note on the graphs used here

sometime during the third week of March, the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our graphs, and also left us with about half the options we had available and used before the upgrade...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them blank or unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where a graph has gone missing, click on the blank space where it had been in order to view it....


Sunday, November 11, 2012

september’s trade, JOLTS, consumer credit and the LPS mortgage monitor; october’s NMI, & the fiscal cliff again…

it was a fairly uneventful week, unless you consider the reelection of most of the incumbents who were running for national office to have been an event worth noting...the Democrats maintain a slim majority in the Senate, and although they prevailed in the popular vote for House representatives by a half million nationally, they only picked up a few seats in the House, as congressional districts were heavily gerrymandered to favor the installation of a Republican majority...so the gridlocked government will continue for at least another two years, and nothing we've seen over the past two years indicates that rational behavior will break out among the political set anytime soon -- the discussion in the media turned almost immediately to the "fiscal cliff", that January 1st collection of automatic spending cuts and tax increases (which we first discussed in May, and covered again at length in July) which by some estimates would clip around 5% off GDP and put us back into a recession unless the parties come to an agreement on how to avoid it....again, briefly, what we're looking at is an expiration of the bush tax cuts, (income tax rates would return to 15%, 28%, 31%, 36% and 39.6%, up from the current 10%, 15%, 25%, 28%, 33% and 35%) & a rollback to $1 million for the $5 million exemption for estate taxes, the end of the 2% payroll tax "holiday", and modifications to the alternative minimum tax that prevent it from reaching around 30 million more taxpayers, the $109 billion of sequestered spending cuts, half to defense & half to other spending, the expiration of all remaining Federal unemployment rations, and an automatic cut of about 27% in Medicare doctor payments...in addition, two minor tax provisions benefiting the poorest also expire; the child tax credit and earned income tax credit, which were initiated by the 2009 stimulus package...and if watching the same congress and the same president deal making over all of that again werent enough to drive us all batty, we'll also be hitting the arbitrary debt ceiling just about the same time, so just to keep the government up and running will take a measure of cognitive clarity never previously seen in these congressional critters...so on Thursday the CBO released another assessment of the economic effect of this fiscal tightening, warning of a projected negative 0.5% GDP and 9.1% unemployment rate for 2013, with detailed estimates of outcomes for various combinations of policy changes...and on the same day the International Monetary Fund officials warned global leaders that they believe there is a “medium probability" that US pols will fail to reach an agreement, pushing the US into a recession & likely taking the rest of the world along for the dive..

U.S. Trade Deficit we had something of a surprise in our trade deficit for September as reported by the Department of Commerce (pdf); even in the face of the recession in europe and a worldwide slowdown, our trade gap narrowed by $2.3 billion in September, to $41.5 billion, as seasonally adjusted September exports of $187.0 billion were $5.6 billion more than August exports of $181.4 billion, and September imports of $228.5 billion were just $3.4 billion more than August imports of $225.2 billion; this resulted in a goods and services deficit of $41.5 billion in September, down from the revised August figure of $43.8 billion...as usual, the deficit was in trade of goods, while we ran a surplus in services; September saw import increases in consumer goods ($2.7 billion); industrial supplies and materials ($1.2 billion); and capital goods ($0.6 billion), while imports of automotive goods decreased $0.9 billion; there was also a $2.2 billion surge in exports of gasoline, diesel and other petroleum products as domestic demand for refinery output was less than produced...the increase in exports of goods reflected a $3.1 billion increase in capital goods, a $2.5 billion increase in foods, feeds, and beverages, and increases in automotive vehicles, parts, and engines of $0.5 billion and consumer goods of $0.2 billion...exports of services increased $0.3 billion from August to September, most of which was accounted for by a $0.2 billion increase in travel; imports in services decreased $0.6 billion from August to September, which was more than accounted for by a $0.8 billion decrease in royalties and license fees associated with the end of payments to broadcast the 2012 Summer Olympics...despite the improvement in our energy balance of trade, our goods trade deficit with China alone widened to $29.1 billion, or 50.2% of the total goods trade, while our trade deficit with the euro area was $8.6 billion in September, down from $11.7 billion in August, and our trade deficit with OPEC also declined, from $8.1 billion to $7.1 billion...September also showed some small surpluses of $2.2 with Hong Kong, $1.9 billion with Australia, $0.7 billion with Singapore and $0.3 billion with Egypt...Bill McBride's chart, included to the right, shows the trade deficit for oil in black, the trade deficit ex-oil in red, and the total trade deficit in blue; note that the top bar is zero, and all numbers graphed are negative...

