by Calculated Risk on 7/04/2010 08:55:00 AM

From Tom Bayles at the HeraldTribune: Home closings mired in crude. (ht Wayne in Elizabeth City) This is mostly anecdotes about canceled closings:

Coldwell Banker Residential Real Estate says that six of its 22 sales that failed to close in late May and early June were on waterfront homes and the direct result of buyer qualms about the spill.
...
BP has received about 1,350 claims from Realtors and others who profit from the sale of real estate. Of the 583 claims from Florida, only two had been paid as of Tuesday ...

Alyssa M. Nohren, a real estate attorney with Sarasota's Icard Merrill firm, had a sale fall through this month on a home listed for about $350,000 on Sarasota Bay.

"It was an out-of-state buyer who just freaked out about the oil and was convinced the oil is coming this way and will further reduce property values," Noreen said. "I was devastated as a real estate lawyer because we were finally getting back on our feet, but what could I say? It is not going to come here? I can't say that."

And from Bob Drogin at the LA Times: Oil spill takes boom out of holiday weekend

Gulf beaches are bare and businesses are empty on what is usually one of the busiest weekends of the year. Alabama's Dauphin Island and Bayou La Batre have canceled fireworks displays.

A tough holiday weekend.

by Calculated Risk on 7/03/2010 10:48:00 PM

From the Chicago Tribune: Price cuts mount as condos linger

A trio of condo developments — one small, one medium and one large — announced price cuts recently as the market readjusts in a post-tax credit market ...

Among the developments with recent price cuts is Parkside of Old Town, where prices were cut by up to 30 percent on 75 condos and up to 40 percent on 27 town homes ...

In Bucktown, Wabansia Row has dropped the price by up to $100,000 on 11 new town homes. At The Columbian, a 46-story condo tower that overlooks Grant Park and was taken over earlier this year by Fidelity Investments, prices on 20 of the remaining 60 unsold condos have been cut by an average of 25 percent.

The $100,000 price decrease at Wabansia Row was from $800,000 to $700,000 (12.5%). And the other 40 unsold condos at "The Columbian"? Those prices will be reassessed next year.

"Price reduced" is a common sign where I live ...

by Calculated Risk on 7/03/2010 06:18:00 PM

My forecast is for U.S. economic growth to slow in the 2nd half (a sluggish and choppy recovery), but not slide into recession. However a recession is a possibility, and the following describes how NBER differentiates between a "double dip" and a new recession.

The National Bureau of Economic Research (NBER) Business Cycle Dating Committee is the recognized group for dating recessions in the U.S. It is always difficult to tell when a recession has ended, especially with a sluggish recovery. If the economy slides back into recession - a possibility right now - the NBER has to decide if it is a continuation of the previous recession, or if the new period of economic decline is a new separate recession.

This is just a technical question: for those impacted by the recession it makes no difference if it is called a "double dip" or a new recession.

Yesterday an AP story quoted Robert Hall, the current Chairman of NBER on a "double dip": So what exactly is a 'double-dip' recession?

"The idea -- hypothetical because it has yet to happen -- is that activity might rise for a period, but not far enough to complete a cycle, then fall again, and finally rise above its original level, only then completing the cycle."

The closest we've seen to a "double dip" was in the early 1980s - and the NBER dated those as two separate recessions. We can use the NBER memos from that period to look for clues. From July 8, 1981 announcing the end of the 1980 recession: Business Cycle Trough Last July

The period following July 1980 will appear in the NBER chronology as an expansion. An important factor influencing that decision is that most major indicators, including real GNP, are already close to or above their previous highs.

And from the January 1982 announcing the beginning of the 1981-1982 recession: Current Recession Began in July

The committee also reviewed its earlier decision that a peak of economic activity occurred in January 1980 and a trough in July 1980 and reaffirmed that decision. Although not all economic indicators had regained their 1979-80 peaks by the summer of 1981, the committee agreed that the resurgence of economic activity in the previous year clearly constituted a business cycle recovery.

And from The NBER's Recession Dating Procedure

In choosing the dates of business-cycle turning points, the committee follows standard procedures to assure continuity in the chronology. Because a recession influences the economy broadly and is not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee views real GDP as the single best measure of aggregate economic activity. ...

The committee places particular emphasis on two monthly measures of activity across the entire economy: (1) personal income less transfer payments, in real terms and (2) employment. In addition, the committee refers to two indicators with coverage primarily of manufacturing and goods: (3) industrial production and (4) the volume of sales of the manufacturing and wholesale-retail sectors adjusted for price changes.

