by Calculated Risk on 9/10/2010 08:44:00 AM

From the WSJ: Goolsbee to Lead Council of Economic Advisers

President Barack Obama will name Austan Goolsbee, a longtime adviser and an architect of his campaign's economic message, to be chairman of the White House Council of Economic Advisers at a White House press conference Friday, an administration official said Thursday night.

Tanta, my former co-blogger, once wrote about Goolsbee (back in 2007): Dr. Goolsbee: I’ll Stop Impersonating an Economist If You Quit Underwriting Mortgage Loans

Tanta's post was very funny - but it isn't funny that Goolsbee demonstrated a lack of understanding about the housing market.

by Calculated Risk on 9/09/2010 10:27:00 PM

David Lazarus has an interesting foreclosure story in the LA Times: Suddenly, their house is taken over

A few details:

The couple fell behind on their mortgage payments (he works in construction). Wells Fargo put them in a HAMP three month trial modification program in December, and they made all their payments.

After the three months were up, Ellen Kahara said, they were told by Wells that their case was still under review and that they should keep making the $1,400 payments. They did.

The bank continued requesting paperwork as part of its review process. ... The Kaharas received a letter from Wells dated Aug. 11 saying that their application for a permanent loan modification had been rejected. The letter said the Kaharas would have 30 days to discuss other options available to them.

"No foreclosure sale will be conducted and you will not lose your home during this 30-day period," the letter said.

On August 18th there was a knock on the door - it was the new owner who had bought the home at foreclosure!

Obviously Wells Fargo made a huge mistake with the foreclosure, but perhaps just as outrageous is how they strung the couple along for months - collecting seven or eight monthly payments - and then finally denied the permanent modification when they were ready to foreclose.

by Calculated Risk on 9/09/2010 06:44:00 PM

From Ethan Harris, Bank of America North American Economist, and others, Growth recession, Sept 3rd:

"[F]or most of 2010 and 2011, employment growth is not expected to keep up with the rise in the labor force, which means the unemployment rate heads north. We expect a steady increase to 10.1% by the second quarter with a slow fall slightly below 10.0% by the end of 2011."

From Ed McKelvey, Goldman Sachs senior economist today:

"[W]e expect payroll gains to slow to 25,000 per month (ex Census workers) and the jobless rate to drift up to 10% over the next half year."

With growth slowing in the 2nd half (and into 2011), this means the unemployment rate will probably tick up too (unless the participation rate falls further). I've been expecting the unemployment rate to stay elevated, and probably increase further - and the main reason is the same as for the BofA and Goldman analysts: the general slowing economy.

by Calculated Risk on 9/09/2010 02:29:00 PM

Here is a look at European bond spreads from the Atlanta Fed weekly Financial Highlights released today (graph as of Sept 7th):

Click on graph for larger image in new window.

From the Atlanta Fed:

Peripheral European bond spreads (over German bonds) have risen since the August FOMC meeting.

Irish and Portuguese bond spreads are currently at all-time highs, while the spread for Greek bonds remains extremely elevated.

Since the August FOMC meeting, the 10-year Greece-to-German bond spread has risen by 146 basis points (bps) ... through September 7. Similarly, with other European peripherals’ spreads, Portugal’s is higher by 99 bps during the period, and Spain’s is up by 20 bps.

Note: The Atlanta Fed data is a couple days old. Nemo has links to the current data on the sidebar of his site. The bond spreads have eased slightly over the last couple of days.

Note: A big story today was the report that Deutsche Bank is seeking to raise 9 billion euros.

by Calculated Risk on 9/09/2010 12:23:00 PM

Menzie Chinn at Econbrowser posted a graph of total government employment over the last decade: The "Ever-Expanding" Government Sector, Illustrated

In response to the comments to his post, here are a couple of additional graphs:

Click on graph for larger image.

This graph shows federal, state, and local government employment as a percent of the civilian noninstitutional population since 1976 (all data from the BLS).

Federal government employment has decreased over the last 35 years (mostly in the 1990s), state government employment has been flat, and local government employment has increased.

Note the small spikes very 10 years. That is the impact of the decennial census.

The second graph shows government employment excluding education as a percent of the civilian noninstitutional.

The percent of federal and state government employment (ex-education) have all declined. Local government employment has been steady - so overall government employment (ex-education) as a percent of the civilian population is down over the last 35 years.

by Calculated Risk on 9/09/2010 09:11:00 AM

The Census Bureau reports:

[T]otal July exports of $153.3 billion and imports of $196.1 billion resulted in a goods and services deficit of $42.8 billion, down from $49.8 billion in June, revised.

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through June 2010.

Although imports declined in July, imports have been increasing much faster than exports.

The second graph shows the U.S. trade deficit, with and without petroleum, through July.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The decrease in the deficit in July was across the board, although the oil deficit only declined slightly. And the trade gap with China declined slightly to $25.92 billion from $26.15 billion in June - essentially unchanged.

This is the 2nd largest monthly trade deficit since the 2008 collapse in trade.