Tuesday, May 28, 2013

Midway: message from the gyre

Midway is a 2.4-square-mile atoll in the North Pacific Ocean, roughly equidistant between North America and Asia.  On the Midway Atoll National Wildlife Refuge, administered by the US Fish and Wildlife Service, tens of thousands of baby albatrosses lie dead on the ground, their bodies filled with plastic from the Great Pacific Garbage Patch.  Of the 1.5 million Laysan Albatrosses that still inhabit Midway, nearly all have plastic in their digestive system.  This is the trailer for the feature film “MIDWAY” by photographer Chris Jordan, expected to be released late 2013.  See MidwayFilm.com for more information..

Sunday, May 26, 2013

Fedspeak, April’s durable goods, new & existing home sales

    Fed Chairman Ben Bernanke's testimony on the Economic Outlook before the Joint Economic Committee of Congress and the release of the minutes from the April 30-May 1 Federal Open Market Committee monetary policy meeting probably commanded more attention than anything else going on this week, and resulted in more than 3 dozen linked paragraphs included at the beginning of this week's globalglassonion....there's always a contingent of the blogosphere that follows every nuance of Fed-speak for clues about what the Fed might do, as if the Fed would do much meaningful for the majority of us...by keeping interest rates low, they may be encouraging companies to borrow as much and as fast as they can at record low rates -- even junks bonds are less than 5% -- but they cant make those companies put that cash to use; record amounts of unused cash still remain on corporate balance sheets, and companies arent going to deploy cash that with capacity utilization still well below historical averages...at any rate, what was widely seen as the punchline that Bernanke delivered Wednesday was "If we see continued improvement and we have confidence that that's going to be sustained,  then we could in the next few meetings ... take a step down in our pace of purchases" which apparently cued the markets that the Fed might really one day take away the punchbowl, aka QE-4ever, & supposedly provoked a worldwide market selloff, including the worst day in european markets in 10 months, capped by a 7.3% one day plunge in the Japanese Nikkei Stock Index...but it was just a one day affair; markets recovered as some Fed presidents suggested that bond purchases might even move up; and the markets had been frothy anyway, the Nikkei had been up 60% since November in the face of aggressive fiscal and monetary stimulus in that country, but the incident does underscore how much the speculative markets have become dependent on a continuous stream of easy money from the central banks...

    FRED Graph

    it was a fairly slow week for economic data releases, but the Commerce Dept did release the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for April (pdf) on Friday, which precedes the full factory orders report which will be released next week; this report is usually watched for the forward looking new orders for durable goods, which rose $7.2 billion or 3.3% to $222.6 billion in April; this followed a 5.9% decrease in March, a 6.4% increase in February, and a 6.4% decrease in January...the volatility in this report largely stems from unevenness in orders from the defense department and for big ticket airliners from Boeing, so the results are often quoted excluding one or both; without defense, new orders were up 2.1%; without transports, new orders were up just 1.3%, and if we exclude both transportation and defense orders, durable goods orders were down 0.5% for the month; new orders for transportation equipment were up $5.1 billion or 8.1% to $67.6 billion; $1.9 billion of that was orders for nondefense aircraft and parts...new orders for nondefense capital goods, such as equipment and machinery used in production, increased $2.5 billion or 3.3% to $76.1 billion over the month, and unfilled orders increased $4.4 billion or 0.8% to $577.3 billion, while new orders for defense capital goods increased $1.8 billion or 31.3%; new orders for nondefense capital goods excluding aircraft increased 1.2% in April, but capital good shipments less aircraft fell 1.5%...overall, unfilled orders for durable goods rose $2.7 billion or 0.3% to $996.2 billion; $1.0 billion of that was from the unfilled backlog for computers and electronics, which rose 0.8%; unfilled orders for communications equipment rose $380 million, or 1.2%...our adjacent FRED chart shows the track of the year over year changes in new orders for durable goods; as you can see, while the annual change remains positive, it has been trending less so since the easy YoY comparisons of 2010…

    Year-over-year Inventory both major reports on home sales during April were also released this week...the National Association of Realtors (NAR) reported that sales of previously owned homes only rose a seasonally adjusted 0.6% in April because of tight credit & a shortage of homes on the market...at the rate homes were selling in April, NAR figures that 4.97 million homes would sell over a years time; this seasonally adjusted annual rate is 9.7% higher than the 4.53 million annual rate homes were selling at a year earlier; note that neither April's number or the seasonally adjusted annual rate says anything specific about the actual number of homes that sold in April or over the year; it's just the way the NAR obfuscates their data; they also say "buyer traffic" was 31% higher than a year ago, but since that increase of traffic didn't quite yield a 10% increase in sales, it's fair to say a lot of that buyer traffic could be characterized as "looker traffic"; at the end of April, 2.16 million existing homes remained available for sale; that was 11.9% more than at the end of March, and based on the April's sales rate, those would amount to a 5.2 month supply of homes, up from the 4.7 month inventory at the end of March, but still 13.6% below the unsold inventory of a year ago, which then represented a 6.6 month supply at last April's sales rate; homes were on the market for a median of 46 days in April, down from a median of 62 days in March and 83 days a year ago....the adjacent chart from Bill McBride shows the year over year change in homes on the market in blue, and the months of supply as given by the NAR for each corresponding month since 2002 in red; note this does not include foreclosed homes owned by the banks that are being held off the market or any other shadow inventory...the April median home sales price was 11.0% higher than last April at $192,800, the 14th consecutive YoY price increase, something NAR hasnt seen since the boom period from April 2005 to May 2006; the median sales price for single family homes was $193,300, while the median for condominiums was at $189,500...Freddie Mac reported the national average interest rate for a conventional 30 year fixed mortgage was at 3.45% in April, down from 3.57% in March and 3.91% a year earlier, yielding about a 5.8% difference in monthly payments (mortgage rate chart shown below)...distressed sales - foreclosures or short sales - accounted for 18% of April sales, down from 21% in March and 28% in April of 2012; NAR says foreclosures sold at 16% less than market value in April, while short sales were discounted 14%...the percentage of first time home buyers continues to fall; from 30% in March to 29% in April, down from 35% a year ago, and the percentage of all cash home buyers continues to rise, from 30% in March to 32% in April, and up from 29% a year ago...anecdotal reports indicate heavy hedge fund buying, crowding out local buyers; moreover, it appears some of the private equity buyers are attempting to turn a quick profit by launching initial public offerings on the stock market, leaving other suckers investors to absorb the risk...