GDP is the key measure, and the NBER actually uses two measures of GDP: 1) real GDP, and 2) real Gross Domestic Income (GDI). For a discussion on GDI, see from Fed economist Jeremy Nalewaik, “Income and Product Side Estimates of US Output Growth,” Brookings Papers on Economic Activity.

Below is a look at four of the measures mentioned: real GDP (and real GDI), industrial production, employment and real personal income excluding transfer payments.

Note: The following graphs are all constructed as a percent of the peak in each indicator. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%. On all graphs the recent recession is marked as ending in July 2009 or Q3 2009 - this is preliminary and NOT an NBER determination. GDP is quarterly, the other data is monthly.

Click on graph for larger image in new window.

The first graph is for GDP through Q1 2010.

This is the key measure and real GDP is only 1.3% below the pre-recession peak - and real GDI 2.0% below the previous peak. GDP probably increased in Q2 too (probably at close to a 3% annualized rate), and at the end of Q2 both of these measures will be even closer to the previous peak, but not there yet.

If you look at the period between the two early '80s recessions, both real GDP and real GDI returned to pre-recession levels before declining again.

The second graph is for monthly industrial production based on data from the Federal Reserve through May.

Industrial production is still 8.1% below the pre-recession peak -and now it appears that growth is slowing in the manufacturing sector (although still expanding). Even if growth continues, it will take some time before industrial production is back to pre-recession levels.

Between the early '80s recessions, industrial production didn't quite return to pre-recession levels - but it was only about 0.5% below the previous peak.

The third graph is for employment through June.

Between the two recession in the early '80s, employment returned to the pre-recession peak.

This time employment is barely off the bottom.

And the last graph is for real personal income excluding transfer payments through May. This bottomed in Sept 2009, but has only increased slightly since then and is still 6% below the pre-recession peak.

Once again - looking back - this measure returned to the pre-recession peak between the 1980 and 1981/1982 recessions.

Based on these graphs and the NBER memos, it would seem pretty easy to date two recessions in the early '80s. However, if another recession starts this year, it will almost certainly be dated as a continuation of the "great recession" that started in 2007. If so, I'll need more blue ink to shade all my graphs ...

by Calculated Risk on 7/03/2010 01:25:00 PM

An update by request ...

Click on graph for larger image.

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.

Note: The BLS reports 15+ weeks, so the 15 to 26 weeks number was calculated.

In June 2010, the number of unemployed for 27 weeks or more declined slightly to 6.751 million (seasonally adjusted) from a record 6.763 million in May. Because the civilian labor force declined sharply, the percent of long term unemployed set a new record in June (4.39% of civilian labor force).

It is possible that the number of long term unemployed might has peaked, but it is still very difficult for these people to find a job - and this is a very serious employment issue.

All categories of unemployment duration increased in June as a percent of civilian unemployment.

Note: Even though these numbers are all seasonally adjusted, they can't be added together to calculate the unemployment rate.

by Calculated Risk on 7/03/2010 08:53:00 AM

From Google Trends, search trend on "double dip"...

It appears the 2nd half slowdown is here, but I think the U.S. will avoid a technical "double-dip" recession. As I noted last week, for the unemployed and marginally employed, and for many other Americans suffering with too much debt or stagnant real incomes, there is little difference between slower growth and a double-dip recession.

And a repeat of a couple graphs from yesterday ...

Click on graph for larger image.

This graph shows the job losses from the start of the employment recession in percentage terms.

The dotted line shows the impact of Census hiring. In May, there were 339,000 temporary 2010 Census workers on the payroll. The number of Census workers will continue to decline - and the gap between the solid and dashed red lines will be mostly closed in three or four months.

This graph shows the employment-population ratio; this is the ratio of employed Americans to the adult population.

The Employment-Population ratio decreased to 58.5% in June from 58.7% in May. This had been increasing after plunging since the start of the recession, and the recovery in the Employment-Population ratio was considered a good sign - but the ratio has now decreased for two consecutive months.

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

Employment posts yesterday:

June Employment Report: 100K Jobs ex-Census, 9.5% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

Employment-Population Ratio, Part Time Workers, Unemployed over 26 Weeks with graphs - including recessions aligned at bottom.

Employment Report: Temporary Help and Diffusion Index

Fewest Teen Jobs added in June since 1951