by Calculated Risk on 1/06/2012 08:44:00 PM

Today Freddie Mac announced it is extending the period for forbearance for unemployed borrowers. That is probably just the beginning of a series of policy announcements. Three Fed officials discussed some possibilities today (see WSJ article below), and some sort of REO to rental program seems likely. The revamped HARP for refinancing is just ramping up. Also the servicer mortgage settlement will probably be announced in the next month or so. It will be a busy month or two for housing policy.

• From Freddie Mac: Freddie Mac Now Permits Up To 12 Months Forbearance To Unemployed Borrowers

Freddie Mac today announced it is giving mortgage servicers expanded authority to provide six months of forbearance to unemployed borrowers without Freddie Mac's prior approval and up to an additional six months with prior approval.

• From the WSJ: Three Fed Officials Urge Action to Boost Housing

Top Federal Reserve officials ramped up their call for more forceful government action to fix the broken housing market ... "The ongoing weakness in housing has made it more difficult to achieve a vigorous economic recovery," William Dudley, president of the New York Fed, told a bankers' group in Iselin, N.J. "With additional housing policy interventions, we could achieve a better set of economic outcomes."

• From NY Fed President William Dudley: Housing and the Economic Recovery

Even with aggressive policies to minimize the flow of loans into foreclosure, my staff estimates that large volumes of properties would still flow into lenders' REO over the next few years. This growing overhang could continue to depress prices.

Thus, along with more incentives to promote short sales, steps should be taken to facilitate the timely and orderly absorption of these properties back into the market including as renter-occupied housing. An interagency group including the Federal Reserve is working on issues relating to REO-to-rental conversions. Appropriate policies would simultaneously lessen downward pressure on home prices and upward pressure on rents.

Among other steps, investors could be encouraged to purchase REO to be made available as rental housing. Fannie Mae and Freddie Mac could increase the number of loans offered to individual investors, provided the investor puts up an adequate amount of equity for each mortgage. And REO properties in a given locality could be bundled for sale.

The government might consider a package of tax incentives for purchases of REO that are used as rental properties. Such incentives might include a reduction of the current 27½ year depreciation period and/or a reduction of capital gains tax liability if the property is held for a minimum period, such as five years.

One idea developed by my staff—let's call it "homes for heros"—would be to create a new tax credit or other home purchase subsidy specifically for veterans of our foreign wars that would enable these veterans to purchase such properties at a discount. There are over 2½ million Gulf War II veterans alone, many of whom served multiple tours of duty overseas, and a significant proportion of them might otherwise not be able to purchase homes today.

Here are the earlier employment posts:
• December Employment Report: 200,000 Jobs, 8.5% Unemployment Rate
• Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
• Seasonal Retail Hiring, Duration of Unemployment, Unemployment by Education and Diffusion Indexes
• Employment graph gallery

by Calculated Risk on 1/06/2012 05:19:00 PM

The Association of American Railroads (AAR) reports carload traffic in December increased 7.3 percent compared with the same month last year, and intermodal traffic (using intermodal or shipping containers) increased 9.4 percent compared with December 2010.

A good beginning, some uncertainness in the middle, and a good ending — that describes U.S. rail traffic in 2011. Total carloads for the year were 15.2 million, up 2.2% over 2010’s 14.8 million and up 9.7% over 2009’s 13.8 million. Total U.S. rail intermodal volume in 2011 was 11.9 million containers and trailers, up 5.4% over 2010’s 11.3 million units and up 20.4% over 2009’s 9.9 million units.

On a seasonally adjusted basis, carloads in December were up 1.8% from last month, and intermodal in December was up 0.4% from November.

Click on graph for larger image.

This graph shows U.S. average weekly rail carloads (NSA).

U.S. railroads originated 1,134,580 carloads in December 2011, an average of 283,645 per week and up 7.3% over December 2010. That’s the biggest year-over-year monthly increase since January 2011, but the gain is somewhat overstated because December 2011 ended on December 31, 2011, while December 2010 ended on January 1, 2011. That means that the New Year’s holiday (a very low traffic day) is not included in December 2011 but is included in December 2010.

Rail carload traffic collapsed in November 2008, and now, 2 1/2 years into the recovery, carload traffic is still not half way back to the pre-recession levels.

The second graph is for intermodal traffic (using intermodal or shipping containers):

Graphs reprinted with permission.

Intermodal traffic is close to the peak year in 2006.

U.S. rail intermodal originations totaled 873,390 containers and trailers in December 2011, an average of 218,348 per week — up 9.4% over December 2010 and the second-highest monthly intermodal average for any December in history (behind December 2006 — see chart ...).

Overall rail traffic was up in December.
All Current Transportation graphs

by Calculated Risk on 1/06/2012 02:59:00 PM

From LPS Applied Analytics: LPS' Mortgage Monitor Shows Halt in Delinquency Drop; Foreclosure Starts Down in November

The November Mortgage Monitor report released by Lender Processing Services, Inc. shows that while mortgage delinquencies at the end of November 2011 were nearly 25 percent less than the January 2010 peak, the trend toward fewer loans becoming delinquent, which dominated 2010 and the first quarter of 2011, appears to have halted. At the same time, new problem loans – those loans seriously delinquent as of the end of November that were current six months prior – have not improved significantly in the last year. This degree of stagnation indicates that while the situation is not getting markedly worse, it is not improving either, and inventories of troubled loans remain significantly higher than pre-crisis levels across the board.

