in the lurch."

Or, as Carlsbad real estate agent Tyson Lund put it: "This is crazy."
...
There are, of course, a host of caveats not included in the calculation. The analysis does not amortize the down payment on the house, nor does it include the maintenance costs that homeowners accrue to keep their homes in good repair, though many economists argue the mortgage interest tax deduction offered by the federal government balances those expenses. Still, the calculation depends on a homebuyer having enough money to make a down payment, and sufficient credit to get a loan. In 2011, banks raised the bar on those to whom they'd lend, making it difficult for many people to get mortgages. ... "If rates were back to 5.5 percent or 6 percent, then the mortgages become more expensive than rents. I would not call 4 percent a normalized housing market," [Nathan Moeder, a principal at The London Group] said in an email. "Today, people are able to afford more home because of the interest rates."

These comparisons aren't perfect, however the price-to-rent ratio (that doesn't include interest rates) is back to normal too, so stories like this aren't a surprise.