    the widely followed report on New Home Sales for April (pdf) was released by the Census Bureau on Thursday; the source data for these monthly estimates are collected on laptop computers by Census field representatives who visit a sample of building permit offices and select a sample of permits issued for new housing, hence they have a large margin of error and are subject to larger revisions than other census residential series; with that caveat, Census reports that April sales of new single family homes were at a seasonally adjusted annual rate of 454,000, which was "2.3 percent (±12.8%)* above the revised March rate of 444,000 and is 29.0 percent (±20.7%) above the April 2012 estimate of 352,000"; what that means is that if the estimated pace of new home sales in April were extrapolated throughout a year, Census is 90% confident that somewhere between 395,888 and 512,112 homes would be sold, and that April sales would be between 8.3% and 49.7% more than the estimated sales of a year ago...with this report, the reported March annual sales rate was revised up from 417,000 to 444,000, and February's given annual sales rate was revised up from 411,000 to 429,000; if we check table 3 in the release, we see that the annualized February sales number was extrapolated from 34,000 sales reported by census field reps, while March sales were reported at 42,000, and that preliminary April sales were estimated at 45,000, of which 15,000 were completed,14,000 were under construction, and 15,000 were not yet started...the median sales price of new homes sold in April was $271,600; up from the $250,700 median price of homes sold in March; the average sales price was $330,800, a 15.4% jump from the March average price of $286,700; these increases were mostly caused by a change in the mix of homes sold; 12,000 homes sold for under $200,000 in April, compared to 14,000 for under $200,000 in March; meanwhile approximately 4,000 homes sold for over $750,000 in April vs ~1,000 in March...a seasonally adjusted estimate of 156,000 new homes remained on the market at the end of April; this is a 4.1 month supply at the current annualized sales rateincluded on the FRED graph on the left below is a monthly track of new homes sold since 2000 in blue, with the scale in thousands on the left; also shown is a monthly track of median sales prices in green, and a monthly track of average sales prices in red; the dollar scale for both is on the right margin...the FRED graph on the left shows the monthly track of the average interest rate on a conventional 30 year fixed rate mortgage since 1972 in blue, and the average interest rate on a 15 year fixed rate mortgage in red; obviously, continuously lower interest rates have contributed to mortgage affordability and hence higher home prices, but it's difficult to discern the influence of the Fed's buying of mortgage backed securities, which started in September 2012, on the downward trend, which seems to have begun in 2009 and continued unabated since (both graphs will enlarge somewhat if you click them)..

    FRED Graph

    FRED Graph

    (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…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…)

    Sunday, May 19, 2013

    CBO budget forecast, April’s retail sales, CPI, PPI, and industrial production, Q1 household debt & credit

    US Federal Government Budget Surplus Deficiton Tuesday, the Congressional Budget Office (CBO) released their Updated Budget Projections for Fiscal Years 2013 to 2023 (pdf; summary here); which, in creating their ten year forecast, assumes that current laws on taxes & spending do not change and no surprises intervene over the duration, chances of which happening are between slim and none; at any rate, this report is a quarterly update to the mandated Budget and Economic Outlook that they published in February, & is remarkable if only for the massive shift in their fiscal projections in such a short time (the sequester was already assumed in that forecast)...expecting revenues to rise more rapidly than spending over the short term, the CBO estimates that the budget deficit will shrink to $642 billion this fiscal year (ending Sept 30) down from their earlier estimate of $845 billion, which will make it the smallest deficit since 2008; this is a 24% reduction in their deficit projection of just 3 months ago, which was due in part to the unexpected profitability of federal mortgage giant Fannie Mae, which will contribute $59.4 billion, including a one time recredit of $50.6 billion in deferred-tax assets, after reporting a record quarterly profit, and a record $50.6 billion profit from student loans, 43% higher than expected in February...the result, according to the CBO, will be a further reduction in the relative size of the deficit to 4.0% of GDP, which will shrink further to 3.4% of GDP in 2014 and then to 2.1% of GDP in 2015, by which time they expect a GDP of $17,632 billion with the economy growing at a 5.9% annual rate...later in the decade, however, deficits are expected to rise again due to costs associated with the aging baby boomers and increased interest on new Treasury script...over the entire ten year period, CBO now forecasts the cumulative deficit to be $618 billion less than it forecast in February...to the right, we have a chart from Bill McBride wherein he has graphed the actual budget deficits as a percentage of GDP since 1980 in purple, and then added the CBO projections for the next ten years in blue…it’s fairly clear that if the CBO projections play out, the deficits of the next ten years will be no greater than those of the last 22, and certainly less than the last 10 years of Reagan-Bush...and in a prospect of an even more austere future, the CBO also scored Obama’s budget proposal (pdf) on Friday, with this report as a baseline, and found that it would take an additional $1.146 trillion from the deficit over 10 years...