Job Openings and Labor Turnover Survey the BLS released the Job Openings and Labor Turnover Summary for September this week, a report that gets little media coverage because its data lags the regular unemployment summary by a month...but this report includes estimates of the number and rate of job openings, hires, and separations for the nonfarm sector by industry and by geographic region, so it's a trove of data that can give us a greater insight in the conditions in the employment arena; for September, job openings, actual hires and layoffs were all down, possibly indicating some uncertainly by businesses facing first the unknowns of the election, and then the fiscal cliff...the number of jobs open in September was 3.6 million, a 2.7% decrease from August, leaving the ratio of unemployed to openings unchanged at 3.43 to 1; under the broader definition of unemployment, or U-6, the ratio is 6.5 unemployed for each job opening; while this report's job openings compares favorably with the 2.4 million job openings per month at the end of the recession in June 2009, it's a far cry from the normal level of 4.7 million job openings per month we saw before the recession...as mentioned, other stats covered by this reports all declined as well; the hires rates was off 3.1%, the separations rate was off 3.0%; of that, fires and layoffs were down 1.3% and the quits rate was down 1.5%...bill mcbride does a good job of getting all of this data onto one graph, shown to the right; the job opening each month is traced by the yellow line, and the number of hires each month is represented in dark blue...the total separations are represented by a bar for each month, with layoffs, firings, and other discharges shown in red within the bar, and the number who quit their job voluntarily represented by the light blue portion...

another report we should look at is the October 2012 Non-Manufacturing ISM Report; this is the 2nd of the pair of reports from the the Institute for Supply Management that usually come out the same week, and we typically touch on this service industry report as something of an afterthought to the manufacturing report, which gets more attention because it has a longer historical record and is something of a precursor to factory orders and industrial production stats...but for the US, the service sector is really the larger part of the economy; it includes everything from retail sales to finance to health care..the october ISM non-manufacturing index, or NMI, was at 54.2%, down from 55.1% in September...business activity registered 55.4% which was 4.5% off from the 59.9% reported in September, but like all readings over 50, still indicative of expansion; the new orders index also disappointed, as it decreased by 2.9 percentage points to 54.8%...but the employment index increased by 3.8 percentage points to 54.9%, indicating that more purchasing managers are reporting an increase in hiring at their companies over septembers level...and the prices index decreased 2.5 percentage points to 65.6%, indicating prices were increasing at a slower rate in October when compared to September...recent monthly readings for the overall NMI are shown by bars in the chart to the right from J. Picerno at the capital spectator; the non-manufacturing employment index is traced in blue, and the non-manufacturing new orders index is traced in black...of the 18 industries covered by this report, 13 reported growth in October, led by agriculture, construction, management of companies, finance and insurance, tech services and food services...only mining, entertainment and arts, wholesale trade, utilities, and public administration reported contraction...

