by Calculated Risk on 3/11/2014 09:10:00 AM

From the National Federation of Independent Business (NFIB): February optimism takes a tumble

Small business optimism continues its winter hibernation with the latest Index dropping 2.7 points to 91.4 ... NFIB owners increased employment by an average of 0.11 workers per firm in February (seasonally adjusted), virtually unchanged from January.

Click on graph for larger image.

This graph shows the small business optimism index since 1986. The index decreased to 92.7 in February from 94.1 in January.

by Calculated Risk on 3/10/2014 08:09:00 PM

Congratulations to Tom Lawler for winning another "Crystal Ball" award (most accurate 2- and 3-year forecasts ending in 2013 for panel of forecasters).  

Also I've another great site to the right sidebar: House of Debt by Atif Mian and Amir Sufi (I've linked to several over their papers of the years and I'm happy to see them blogging).

Tuesday:
• At 7:30 AM ET, the NFIB Small Business Optimism Index for February.

• At 10:00 AM, the Job Openings and Labor Turnover Survey for January from the BLS. The number of job openings were up 10.5% year-over-year in December compared to December 2012, and Quits increased in December and were up about 12% year-over-year.

• Also at 10:00 AM, Monthly Wholesale Trade: Sales and Inventories for January. The consensus is for a 0.4% increase in inventories.

by Calculated Risk on 3/10/2014 02:37:00 PM

In November 2012, I was interviewed by Joe Weisenthal at Business Insider. One of my comments during our discussion on state and local governments was:

I wouldn’t be surprised if we see all of a sudden a report come out, “Hey, we’ve got a balanced budget in California.”

At the time that was way out of the consensus view. And a couple of months later California announced a balanced budget, see The California Budget Surplus

The situation has improved since then. Here is the most recent update from California State Controller John Chiang: Controller Releases February Cash Update

State Controller John Chiang today released his monthly report covering California's cash balance, receipts and disbursements in February 2014. Revenues for the month totaled $5.6 billion, surpassing estimates in the 2014-15 Governor's Budget by $968.9 million, or 20.9 percent.

"Driven by strong retail sales and personal income tax withholdings, February receipts poured in at nearly $1 billion above projections," said Chiang. "How we conserve and invest during the upswings of California's notorious boom-or-bust revenue cycles will determine how critical programs – such as public safety and education – will weather the next economic dip. With fiscal discipline and a focus on slashing debt, we can make California more recession-resistant and prosperity a more enduring hallmark of our state."

Income tax receipts exceeded the Governor’s expectations by $721.7 million, or 45.7 percent. Corporate tax receipts came in ahead of estimates by $87.4 million, or 236.2 percent. Sales and use taxes were $113.7 million above, or 3.9 percent, expectations in the Governor's 2014-15 proposed budget.

The State ended the month with a General Fund cash deficit of $14.1 billion, which was covered with both internal and external borrowing. That figure was down from last year, when the State faced a cash deficit of $16.2 billion at the end of February 2013.
emphasis added

This is just one state, but I expect local and state governments (in the aggregate) to add to both GDP and employment in 2014.

by Calculated Risk on 3/10/2014 01:15:00 PM

Here is another graph on framing lumber prices. Early last year lumber prices came close to the housing bubble highs. Then prices started to decline sharply, with prices declined over 25% from the highs by June.

The price increases early last year were due to stronger demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices are down about 10%  from a year ago, probably due to more supply coming on the market.   Here is another mill coming back from the Oregonian: Cave Junction sawmill will reopen

If all goes as planned, the small-log mill will be retooled and running by July. Its owners say they are confident that they can maintain a single shift, and put 67 people to work running the mill.
...
Rough & Ready was the last sawmill operating in Josephine County, putting a psychological and economic capstone on the decades-long decline of Oregon’s timber industry. The industry employed 25,400 people statewide in 2012, half as many as in 1992.
...
“Demand is good right now,” Link Phillippi said. “Our markets are good. our customers are begging for wood.”

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through last week (via NAHB), and 2) CME framing futures.

Prices are probably close to the peak for this year (demand usually peaks seasonally in March and April).

by Calculated Risk on 3/10/2014 09:09:00 AM

Friday on the employment report:
• February Employment Report: 175,000 Jobs, 6.7% Unemployment Rate
• Comments on Employment Report


A few more employment graphs by request ...

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.

The general trend is down for all categories, and both the "less than 5 weeks" and 6 to 14 weeks" are close to normal levels. 

The long term unemployed is at 2.5% of the labor force - the number (and percent) of long term unemployed remains a serious problem.

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.

Although education matters for the unemployment rate, it doesn't appear to matter as far as finding new employment.

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

Construction Employment
This graph shows total construction employment as reported by the BLS (not just residential).

Since construction employment bottomed in January 2011, construction payrolls have increased by 509 thousand.

Historically there is a lag between an increase in activity and more hiring - and it appears hiring should pickup significant in 2014.

Diffusion Indexes
 The BLS diffusion index for total private employment was at 59.3 in February, down from 60.6 in January.

For manufacturing, the diffusion index decreased to 51.2, down from 52.5 in January.

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.

Job growth was fairly widespread in February.