    Click to Viewthe key economic release of the past week was the Advance Report on Retail Sales for April from the Census Bureau (pdf); as reported, the estimated seasonally adjusted retail and food services sales "were $419.0 billion, an increase of 0.1 percent (±0.3%)* from March", which is footnoted with "Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different than zero", so we should keep that uncertainty in mind as we examine the details of the report, eg, the sales decline for March was revised down to a negative 0.5%;...the major factor impacting this month's report a 4.7% decline in gas station sales, from a seasonally adjusted $46,014 million in March to $43,869 million, without that, retail sales would have been up 0.7% for the month....total April sales were 3.7% (±0.7%) above those of April 2012, and year to date sales amounted to $1,606,433 million, 3.3% higher than the same period last year; unadjusted sales for the month amounted to $416.5 billion, so seasonal adjustments weren't a significant factor in this month's report...sectors showing significant sales gains include car & parts dealers, where sales rose a seasonally adjusted 1.0%, from $77,861 million to $78,644 million, building & garden supplies dealers, where sales rose 1.5%, from $25,108 million to $25,497 million, clothing & accessories stores, where sales rose 1.2%, from $20,374 million to $20,624 million, general merchandise stores, where sales increased 1.0%, from $51,661 million to $52,182 million, and non-store retailers (internet & catalog) where sales were up 1.4% to $40,938…other than gasoline, the only retail sectors where sales fell in April were food & beverage, where sales fell 0.8% to $53,686 million, and drugstores, where sales were off 0.1% to $22,830 million...on a year over year basis, nonstore or internet sales were up 15.4%, car dealers saw sales rise 8.8%, and clothing stores saw sales rise 5.7%...sectors seeing sales slip since last April included gas stations, which sold 4.6% less by dollar value, department stores, whose sales were off 3.6%, general merchandise stores, where sales slipped 0.7%, and drugstores, where sales declined 0.9% over the past year...the chart we have included here from Doug Short tracks the year over year change in monthly retail sales since 1995 (you may have to click to enlarge to see the scale)…note that while YoY sales have remained positive, the increase has generally been declining since its recent peak in June 2011…he also highlights the month before each recession (grey bars) with a red dot, showing YoY sales at those times to be in the same range as those of this current month…

    FRED Graph as was the case with retail sales, the sharp decrease in the price of gasoline was the major factor in the lower April consumer price index; the Bureau of Labor Statistics reported the seasonally adjusted price index for all urban consumers (CPU-U) fell 0.4% from March to April, reducing the one year overall change in prices to 1.1%...as was the case in March, the decline in the energy index turned the broader index negative; decreases of 8.1% in the price of gasoline and 4.4% in the price of fuel oil overwhelmed the increases of 0.5% in the price of electricity and 4.4% in the cost of natural gas to leave the April energy index 4.3 % lower than March and also 4.3% lower than a year ago; otherwise, prices changes for other components were fractional and mixed; food prices were up 0.2%, as the index for food away from home rose 0.3% and the food at home index rose 0.1%, with a 1.4% decline in fruits and vegetables offsetting larger increases in other food categories; the index for all items less food and energy, aka core CPI, increased 0.1%, same as in March, leaving it 1.7% higher than a year ago; the index for shelter, the largest component of the CPI at 31.5% of the total index, was up 0.2%, with lodging away from home up 0.3% and insurance down 1.0%, while among transportation index components, prices of new cars were up 0.3%, prices of used vehicles were up 0.6%, and transportation services were down 0.2%; medical care services were also down a bit, 0.1%, as hospital costs were down 0.7% while prices doctors services rose 0.4%; medical care commodities, which includes drugs & equipment, on the other hand, were up 0.1%...the cost of recreation was down 0.1%, the relatively small component of apparel was down 0.3%, while prices for education and communication commodities fell 0.6%...on the right, we've created a fairly busy FRED graph from the CPI-U and selected components, using the percentage change monthly in lieu of the index for most of them...using the scale on the left, the black line traces the monthly percentage change in the CPI, the bright blue line traces the percentage changes in the medical care services index, the red line traces the food at home index, and the green line shows the monthly changes in the shelter index…the blue line is the actual gasoline prices index, with the scale on the right; based on gasoline prices between 1982 & 1984 = 100; we could not show the month over month price changes in this index because if it was on the same chart as the rest, the other indexes would all appear as straight lines in comparison to the gas index, which has more than doubled since the recession bottomed...

    the BLS also released the Producer Price Indices for April, which is also often referred to as wholesale prices; this release includes 3 main indexes; the price index for finished goods fell 0.7%, the price index for intermediate goods in earlier stages of processing declined 0.6%, while prices of crude goods fell 0.4%...over 80% of the price decrease in finished goods, which are now up only 0.6% in price over the past year, was the result of the 2.5% decrease in prices for finished energy goods, led by a 6.0% decrease in the whole price of gasoline; in addition, wholesale prices for finished foods were off 0.8% in April on the back of a 10.6% decrease in prices for fresh & dried vegetables, which meant that prices for core finished goods (less food and energy) were actually up 0.1%; pharmaceuticals, up 0.6%, led the core prices increase...as with the CPI and finished goods, two-thirds of the decrease in the intermediate goods price index can be accounted for by declining prices for intermediate energy goods, which dropped 2.1% in April; the index for intermediate foods and feeds also fell, by 0.9%, as did the core intermediate index, which was off 0.2%; prices for intermediate goods are now 1.0% lower than a year ago...in contrast to the other major indexes, the crude energy index was actually up by 3.7%, led by a 15.5% spike in the price of natural gas; lower overall prices for crude materials, which are now down 3.2% over the past three months, were led by lower prices for crude foods and feeds, which fell 2.6% in April; about 70% of that was due to an 11.5% decrease in the price of corn, although price indexes for hay, hayseeds, and oilseeds and fresh vegetables also declined; meanwhile, the index for crude materials not including food and energy was off 2.8% in April; lower prices for copper scrap (-4.8%), paper waste (-4.5%), and non-ferrous metal ores (-3.7%) contributed to the decline