FRED Graph

one economic report we've been watching for about a year now is the G19, or the monthly Consumer Credit report from the Fed....in september, consumer credit increased $11.4 billion to a record $2.74 trillion, which is a seasonally adjusted annual increase rate of 5.0%, after a upwardly revised  $18.4 billion jump in August; the mix in September was not unlike most months this year; revolving credit, which is mostly credit cards, shrank by $2.9 billion to $852 billion, declining at a seasonally adjusted annual rate of 4.1%, and it thus has decreased at an annual rate of 1-1/2 percent over the 3rd quarter; meanwhile, non-revolving credit, which is longer term borrowing for such as autos, yachts, or education, increased $14.3 billion, a 9.2% annual rate in september, bringing the annual rate of increase for the quarter to 6-1/2 percent...while the financial press applauded that "consumers are growing more confident about big-ticket buys"; we know that the expansion of consumer credit has been, for the most part, about just one sector; federal student loans; last month we showed that federal student loans expanded by $23.9 billion, more than the total credit expansion for the month (meaning net other credit sectors contracted); checking "Consumer Credit Outstanding" in this week’s G19, under nonrevolving, we see the one month change in federal loans was $13.8 billion, as they rose from August's $495.7 billion to September's $509.5 billion, again overwhelming the total monthly increase in consumer credit and leaving only $0.5 billion of the total for those "big ticket buys" as revolving credit shrank...the adjacent FRED chart shows these "Nonrevolving Consumer Loans Owned by the Federal Government" over 20 years; clearly they only started growing exponentially, at a far greater rate than tuition inflation, after the recession, indicated by the grey bar, officially ended...in a related matter, last week the Department of Education initiated a new student-loan repayment program, which will allow some graduates to peg their federal loan payments to 10% of their discretionary income, which will take some pressure off those recent grads stuck in low paying jobs....

Delinquency Rate another report we want to look at a bit closer this week is the LPS Mortgage Monitor (pdf), which reflects data as of September 30th...as we noted when they released their "first look", Lender Processing Services reported that the nation's mortgage delinquency rate suddenly spiked 7.7% over August's numbers, and no explanation for the surge was given; the explanation accompanying the full report was no more enlightening; they pointed out that the increase was concentrated in the 30+ days delinquent, & that the longer term delinquencies continued to improve with an increase in "cure rates", and that total delinquencies were still down 4.2% from a year ago...so until a better explanation is forthcoming, we'll just have to assume that more homeowners are treating their mortgage payment as an optional expense, and that when cash is needed for another purpose (such as to buy a new gadget), they'll just let the mortgage payment slide...we'll likely get a better picture of this in the coming months, as the normal seasonal spike in delinquencies associated with christmas approaches...meanwhile, the September report showed that 2,170,000 mortgages were more than 30 and less than 90 days past due, and another 1,530,000 properties were 90 or more days delinquent but not in foreclosure; in addition, 1,940,000 more homeowners were in the foreclosure process, which was 3.87% of all mortgages, down from the 4.04% in foreclosure in August...the spike in foreclosures we expected as a result of the foreclosure fraud settlement has not materialized, largely because banks have convinced homeowners to go the short sale route (wherein owners sell the house for less than they owe & the balance is forgiven), which unsurprisingly also benefits the banks, as short sales usually sell for more than foreclosures,  and the banks dont end up with real estate inventory they'd have to maintain...the adjacent graph, from page 4 of the LPS pdf, shows the total delinquent and in-foreclosure rates since 1995; the insert is pointing out that all of the increase in delinquencies was in the early, 30 day, stage...also of interest in this report is the "pipeline ratio", which is shown for selected states on page 14 of the pdf; this reflects the average length of time that homeowners remain in the foreclosure process based on the rate that foreclosures are being executed in each individual state; obviously, seizures in non judicial states are executed more quickly, but foreclosures must be processed in court in judicial states...with its large court backlog, new york's is still the longest at 482 months, followed by the 403 month backlog in new jersey; even so, both states foreclosure processing rates have improved considerably from the beginning of the year, when they both had a foreclosure backlog of over 50 years...another table of interest is on page 19 of the pdf, where the delinquency and foreclosure rates are listed by state; florida leads in the latter category, with 12.7% of its homeowners in foreclosure, followed by new jersey with a foreclosure rate of 6.8%, and new york and illinois at 6.2%, while mississippi has the most delinquent but not foreclosed mortgages, 14.3% of the total, followed by louisiana at 10.6%. and nevada, where 10.4% of homeowners are delinquent but have not yet received a notice of default...florida, by the way, also has 8.0% delinquent in addition to those in the foreclosure process, which means a total of 20.8% of florida homeowners are not paying on their mortgages...

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

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