According to LPS, 8.15% of mortgages were delinquent in November, up from 7.93% in October, and down from 9.02% in November 2010.

LPS reports that 4.16% of mortgages were in the foreclosure process, down from the record 4.29% in October, and up from 4.08% in November 2010. This gives a total of 12.31% delinquent or in foreclosure. It breaks down as:

• 2.33 million loans less than 90 days delinquent.
• 1.81 million loans 90+ days delinquent.
• 2.21 million loans in foreclosure process.

For a total of 6.26 million loans delinquent or in foreclosure in November.

Click on graph for larger image.

This graph shows the total delinquent and in-foreclosure rates since 1995.

The total delinquent rate has fallen to 8.15% from the peak in January 2010 of 10.97%, but the decline has "halted". A normal rate is probably in the 4% to 5% range, so there is a long ways to go.

The in-foreclosure rate was at 4.16%, down from the record high last month of 4.29%. There are still a large number of loans in this category (about 2.21 million). LPS reported that foreclosure starts were down nearly 30% in November, probably due to process issues.

This graph provided by LPS Applied Analytics shows foreclosure inventories by process.

As LPS noted last month "Judicial vs. non-judicial foreclosure processes remain a significant factor in the reduction of foreclosure pipelines from state to state, with non-judicial foreclosure inventory percentages less than half that of judicial states. This is largely a result of the fact that foreclosure sale rates in non-judicial states have been proceeding at four to five times that of judicial. Non-judicial foreclosure states made up the entirety of the top 10 states with the largest year-over-year decline in non-current loans percentages."

The third graph shows the pipeline ratio (90+ delinquencies and foreclosures, divided by foreclosure sales).

"Pipeline ratios in several judicial states remain extreme." This is especially true for New York and New Jersey - and means that the level of foreclosure sales will probably increase sharply in those states soon. Most of the non-judicial states are in much better shape.

As LPS noted "while the situation is not getting markedly worse, it is not improving either".
All current mortgage delinquency graphs

by Calculated Risk on 1/06/2012 12:29:00 PM

Here are the earlier employment posts:
• December Employment Report: 200,000 Jobs, 8.5% Unemployment Rate
• Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
• Employment graph gallery (fast, no scripting)

And a few more graphs ...

Seasonal Retail Hiring
According to the BLS, retailers hired seasonal workers at the pre-recession pace in 2011.

Click on graph for larger image.

This graph shows the historical net retail jobs added for October, November and December by year. Typically retail companies start hiring for the holiday season in October, and really increase hiring in November.

Retailers hired 718.5 thousand workers (NSA) net this year. This is about the same level as in 2006 and 2007. Note: this is NSA (Not Seasonally Adjusted).

This suggests a fairly strong holiday season.

Duration of Unemployment
This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

All categories are moving down (the less than 5 week category is back to normal levels). The other categories are still high.

The the long term unemployed declined to 3.6% of the labor force - this is still very high, but the lowest since September 2009.

Unemployment by Education
This graph shows the unemployment rate by four levels of education (all groups are 25 years and older).

Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and it appears all four groups are generally trending down.

Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".

Diffusion Indexes
This is a little more technical. The BLS diffusion index for total private employment was at 61.2 in December, up from 50.7 in November. For manufacturing, the diffusion index increased to 56.8, up from 40.7 in November.

Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS. From the BLS:

Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.

It appears job growth was spread across more industries in December (good news).

We'd like to see the diffusion indexes consistently above 60 - and even in the 70s like in the '1990s.

by Calculated Risk on 1/06/2012 10:01:00 AM

This was a decent report compared to expectations, but it was still weak compared to the number of people unemployed and the high level of unemployment.

There were 200,000 payroll jobs added in December. This included 212,000 private sector jobs added, and 12,000 government jobs lost. The unemployment rate fell to 8.5% from a revised 8.7% in November (revised from 8.6%). U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, declined to 15.2% - this remains very high. U-6 was in the 8% range in 2007.

For the year, the economy added 1.64 million total non-farm jobs or just 137 thousand per month. This is a better pace of payroll job creation than in 2010, but the economy still has 6.0 million fewer payroll jobs than at the beginning of the 2007 recession.

There were 1.92 million private sector jobs added in 2011, or about 160 thousand per month.

Both the participation rate and the employment population ratio were unchanged in December at 64.0% and 58.5% respectively.

The average workweek was increased slightly to 34.4 hours, and average hourly earnings increased 0.2%. "The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.4 hours in December. ... In December, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents, or 0.2 percent, to $23.24. Over the past 12 months, average hourly earnings have increased by 2.1 percent." This is sluggish earnings growth, and earnings are being impacted by the large number of unemployed and marginally employed workers.

There are a total of 13.1 million Americans unemployed and 5.6 million have been unemployed for more than 6 months. Still very grim.

Overall this was a decent report compared to expectations, but still weak given the slack in the economy.

Percent Job Losses During Recessions

Click on graph for larger image.

This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at maximum job losses.

In the previous post, the graph showed the job losses aligned at the start of the employment recession.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 371,000 to 8.1 million in December.

This is the lowest level since January 2009.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 15.2% in December from 15.6% in November.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 5.588 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 5.680 million in November. This is still very high, but this is the lowest number since Oct 2009. Long term unemployment remains a serious problem.

More graphs coming ...