     FRED Graph another important release this week was on Industrial production and Capacity Utilization for April from the Fed, which showed the seasonally adjusted industrial production index fell 0.5% in April, the worst showing in eight months, largely because of a 3.7% decline in utility production, reflecting the partial unwinding of the 5.3% jump in utility production in a colder than normal March, which boosted that month's total production to a 0.3% gain...the manufacturing index also fell, 0.4%, from 96.6 to 96.2, cutting it's year over year increase to 1.3%, while the mining index, which includes gas & oil production, rose by .0.9%, from 115.9 to 116.9, and is now 4.2% above the level of last April...our adjacent FRED graph shows the tracks of these major production indexes since 2005: the production index for all industry is in black, the manufacturing production index is in blue, the utility production index track is green, the mining production index is in red, and the grey bar marks the official recession (recall all industrial production indices were reset at the peak where 2007=100); in addition to these major industry groups, the Fed also reports industrial production by market group: production of consumer goods fell 0.6% in April, but the consumer goods index index is still a full point above its year end level at 94.2; production of consumer durable goods was off 0.8%, with output of cars, appliances, furniture, and carpeting all down significantly, and only consumer electronics showing a half percent increase; the index for consumer nondurables was down 0.5%, mostly due to a 3.1% drop in the output of consumer energy products; the index for non-energy nondurables rose 0.4%....production of business equipment was down 0.5%, with output of transportation, info processing, and industrial equipment all down by a similar fraction, while production of defense and space equipment slipped 0.3% after a 0.2% increase in March….within non-industrial supplies, output of construction supplies was down 0.8% after falling 1.5% in March while the output of business supplies fell a full percent after smaller gains in each earlier month this year; meanwhile, output of materials to be processed further fell 0.4% due to pullbacks in all major components, led by a 1.6% drop in output of consumer parts and a 1.5% drop in textile production...this release also reports on capacity utilization, which is given as a percentage of plant and equipment in use during the month; in April, capacity utilization for total industry decreased from a revised March figure of 78.3 percent to 77.8 percent, meaning at any given time during the month, over 22% of our plant and equipment was sitting idle...just 75.9% of our manufacturing capacity was in use, down from 76.3% in March and 76.1% a year ago, while capacity utilization for utilities was at 79.4%, down from 82.4% in March but up from 77.8% in April of last year, and capacity utilization for mining, which includes oil & gas, was at 88.0%, up from 87.5% in March and 87.9% a year ago...

    another report released this week was The 1st Quarter Report on Household Debt and Credit (pdf) from the NY Fed, which showed that aggregate consumer debt declined by $110 billion to $11.23 trillion in the first quarter, and is now down from the peak of $12.68 trillion in the 3rd quarter of 2008; most of the fall could be attributed to lower mortgage debt, which was down $101 billion from the 4th quarter to $7.93 trillion, although the portion of that which was discharged through foreclosure or short sales apparently wasn't noted; home equity lines of credit dropped $11 billion, or 2.0%, and stood at $552 billion as of March 31st; outstanding student loan balances rose by $20 billion and had reached $986 as of the end of the quarter, while auto loans outstanding rose by $11 billion, credit card balances fell by $19 billion and other consumer loan balances were $10 billion lower...co-incident with this report, the NY Fed released a special report on student indebtedness, The Geography of Student Debt, which broke down student debt by state and percentage delinquent and included an additional set of maps; they find 16.2% of americans are burdened with student debt, from a low of less than 12% in Hawaii to a high of more than 25% in the District of Columbia; outstanding balances average $24,810 nationally but the average 2013 graduate starts out life already $35,200 in debt, and while 90 day delinquency rates average 11.7% nationally, they vary widely regionally, from a low of 6.5% in North Dakota to levels approaching 18% in West Virginia and the deep south...the adjacent bar graph from the NY Fed report shows the quarterly changes in each type of household debt over the past ten years; the orange codes for mortgage debt outstanding, gradually coming down but still 71% of the total, above that in purple is home equity lines of credit, amounting to 5% of outstanding debt; the green represents auto loans outstanding, now at 7% of all debt outstanding, while the blue represents credit card debt, which has shrunk to 6% of the total, while the red indicates student indebtedness, now up to 9% of all consumer debt outstanding...at the top in grey is the last 3%, which the Fed classifies as "other"…

    (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…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…)

    Sunday, May 12, 2013

    the MBA & LPS on mortgage delinquencies & foreclosures, March consumer credit, & a new CO2 record..

    it's been a pretty slow week, with neither major monthly economic reports nor widespread kerfuffles in the blogosphere...as we figured, all the budget proposals floated earlier this year have gone nowhere, and it now appears that the republicans wont negotiate on any compromise until they have the democrats and the president and backed up against the debt ceiling...in case you forgot, the artificial federal debt limit is set to kick back into effect a week from now, on May 19th, after a three-month hiatus...according to the inane deal negotiated with the tea party contingent in late January, the debt ceiling was suspended until that date so the anti-everything crowd would not be on record as having raised it; then, on May 19th, the new debt ceiling will suddenly become whatever amount of script the Treasury has outstanding at that time, effectively forcing the government immediately into accounting legerdemain to run the show while the clock runs out...estimates were that would be by mid August, but with revenues now higher than expected, it could be stretched till early September or even October, around the same time the stop gap continuing resolution to fund government functions expires, September 30th, at the end of the fiscal year...

    despite the slow week, we did have a once in a blue moon coincidence of the 1st quarter Mortgage Delinquency Survey from the Mortgage Bankers Association’(MBA) and the March Mortgage Monitor from LPS (pdf) that both look at the condition of US home mortgages as of the same last day of March date, giving us an opportunity to compare them in the same week... the MBA reported that their seasonally adjusted delinquency rate for mortgage loans on one-to-four-unit residential properties increased to 7.25% of all loans outstanding at the end of the 1st quarter, up from 7.09% at the end of the year; these are mortgages that are at least one payment past due, but yet not in the foreclosure process... however, the percentage of loans in the foreclosure process, also called the foreclosure inventory rate, decreased to 3.55% from the 4th quarter's 3.74% rate; meanwhile, new foreclosure actions were initiated on 0.70% of mortgages in the 1st quarter, the same percentage as were started in the 4th quarter of 2012...a year ago, the seasonally adjusted delinquency rate was 7.40% while the foreclosure inventory rate was 4.39%...MBA also gives the unadjusted rates, which we'll need to compare to the LPS report; at the end of the first quarter, 6.75% of home mortgages were at least one payment overdue but not in foreclosure; that's down from a 4th quarter delinquency rate of 7.51%...note that the net seasonal adjustment was 0.92% and swung the quarter over quarter change from a decrease to an increase; what that's showing us is the long standing tendency of homeowners to skip mortgage payments during the holiday shopping season and catch up again by the end of March...MBA also gives a "serious delinquency rate" by adding those homeowners in foreclosure to those more than 90 days past due on their housepayments at 6.39% as of the end of March, which is down from 6.78% at year end and down from 7.44% a year earlier; combined with those who have missed at least one mortgage payment, total delinquent mortgages at the end of march amounted to 10.30% of all mortgages on an unadjusted basis, so despite the ongoing improvement in the overall delinquency rate, there were still more than one in ten homeowners who were behind on housepayments at the end of March...two graphs are included below; the calculated risk bar graph on the left is sourced from this MBA report; it shows the seasonally adjusted percentage of mortgages past due in each quarter since 2005 by the length of time overdue, with the percent in foreclosure in red, those more than 3 months behind but not in foreclosure are shown in yellow, those between 60 and 89 days overdue are shown in blue, and those just a month behind are shown in violet...at a seasonally adjusted rate of 10.8% delinquent, there's been obvious improvement from the late 2009 & early 2010 delinquency rates over 14%, but we're still far from the normal rates around 5.5% in the middle of the last decade....the graph on the right from the MBA shows the percentage of loans in the foreclosure process by state (click to enlarge); the judicial states, where the banks must prove the right to foreclose in court, are indicated by the dark navy coloring, whereas the non-judicial states, where banks can seize homes without proof, are indicated in red; the largest foreclosure inventory rates are seen here to be in Florida at 11.43%, New Jersey at 9.00%, New York at 6.18%, and Illinois, where 5.89% of all mortgages are in foreclosure; those are all judicial states; obviously, with the banks having scrambled the property records both electronically through MERS and through securitization, it's made judicial foreclosure next to impossible (without fabricating documents after the fact), so large court backlogs have built up in judicial states; Nevada, the only non-judicial state with a foreclosure backlog over 5%, passed a law in 2011 making it a felony if a mortgage servicer made fraudulent representations concerning a title, and imposed fines up to $5,000 for falsifying documents, which brought foreclosures in that state to a standstill...
    MBA Delinquency by Period MBA In-foreclosure by state
    the Mortgage Monitor for March (pdf) from LPS (Lender Processing Services) is a similar report, released monthly, which we've been tracking for a few years as a proxy for the national mortgage crisis...consistent with the last time we compared these reports, the LPS delinquency data seems to be a bit lower than the MBA's; the March summary statistics and LPS 12 month history on are page 19 of the pdf...in figures that correspond to MBA's unadjusted percentages, LPS reported that 6.59% of mortgages were delinquent in March, down from 6.80% in February and 7.17% at year end, the typical seasonal high...of March delinquencies, 1,842,000 homeowners were more than 30 days but less than 90 days behind on their mortgages, while 1,466,000 mortgages were 90 or more days delinquent but not yet in foreclosure; in addition, LPS counted 1,689,000 homes still in the foreclosure process (ie, notices had been served but the homes had not yet been seized); these amounted to 3.37% of all mortgages, down from 3.38% last month and 3.44% in December; combining mortgages over 90 days past due with those in foreclosure yields a serious delinquency rate of 6.29%; the average time of serious delinquency before foreclosure starts is now up to 492 days nationally, while the average days delinquent for those already in foreclosure is 834 days (see page 21)...LPS reported 121,012 new foreclosure starts in March, down 8.2% from February, and a 10.1% increase in foreclosure sales, which is an industry euphemism for home seizures, although they note that the passage of the Homeowner Bill of Rights in California appears to have slowed down the foreclosure sale process in that state considerably...since most of the data in the 32 page mortgage monitor is graphically presented, we''ll present a few below with explanations...

    March LPS loan counts

    March LPS foreclosure inventory rates

    the bar graph to the left above from page 4 of the Mortgage Monitor is roughly the LPS analogue of the first MBA graphic above; each bar represents a month of data and shows the number of mortgages 30 days delinquent in blue, the number 60 to 89 days overdue in red, those more than 90 days delinquent but not in foreclosure in green, and the number of mortgages in the foreclosure process during that month in violet; the gauge for those counts in thousands is on the left margin...in addition, there is a blue line showing the count of active mortgages each month with the count in thousands on the right axis, and text on the graph gives active mortgage counts and number not current for 3 dates; January 2005, when the chart starts, January 2010, when the number of non-current mortgages peaked at 7,700,000, and the current counts of 50,200,000 active mortgages with 5 million not current...the graph to the right above from page 7 of the pdf shows the track of the national foreclosure inventory rate in black (now 3.37%), and the contrast between the percentage in the foreclosure process in judicial states tracked in blue (now 5.65%) and the percentage of those in the process in non judicial states tracked in red (now 1.72% of active mortgages...and last, from page 20 of the Mortgage Monitor, below we have the LPS states table showing the percentage delinquent, the percentage in foreclosure, the total non-current, and the year over year change in that non-current total for each state...again we see Florida with the greatest fraction in foreclosure at 11.1%, followed by New Jersey at 8.6% and New York at 6.2%...note that Hawaii shows 6% in foreclosure here, compared to less than 4 1/4% on the MBA's chart ...also note high delinquency rates in Mississippi at 12.5%, Alabama at 9.3%, and Louisiana at 9.1%

    March LPS states

    one regular release of this past week that we've been following was the G19 on Consumer Credit for March from the Fed...in a credit expansion only half of what was forecast, aggregate seasonally adjusted consumer credit increased by just $7.97 billion to $2,807.5 billion, which works out to an annual rate of 3.4%, the smallest increase in eight months; the February credit increase was also revised a bit lower, to $18.14 billion...credit card, or revolving debt, decreased for the first time this year by $1.71 billion, at a 2.4% annual rate, following a $452.7 million increase in February, while non-revolving credit, which is borrowing for such as cars, yachts, and college tuition, (but not real estate) rose by $9.68 billion in March, or a 5.9% annual rate...on an unadjusted basis, overall credit outstanding actually fell from $2,766.3 billion in February to $2,762.4 billion in March; the revolving credit portion fell from $810.7 billion to $802.0 billion, while the non-revolving component rose from $1,955.5 billion to $1,960.4 billion...the adjacent bar graph from ZeroHedge shows the seasonally adjusted monthly change in revolving credit outstanding in blue, the change in non-revolving credit in red, with the black line tracking the total change in credit monthly...as you all know by now, the reason we've been following this report has been to track the expansion of the government funded student debt bubble...to do that, we scroll down to the 2nd table in the release, under the heading "Consumer Credit Outstanding", for the actual unadjusted data; under the subheading "Major types of credit, by holder" we see loans made by the Federal government directly to consumers, all of which are for education...at the end of March, these amounted to $560.8 billion, up from $556.9 billion in February and $452.6 at the end of the 1st quarter last year, a 19.3% increase...so although the rate of increase has slowed, student debt owed to the Federal government alone is still increasing at over $100 billion a year; students are now paying 3.4% interest on those loans, but because last year's extension of the interest rate break was only for a year, interest rates on Federally subsidized student loans are set to rise to 6.8% on July 1st...Elizabeth Warren introduced her first piece of legislation as a Senator this week to not only roll that back, but to lower it to 0.75%, the "same deal on interest rates the banks get"

    finally, we would be remiss if we didnt at least make note of the milestone marker that atmospheric carbon dioxide concentrations hit on Friday morning (Thursday Hawaii time, where official readings are taken)...CO2 measurements at the mountaintop Mauna Loa Astronomical Observatory (chosen for it's remoteness from local influence) averaged 400.03 parts per million on Thursday, the first time that level has been breached in known history...the estimates of a previous time when CO2 might have reached that level would be in the pre-historic Pliocene, when jungles covered northern Canada and the north pole averaged 60 degrees and the sea level was around 125 feet higher than today...we have two charts below which will serve to explain graphically how this change in the atmosphere came about...on the left, we have a graph of the average monthly atmospheric concentrations of CO2 as per the readings taken at Mauna Loa; you'll note it is a jagged line; that's because each summer green vegetation removes carbon dioxide from the atmosphere, lowering it’s concentration down to a november minimum, when carbon dioxide again begins to increase, to end up at a annual higher high each May, when the growing season and photosynthesis again turn the levels down..the only pause in the continuous upslope was caused by the 1991 eruption of mount pinatubo, which belched millions of tons of sulfur dioxide into the atmosphere, which resulted in an increase in cloud cover cooling and a corresponding increase in the solubility of carbon dioxide in sea water...on the right, we have a graph of atmospheric CO2 levels as measured from data from air bubbles trapped in ice taken from ice cores drilled into the Antarctic ice sheet, where what's graphed on the left appears vertical...you can see that over most of the last 800 thousand years, atmospheric carbon dioxide has roughly averaged between 180 and 280 parts per million, only once briefly touching 300 parts per million about 325,000 years ago...so it's quite obvious that at 400 ppm we're already living in an entirely different atmosphere than we or any of the plants and animals that we know have ever experienced, a new atmosphere which will persist for thousands of years even if new emissions are controlled... and the oceans, where much of the carbon dioxide we've emitted has ended up as carbonic acid, are already 30% more acidic than preindustrial times, and now acidifying 10 times faster today than 55 million years ago when a mass extinction of marine species occurred...
    mlo_full_record (Scripps Institution of Oceanography)

    (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…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…)

    Saturday, May 11, 2013

    Sunday, May 5, 2013

    April’s jobs report, March’s income & outlays and trade deficit, February’s Case-Shiller

    FRED Graphthe April unemployment report was better than expected, and positive revisions of nonfarm payrolls over the past two months took some of the sting out of the lousy jobs report in March... the Bureau of Labor Statistics reported that seasonally adjusted payroll jobs rose 165,000 and the unemployment rate ticked down to 7.5% in April; in addition, the establishment survey payroll job numbers were revised to show 138,000 jobs added in March instead of the 88,000 reported last month, and 332,000 jobs added in February, up from the 268,000 reported last month and the originally reported 236,000...according to the establishment survey, 73,000 professional and business service jobs were added in April, of which 22,800 were in professional and technical services and 30,800 were in temporary help services; another 38,000 jobs were added by restaurants and bars, and 29,000 were in retail, 15,000 of which were in general merchandise stores..and another 19,000 were in health care, more than accounted for by the 14,000 in ambulatory care services and 7,000 in social services...net government payrolls were down 11,000 workers, including 8,000 at the federal level, suggesting a minimal impact from the sequester to date...jobs in construction were little changed, with 13,300 new jobs in residential construction more than offset by almost 14,000 less jobs in nonresidential buildings and civil engineering; likewise, payrolls jobs in both durable and non durable goods manufacturing, wholesale trade, transportation and warehousing, and financial activities were little changed for the month...however, with the increase in payroll jobs came a significant drop in the average workweek for all employees on private payrolls; from 34.6 hours in March to 34.4 hours in April; in manufacturing, the workweek was down 0.1 hour to 40.7 and overtime was also down 0.1 hour to 3.3 hours, while the average workweek for production and non-supervisory employees slipped to 33.7 hours; to show the significance of this, zero hedge took that decline of 0.2 hours in the workweek and multiplied it by the 135,474,000 payroll jobs reported this week and figured that the workweek decline was the equivalent of a loss of 618,000 payroll jobs; partially offsetting that cut in hours, the average hourly earnings for all private payroll employees rose by 4 cents to $23.87, while nonsupervisory employees saw their pay edge up by 2 cents to $20.06 an hour...our FRED graph shows total number of employees in manufacturing in blue, those employed in retail in green, and those employed in construction in red...

    FRED Graphthe April results of the smaller BLS household survey mitigated some of the extreme swings in labor force data we saw in March, which suggests the +/-400,000 margin of error may have been a factor in last month's report; in April, those counted as in the labor force increased by 210,000 to 155.238 million, while those not in the labor force declined 31,000; we also saw a 293,000 increase in those reporting they were employed, while those meeting the criteria for being unemployed (actively looking for work during the reporting period) declined by 83,000, resulting in a drop in the official unemployment rate to 7.5% in April from the 7.6% reported in March; within demographic groups, the seasonally adjusted jobless rate for adult women fell from 7.0% to 6.7%, as unemployment for white women declined from 6.1% to 5.7% while the jobless rate for black women fell from 12.2% to 11.6%; meanwhile, the jobless rate for adult men rose from 6.9 to 7.1%, driven mostly by a surge in the jobless rate for adult while males from 6.1% to 6.4%; seasonally adjusted unemployment rates for Hispanics at 9.0%, Asians at 5.1%, and teenagers at 24.1% were little changed...the metrics we follow as a better indicator of the employment situation remained dismal; the labor force participation rate was unchanged at 63.3%, again the lowest since before women entered the labor force en masse in 1979, while the employment-population ratio increased to 58.6% in April from 58.5% in March; the track of both those metrics since 2000 is shown on our adjacent FRED graph; over the past year, those "not in the labor force" and hence not counted as jobless increased by 1,604,000; there are now 6,329,000 of us who are not counted but still report that they want a job...the number of those jobless or 27 weeks or more and still actively looking for work declined by 258,000 to 4.353 million; their share of the total unemployed declined by 2.2% to 37.4%; there was a corresponding 230,000 increase in those unemployed 15 to 26 weeks...another 2,347,000 of us were classified as marginally attached to the workforce, up 21,000 from March; these are those who looked for work sometime over the preceding 12 months but not in the 4 weeks preceding the survey; of those, 835,000 were considered discouraged workers because they reported they werent looking for work because they believed no job is available for them; their numbers are up from 803,000 in March...there was also a significant jump in the number of employed just working part time; 26.8 million workers reported they only worked part time in April; of those, 7,916,000 either had hours cut or could only find part time work, a 278,000 increase over the number who reported they'd rather work full time in March; as a result, the broader U-6 measure of unemployment rose from 13.8% to 13.9%; several writers blame the ongoing increase in part time jobs on obamacare, due to the $2,000 per employee penalty for uncovered full time workers under ACA; there have been anecdotal reports that this is happening, but no hard numbers to quantify the effect...

    FRED Graphanother important economic release this week was for Personal Income and Outlays for March from the BEA; seasonally adjusted personal income inched up $30.9 billion, or 0.2%, from an annual rate of $13,599 billion in February to a rate of $13, 630 billion in March, wages and salaries increased $14.9 billion to $7,039 billion, compared with an increase of $44.6 billion in February, supplements to wages and salaries increased $3.2 billion in March, compared with the previous increase of $5.7 billion; proprietors' income increased $8.8 billion, compared with their increase of $17.1 billion in February; $6.3 billion of that increase went to farmers, while other business owners saw their incomes increase at a $2.5 billion annual rate; income from rents increased $9.5 billion, while interest & dividend income decreased $7.3 billion, in contrast to an increase of $68.2 billion in February; these month over month fluctuations are apparently still reflecting the accelerated and special dividend distributions paid during November and in December; in addition, personal transfer receipts, which are government payments to individuals, were up $3.7 billion over February's level...disposable personal income (DPI), which is income after taxes, also rose at a seasonally adjusted rate of 0.2%, from an annual rate of $12,059 billion in February to a rate of $12,080 billion in March; this is after February's figures were revised to show personal income up $151.2 billion, and DPI up $134.0 billion, or an increase of 1.1% for both, rebounding from depressed levels of January...because of an inflation decrease of 0.1%, real (adjusted) DPI was up 0.3% for the month...regarding outlays, personal consumption expenditures (PCE) increased $21.0 billion in March, from an annual rate of $11,384 billion to a rate of $11,405.1 billion, or 0.2% above February's rate...spending on goods overall was down from an annual rate of $3,890.5 billion to $3,857.7 in March, as spending on durable goods declined $3.0 billion or 0.2% and spending on non-durables declined $29.8 billion, or 1.3%...spending on services rose $53.8 billion from $7,493.6 billion in February to $7,547.4 billion in March, which was the 2nd largest jump in spending on services on record; nearly half of that was a jump in spending on gas and electric, roughly matching the jump in utilities we saw in the industrial production data, due to a colder than normal March...total personal outlays, which includes PCE plus interest and transfer payments, increased $22.6 billion, compared with an increase of $83.1 billion in February; personal saving, which is DPI less personal outlays, was $329.1 billion in March, compared with $330.9 billion in February, which left the personal saving rate, which is personal saving as a percentage of disposable personal income, virtually unchanged in March at 2.7%, a post recession low...our FRED graph shows gross real DPI in blue and real PCE in red in billions of 2005 dollars since 2000, with the savings rate in green on the right scale... the price index for personal consumption expenditures, which is the Fed's preferred inflation gauge, was down 0.1% in March, while the core PCE price index, which excludes food and energy, was up less than a tenth of a percent...year over year inflation for the headline PCE index is now under 1% at .97%, while the Core PCE index has slipped to 1.13%...

    U.S. Trade Deficit  our trade deficit for March was less than expected as daily oil imports dropped to a 17 year low and our bilateral trade deficit with china fell to a 3 year low (china new year)....the Department of Commerce reported that seasonally adjusted exports of $184.3 billion and imports of $223.1 billion lowered our international goods and services deficit  in March to $38.8 billion, down from $43.6 billion in February; an immediate impact will likely be a revision to 1st quarter GDP which we reviewed last week, as this report represents an annualized 4.6% decline from reported first quarter net trade...in March, exports of goods fell $4.6 billion to $56.1 billion while exports of services rose $0.1 billion to $53.9 billion; meanwhile, imports of goods fell $6.4 billion to $186.5 billion and imports of services fell $0.1 billion to $36.6 billion...seasonally adjusted month over month changes to major export components included a $1.052 billion decrease in exports of foods & grains, a $0.331 billion decrease in exports of cars & parts, a $0.288 billion decrease in exports of industrial materials & supplies, a $0.269 billion decrease in exports of capital goods, & a $0.260 billion decrease in exports of consumer goods; decreases in imports components included $1.417 billion less industrial materials & supplies, including the $1.919 billion decrease in oil imports, $3,406 billion less imports of consumer goods, $1.505 billion less imports of capital goods, and $0.771 billion less imports of cars and parts...exports in advanced technology products, which are not seasonally adjusted, amounted to $27.9 billion in March and imports of same were at $31.3 billion, resulting in a March  deficit of $3.4 billion, which was down $1.5 billion from the advanced technology deficit of $4.9 billion in February...our major bilateral trade deficits in March, also not seasonally adjusted, were $17.9 billion with China, down from February's $23.4 billion, $9.9 billion with the European Union, up from $8.8 billion, $6.6 billion with Japan, up from $5.9, and $5.3 with Mexico, $5.1 billion with Germany, and 4.5 billion with OPEC....smaller bilateral trade surpluses were recorded with Hong Kong at $3.2 billion, Brazil at $1.7 billion, Australia at $1.5 billion, and Singapore at $1.4 billion...Bill McBride's graph to the right shows our trade deficit in Blue through March; our petroleum deficit is also charted in black, and our deficit without petroleum in red; note that despite our lower than ever oil imports, the oil trade deficit has remained in a range between ~$20 billion and ~$30 billion for over 3 years due to higher oil prices; oil averaged $96.95 a barrel in March, up from  $95.96 per barrel in February… 
    case shiller 1 yr chg sa February 2013

    the widely followed Case-Shiller home price indexes for February were also released this week, which are the average of home price increases over 3 months (December, January and February); with the Fed continuing to subsidize mortgage interest rates, the 20 city index was up 9.3% year over year, the most in almost 7 years; while the ten city index showed an annual increase of 8.6%; for the month, the 10 city rose 0.4% and the 20 city rose 0.3%, while on a seasonally adjusted basis both indexes were up 1.2% in February...cities showing the greatest year over year price appreciation were Phoenix, where prices climbed 23%, San Francisco where prices were up 18.9%, Las Vegas, which saw a 17.6% home price increase, and Atlanta, where home prices were 16.5% higher than last February...the smallest annual gain was in prices of homes in New York, which were up 1.9%; as per usual, the wall street journal has an accessible, sortable interactive table including the Case-Shiller index for February, the monthly and the annual change; Case-Shiller individual city indexes are all set at January 2000 = 100...included to the right is a bar graph from Robert Oak’s coverage at the Economic Populist showing the home price increases in each of the 20 case-shiller cities over the past year…mortgage rates are falling again; Freddie Mac reports the 30-year fixed-rate mortgage at 3.35%, just above its all-time record low of 3.31% set during November, while the 15-year fixed-rate mortgage is at a new all-time record low of 2.56%, breaking the record low set last week...much of the home buying continues to be driven by investors; the Census Bureau reported this week that US home ownership fell to 65% in the first quarter, down from 65.4% a year earlier and the lowest home ownership rate in nearly 18 years...

    (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…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…)